U.S. Wind Power Markets Face a Growth-Constrained 2010

Following a record-breaking year of capacity additions in 2009 with 9.8 GW of wind farm projects installed, the U.S. wind energy market finds itself confronting a growth constrained 2010 and a near-term market landscape wrought with increased competition, according to a new market study, US Wind Power Markets and Strategies: 2010-2025 from IHS Emerging Energy Research.

However, with the proliferation of favorable state and federal policies, the U.S. wind energy industry is on track to add more than 165 GW of new capacity through 2025, resulting in a total installed base of 200 GW, according to the study’s projections.

The study forecasts anywhere from 6.3- 7.1 GW of wind could be installed in 2010, 40-60 percent lower than 2009 installations. "2010 marks the first time since 2004 that the U.S. wind industry will not surpass the previous year’s growth level. Despite unprecedented federal wind incentives, reverberations from the financial crisis continue to create a difficult near-term market landscape especially in light of continued energy policy uncertainty. However, the U.S. wind market is poised to emerge from this near-term uncertainty with a clearer path toward strong future growth," according to IHS Senior Analyst Matthew Kaplan, one of the study’s authors.

The U.S. wind industry will represent U.S. $330 billion in investments between 2010 and 2025, with more than 90 percent stemming from onshore wind, according to the study’s projections. The Midwest, Great Plains and Rocky Mountain states will act as major wind export hubs to areas with large appetites for renewables, including California, the Mid-Atlantic and the South.

While the U.S. is closer than ever to tapping into its enormous offshore potential with the the expected completion of the Cape Wind farm in 2013, offshore is expected to account for only 5 percent of total U.S. wind build in 2025.

"The unprecedented decline in power demand and electricity and natural gas prices has had a profound effect on utility willingness to ink power purchase agreements," says Kaplan.

Despite large build years in 2009, leading independent power producers EDP Horizon and NextEra Energy Resources have slashed wind build expectations exemplifying near-term challenges.

As heightened transmission congestion and waning utility demand for wind have strained growth in traditional wind hot spots including Texas, Minnesota and California, developers have been forced to prospect states with less prolific resources and more arduous development conditions.

"Transmission remains one of the greatest barriers to the development of U.S. wind farm projects. Coordinated national policies will be necessary to more efficiently link the U.S.’ vast wind resources to high-demand regions, however, even with enabling policies, there will be a lag of several years for projects to become operational," says Kaplan.

"A national renewable energy standard or federal energy policy legislation along with a streamlined transmission siting and cost allocation process are the essential ingredients to building a robust future U.S. wind energy market."

On the supply front, the sudden drop in wind turbine demand and a heightened level of competition has created a seller’s market for the foreseeable future. "Wind turbines manufacturers and their suppliers will increasingly look to differentiate themselves based on cost, product, services and track record," says Kaplan.

The U.S. supply chain continues to expand domestically, supported by strong prospects for future wind growth. The surge in U.S. wind installations over the past three years has encouraged established European players and new entrants from Asia to enter the U.S. market, ensuring a steady supply of wind turbines to the U.S. market for the foreseeable future.

US Wind Power Markets and Strategies: 2010-2025: Released in May 2010, this 234-page study provides strategic market intelligence on U.S. wind energy markets analyzing development strategies, supply chain positioning, regulatory changes and growth in the new market landscape. Emerging Energy Research (www.emerging-energy.com), now IHS Inc. (NYSE: IHS), is the leading provider of analysis on clean and renewable energy markets.

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