Wind Energy in US hits an Air Pocket in 2010 due to Low Gas Prices and Federal apathy
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May 28, 2010
Wind Energy in 2010 has ground to a halt in the US after a record 10,000 MW were installed in 2009.The ARRA grants in 2009 which gave a 30% cash grant for wind farm development plus the 2008 pushed out orders led to a path breaking 2009 for Wind Energy in the US .Almost 30% of the total installed capacity in the US was constructed in 2009 alone.Wind Energy accounts for roughly 39 GW of electricity capacity in the US or roughly 4% . The major reason for the slowdown has been Gas prices which were ruling at $8/BTU at the peak have crashed down to $4.2/BTU making Gas based Power much cheaper .Wind Energy is one of the cheapest forms of Renewable Energy at around 8-10c/KwH.However , it has been tough for Wind Farm developers to sign Power Purchase Agreements (PPAs) with utilities given that electricity demand has contracted in the US . Wind Energy has hit a perfect Storm driven by a confluence of negative factors.Total Wind Energy Capacity declined by a whopping 80% y/y in first quarter of 2010 compared to the first quarter of 2009.The factors contributing to this decline are
- Decline in Electricity Demand in the US for the first time in 50 years due the Economic Crisis
- 25% Decline in Gas Prices making Gas based power generation cheaper in comparison to Wind power
- Lack of a National Renewable Energy Standard (RES) which mandates a certain percentage of electricity generation done through Cleaner Energy at the federal level
US losing the Clean Energy Race to China
US lags far behind in Wind Energy equipment production with only General Electric(GE) being the only US manufacture in the top 10 rankings.A slowdown in the home market will make it even tougher for US companies to compete with Chinese suppliers which are looking to expand outside.The Government has been tardy about passing a Climate Bill which would give a boost to Renewable Energy.China on the other hand is looking to dominate Wind Energy just like it is currently dominating Solar Energy.
US Turbine Producers face a Bleak 2010
The US Wind Energy Turbine Manufacturers have been pushing for a RES at the federal level as wind farms require long term financing which in turn requires policy stability.With 30% Cash Grants expiring this year and no Federal Push on the Energy and Climate issues , its tough for Wind Farm developers to get financing.Suzlon, Gamesa, Vestas and GE which have large US factories will have to run theirFactories at low utilization levels waiting for a friendly Green policy.
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[…] Wind Energy in the USA has hit an Air Pocket in 2010 with Low Prices for Gas and lack of a Federal Push for Green Energy.The end of 30% Cash Grants for Wind Investments by 2010 end may lead to a worse 2011,if the incentives are not extended by the Congress.Note Wind Energy is the cheapest form of Green Energy with prices of 8-10c/KwH and the second most prevalent form of Renewable Energy after Hydro Power.China has become the largest installer of Wind Energy in 2009 with 13 GW showing a 100% CAGR over the last 2-3 years.Like in other sectors of Green Industry,USA is also losing the ball in Wind Energy as well due to lack of a comprehensive Federal Strategy like a Renewable Portfolio Standard (RPS). […]
[…] who have found New Nuclear to be too expensive.While a number of cyclical factors are at play (Wind Energy has also been affected) in hindering the development of these plants,it seems a secular shift has occurred.Finland has […]
[…] Wind Energy Companies in the Developed Markets have taken it on the chin in 2010.Companies dependent on the Wind Energy Markets in the West like Vestas,Gamesa,Suzlon,Iberdola Renewables etc. have had a very bad 2010 as their stocks price keep finding new lows.A Combination of Tough Financing Markets,Low Gas Prices and Declining Electricity Demand has made the livers of Wind Executives hellish in recent times.More competition in terms of Chinese heavyweights like Sinovel,Goldwind and Koean shipbuidlers precludes an easy recovery.Green IPOs in recent times have faced huge volatility with some managing success while others have led to huge losses.China’s Ming Yang Power which is a Chinese Turbine Manufacturer has seen a 30% erosion of its IPO stock price of $14 as it was priced a tad too aggressively.First Wind which is a bit different being a Wind Energy Developer similar to renewable energy developers like Enel Green Power,EDF Novellas might face a frosty reception as well.Its not a good time to be in the wind energy business as increasing competition and declining demand cause problems.Note John Deere sold off its Renewable Energy Arm for a bargain as US Climate Change Legislation seems stuck in an everlasting limbo.Without a Federal RPS and an expiring 30% Treasury Cash Grant for Wind Farms,2011 is very uncertain for Wind Energy in the USA. […]
[…] US Wind Industry has been facing headwinds since the beginning of 2010 due to a confluence of adverse factors.This has continued till the 3rd quarter of 2010 with AWEA […]