Wind Energy, Battered by Boom and Bust Cycles, Back in Doldrums
[Corrected 5/6/10, 1:45 pm. See below.]When Jim McDermott, the managing partner at U.S. Renewables Group, came through San Diego a few months ago, he told a Cleantech San Diego audience the 2008 collapse in the capital markets had wiped out a third of the U.S. wind energy projects then under development.
“For about six months, there was no money for any project at any price,” McDermott said. The capital markets have recovered somewhat since then, and the U.S. wind industry installed more than 10,000 megawatts of new generating capacity in 2009—a record amount. That’s enough energy capacity to power the equivalent of 2.4 million homes.
But the capital shut off in 2008, along with a much-reduced number of firms willing to fund wind projects since then, has slowed new turbine installations to a trickle. As a result, the cyclical wind industry is again in the doldrums.
[Corrects spelling to Kanaby] A lull in business orders has led the National City, CA-based Knight & Carver Wind Group to lay off 16 employees, or roughly a third of its 55-employee workforce at a wind turbine blade manufacturing facility near Sioux Falls, S.D. “Really, what happened is the facility was built to address the mid-capacity turbine market, a market we predicted [in 2006] would develop,” says Gary Kanaby, Knight & Carver’s vice president of sales.
But predicting the wind turbine market has proved to be a fickle business. The mid-size turbine market, which Kanaby says ranges from roughly 100 kilowatt to 1,000 kilowatt turbines, blows hot and cold—and these days it’s in the freezer. The slowdown in new blade orders has fallen off so much that Kanaby says Knight & Carver has been contemplating a temporary shut down of its South Dakota manufacturing plant that could last two to six months. (Kanaby says the company’s San Diego area workforce, which numbers about 185, has been unaffected by the downturn in installations.)
The American Wind Energy Association (AWEA), which measures industry activity by the number of megawatts installed each quarter, says the 292 wind turbines installed during the first three months of 2010, with a combined generating capacity of 539 megawatts, was the slowest quarter since the beginning of 2007. The number of installations in the most recent quarter represents about an 80 percent drop in demand from the same period in 2009. In a recent statement, AWEA CEO Denise Bode said, “Financing wind projects is an 18-month process and the struggles in 2009 to raise new capital, combined with lack of new demand from utilities, are now surfacing in the market.”
Aside from the 18-month lag that is rooted in the economic collapse, the AWEA attributes the boom-and-bust cycles of the wind energy industry to government procrastination and inconsistent policies of the past. “Minimal new installations and current announcements for project delays or downgrades in 2010 are the consequences of inaction to provide a serious market signal,” Bode said.
More recently, the AWEA joined with the Business Council for Sustainable Energy, Biomass Power Association, and other renewable energy and energy efficiency trade groups in calling for Congress to establish long-term policies that help sustain long-term markets for renewable energy technologies. The groups stressed an “urgent need” for comprehensive climate and energy legislation and specifically called for the inclusion of several measures:
—Establishing a “strong renewable electricity standard” that requires renewable energy sources to provide a percentage of grid electricity.
—Setting sensible and effective transmission policies.
–Setting targets and funding for strengthened building energy codes and compliance, and enhanced appliance efficiency standards.
—Establishing a building efficiency information disclosure program.
—Extending the convertible tax credit provision in the American Recovery and Reinvestment Act, and incentives for residential, commercial, and industrial retrofits.