Wind turbine technology is improving rapidly, but challenges–especially the current very low cost of natural gas and uncertainty concerning the federal wind energy Production Tax Credit (PTC)–remain, according to presenters on a WINDPOWER 2012 session entitled “Post 2012: Wind Market Assessment of Supply, Demand & Cost.”
In a talk focusing on technology improvement and innovation, Matt Kaplan of IHS Emerging Energy Research (IHS-EER) had some very positive news. His firm, Kaplan said, predicts that the average capacity of the U.S. fleet will increase due to continuing changes in towers and turbines due to a “clear trend” toward turbines optimized for lower-wind-speed sites. Kaplan cited the GE 1.6-100, a relatively new turbine with an increased rotor diameter, as an example, saying that it produces 19 percent more electricity than an older version. New turbines are also coming to market from Nordex, Gamesa, Vestas and others, Kaplan said.
“It's not just the rotors–taller towers are also a significant trend,” he added. “There's a lot more potential in some of these new markets [e.g., Ohio and Michigan] at a 100-meter hub height than at 80 meters. The real challenge is how to decrease the cost–a 100-meter tower can cost twice as much as an 80-meter tower.” In response to this challenge, Kaplan said, companies are working on innovative tower designs, such as one consisting mostly of concrete rather than steel. According to IHS-EER, 99 percent of turbines installed in Michigan in 2011 and 100 percent of those installed in Ohio are on towers over 90 meters in height.
Taller towers and larger rotors are not just unlocking new markets, Kaplan added–they are driving down costs in existing markets. For a wind project near Limon, Colo., using GE 1.6-100 turbines, he said, they allowed Xcel Energy to sign a contract for 40 percent less than a power purchase agreement it cancelled in 2009. The average capacity for the wind farm is expected to be “in the 50s,” compared to a nationwide average for the U.S. fleet of 33 percent in 2011.
Wind turbine technology, Kaplan concluded, is key to improving economics: “In an environment that is characterized by low natural gas prices and uncertainty, it can go a long way.”
Amy Grace of Bloomberg New Energy Finance (BNEF) said the basic ingredients that go into her firm's long-term forecast include: state renewable portfolio standard (RPS) requirements, assumed to contribute roughly 1,500 MW annually; “economic build,” which depends on economic market factors such as the cost of gas, average turbine capacity, and capital cost of wind farms; and “discretionary build,” driven by national security (military procurement of renewable energy), fuel diversification (utilities hedging against gas price risk), and green credentials (utilities and consumers purchasing wind because of its environmental benefits).
BNEF's base case forecast for 2013-2030, she said, averages 5,500 MW/year, assuming gas reaches $5 per million Btu in 2014, turbine capacity averages 35 percent, a 1 percent/year decline in capital cost, and discretionary build of 2 percent of new capacity. In the low case, gas stays below $5/million Btu until 2025 and discretionary build is 1 percent, resulting in average new installed capacity of 3,000 MW/year. And the high case includes average capacity of 40 percent and discretionary build of 5 percent, for 8,000 MW/year.
MAKE Consulting's Dan Shreve further underlined the centrality of technology development, noting that with installations forecast to drop from nearly 11,000 MW this year, as companies race to install new capacity before the PTC expires, to an average of around 4,000 MW/year for the next four years, lowering capital costs will be critical to wind's competitiveness. He stressed Condition Based Monitoring as one important technique, to reduce turbine operations and maintenance costs and extend turbine lifetime
Shreve also pointed to changing market dynamics in the Americas, where the U.S. accounted for 90 percent and Canada for 9 percent of new installations in 2009, but where the 2016 outlook calls for 41 percent in the U.S., 27 percent in Canada, 19 percent in Brazil, and 13 percent in Mexico. Crafting an Americas strategy will be more critical for wind companies, he said.
Mark Bolinger of Lawrence Berkeley National Laboratory (LBNL) discussed findings of a recent study on wind turbine costs that has found them softening over the past few years. LBNL's analysis, he said, shows that while improvements in the cost of energy from turbines have been offset to some extent by the industry's expansion to lower-quality wind sites, that same expansion has helped to alleviate some transmission and siting barriers [for example, by making wind development possible in higher-demand industrial states like Illinois, Indiana, Michigan and Ohio]. The PTC, Bolinger added, is a huge wild card at present–if it is not extended, costs could increase sharply in the short term.