WINDPOWER 2013 Update: Large turbine vendors see need for policy certainty, fairness

Following the very late extension on January 1 of the federal wind energy production tax credit (PTC), the U.S. wind power market appears headed for a sizable drop this year, followed by a solid recovery in 2014, according to panelists at the WINDPOWER 2013 Large Turbine Vendors Forum.

The overarching theme of what the market needs—policy stability—is nothing new, but the panelists’ remarks reflected the experience of the past year and a half, during which the domestic supply chain of turbine component manufacturers suffered serious whiplash as a result of the PTC extension delay. Gamesa CEO Borja Negro spoke most strongly about the results, saying at one point, “Without a stable policy framework, I don't think we'll invest further [in this market].” The last year has been very difficult, with layoffs being required, he said, and “I don't think we want to do that again.”

Speakers said some component manufacturers have gone out of business altogether or abandoned the industry due to a collapse in post-2012 orders resulting from the PTC’s impending expiration. Also, they said, the delay resulted in a higher cost of energy from some projects completed in late 2012 as companies, working feverishly to install equipment before the December 31 deadline, were forced to import some components and prices rose. As Vestas Sales and Service President Chris Brown commented, “We’ve got to figure out how to help these guys [component suppliers] get stronger.” Goldwind USA CEO Tim Rosenzweig concurred, saying, “We haven't talked much about the inefficiencies of these ups and downs.  We've partnered with people for blades and towers, and when they have to lay people off and train new ones, if you’re trying to drive down the cost of energy, that doesn't do it.”

Mr. Brown also repeatedly emphasized the need for greater policy fairness among competing energy sources, pointing to the availability of Master-Limited Partnerships (MLPs) as a permanent tax code feature for fossil fuel investments (wind is excluded from MLPs at present): “We need to get ourselves on an equal footing with natural gas and the real estate industry.” Still, certainty is critical, according to Nordex President and CEO Ralf Sigrist, who said, “There are a couple of rotor molds that have disappeared from the U.S. recently—[companies] put them somewhere where there is more certainty.  They don’t necessarily come back with a short extension. Yes, we need a level playing field, but we also need to know what's happening over the next 3-5 years.”

Panelists differed somewhat on the exact size of the 2013-2014 market, collectively predicting ranges of 2-5 GW (gigawatts) for 2013 and 5-8 GW for 2014. Beyond that, they agreed, visibility is challenging because yet another “PTC cliff” lies ahead, as the credit is scheduled to expire on December 31 for new projects that are not under construction. When panel moderator Adam Umanoff, of Akin Gump Strauss Hauer & Feld, asked whether the conversation would have been different had the credit been extended in early 2012, there was unanimous agreement. And Mr. Negro prompted a moment of black humor when he said, “If you ask me about 2014 or 2015, I can make a guess, but for 2016, if I give you an honest answer–I don’t have a clue.” (A report on industry analysts’ discussion of future U.S. wind turbine market size at another WINDPOWER 2013 session is located here.)

One policy idea that attracted support was the concept of a renewable energy standard under which utilities would be required to source a certain minimum percentage of their electricity supply on the basis of long-term prices. Commented Mr. Sigrist, “At the end, it’s all around economics and what makes economic sense. [Public utility commissions] could certainly say that utilities have to present, for a certain percentage [of supply], long-term fixed prices versus the spot market.  Do that on a competitive basis, and let’s see where natural gas shows up on [a 20-year basis].  When you talk to public utility commissions, they do not contest that it's sound to diversify.”

Members of the panel disagreed on the best turbine drivetrain approach going forward, reflecting the design choices of their companies. Keith Longtin of GE Renewable Energy spoke up for gearboxes, saying that through a variety of innovations including accelerated testing, his company has reduced predicted failure rates from 80 percent within 5-10 years to 10 percent within 10 years: “We believe gearboxes are a really effective way of transferring torque and building low-cost machines.” Favoring direct-drive designs, which eliminate the gearbox, were Siemens’s Mike Revak, VP of Technical Sales and Proposals, and Mr. Rosenzweig. Commented Mr. Revak, “We have both geared and direct-drive platforms–the gearbox has been an Achilles heel of design.  When you look at the market and demands, there's a place for it all, but long term, we're moving to direct-drive … We do a lot of offshore turbines as well–particularly when you're out on the water, [the cost of] gearbox removal drives you to direct-drive.  We have a 6-MW direct-drive machine in service now.”

Related articles:

WINDPOWER 2013 Update: Analysts see future market of 4-8 GW/year in U.S., May 7, 2013
E.U. wind power now 7 percent, but industry challenged in 2013, February 11, 2013
It's official: U.S. wind energy blew away old record for installations in 2012, January 31, 2013
Turbine makers' outlook: Strong 2012, tough 2013, long-term optimism, June 21, 2012
Skeptical about renewable energy predictions? You should be., June 20, 2012
WINDPOWER 2012 Update: U.S. lags behind China in clean energy technology race, June 5, 2012
Wind technology advancing rapidly, challenges remain, June 4, 2012
U.K. market for small turbines surpasses U.S., but U.S. manufacturers benefit, May 3, 2012
Global wind power market expected to more than double in next five years, April 17, 2012
Wind power drives strong interest in U.S. renewable electricity generation, April 17, 2012
AWEA Annual Market Report underscores need for PTC extension, April 13, 2012
WINDPOWER report: U.S. wind market near-term prospects clouded by natural gas; policy key, May 24, 2011

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