Turbine makers' outlook: Strong 2012, tough 2013, long-term optimism

The consensus forecast at the recent WINDPOWER 2012 Large Turbine Vendors' Forum will come as no surprise to anyone who has been following the wind industry's battle to win an extension of the federal wind energy Production Tax Credit (PTC): a blowout 2012, followed by a difficult 2013.  While that much is obvious, given that the PTC expires at year's end and has not yet been renewed by Congress, turbine manufacturers unanimously said they are in the U.S. for the long haul and generally were optimistic about the longer term.

As attorney Adam Umanoff, the session moderator, noted in opening, the industry is currently bucking some strong headwinds.  In addition to the impending PTC expiration, which is creating uncertainty in the U.S. market, the global economy remains weak, the price of natural gas is at a historic low, and the U.S. economy is facing a “fiscal cliff” with the combination of expiring Bush tax cuts and automatic federal spending cuts.

Panel participants said they generally predict new installations in the U.S. this year of 9-12 gigawatts (GW) of wind capacity, compared with a record 10 GW in 2009.  If Congress extends the PTC before year's end, some installations are likely to slip into 2013, lowering the 2012 total.

Other insights from the manufacturers:

U.S. market fundamentals remain strong.  As Gamesa Technology Corp. CEO Borja Negro put it, “We see a strong economy, strong winds, lots of land, and adequate policy.” Suzlon's Duncan Koerbel added, “If you're going to be in wind, you have to be in the U.S.,” and Goldwind USA CEO Tim Rosenzweig concurred, noting that his firm is currently heavily concentrated in its native China and “We are looking to the U.S. to expand–if we can make it here, we feel we can be successful globally.”

Wind turbine technology is continuing to improve rapidly.  Panelists said they see a broad range of opportunities to continue to reduce the life-cycle cost of energy from wind, including improved operations & maintenance (O&M), use of computational fluid dynamics to increase rotor blade efficiency, improving manufacturing processes, and in at least one instance, converting to direct drive to eliminate gearbox maintenance costs.

Policy uncertainty around the federal wind energy Production Tax Credit (PTC) is damaging to efforts to develop a domestic component supply chain.  Goldwind's Rosenzweig, for example, commented, “We've sourced a lot of content for our turbines in the U.S., from companies like Broadwind, LM Wind Power, and Timken. We're very concerned.”  Added Nordex USA CEO Ralf Sigrist, “Many suppliers did not come to the U.S. because of the policy uncertainty.  Many went to China … The current situation is certainly not favorable.”  GE Wind Technology Manager Keith Longtin noted an additional perverse impact of the uncertain status of the PTC: the all-out effort by companies to get projects in before year's end has led to increased costs in some cases, as parts are being sourced from overseas to meet demand despite shipping costs. He added, “That's the result of policy uncertainty driving huge peaks and valleys in the supply chain.”

Wind's value as a long-term hedge against fuel price uncertainty is not adequately reflected in the market.  Sigrist was emphatic on this point, saying, “There is still something needed to get buy-in on the utility side: they need to recognize the economic attribute of a long-term price hedge.  Current natural gas prices are not sustainable–they need to recognize that attribute.”

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