Wind market could hit record high in U.S.

The market for wind power in the U.S. is set to get even bigger, with a new report forecasting that capacity will surpass 150 gigawatts by 2020.

Cambridge, Mass.-based Emerging Energy Research, a cleantech advisory and consulting firm, said the U.S. has already hit its third straight year as the largest wind growth market in the world, installing more than 27 percent of newly added global capacity in 2007.

There were 5,329 megawatts of of wind installed last year, and 2008 is set to be another record year, with 8 GW of projects currently under construction and scheduled to go online by year's end.

While there are some hurdles ahead, including the potential expiration of the Production Tax Credit and a turbine supply crunch, the research group is confident that the wind industry will continue its record growth.

"The Production Tax Credit is still a valuable component of any U.S. wind project's revenue model," Joshua Magee, research director at Emerging Energy Research, told the Cleantech Group. "That being said, the Production Tax Credit has expired three times in the past."

"Each time, there was a substantial hit to the market in the year in which it was allowed to expire, but at the same time it was never allowed to expire by the U.S. Congress for more than a maximum of approximately nine to 10 months before it was reinstated."

Although it's not likely to have a long term effect, the industry isn't looking forward to a possible expiration. In June, Fairfield, Conn.-based General Electric (NYSE: GE) tried to appeal to Congress' bottom line needs when it released a report that argues that the credit generates more federal tax revenue than the cost of the incentive program (see GE fights to keep tax credits alive).

GE has a significant stake in the wind industry as a manufacturer and as a financial backer. It's the leading manufacturer of wind turbines in the U.S., and wind makes up 80 percent of GE Energy Financial Services' more than $3 billion global renewable energy portfolio.

The U.S. is No. 2 behind Germany in wind power production, with Germany generating 22.2 gigawatts and the U.S. producing 16.8 GW.

With an expected record increase in wind installations in the U.S., and amid a current turbine supply crunch that's affecting price and availability, turbine manufacturers like GE and others will have to work to keep pace with demand.

"It's primarily been an issue in terms of the timeline for project development or project execution for smaller companies that are not able to effectively negotiate for the available capacity against some of their larger, established competitors that have previous energy industry contacts," said Magee.

But he said the global wind turbine supply chain has been reacting to the market situation, with investments being made over the last few years from both the original equipment manufacturers and the subcomponent suppliers in additional capacity.

"And that capacity is increasingly coming on line as we speak, essentially, to the point that EER is anticipating that there may be potentially a greater level of supply-demand parity by as early as 2011," said Magee.

Emerging Energy Research expects the U.S. wind turbine sales market to climb from an estimated $12 billion this year to nearly $16 billion by 2015.

Connecting that expected boom in wind power to the grid is another potential hurdle. A report earlier this year from the U.S. Department of Energy said that wind power could provide up to 20 percent of the nation's total electricity needs by 2030, but more than 12,000 miles of additional transmission lines would need to be built, at a cost of $20 billion (see Wind power push could depend on incentives).

That report estimated that more than 300 GW of wind would be needed by 2030 to support that scenario. Even at the 150 GW level estimated by Emerging Energy Research by 2020, the expansion of wind power hinges on the need for the expansion of transmission.

"You have projects across multiple states now that are in the multi-gigawatt capacity range in terms of their proposed size," he said.

"To get to that level of scale as an industry, you're really talking about the crucial need for this coordinated transmission development targeting specifically renewable energy zones, such as high wind regions, in order to facilitate the extraction of that resource and deliver it to load centers."

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