Wind Energy Project Developers and Turbine Manufacturers Jockey for Position as Record U.S. Windfarm Installations Hit the Market in 2006 and 2007

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Researched by Industrial Info Resources (Sugar Land, Texas). Thanks to the Energy Policy Act extending the wind energy production credit before it expired for the first time in the credit’s history, developers and manufacturers are moving forward unimpeded, driving spending in 2006 and 2007 at a record pace with installations expected to total 3,100 and 3,600 megawatts, respectively in the U.S.

Click on the image at right to view the U.S. Wind Energy Capacity Additions Chart

The PTC, approved back in October of 2004, unleashed a backlog of projects that had previously been placed on hold without a tax incentive in place. This led to record project development in 2005, with over $3 billion in investments and 2,400 megawatts of capacity installed, increasing the U.S. installed wind capacity by 36%.

This year, Industrial Info is tracking more than $3.7 billion in investment from 42 projects and 3,100 megawatts of installed capacity going commercial in 21 states.

The top five wind power developers this year, represent about 57% of the capacity expected to come online. PPM Energy is adding 500 megawatts of new capacity. Noble Environmental Power is looking at 432 megawatts. Horizon Wind Energy currently looking at adding 429 megawatts, Navitas Energy 364 MW, and Invenergy around 280MW.

Click on the image at right to view a map showing the number of megawatts planned to come online this year by state

Currently, 391 megawatts has reached commercial start-up this year. There is another 1,425 megawatts under construction with the remaining 1,284 megawatts scheduled for construction by late summer to reach commercial start-up by the end of the year. Additional delays may occur bringing the total below the expected 3,100 megawatts, but possibly at a significant increase over last year’s total of 2,600 megawatts.

An additional 24 wind farms, totaling 2,200 megawatts, are expected to start construction before the end of 2006, with commercial start-up planned for 2007. This will give 2007 a head start toward achieving a predicted 3,600 megawatts total for next year.

In 2006, GE Energy turbines will account for nearly 54% of the new capacity. Vestas is supplying 23%. Gamesa has risen to 15%. Siemens will contribute 5% to the mix, with Mitsubishi and Suzlon rounding out the top six.

Turbine availability was a major topic of concern last year and will remain one for the foreseeable future. The market for this year is sold out and most of the turbines coming off the assembly line for 2007 have already been purchased. In order to achieve market share, many project developers are buying turbines without projects on the books, in turn are using them as leverage to buy into late stage projects from other developers. This is forcing smaller developers to purchase turbines from the big guys at middleman prices, or to partner with someone who has access to turbines. This is similar to what happened with combustion turbines during the natural gas construction boom just a few short years ago.

One Example: Horizon Wind Energy has taken a three-year turbine position totaling 1,200 megawatts. The firm will leverage this position, along with its strengthened development team and 5,000 MW pipeline, to ensure its place among the major U.S. wind players in the coming years. With increasing confidence in the PTC’s extension, turbine procurement continues to shape wind development competition and more firms will look to hedge supply risk.

These shortages are leading to new manufacturing plants in the U.S. by Spain’s Gamesa and homegrown Clipper Windpower. Siemens also has nearly doubled its production capabilities since its acquisition of Bonus Energy in December of 2004, and has added more than 700 employees in Denmark to keep with the pace.

Clipper Windpower’s new manufacturing plant, which is coming online this month in Cedar Rapids, Iowa, will start manufacturing its new 2.5 MW Liberty Turbine this year. It plans to have 30 turbines complete by the end of the year and 150 next year. The machines take about six months to produce.

Gamesa is commissioning three manufacturing plants in Pennsylvania this summer producing wind turbine blades, nacelles and towers, with an annual production capacity of 400 megawatts. Its plant in Ebensburg will be complete this month and the Fairless Hills site will be on-line by August.

Currently, Industrial Info is tracking 209 wind farm projects, totaling 23,000 megawatts scheduled to kick off construction in 2007, of which about 85% are expected to drop out of the running for a 2007 start-up due to wind resource studies not panning out, lack of turbines and no power purchase agreement available. The PTC, ending December 31, 2007, transmission constraints, not in my backyard activity, moratoriums on offshore development, and rising equipment costs will cause most of these projects currently on the books to be delayed or cancelled.

With or without a Production Tax Credit incentive in place after 2007, the rising cost of traditional generation, improvements in wind turbine design, and the growing involvement by larger developers, utility companies, and expanding state government renewable portfolio requirements will continue to drive wind energy development.

For details on the projects mentioned in this report contact Industrial Info’s Member Center at 1-800-762-3361.

Industrial Info Resources (IIR) is a Marketing Information Service company that has been doing business for over 23 years. IIR is respected as the leader in providing comprehensive market intelligence pertaining to the industrial processing, heavy manufacturing, and energy-related industries throughout the world.