Q&A: Has wind energy reached overcapacity?

Guest article, cross posted from Composites Manufacturing Blog. Minor proofing edits.

Philip Totaro, Principal at Totaro & Associates

Philip Totaro’s company Totaro & Associates works with renewable energy companies to develop new products and technologies. Specifically, he gets involved in business risk mitigation and intellectual property due diligence activities when clients want to introduce a new product. Totaro spent the early part of his career in aerospace & defense and more recently in power generation and renewables, which gives him significant experience with composite materials and manufacturing.

What is the main focus of the wind energy sector and how are composites involved?

Wind turbines have become one of the most cost-competitive forms of renewable energy production, and they are striving to become cost competitive with conventional forms of power generation like coal and natural gas by reducing acquisition costs as well as operational/maintenance costs. Over the past 30 years the cost of energy production from wind has been reduced from ~0.90 cents / kwhr to ~0.06 cents / kwhr, according to an annual report published by Lawrence Berkley National Labs. This has been the result of both policy and innovation.

Wind turbine blades have been one of the most heavily innovated components of a wind turbine during that time, and composite material use in those blades has grown substantially. From formation of structural components such as the spar or box beam to the use of skin panels to provide torsional stiffness, the impact of composites has been to enhance reliability and reduce weight.

What do you see driving the industry right now?

Globally, what has helped the wind industry has been policy, typically in the form of mandates (like a renewable portfolio standard (RPS)) for renewable energy deployment coupled with incentives, which come in the form of tax breaks or production credits for developers and utilities. The U.S. wind turbine industry is in an interesting state right now, given the pending expiration of the production tax credit, along with lingering effects of the credit crisis, as well as an over-capacity of production for blades, nacelles, and other components. The glut of manufacturing capacity was the result of the tax incentives provided to anyone willing to invest the capital in opening up a factory domestically. The result was a majority of new factories opened by foreign-led firms intent on creating a domestic manufacturing footprint to gain market share and comply with domestic content production requirements to receive some of the tax incentives. That being said, the industry continues to innovate because the single largest driver is the desire to displace conventional forms of energy production and at least a 2 cents / kwhr reduction in the production cost of energy is required in order to make that a reality. Since demand for wind turbines in the domestic industry has stagnated recently, the major OEMs are focusing on cost out on their existing platforms as well future technology development with early stage R&D, which is three to five years from commercialization at this point.

What do you mean by “over-capacity”?

I’d say too many manufacturing facilities have led to too much production. For example, in the U.S. there is a 14 GW manufacturing capacity for nacelles that will be online by the end of 2011, but so far there is only a demand in 7-9 GW range. While I’m not sure what the exact statistics are on blade production, they are similar, and the fact remains that there is more supply than demand right now. Add to that a lack of ongoing policy at the Federal level with regards to the production tax credit and other renewable energy incentives, and there is a level of uncertainty and a lack of desire to invest in development projects. Right now, it looks like the tax credit will end in 2012 because coming up on congressional and a presidential election, no one wants to take sides on a divisive issue. The cyclical stalling gives manufacturers’ years of boom and bust, which is not good for job hiring or economic sustainability.

What would help the composites industry expand within renewable energy?

Materials science will be the most dominant force in influencing the renewables industries over the next 20 years. In any industry, materials science ends up being the largest influence in creating change in technology. Through our efforts in investigating wind industry technology trends, my firm has identified six trends driving the sector. Chief amongst them is component cost / weight reduction. Some manufacturers would choose to make the blades, the nacelle and even the tower of a wind turbine out of composites if it would be cost effective. Blades are still made from fiberglass and balsa wood due to the input cost comparison with composites, but as components get larger and heavier, improved stiffness or reliability is needed and currently that can only be enabled by composites. Other materials are currently not as cost or weight-effective as fiberglass and balsa. However, shape memory alloys (SMA) are one material that is strongly being considered for aerodynamic performance enhancements. We’re at a point where significant R&D investment in furthering technology is resulting in minuscule improvement. We need something more radical and no one has that figured out yet. We need to talk about implementing carbon nanotube-based technologies and composite materials in areas that will have a huge impact.

Are there key pieces of legislation or law that you keep an eye on?

Domestically, energy policy will have the largest stimulus on the composites industry. If there is an extension of the production tax credit or other incentives for renewables like wind, then demand should return in a robust way that will bolster the sub-component suppliers as well.

What more would you like to see from composites?

Continued technological innovation around manufacturing and quality are the most important contributions the composites industry can make to wind turbine production. Most wind turbine blades are made with a hand lay-up process, which can lead to manufacturing defects and lack of consistency. As the industry moves towards more composite material use in wind blades, manufacturing processes that have been pervasive in the aerospace and defense industries for the manufacturing of wings, fuselages and helicopter rotor blades, need to be more heavily utilized. Specifically, automation in manufacturing around fiber placement and the manufacturing and use of pre-pregs or pultruded rods for structural members in the blades are the largest areas of innovation being talked about right now in the wind sector.

What does the wind energy market have to look forward to in 2011-2012?

Globally, growth for wind turbines will continue, albeit in a tepid manner, but there is still significant potential for demand to return more robustly in the U.S. if energy policy will be addressed this year, which is a long shot. If not, the focus will shift elsewhere globally, with China and South America becoming hotbeds for wind turbine deployment, and the European offshore market set to take off in the coming years as well. Currently China—growing at a rate of 12-15 GW per year—is the leader in wind energy, and that trend is expected to continue. However, they tend to use older technology in their manufacturing. For example, there’s not a lot of composites usage as they sign licensing agreements for older designs from the U.S. and European turbine OEMs. Other developing countries like Brazil and India also continue to implement energy policy that encourages growth.

Where are the biggest opportunities for composites in the wind energy market?

Obtaining a larger footprint of composites use in the wind sector will be the result of making the materials more cost competitive. Although, even if the material cost is a net increase for the overall capital cost of the turbine, if it enables technology enhancement such as larger rotor diameters with the same loads as conventional materials, then they could have a significant impact on the cost of energy production for wind.

Within wind energy, what changes need to occur to see more growth?

The owners and/or operators of wind farms are typically technology agnostic, meaning as long as they can get the power produced cheaply and re-sell it to us as consumers with profit and mark-up to cover transmission, then they are happy with whatever form of energy production they get. Further reduction in overall cost of energy for wind will also be needed for more widespread adoption. As long as natural gas and coal are abundant and cheap, wind and other renewables will have a tough time displacing them. While it might be nice to see everyone take an interest in clean energy production for the sake of environmental preservation, consumers ultimately tend to speak with their wallets. It’s possible to change their mindset and the American Wind Energy Association (AWEA) is lobbying for that type of change, but it’s slow moving.

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