Acconia’s factory in Iowa: from http://www.acciona.us/AccionaWindpower
These are strange days in the wind turbine industry. Due to events beyond its control (Republican power grabs), the industry has had to adapt to a “wave” business cycle - some years up and some down. For example, they did $25 billion worth of installs in 2012, but only $3 billion in 2013 in the US. In 2014-2015, they will probably do $30 billion (mostly in 2015); the weighting in 2015 is because of the delay in restarting the industry (it takes about 18 months to get permits/order turbines/get them installed, though that can vary depending on the backlog of orders).
Of course, no capital intensive manufacturing business really wants to operate this way. They would prefer a fairly steady set of orders which would allow for better planning, scheduling and a more logical, lower cost arrangement with respect to making and installing these systems. For example, just on the installation aspect, cranes capable of lifting turbines into place (which themselves cost a lot of money and also have ordering backlogs of well over a year) have to be leased and scheduled to place wind turbines into operation. Most new turbines now require cranes capable of lifting beggar weights to taller heights (70 to 100 tons to heights of 100 meters), which means a lot of the ones used a couple of years ago just won’t work anymore.
Accountants and financial types hate the up and down, “boom or bust” business cycles. They like too promise fairly steady projections of growth and profits. Sales that go from 10% to 100% of rated capacity don’t lend themselves to stable projections of revenues. Fortunately, the US is now becoming an exporter of wind turbines and much less of an importer. Regional markets in Canada and Latin America can be supplied by American subsidiaries of European companies - especially by Vestas, Siemens, Gamesa and Acconia - as American products are seen as high quality. The reason China has not become a big player in South and Central America is mostly quality (they certainly have cheap (= psuedo-slave) labor for major components and final assembly, but quality is another matter - cheaper is useless if the turbines aren’t in operation enough of the time to make money due to “maintenance issues”).
The reason for the “wavy” business cycle is the on-again, off-again existence of the tax credits - Investment or Production Tax Credits (ITC or PTC) that get used along with the rapid depreciation (MACRS) tax avoidance based subsidies. These were in effect from 2009 to 2012, and then only reintroduced at the end of 2013 for one year once the industry had effectively shut down by December 31, 2012. The new extension in effect allows developers until the end of 2015 to complete projects that were at least 5% done by December 31, 2013. However, unless the tax credits are revived in the near future by Congress, the industry will once again shut down starting in the early parts of 2015. And almost all wind industry factories and installations go to districts with a Republican Congressperons (rural midwest).
All energy generation and especially electricity generation business is subsidized in the US to some extent, with nukes being the most subsidized of all, followed by solar PV, coal, natural gas and bringing up the rear, wind turbines. The nuke subsidies (Price-Anderson catastrophic insurance pass, am apparently infinite pass or ultra-toxic trash disposal (spent fuel rods) and the PTC are almost impossible to score, but at minimum are worth 20 c/kw-hr over a 40 year lifespan. The photovoltaic subsidies range from 10 to 18 c/kw-hr (over a 20 years), depending on how often the sun gets through the clouds period. Coal gets a variety of subsidies, but the pass on the costs of CO2 pollution are worth 8 c/kw-hr over the 40 to 80 year lifespan of a facility, and the health care related costs of coal based air particulate pollution are worth 2 c/kw-hr. Natural gas gets subsidies worth about half of those for coal for the CO2 pollution (using the Federal government’s “low ball estimate” of $64/ton of CO2) plus the added cost of methane pollution from leaking wells/pipelines - see http://www.whitehouse.gov/sites/default/files/omb/assets/inforeg/technical-update-social-cost-of-carbon-for-regulator-impact-analysis.pdf. Even government owned hydroelectric facilities have utilized subsidies, including low cost bond funding and a pass on their environmental ramifications, such as the near destruction of the salmon in the Pacific Northwest.
As for the subsides to the wind biz - over a 20 year period the MACRS and the less important PTC or ITC add up to roughly 2.8 c/kw-hr. Relative to what other competitors in the electricity generation biz are getting, the wind turbine subsidies are just small fries. Maybe they should get better lobbyists..
But since the Repubs are more or less totally owned by extractive businesses - in particular banking, mining as well as the oil and gas business - all the kissing of the vital parts of Republican congressionals (Senate and House) members by wind industry would be for naught - those parts are already claimed by the extractors. Besides, the oil and gas lobbyists have more money to spend, and a lifetime of long worked relationships - in effect, they own those congress critters souls, much like what happened to Faust (see http://en.wikipedia.org/wiki/Faust).
Meanwhile, the industry keeps evolving as highly competitive industries do. In 2014 and 2015, almost all wind turbines installed will be the so-called low to moderate wind speed models, even in fast wind locations. This allows net energy yields from these units to rise to the 40% to 50% levels. When though these units are slightly more expensive than the fast wind models (tall towers and longer blades for a given generator size cost more), the net cost of the electricity produced can be lower with low wind speed units because of the high yield achieved. It’s just a math thing, since all the annual costs (mostly installed capital related) get divided by the MW-hrs/yr produced (often referred to as the Annual Energy Output, or AEO). As AEO gets bigger, the production cost gets smaller. In many cases, the cost to produce electricity is in the 5 to 7 c/kw-hr BEFORE subsidies are considered. And this fact has the coal AND nuke AND natural gas industry freaked out. It’s often cheaper to maker electricity with wind than to bother with natural gas - whose long term cost (5 to 10 years and beyond) is impossible to know, anyway.
Iowa now gets 27% of its electricity made from wind turbines. By the end of 2015, thanks mostly to Warren Buffet’s investments, over 35% of Iowa’s electricity will be wind sourced. Of course, this taps less than 2% of Iowa’s actual electricity generating capacity…. Kansas, home of the (apparently) Sith twins known as the Koch Brothers (http://en.wikipedia.org/wiki/Sith) may well switch senator and governor from Republican control because they really like their wind turbines on farms. Texas has quite the economic boomlet going due to a huge deployment of wind farms (plus 20,000 manufacturing jobs) - by 2015 there will be close to 18 GW of installed wind turbine capacity in that state. While that is bigger than most countries on the planet (except for China, the US and Germany), that will still be only a small fraction of their capacity to make wind based electricity.
Last month, both Acconia (http://www.windpowerengineering.com/design/acciona-windpower-extends-aw3000-platform-132-meter-rotor-low-wind-sites/) and Siemens announced new models with 132 and 130 meter rotor diameters, respectively, both for 3 MW rated turbines. This matches recent announcements by Vestas (126 meter) Senvion (122 meter), Nordex (130 meter). Alstom (122 meter) and GE (120 meter). Acconia already has 1800 MW of orders for their new 3 MW models, as well as concrete towers that will allow for 120 meter tall hub heights to be reached. These will soon become the industry norm, which is now in the 100 to 110 meter rotor diameter range. See also http://www.acciona-energia.com/media/315814/AW3000_brochure.pdf.
All that has to happen is that the price of natural gas has to go up by ~ $2/MBtu. Actually, methane has to rise from the present ~ $4/MBtu towards $6/MBtu so that most gas wells can be profitable (most are not though some are at present prices). Unless prices rise, production is likely to fall as fewer wells get drilled and declining production from existing wells is not compensated by new gas from new wells. For example, in the original tracking play (Barnett Shale), production is now down to 80% of its peak value (6.3 billion cfd in November 2011). Thanks to lower oil prices c/o Saudia Arabia ($80/bbl), lots of new oil wells (which ALSO make a lot of “associated gas”), are not going to get drilled as soon as would be the case with prices of $100/bbl.
“Associated gas” from fracking oil fields (Bakken, Eagle Ford, Niobrara, Permian, Utica) supply around 20 billion ccd of methane, or about 28% of present US usage. As fewer well get drilled for oil, less gas will get produced. And it only takes some arrangement of less supply couple to stable demand, or less gas produced for an increased demand to seriously bound gas prices. But higher gas prices won’t do much for drilling rates for oil - methane only supplies about 14% of the revenue from these fields. So anyone betting on cheaper supplies of methane that will make for cheaper electricity is putting their money down, long term, on a losing hand. They might squeeze out some luck in the short term, but that’s about all there is for opportunity in that domain. Meanwhile, as wind turbine production costs keep incrementally dropping, that will put even more of a squeeze on whatever profit can be extracted from the gas to electricity theme. Data from http://www.eia.gov/petroleum/drilling/#tabs-summary-2.
So, meet one version of the future. It’s only a question of how may year the Republican legislators can push off the day of reckoning for electricity producers, who will have to finally kick their vile and disgusting and polluting natural gas habit. But this future delayed means fewer jobs now, more CO2 pollution now, more unemployment now, and less of a viable future for those who intend (and who actually make it to the future). Thanks, Repubs… (yeah right). If only there was a way to repay them for those “favors” they keep on insisting on doing, all the while pocketing some hefty commissions….….
The 3 MW Acconia wind turbine schematic, from http://www.acciona-energia.com/media/315814/AW3000_brochure.pdf