AWEA_id1970

PTC Deadline Propels U.S. To New Record

Spurred by the looming expiration of the federal production tax credit (PTC), the U.S. wind energy industry installed 13.124 GW of capacity in 2012, eclipsing the previous record of 10 GW installed in 2009, the American Wind Energy Association (AWEA) reports.

In the fourth quarter of 2012 alone, more than 8.3 GW of wind was installed, making it the strongest quarter in the history of U.S. wind power. Putting the fourth quarter’s numbers into perspective, the amount installed was higher than in every other year except 2009.

AWEA also reported that, for the first time, wind energy became the No. 1 source of new U.S. electric generating capacity, providing 42% of the total.

California regained its position as the No. 2 state in installed wind capacity, surpassing Iowa.

Illinois had its most successful year ever. Ranking No. 5 in new capacity, Illinois saw the installation of more than 800 MW, with half of that output sold into the Tennessee Valley Authority market.

These were the top states for new capacity installations in 2012:

1. Texas (1.826 GW)

2. California (1.656 GW)

3. Kansas (1.440 GW)

4. Oklahoma (1.127 GW)

5. Illinois (823 MW)

6. Iowa (814 MW)

7. Oregon (640 MW)

8. Michigan (611 MW)

9. Pennsylvania (550 MW)

10. Colorado (496 MW)

AWEA also reported that new wind power purchasers included at least 18 industrial buyers, 11 schools or universities, and eight towns or cities, showing a significant trend toward nontraditional power purchasers from the industrial sector. Manufacturers of everything from plastics to light bulbs to semiconductors, as well as farms and medical centers, are now directly purchasing wind power, AWEA notes.

Notably, total U.S. capacity surpassed 60 GW – just five months after reaching 50 GW installed, AWEA adds.

 

Vestas Expects
‘Tough’ 2013

Despite being a record year for installations, 2012 was undoubtedly challenging for the wind energy industry, as policy uncertainty halted developers’ project plans and sapped demand for wind turbine components. Not even the world’s largest wind turbine manufacturer was immune to those challenges: Vestas acknowledged in its 2012 financial report that it, too, has suffered the consequences of market instability.

Although the Danish wind turbine maker recorded a 24% revenue increase, to €7.216 billion, it took a €963 million loss for the year. The disappointing results should not come as a surprise, however, as the company has taken repeated steps to overcome what CEO Ditlev Engel called a “credibility problem.”

In January 2012, the company announced it would make widespread layoffs, and similar announcements followed throughout the year. By year-end, Vestas had cut nearly 5,000 employees – 22% of its global workforce – and the company plans to reduce its headcount by at least another 1,800 by the end of this year.

These workforce reductions will save the company over €400 million over last year and this year combined, Vestas said in its annual report.

However, in a webcast detailing the company’s 2012 results, Engel noted that there were other factors affecting the company’s financial standing.

“What we did not know at the time was that we had a significant cost overrun of the new technology related to the V112 and [V80-2.0 MW] GridStreamer, which haunted Vestas’ financials significantly in the year 2012,” he said. “The important thing here is that it had nothing to do with the fact that we were in the process of adjusting the organization.”

Like many suppliers to the industry, Vestas recorded a decrease in order intake in 2012. The company’s order volume dropped 49% to 3.738 GW, thanks to diminished demand. Europe and Africa accounted for 61% of Vestas’ orders, while the Americas represented 26% and the Asia Pacific had a 13% share.

At the end of 2012, Vestas’ order backlog stood at 7.16 GW, compared to 9.55 GW at the end of 2011. In terms of capacity, Europe and Africa accounted for 67% of the backlog.

Although Vestas beat its 2011 production and shipment numbers in 2012, the results were slightly lower than the company’s expectations for the year. In 2012, Vestas produced and shipped 2,765 wind turbines with an aggregate capacity of 6.17 GW, compared to the 6.3 GW it had predicted, the company said in its financial report.

Vestas said it expects a “much more subdued” 2013 than 2012, when it installed 1.313 GW in the U.S.

Notably, Vestas has reduced its physical presence in the U.S. over the past year – a development the company attributes to the uncertain fate of the production tax credit during 2012. Throughout the year, Vestas made several rounds of cuts at its Colorado manufacturing plants, as well as shuttered all three of its U.S. research and development facilities.

 

Technology and outlook

After discontinuing its V52-850 kW and V60-850 kW turbine platforms last year, Vestas will focus on further improvements to its 2 MW and 3 MW machines, the company said in its financial report. To this end, Vestas will add new rotors and generators of varying sizes to its existing platforms.

The company will also continue the development of its 8 MW offshore wind turbine. Vestas expects to install the first prototype of the V164-8.0 MW in the second quarter of next year in Denmark, where it will be tested in collaboration with developer DONG Energy. The serial-production date for the turbine will depend on customer demand but could begin as early as 2015, Vestas said.

Due to weaker-than-anticipated order intake, Vestas is “prepared for a tough 2013,” the company said, adding it expects its overall shipments to decline next year, to between 4 GW and 5 GW. However, thanks to cost-cutting measures, Vestas forecasts a revenue increase of €1 billion, to €5.5 billion, next year. The company also noted that it has no plans to invest in production facilities and will even put some factories up for sale.

 

Uncertainty Crimps
Global Investment

Clean energy investment declined 11% in 2012, weighed down by regulatory uncertainty and policy changes in big markets such as the U.S., India, Spain and Italy, according to the latest research from Bloomberg New Energy Finance (BNEF).

The sharply lower prices of wind and solar technology also exerted downward pressure on investment volumes, although they allow for higher installation levels per dollar of funding, BNEF says.

The firm’s data show that overall global clean energy investment in 2012 was $268.7 billion, down from a revised figure of $302.3 billion in 2011. The 2012 investment total was the second-highest ever, and five times that seen in 2004.

The highlight of the 2012 total for clean energy investment was a record $67.7 billion outlay by China – up 20% over 2011 due to a surge in the country’s solar sector. China’s total was more than 50% above that of the second-place country, the U.S., which saw $44.2 billion in clean energy investment in 2012. In 2011, the U.S. beat China as investors rushed to take advantage of stimulus-related programs before they expired.

Other strong performers include South Africa, which saw investment leap to $5.5 billion from just a few tens of millions in 2011, as its tender process for wind and solar led to a string of large project financings; and Japan, where a fresh emphasis on renewable energy after the Fukushima nuclear disaster in 2011 and the start of a new subsidy program helped investment soar 75% in 2012 to $16.3 billion.

Meanwhile, clean energy investment in the U.S. fell 32%, thanks to policy uncertainty throughout most of the year. Italy saw a 51% plunge in clean energy investment to $14.7 billion, as policy changes curbed the country’s solar photovoltaics boom; Spain saw a 68% decrease to just $3 billion, as its government announced a moratorium on subsidies for projects not yet approved; and India experienced a 44% setback, reflecting the expiration of incentives for wind and fewer project approvals for solar.

Other countries showed mixed results in terms of total investment in 2012. Germany saw a 27% drop to $22.8 billion, while France suffered a 35% decline to $4.3 billion and the U.K. experienced a 17% fall to $8.3 billion. Australia enjoyed a 40% gain to $6.2 billion, Mexico saw a fivefold increase to $2 billion and Brazil saw a 32% decrease to $5.3 billion.

“We warned at the start of last year that investment in 2012 was likely to fall below 2011 levels, but rumors of the death of clean energy investment have been greatly exaggerated,” says Michael Liebreich, CEO of BNEF. “Indeed, the most striking aspect of these figures is that the decline was not bigger - given the fierce headwinds the clean energy sector faced in 2012 as a result of policy uncertainty, the ongoing European fiscal crisis and continuing sharp falls in technology costs.

“Another message from the 2012 data is that investment is broadening rapidly from established markets - such as Europe, the U.S. and China - to new ones in Africa, the Middle East, Latin America and Asia Oceania,” he continues. “Australia, South Africa, Morocco, the Ukraine, Mexico, Kenya, Brazil, Ethiopia, Chile and South Korea were among the countries seeing at least one project of more than $250 million financed during the year.”

 

Breaking down the data

The new investment total of $268.7 billion was made up of five main parts. The largest of these was asset finance of utility-scale renewable energy projects, such as wind farms, solar parks and biofuel plants. This segment totaled $148.6 billion, down from $180 billion in 2011.

The next biggest segment was small-scale project investment, primarily rooftop solar, which came in at $80.2 billion, up from $76.5 billion in 2011. Corporate and government research and development totaled $30.2 billion in 2012, up marginally from 2011.

The other elements were venture-capital and private-equity investment in specialist clean energy companies, which fell 34% to $5.8 billion - its lowest figure since 2006 - and public-market investment in quoted companies. The latter fell 57% to $5.1 billion – the lowest since 2004 - and was down 80% from the peak figure of $25.6 billion in 2007.

Merger and acquisition (M&A) activity in clean energy is not counted as new investment but is an important part of the sector’s development, BNEF notes. Clean energy M&A activity totaled $50.8 billion in 2012, down 31% from the record figure recorded in 2011. Within this segment, corporate M&A (as distinct from projects changing hands) was $10.4 billion, down 69% from 2011 and the weakest since 2004.

Once again, solar was the dominant sector in terms of overall clean energy investment in 2012, accounting for $142.5 billion – down 9% from its 2011 record. Wind energy saw investment of $78.3 billion, down 13%, while the third-largest sector – energy-smart technologies such as smart grid, energy efficiency and electric vehicles – suffered a 7% drop to $18.8 billion.

Biomass and waste-to-energy was the fourth-largest sector, at $9.7 billion in 2012, but this figure was 27% down over last year. Biofuels, the second-largest sector back in 2006, saw investment fall 38% to $4.5 billion, while geothermal experienced a 39% drop to $1.8 billion.

The only sector to show growth in 2012 was small hydro (projects smaller than 50 MW), which saw an increase of 17% to $7.6 billion. For the first time, BNEF also published a figure for total investment in carbon capture and storage (CCS) projects worldwide, although this is being shown separately rather than being included in the clean energy total. CCS project investment was $2.8 billion in 2012, down from $3 billion in 2011.

Among the largest projects financed in 2012 were four offshore wind sites in the German, U.K. and Belgian sections of the North Sea: Wikinger (400 MW, $2.1 billion); Baltic II (288 MW, $1.6 billion); Lincs (270 MW, $1.6 billion); and Northwind (216 MW, $1.1 billion).

Wind energy developer China Longyuan Power Group achieved the biggest public-market issue of the year, raising $375 million on the Hong Kong Stock Exchange.

 

ERCOT Expects
Project Upgrades

The Electric Reliability Council of Texas (ERCOT) expects Texas transmission providers to complete improvement projects totaling $8.9 billion by the end of 2017.

A long-standing constraint between West Texas, where most of the state’s wind energy generation is located, and the North Texas region, which includes the Dallas-Fort Worth area, is expected to be resolved by the end of this year, when the state’s Competitive Renewable Energy Zones project is completed.

However, with more than 20 GW of new wind power currently being studied, new constraints could occur in the future, particularly in the Panhandle region, ERCOT says.

To address these and other concerns, ERCOT has released the Long-Term System Assessment (LTSA) report, which provides an assessment of system needs over the next 10 to 20 years, as well as the Electric System Constraints and Needs report.

The LTSA looks beyond the five-year ERCOT stakeholder planning horizon, evaluating a range of possible scenarios that could affect the types and locations of generation resources, as well as consumer energy-use patterns.

The results indicate that the following resources likely will be needed within the next 10 years:

 

Plans Revealed
For AWC Backbone

The companies behind the Atlantic Wind Connection (AWC) – an offshore wind transmission “backbone” planned by independent transmission company Trans-Elect and developer Atlantic Grid Development, and backed by Google, Bregal Energy, Marubeni Corp. and Elia – have revealed some of the details for the first phase of the project.

The group has selected New Jersey for the project’s first phase, which will be called the New Jersey (NJ) Energy Link. According to the companies, the selection was based on the state’s commitment to developing an offshore wind energy industry and the large potential for renewable energy that exists off its shoreline.

The NJ Energy Link, which will be built in three phases, will be a subsea offshore electrical transmission cable linking energy resources and end users in northern, central and southern New Jersey. The cable will span the length of New Jersey and carry 3 GW of electricity.

According to AWC, the NJ Energy Link will help support the goal of developing offshore wind by reducing the cost of offshore wind energy; creating a superhighway for wind farms; and providing ratepayers with a transmission line that works 100% of the time, not just when the wind is blowing.

AWC expects that construction on the NJ Energy Link will begin in 2016 and that the first phase will enter service in 2019.

 

Project Planned At
Nuclear Facility

The National Nuclear Security Administration (NNSA) has awarded a contract to Siemens Government Technologies Inc. to construct and operate the U.S. government’s largest wind farm.

Under the agreement, Siemens will provide a wind farm system for 20 years, including a five-year service, maintenance and warranty agreement with operations and maintenance options in years six through 10. Siemens will also provide an annual energy production guarantee.

The Pantex wind farm will consist of five 2.3 MW turbines located on 1,500 acres of government-owned property east of the Pantex Plant, a federal nuclear weapons assembly and disassembly facility. The project will allow the NNSA to meet almost all of its renewable energy goals while also offering research opportunities to Texas Tech University and its research collaborators.

The wind farm will fulfill more than 60% of Pantex’s annual electricity needs, the NNSA notes.

“Three years of hard work, dedication and determination have paid off,” says Steve Erhart, manager of the NNSA’s production office. “The NNSA’s goal was to turn Texas wind into energy, and we have overcome numerous hurdles in implementing the contracting strategy.”

 

DOI Spurs Arizona
Renewables

The U.S. Department of the Interior (DOI) has announced the first-ever statewide plan to identify and set aside previously disturbed lands for wind and solar energy development.

The initiative, called the Restoration Design Energy Project, designates a renewable energy zone on 192,100 acres of public land across Arizona as potentially suitable for utility-scale solar and wind energy development.

The publication of the record of decision (ROD) for the project caps a three-year, statewide environmental analysis of disturbed land and other areas with few known resource conflicts that could accommodate commercial renewable energy projects. The ROD also establishes the Agua Caliente Solar Energy Zone, the third solar zone on public lands in Arizona and the 18th nationwide.

The lands identified in Arizona include previously disturbed sites (primarily former agricultural areas) and lands with low resource sensitivity and few environmental conflicts. Bureau of Land Management lands in Arizona containing sensitive resources requiring protection, such as endangered or threatened wildlife and sites of cultural and historic importance, were eliminated from consideration.

Furthermore, the areas selected had to have reasonable access to transmission lines and load centers, as well as be situated near areas with high electricity demand.

The ROD also sets standards for projects to avoid impacts to sensitive watersheds, groundwater supplies and water quality, and establishes a baseline set of environmental protection measures for proposed renewable energy projects.

However, the initiative does not directly authorize any wind or solar projects; any proposal will need to undergo a site-specific environmental review.

 

FERC Mulls Reforms
To Interconnection

The Federal Energy Regulatory Commission (FERC) has issued a notice of proposed rulemaking (NOPR) to modify its small generator interconnection procedures (SGIP) and small generator interconnection agreement (SGIA), which establish the terms and conditions under which public utilities must provide interconnection service for electric generating facilities that are 20 MW or smaller.

FERC states that the proposed reforms stem from market changes, such as higher volumes of small generator interconnection requests and increases in solar photovoltaic installations.

The proposals are intended to ensure that the time and cost of processing small generator interconnection requests, particularly those for distributed solar generating facilities, will be just and reasonable and not unduly discriminatory, as well as allowing for more efficient interconnection of resources to the benefit of customers while maintaining grid reliability, increasing energy supply and removing barriers to the development of new energy sources.

While the NOPR was motivated by increases in the solar photovoltaic market, the FERC filing also notes that installed wind generation with a capacity of 20 MW or less increased from 1,185 MW in 2005 to 2,961 MW in 2012.

 

ITC Rules On
Wind Tower Case

The U.S. International Trade Commission (ITC) has determined that the U.S. wind energy industry has been materially injured by dumped and subsidized imports of utility-scale wind turbine towers from China and Vietnam.

The case was brought on Dec. 29, 2011, by the Wind Tower Trade Coalition (WTTC), a group of producers of utility-scale wind towers in the U.S. The case covers utility-scale wind towers with a minimum height of 50 meters that are designed to support turbines with generating capacities in excess of 100 kW.

The U.S. Department of Commerce (DOC), which issued its final ruling on the case in December 2012, will now impose antidumping (AD) and countervailing-duty (CVD) orders against Chinese producers of utility-scale wind towers with AD margins of between 44.99% and 70.63% and CVD margins of between 21.86% and 34.81%, according to law firm Wiley Rein, which represented the WTTC in the case.

The DOC will also impose an AD order against Vietnamese producers of utility-scale wind towers at margins of between 51.50% and 58.49%.

“The commission’s determination today recognizes that over the last two years, in a period of peak demand, the U.S. [wind] industry should have been profitable,” says Alan H. Price, a partner in Wiley Rein’s international trade practice and lead counsel to the WTTC. “Instead, due to the surge in dumped and subsidized imports, the industry lost market share [and] saw its profits collapse, producers leave the industry and its workers laid off.”

The ITC’s determination ensures that, following publication of the AD and CVD orders in the Federal Register, the DOC will instruct U.S. Customs and Border Protection to begin collecting cash deposits on entries of utility-scale wind towers at the final AD and CVD rates, Wiley Rein says.

“These orders are important to help restore a U.S. industry and its workers that have been devastated by unfair price competition from Chinese and Vietnamese wind tower producers,” Price notes.

 

Wind Development
Company Formed

Asset management firm Blackstone has formed a partnership with a team led by Pedro Barriuso, former executive chairman of Element Power and former head of Iberdrola Renewables, to create Fisterra Energy, a company owned by funds managed by Blackstone on behalf of its private equity investors.

Fisterra’s primary focus will be to identify, develop, finance, construct and operate large-scale independent power projects in markets with capacity or transmission shortfalls, with a focus on Latin America, Europe and the Middle East.

The Fisterra team has collectively managed the development of more than 25 GW of new power projects over the past 15 years and has built more than 8 GW of power plant projects in more than 15 countries.

The team combines management and technical capabilities covering all aspects of project development, project financing, long-term supply contracts, mergers and acquisitions, and the construction and operation of energy and infrastructure projects. w

New & Noteworthy

PTC Deadline Propels U.S. To New Record

 

 

 

 

 

 

 

 

 

 

 

 

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