Report Says U.S. Must Find Way To Rebuild
By now, most everyone in the U.S. wind industry understands that last year’s 13 GW-plus installed capacity shattered all previous records.
But how many knew that the price of wind under long-term power purchase contracts signed in 2011 and 2012 averaged $0.04/kWh – making wind competitive with a range of wholesale electricity prices seen in 2012. Or that cumulative U.S. installations have increased more than 22-fold since 2000?
These factoids are all part of the 2012 Wind Technologies Market Report, released on Aug. 6 by the U.S. Department of Energy and Lawrence Berkeley National Laboratory (LBNL). The report, authored by the LBNL’s Ryan Wiser and Mark Bolinger, details the latest trends in the U.S. wind power market.
Findings from the report indicate that nine states now rely on wind power for more than 12% of their total annual electricity consumption – with wind power in Iowa, South Dakota and Kansas contributing more than 20%. Additionally, Texas added over 1.8 GW of wind power last year, more than any other state.
The authors contend the wind sector’s growth underscores the importance of continued policy support and clean energy tax credits to ensure that wind manufacturing and jobs remain in the U.S. The 2012 Wind Technologies Market Report expects 2013 to be a slow year for new capacity additions, due in part to continued policy uncertainty and project development timelines. While the report notes that 2014 is expected to be more robust, as developers commission projects that will begin construction in 2013, projections for 2015 and beyond are much less certain.
Despite the fine work of the domestic supply chain last year, reduced near-term demand expectations led to a difficult business environment toward the middle and end of last year.
Not only did a smaller number of new turbine and component manufacturing facilities open in 2012 than in 2011, but also a number of facilities closed (including the manufacturing facilities of Clipper and Nordic).
Even with these adjustments, notes the authors, near-term forecasts for wind power additions in the U.S. suggest that the market will have an over-capacity of nacelle assembly capability in the short term. The American Wind Energy Association estimates that the entire wind energy sector directly and indirectly employed 80,700 full-time workers in the U.S. at the end of 2012.
Although this is 5,700 more jobs than reported in 2011, wind industry manufacturing jobs saw an overall decrease from 30,000 jobs in 2011 to 25,500 in 2012, due to the severe decline in new orders toward the end of 2012.
According to the authors, manufacturers have now begun receiving orders for 2013 and 2014 delivery, but it is not yet clear to what degree these orders will lead to a recovery of the manufacturing sector in 2013.
Perhaps more troubling is that current state policies cannot support continued growth at recent levels. As of June, renewable portfolio standards (RPS) existed in 29 states and Washington, D.C. From 1999 through 2012, 69% of the wind power capacity built in the U.S. was located in states with RPS policies; in 2012, this proportion was 83%.
However, given renewable energy growth over the last decade, existing RPS programs are projected to drive average annual renewable energy additions of just 3 GW to 5 GW per year between 2013 and 2020 (only a portion of which will be from wind), less than the amount of wind capacity added in recent years, thus demonstrating the limitations of relying exclusively on RPS programs to drive future deployment.
Has Big Plans
South Dakota-based developer Dakota Plains Energy wants to team up with local landowners in Lincoln County to build a community wind farm between 500 MW and 1 GW. The ambitious developer cites two main catalysts for the project: South Dakota’s strong-but-underutilized wind regime and a nearby transmission project.
According to the National Renewable Energy Laboratory, South Dakota is the fifth windiest state, with potential to generate more than 882 GW of wind energy. However, the state had a total 784 MW of installed wind capacity by year-end 2012.
“We have an awful lot of wind. We should be embracing it, we should be monetizing it,” says Rob Johnson, president and co-founder of Dakota Plains Energy. He refers to wind power as a “game changer” for South Dakota.
Dakota Plains Energy began working in the wind energy business in 2007 and started formulating its first project in early 2008. Dubbed the Campbell County Wind Farm, it is a traditionally financed project, and Johnson says construction on a 99 MW phase is slated to begin by December. The developer plans to eventually build the wind farm out to 300 MW.
The company principals, including Johnson, come from a background in real estate development. So, while working on the Campbell project, Dakota Plains Energy traveled to South Dakota looking for a prime spot to put another wind farm.
“We learned a long time ago in real estate development that if you wait for people to knock on the door, you’ll starve to death. Nothing will happen,” explains Johnson. “You go out and find the best location and figure out a way to put a project together.”
About two years ago, the developer came across Lincoln County and did some due diligence. The county is located close to a planned transmission project, and Johnson says preliminary wind studies showed the region is promising. Dakota Plains Energy then prepared a business plan and engaged local landowners to see if they would be interested in moving forward with a project. As it turned out, they were.
Earlier this year, some Lincoln County landowners and community leaders established Dakota Power Community Wind. The group formally announced “preliminary action” on the up-to-1 GW community wind farm in July, saying the project would help boost the county’s economy.
“This wind energy plan is unique in being a truly community-based project,” says Jim Fedderson, mayor of Beresford and Dakota Power board vice chairman. “The economic potential for our area is tremendous, in addition to using South Dakota renewable resources to help solve our country’s energy needs.”
According to Dakota Power Community Wind, a 1 GW project would create over 1,000 construction and 70 permanent jobs, as well as lead to millions of dollars in direct investments. The entire project could have a $2 billion price tag.
Johnson explains that enrolled landowners in the project footprint would receive royalties, and conceptually, citizens across the state may have the opportunity to invest in the project, should such a plan be approved.
“To bring this into a project that’s really feasible, we need the buy-in, if you will, of the local residents and the potential stakeholders,” he says, adding that he hopes to secure between 65,000 and 75,000 acres of land.
Making the connection
South Dakota may have a great wind regime, but according to Johnson, “Our problem is we don’t need it here. We’re a small state.”
Therefore, he says South Dakota should make wind energy an exportable product. The main hurdle, though, is that the state has a lack of available transmission. “If we can figure out a way to break that transmission deadlock, we can really open up the doors for this state.”
In addition to its wind potential, Johnson explains that he chose Lincoln County mainly because it is near the planned Rock Island Clean Line project. As proposed by Clean Line Energy Partners, the 500-mile HVDC transmission line project would deliver 3.5 GW of renewable energy from northwest Iowa and the surrounding regions to Illinois and other states to the east.
Hans Detweiler, development director of Rock Island, says the project is well under way and currently seeking regulatory approvals. He expects the line to be in operation sometime in 2017.
Dakota Plains Energy has been in discussions with Rock Island for quite some time and will seek to connect to the transmission line if and when both projects come to fruition. As of now, Johnson says the only formalization between the two parties is an executed memorandum of understanding.
“We are pleased that Dakota Plains Energy is interested in our project,” notes Detweiler. “South Dakota is highly transmission constrained, and Rock Island Clean Line would create potential outlets for that energy to be delivered to PJM.”
That said, there is a problem: Dakota Plains Energy would still need to build about 60 miles of transmission line to connect to Rock Island’s western terminus in Iowa. Johnson anticipates constructing a 345 kV line and says the community wind farm must ultimately be at least 500 MW to make it financially viable.
“Can this be done? Yeah. Are we going to do 1 GW? I don’t know,” he says. “It depends on how much land we sign up and the response, but our modeling shows us that to pay for that 60 miles, we’re going to need to have pretty close to 500 MW minimum.”
Johnson says he has met with several potential developers, including Clean Line, that could handle the extension and other transmission work. As to whether Clean Line will be the one to build the extra 60 miles, Detweiler says, “It is too early to determine at this point.”
Dakota Plains Energy recently held meetings with over 200 Lincoln County landowners. According to Johnson, there has been an “amazingly strong positive response [and] absolutely no negative reaction to this point.”
The developer’s attorneys are in the process of formalizing some landowner option agreements, and Johnson expects to begin signing up acreage. He is careful not to disclose anymore details.
Johnson hopes to begin erecting meteorological towers by the end of the year, as well as conduct other studies and seek necessary permits. In order to closely match Rock Island’s timeline, Dakota Plains Energy wants the wind farm to come online by 2018. “We’re already halfway through 2013, so we have to get moving,” Johnson admits.
Nonetheless, Dakota Plains Energy is determined to develop the wind farm, whether it be 500 MW or 1 GW.
“We’re a South Dakota company that wants to help our home state, so we are taking the challenge head-on and intend to do everything in our power to make this project a reality.”
NREL: RE Cost To Narrow By 2025
By 2025, wind and solar power electricity generation in the western U.S. could become cost-competitive without federal subsidies if new renewable energy development occurs in the most productive locations, according to a new report from the National Renewable Energy Laboratory (NREL).
The report, “Beyond Renewable Portfolio Standards: An Assessment of Regional Supply and Demand Conditions Affecting the Future of Renewable Energy in the West,” compares the cost of renewables (without federal subsidies) from the West’s most productive renewable energy resource areas with the cost of energy from a new natural gas-fired generator built near the customers it serves.
“The electric generation portfolio of the future could be both cost-effective and diverse,” says NREL Senior Analyst David Hurlbut, the report’s lead author. “If renewables and natural gas cost about the same per kilowatt-hour delivered, then value to customers becomes a matter of finding the right mix.
“Renewable energy development, to date, has mostly been in response to state mandates,” Hurlbut adds. “What this study does is look at where the most cost-effective yet untapped resources are likely to be when the last of these mandates culminates in 2025 and what it might cost to connect them to the best-matched population centers.”
According to NREL, the study’s key findings include the following:
- Wyoming and New Mexico could be areas of robust competition among wind projects aiming to serve California and the Southwest. NREL says both states are likely to have large amounts of untapped, developable, prime-quality wind potential after 2025. Wyoming’s surplus will probably have the advantage of somewhat higher productivity per dollar of capital invested in generation capacity; New Mexico’s will have the advantage of being somewhat closer to the California and Arizona markets.
- Montana and Wyoming could emerge as attractive areas for wind developers competing to meet demand in the Pacific Northwest. The challenge for Montana wind power appears to be the cost of transmission through the rugged forests that dominate the western part of the state.
- Wyoming wind power could also be a low-cost option for customers in Utah, which also has its own diverse portfolio of in-state resources.
- Colorado is a major demand center in the Rockies and will likely have a surplus of wind potential in 2025. However, the study suggests that Colorado is likely to be isolated from future renewable energy trading in the West due to transmission costs between the state and its Rocky Mountain neighbors.
- California, Arizona and Nevada are likely to have surpluses of solar resources. None is likely to have a strong comparative advantage over the others within the three-state market, unless environmental or other siting challenges limit in-state development. Consequently, development of utility-scale solar will probably continue to meet local needs rather than expand exports.
- New geothermal development could trend toward Idaho by 2025 since much of Nevada’s resources have already been developed. Geothermal power from Idaho could be competitive in California as well as in the Pacific Northwest, but NREL says the quantity is relatively small. Reaching California, Oregon and Washington may depend on access to unused capacity on existing transmission lines or being part of a multi-resource portfolio carried across new lines.
The study notes future electricity demand will be affected by several factors, including trends in the supply and price of natural gas, consumer preferences, technological breakthroughs, further improvements in energy efficiency, and future public policies and regulations. While most of these demand factors are difficult to predict, NREL says the study’s supply forecasts rely on empirical trends and the most recent assessments of resource quality.
CEO Ditlev Engel
Vestas Wind Systems A/S has ousted Ditlev Engel as company president and CEO. Engel, who has served as the wind turbine maker’s head since 2005, will be replaced by Anders Runevad effective Sept. 1. Until then, Chief Financial Officer and Executive Vice President Marika Fredriksson will assume the role of acting president and CEO.
The announcement comes as Vestas reveals its interim financial report for the second quarter of 2013 (Q2’13). In the quarter, the company generated revenue of €1.185 billion, down 26% from the year-earlier period, and net loss amounted to €62 million, a decrease of €54 million compared to Q2’12.
Earnings before interest and taxes (EBIT) decreased by €28 million to €12 million. The EBIT margin was 1%, and the free cashflow increased by €535 million to €197 million.
The intake of firm and unconditional wind turbine orders was 1,641 MW in the second quarter. Due to uncertainty surrounding a few customers’ ability to comply with the contractual obligations, Vestas says it has resolved to lower the order backlog value by €4 million. Including this adjustment, the value of the wind turbine backlog amounted to €7.1 billion as of June 30.
In addition to the wind turbine order backlog, Vestas had service agreements with contractual future revenue of €5.9 billion at the end of June. Thus, the company says, the value of the combined backlog of wind turbine orders and service agreements stood at €13 billion – an improvement of €600 million during the quarter.
Vestas has experienced a longtime trend of bleak financial earnings, which has led to thousands of job cuts, executive shakeups and restructuring. In its Q2’13 report, the company says its “two-year turnaround continues according to plan.”
Bert Nordberg, chairman of Vestas’ board of directors, says replacing Engel is a necessary next step.
“Following the recent measures taken, it is now the appropriate time to make this change,” comments Nordberg. “The company is now entering a new phase, where we want to realize our growth potential, and I am confident that Mr. Runevad has the right experience to lead the company going forward. The restructuring program has resulted in a more competitive company, and we thank Mr. Engel for his leadership over the past eight years.”
Navigant Consulting’s director of energy, Bruce Hamilton, tells NAW he is not surprised that Engel has been replaced.
“This is a natural and expected transition,” he says. “Having completed rigorous restructuring over the past 18 months, facing legal challenges and criticism from disgruntled stakeholders means the focus has been on Engel rather than on the positives that Vestas has gained from the restructuring and developing a healthy order book.”
Hamilton adds that he would characterize Engel’s tenure as being “very challenging but overall successful in maintaining Vestas’ status as the world’s leading pure-play wind turbine manufacturer.”
Runevad joins Vestas from telecom solutions company Ericsson, where he was president of region West and Central Europe and a member of the Ericsson Global executive team. Although he has spent his entire career in the telecom industry and has no experience in the wind sector, Vestas says Runevad has held several senior positions and led successful restructuring programs in large organizations.
“I am delighted to be joining Vestas and look forward to leading the company in its next phase of development,” says Runevad. “I believe that my career has equipped me with the right tools to take on this task.”
Dallas-based Trinity Industries – a provider of products and services to the industrial, energy, transportation and construction sectors – is reporting an increase in wind tower production due to the extension of the federal production tax credit.
In its quarterly filing, Trinity says its Energy Equipment Group – the segment that includes wind towers – reported revenue of $152.5 million for the quarter ending June 30, compared to revenue of $130.7 million in the same quarter last year. In the filing, Trinity notes, “Orders for structural wind towers, slow since mid-2008, increased in 2013 principally related to the January 2013 renewal of the federal production tax credit.”
Further, its operating profit for the quarter increased to $14.3 million, compared to $4 million in the same quarter last year.
As of June 30, the company notes it has received orders for $22 million of structural wind towers during the quarter, resulting in a backlog for structural wind towers of $642.9 million.
The rebound in tower orders is notable considering that in July 2012, Trinity noted that it was transitioning away from tower production. In fact, Trinity re-purposed tower facilities in Ft. Worth, Texas, and Castanos, Mexico, to produce rail tank cars.
However, Trinity continued to build towers in Clinton, Ill., and Newton, Iowa. The company also confirms that it is manufacturing towers in West Fargo, N.D., and Tulsa, Okla. – two sites formerly owned by DMI Industries, which Trinity acquired in September 2012. w
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Report Says U.S. Must Find Way To Rebuild
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