Ten Years of US Wind Power
Guest blogger Jon Rose of Hyperion Executive Search reflects on the last decade of US wind, and gives his predictions for what's ahead.
Guest blogger Jon Rose of Hyperion Executive Search reflects on the last decade of developments in American wind power, and gives his predictions regarding how US wind could reach its 2030 targets.
It’s July 2008. The New England Patriots are embroiled in ‘Spygate’ after losing to the New York Giants in SuperBowl XLII, Bill Gates has stepped down as the chairman of Microsoft and Barack Obama has just secured the Democratic Party Presidential nomination. Time flies by.
It’s now exactly a decade since the American Wind Energy Association published an in-depth report detailing a bold new vision for wind power in North America: 20% Wind Energy by 2030. This technical report was not intended as a prediction of the future, but sought to paint a hypothetical picture of the national consequences of increasing wind energy’s contribution to US electricity supply.
Ahead of the annual AWEA conference in Chicago this month, coinciding with the twelve-year anniversary of the Bush Administration’s call for the US to rethink its energy mix, now is a good time to review the key points and challenges raised in this report. It’s interesting to see how things have changed since 2008, particularly given the current President’s alternative views on clean energy research and climate change.
Expanding markets and multiple revenue streams
To achieve the 20% by 2030 scenario, according to the 2008 report, would require large expanded markets to purchase and use wind energy and that multiple revenue streams for wind generation output would be increasingly important.
The landscape has changed drastically in this respect. The cost of renewable energy has plummeted and so, with companies, cities & universities looking to be more sustainable, wind energy has become the number one choice for corporate and non-utility purchasers. US businesses, from tech giants to grocery stores, signed up to over 2GW of wind energy in 2017, a huge jump from 100MW in 2009.
The other main buyers of energy, utilities, are rapidly evolving to benefit from America’s wind power boom, moving away from primarily purchasing power from wind farm owners and instead buying the assets outright. With the cost of building wind farms sliding, owning renewables is a more attractive proposition than ever for utilities as they look to diversify their portfolio. AEP is investing $4.5bn that will land them a massive 2GW wind farm in Oklahoma and Xcel Energy is looking to add 3.4GW of new wind energy over the next five years.
The future looks very promising with a much greater and varied demand for wind power, driven by Fortune 500 companies, cities and universities looking to go green as well as utilities providing cleaner, cheaper energy for their customers.
Technology: Improving output and reducing cost
The 2008 report stated that with sufficient research, development, and demonstration, new advances could potentially have a significant impact on commercial product lines in the next 10 years. In 2018, this is very much in play as rotors are getting larger and towers are getting taller, resulting in considerable increases in capacity.
In 2006, the installed wind capacity of North America was 11.6GW and the average size of an onshore turbine was 1.6MW. Fast forward twelve years, and there is now over 89GW of wind capacity and more than 90% of turbines are 2MW or larger, with 23% at 3MW or larger. GE have recently announced significant investment specifically to build a 12MW offshore wind turbine by 2020, the largest the world has ever seen.
Technology advancements have significantly lowered the levelized cost of electricity and, to realistically achieve 20% by 2030, the industry is evolving to continually improve its output (performance) and reduce its cost (maintenance). With a growing number of projects across the US, enormous amounts of data are being generated and companies are increasingly turning their attention to the Internet of Things (or the Industrial Internet) to maximise the efficiency of existing equipment, moving away from traditional, reactive O&M to more sophisticated, predictive and proactive O&M solutions.
There is huge potential for these techniques to provide value to the industry in the coming years. Through harnessing the data at their disposal, wind farm operators can better understand what is happening in the field, plan ahead, and accurately predict extended operating life, resulting in reduced maintenance costs and improved performance.
Providing accurate forecasts, increasing the generating capacity, improving the life span of assets and reducing project uncertainty are key goals for the wind industry moving towards 2030, improving bankability, reducing project risks and creating a more attractive opportunity for long-term investment & policy support.
Offshore Wind – can the US follow in Europe’s footsteps?
The growth of offshore wind in Europe is still too expensive and too difficult to replicate in US waters, the 2008 report concluded. However, it did illustrate the vast opportunity that exists for the nation moving towards 2030. The report showed that the US has an enormous 4,150GW of potential offshore wind power capacity, an amount 4 times that of the country’s total installed capacity from all sources in 2008 - 1,010GW.
In 2018, after a number of false starts, the offshore wind industry in the United States finally seems to be gaining some momentum. Although still lagging behind the burgeoning offshore industry in Europe, companies such as Statoil, Avangrid, and Ørsted are joining US wind energy developers to pursue a number of projects along the U.S. coast. According to the US Department of Energy, over 25 offshore wind projects (24GW) are being planned off the North East and Mid-Atlantic coasts and though not all of these will be built, and only one commercial offshore wind has been constructed (Block Island, which became operational in 2016), the majority of analysts predict that offshore wind is expected to see significant growth in the coming decade.
As oil and gas companies look to diversify into clean energy there exists an opportunity for the wind industry to utilise an enormous network of skilled workers, existing infrastructures and the expertise in operating major offshore projects; this is something the Trump administration is taking note of. In April 2018, interior secretary Ryan Zinke threw his weight behind offshore wind, citing economic, environmental, moral and strategic reasons for looking to partner with this emerging industry.
Whilst there remain several obstacles ahead that make the widespread development of offshore wind farms less than a foregone conclusion, they are being met by a flurry of innovation and activity. Of the present US energy portfolio, offshore wind has the greatest opportunity for growth in the coming years.
The importance of long-term, stable policy
The 2008 report notes that achieving the 20% wind scenario would involve a major national commitment to clean, domestic energy sources and would require clear leadership from Congress to provide wind energy with the long-term, stable policy it provides to other energy sources.
Two years before the 2008 report was published, President Bush emphasised the nation’s need for greater energy efficiency and a more diversified energy portfolio. Despite often being criticised as being an anti-renewables President, during his time as Governor of Texas Bush signed a bill that set the state on a path to becoming a leader in generating carbon-free electricity. During his second term in power, from 2004 through 2008, over one-third of the electricity capacity added in the US was from wind power, largely due to federal subsidies and other government tax breaks.
In 2012, under Obama, wind energy became the number one source of new U.S. electricity generation capacity for the first time, representing 43% of all new electric additions and accounting for $25bn in U.S. investment.
Now in 2018, it’s clear that the industry has capitalised on this momentum. Declining costs and the longest ever period of federal policy stability have led to new records being broken, popularity across demographics, and now a growing number of cities adopting a 100% renewable energy target by 2030 (Minneapolis has recently become the 65th city to join this list including Atlanta, Portland and San Diego).
Like many other energy industries, wind has relied heavily on federal incentives, particularly the bipartisan Production Tax Credit, introduced in 1992 to help finance & construct new projects. As the PTC is phased out by 2019, wind energy is well placed to compete without this support, but the sector shouldn’t take anything for granted and will face new challenges as it continues to contest with heavily-subsidised competition.
So what’s next?
The key suggestions of the 2008 report for that large expanding markets continuing to purchase and use wind; improved turbine technology, utilising previously untapped offshore wind potential; and clear and consistent policies.
Although changes to transmission systems still need to be addressed, and we shouldn’t get complacent about the PTC phase-out, the US wind industry is moving in the right direction.
Wind power is the cheapest form of new electricity, having generated 6.3% of US electricity in 2017. In four states (Iowa, Kansa, Oklahoma and South Dakota) wind generates over 30% and 14 states are currently producing over 10% of electricity by wind. AWEA now predicts that wind energy can grow to supply 10% of total US electricity by 2020 and support tens of thousands additional well-paying jobs.
Despite initial uncertainties about the impact of a Trump administration, given that the president had criticised regulations that pressure businesses to address climate change, talked openly about his distaste for wind turbines and in 2018 looked to cut funding for clean energy by 72%, American companies are investing more than ever in wind energy. American companies are building more wind energy projects and bipartisan Americans want more wind energy than coal. Whilst this follows a global trend towards greater sustainability, it is the economics of wind energy in the US that are converting aspirations into actions.
A decade on from the report, US wind energy has faced its fair share of challenges but just like the New England Patriots, it continues to roll on whether you like it or not.
Jon Rose is a Principal Search Consultant at Hyperion Executive Search, a specialist in clean energy recruitment. He has spent the last 5 years working in the US supporting wind developers, IPPs and OEM’s in their search for talent. Whilst he doesn’t care much for the New England Patriots, he is a passionate supporter of renewable energy & clean technology!