Wind Power Lags, Beset by Shale Gas and Budget Cuts

Chart from the American Wind Energy Association, January 2011 report, via Early Warning

On May 22, 2011, the FT reported that construction of new wind farms was set to decline in 2012 because of competition from natural gas:

Ignacio Galán, chief executive of the Spanish energy group Iberdrola, said the rise in US shale gas production had transformed the country’s energy industry, driving down gas and electricity prices. “Shale gas makes the production of electricity from other sources not attractive enough,” he said.

Installations of new wind capacity in the US dropped from 10,000 megawatts in 2009 to 5,100MW last year. Mr Galán said he expected there could be a further 5,000MW added this year, and perhaps as little as 3,000MW next year.

Government support for wind, which includes federal tax credits and legal standards for renewable generation adopted by 29 states, was adequate, he said, but added: “It’s hard to make an attractive return on investment at these prices.”

Several analysts and industry executives were less downbeat than Mr Galán, with some believing that new capacity additions will pick up next year.

Lisa Frantzis of Navigant, a consultancy, said that falling turbine prices meant new wind farms were now competitive on costs with new gas-fired power plants.

“Wind is one of the more attractive options for complying with states’ renewable energy mandates,” she said.

However, Mr Galán’s caution is a sign of the challenges still facing the US wind industry, which include uncertainty over the longer-term future of tax credits given the pressure on the federal budget, and generally weak electricity demand as the economy slowly emerges from recession.

The American Wind Energy Association, which began its annual conference in California on Sunday, estimates that employment in the industry fell by 10,000 jobs last year, to 75,000. . . .

Iberdrola is the largest investor in new wind capacity in the US, and the second-largest wind generator, after NextEra Energy, the owner of Florida Power & Light. Other leading companies in the US wind market include MidAmerican Energy, owned by Warren Buffett’s Berkshire Hathaway, EDP of Portugal and Eon of Germany.

5/23/11