US Dep of Energy published their annual wind technologies market report, containing a lot of insightful information for the US wind industry. Some of the highlights will be summarized in this post.
Average price of new wind contracts are 2 cents/kwh 2015, compared with solar which is around 4 cents/kwh. Globally, it is 3 cents/kwh. So US wind contracts are really insanely cheap now.
Some useful things to note are as follows:
- LNG prices have also declined. But it will rise later over time, this will put wind at stronger competitive advantage.
- Although prices are low at the moment, the fate of wind prices is out of the control of the industry. It could change drastically over the next few years due to regulations and policy. For eg. if the PTC goes away, 2 cents/kwh may then rise to 4cent/kwh which puts it at a disadvantage over the wholesale market which is priced in the middle. LNG is 3.5cent.
- 80% of wind plants are manufactured domestically in the US. This is due to the economic sense of shaving off shipping costs of imported large/heavy components.
- Typically, the market is dominated by 3 players: GE, Vestas and Siemens. About 3/4 of the installations come from two companies: GE and Vestas.
- OEM has consolidated over the past decade, now the second and third tier wind OEMs are declining as their supply chains dry up. Only those with capabilities to serve the larger players can stay in the market.
One thing is clear: What is keeping the renewable sector afloat is the PTC and RPS. Whether these will continue to give incentives and much-needed fuel for progress in this industry remains to be seen. It is forecasted that the PTC will be reduced gradually beginning 2017. Hopefully, the degree of impact it will have on the wind industry will not be too substantial.
PTC: Production Tax Credit.
RPS: Renewable Portfolio Standard. Regulation that requires increased production of renewable energy.
Nameplate capacity: Term classifying the power output of a power station usually expressed in megawatts (MW)