Released September 21, 2009 | SUGAR LAND
en
Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--After a record-setting year in 2008, wind power is on target for a mediocre 2009, but prospects for 2010 and beyond are extremely bright, Shane Mullins, Industrial Info's Vice President of Product Development - Power Industry, said in an interview. "Last year was a great year for wind power installations, so good, in fact, that a lot of projects scheduled for construction in 2009 were pulled into 2008. But last year's collapse of the tax equity market cut new wind construction in half."
Last year, construction began on more than 9,000 megawatts (MW) of new wind power in the U.S., but through mid-September this year, construction had begun on only 4,162 MW of new wind projects, according to data collected by Industrial Info. "For all of 2009, we'll be lucky if we see construction begin on a total of 4,500 MW of new wind projects," said Mullins.
Click on image at right for a breakdown of wind power construction from 2004.
"Equipment suppliers and developers are hurting right now," Mullins continued. "Some turbine orders have been cancelled because companies have been unable to obtain financing to pay for equipment. Some developers are selling their wind turbines because their projects have been delayed or cancelled."
A major reason for the slowdown this year involves the delay in implementing the American Recovery and Reinvestment Act of 2009 (ARRA), which strongly supported renewable energy, Mullins said. "It took the U.S. Treasury Department about six months--from February through July--to create the forms that developers would use to apply for their cash grants for renewable energy." During that time, "very little could move forward until ARRA cash started trickling into the market."
Mullins said that more than 500 U.S. wind power projects have been delayed from November 2008 until now, but many of these projects are expected to break ground next year or shortly thereafter. According to Industrial Info's data, U.S. renewable energy projects totaling 156,000 MW are proposed for construction during 2010-14, roughly double the 82,000 MW of renewable projects that, only 24 months ago, in September 2007, were proposed to begin construction in 2008-12.
Click on image at right for a comparison of new power generation underdevelopment in the 2008-12 and 2010-14 periods.
The overwhelming majority of these planned renewable projects--perhaps 90%--are wind projects, Mullins said. But he added that many of these projects, regardless of fuel type, will be delayed or cancelled, emphasizing that these numbers are not a forecast, but the current outlook of what is currently under development. "We do not expect to see more than 20% of these projects actually make it through to construction in the currently proposed timeframe, but 20% is a far better track record than just a few years ago, when you could expect only 1 in 10 to move forward," said Mullins.
"Construction activity for renewable projects in 2010 will be about 80% of what it was in 2008," Mullins predicted. "We'll see construction activity begin for about 7,000 MW of new renewable generation, and around 90% of that will be wind power. By 2012, with the right federal support for demand, financing, and transmission, we could be back to the level of wind power construction activity we saw in 2008."
Last month the Wall Street Journal reported that Morgan Stanley (NYSE:MS) (New York, New York) and Citigroup Incorporated (NYSE:C) (New York) each invested $100 million in August to finance separate windfarms, taking advantage of a brand-new federal program that is paying substantial cash grants to help cover the cost of renewable energy investments.
"Renewable energy projects have an edge over other types of generation," Mullins said. "It's much easier to develop a merchant windfarm than a merchant gas-fired power plant." But banks and other financiers are more rigorously examining a developer's track record as part of the general 'flight to quality' in financial markets during the last year. This is not a great time to be building your first project. "You need credibility and a track record," said Mullins. "Even then, developers may have to settle for smaller projects, or break large projects into several phases, in order to obtain financing."
Transmission access continues to be a major factor limiting the growth of wind power. But Mullins noted that a $5 billion transmission project in West Texas with an in-service date of 2013 has already led to the announcement of other new wind power projects in that area. "For every wind power project that is delayed or cancelled, another one has come out of the woodwork," Mullins said.
According to the American Wind Energy Association (AWEA) (Washington, D.C.), five announced wind projects in Texas are scheduled to add 899 MW of new capacity by the end of 2010. Turbines for those projects will be manufactured by units of Mitsubishi Heavy Industries (TYO:7011) (Tokyo, Japan), General Electric (NYSE:GE) (Fairfield, Connecticut), and Vestas (LSE:VWS) (Randers, Denmark). The climate and renewable division of E.ON AG (OTC:EONGY) (Dusseldorf, Germany) is developing three of the projects, while units of Babcock & Brown (Sydney, Australia) and Valero Energy (NYSE:VLO) (San Antonio, Texas) are developing one project each, according to AWEA. During the second quarter of 2009, the Lone Star State added 454 MW of new wind-generating capacity, the most of any state, AWEA said in its second quarter report on wind power.
Other states with large wind-energy projects scheduled to come online by year-end 2010 include Illinois (five projects totaling 643 MW), Indiana (three projects totaling 505 MW), Iowa (four projects totaling 409 MW), and North Dakota (three projects totaling 274 MW), AWEA said. The U.S. utility with the largest installed wind capacity is Xcel Energy (NYSE:XEL) (Minneapolis, Minnesota) with 2,906 MW, according to Lawrence Berkeley National Lab researchers Ryan Wiser and Mark Bolinger. Other utilities with significant installed wind power are: MidAmerican Energy Company (Des Moines, Iowa), with 2,363 MW; Southern California Edison Company, a unit of Edison International (NYSE:EIX) (Rosemead, California), with 1,137 MW; and Pacific Gas & Electric Company, a unit of PG&E Corporation (NYSE:PCG) (San Francisco, California), with 981 MW. Wiser and Bolinger authored the "2008 Wind Technologies Market Report," which was published earlier this summer by the U.S. Department of Energy's Energy Efficiency and Renewable Energy branch.
Industrial Info Resources (IIR) is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy related markets. For more than 26 years, Industrial Info has provided plant and project opportunity databases, market forecasts, high resolution maps, and daily industry news.
Last year, construction began on more than 9,000 megawatts (MW) of new wind power in the U.S., but through mid-September this year, construction had begun on only 4,162 MW of new wind projects, according to data collected by Industrial Info. "For all of 2009, we'll be lucky if we see construction begin on a total of 4,500 MW of new wind projects," said Mullins.
Click on image at right for a breakdown of wind power construction from 2004."Equipment suppliers and developers are hurting right now," Mullins continued. "Some turbine orders have been cancelled because companies have been unable to obtain financing to pay for equipment. Some developers are selling their wind turbines because their projects have been delayed or cancelled."
A major reason for the slowdown this year involves the delay in implementing the American Recovery and Reinvestment Act of 2009 (ARRA), which strongly supported renewable energy, Mullins said. "It took the U.S. Treasury Department about six months--from February through July--to create the forms that developers would use to apply for their cash grants for renewable energy." During that time, "very little could move forward until ARRA cash started trickling into the market."
Mullins said that more than 500 U.S. wind power projects have been delayed from November 2008 until now, but many of these projects are expected to break ground next year or shortly thereafter. According to Industrial Info's data, U.S. renewable energy projects totaling 156,000 MW are proposed for construction during 2010-14, roughly double the 82,000 MW of renewable projects that, only 24 months ago, in September 2007, were proposed to begin construction in 2008-12.
Click on image at right for a comparison of new power generation underdevelopment in the 2008-12 and 2010-14 periods.The overwhelming majority of these planned renewable projects--perhaps 90%--are wind projects, Mullins said. But he added that many of these projects, regardless of fuel type, will be delayed or cancelled, emphasizing that these numbers are not a forecast, but the current outlook of what is currently under development. "We do not expect to see more than 20% of these projects actually make it through to construction in the currently proposed timeframe, but 20% is a far better track record than just a few years ago, when you could expect only 1 in 10 to move forward," said Mullins.
"Construction activity for renewable projects in 2010 will be about 80% of what it was in 2008," Mullins predicted. "We'll see construction activity begin for about 7,000 MW of new renewable generation, and around 90% of that will be wind power. By 2012, with the right federal support for demand, financing, and transmission, we could be back to the level of wind power construction activity we saw in 2008."
Last month the Wall Street Journal reported that Morgan Stanley (NYSE:MS) (New York, New York) and Citigroup Incorporated (NYSE:C) (New York) each invested $100 million in August to finance separate windfarms, taking advantage of a brand-new federal program that is paying substantial cash grants to help cover the cost of renewable energy investments.
"Renewable energy projects have an edge over other types of generation," Mullins said. "It's much easier to develop a merchant windfarm than a merchant gas-fired power plant." But banks and other financiers are more rigorously examining a developer's track record as part of the general 'flight to quality' in financial markets during the last year. This is not a great time to be building your first project. "You need credibility and a track record," said Mullins. "Even then, developers may have to settle for smaller projects, or break large projects into several phases, in order to obtain financing."
Transmission access continues to be a major factor limiting the growth of wind power. But Mullins noted that a $5 billion transmission project in West Texas with an in-service date of 2013 has already led to the announcement of other new wind power projects in that area. "For every wind power project that is delayed or cancelled, another one has come out of the woodwork," Mullins said.
According to the American Wind Energy Association (AWEA) (Washington, D.C.), five announced wind projects in Texas are scheduled to add 899 MW of new capacity by the end of 2010. Turbines for those projects will be manufactured by units of Mitsubishi Heavy Industries (TYO:7011) (Tokyo, Japan), General Electric (NYSE:GE) (Fairfield, Connecticut), and Vestas (LSE:VWS) (Randers, Denmark). The climate and renewable division of E.ON AG (OTC:EONGY) (Dusseldorf, Germany) is developing three of the projects, while units of Babcock & Brown (Sydney, Australia) and Valero Energy (NYSE:VLO) (San Antonio, Texas) are developing one project each, according to AWEA. During the second quarter of 2009, the Lone Star State added 454 MW of new wind-generating capacity, the most of any state, AWEA said in its second quarter report on wind power.
Other states with large wind-energy projects scheduled to come online by year-end 2010 include Illinois (five projects totaling 643 MW), Indiana (three projects totaling 505 MW), Iowa (four projects totaling 409 MW), and North Dakota (three projects totaling 274 MW), AWEA said. The U.S. utility with the largest installed wind capacity is Xcel Energy (NYSE:XEL) (Minneapolis, Minnesota) with 2,906 MW, according to Lawrence Berkeley National Lab researchers Ryan Wiser and Mark Bolinger. Other utilities with significant installed wind power are: MidAmerican Energy Company (Des Moines, Iowa), with 2,363 MW; Southern California Edison Company, a unit of Edison International (NYSE:EIX) (Rosemead, California), with 1,137 MW; and Pacific Gas & Electric Company, a unit of PG&E Corporation (NYSE:PCG) (San Francisco, California), with 981 MW. Wiser and Bolinger authored the "2008 Wind Technologies Market Report," which was published earlier this summer by the U.S. Department of Energy's Energy Efficiency and Renewable Energy branch.
Industrial Info Resources (IIR) is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy related markets. For more than 26 years, Industrial Info has provided plant and project opportunity databases, market forecasts, high resolution maps, and daily industry news.
