U.S. Wind Markets Growth Stalling in 2010

May 27, 2010
Research finds development hurdles, falling demand impeding near-term growth

The U.S. wind-power industry is struggling to maintain the growth rate that propelled it through a record-breaking year in 2009, according to a new market study. Hailed by some as the clean alternative that will save the U.S. economy from high-cost, carbon-based energy, as well as a manufacturing segment that will reinvigorate the domestic industrial sector, the “wind market” posted a record 9.8-GW of new capacity installed in 2009.

However, in 2010 the market is “growth constrained,” according to the 234-page report from IHS Emerging Energy Research, U.S. Wind Power Markets and Strategies: 2010-2025. Still, it indicates that a “proliferation of favorable state and federal policies” have the U.S. wind industry on track to expand by 165-GW of capacity through 2025. That would leave the industry with an installed capacity base of 200 GW.

The wind-power industry’s current problems include heightened transmission congestion and declining utility demand in traditionally strong markets, like Texas, Minnesota and California. This has pushed developers to prospect states with less prolific resources and more hurdles to development.

“Transmission remains one of the greatest barriers to the development of U.S. wind projects,” explained Matthew Kaplan, a senior analyst with IHS Energy Research and a co-author of the study. “Coordinated national policies will be necessary to more efficiently link the U.S.’ vast wind resources to high-demand regions, however, even with enabling policies, there will be a lag of several years for projects to become operational.”

Kaplan adds that a national renewable energy standard or federal energy policy legislation, plus a streamlined transmission siting and cost allocation process, are necessary to building a strong U.S. wind market in the future.

He also indicated that the decline in power demand and electricity and natural-gas prices has influenced utilities’ willingness to ink power purchase agreements. A number of independent power producers have scaled down their investments in wind-energy projects, creating a new challenge of perception for wind proponents

The study forecasts that the total capacity installed this year could range from 6.3 to 7.1 GW, which would be 40-60 percent less than the total capacity installed in 2009. “2010 marks the first time since 2004 that the U.S. wind industry will not surpass the previous year’s growth level,” Kaplan reports. “Despite unprecedented federal wind incentives, reverberations from the financial crisis continue to create a difficult near-term market landscape especially in light of continued energy policy uncertainty.”

Still, Kaplan concludes that the near-term uncertainty will direct the U.S. wind market on a path toward strong future growth.

The study projects that the U.S. wind industry will see total investments of $330 billion between 2010 and 2025, with more than 90 percent of that total devoted to onshore windmills. It forecasts that wind-power projects will allow states in the Midwest, Great Plains and Rocky Mountains to emerge as energy export hubs to areas with large appetites for renewable energy, including California, the Mid-Atlantic and the South.

In spite of some notable projects, offshore wind-energy will contribute just 5 percent to total U.S. wind power in 2025, according to the research.

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