The U.S. wind power industry experienced a trying year in 2010

The U.S. wind power industry experienced a trying year in 2010, with a significant reduction in new builds compared to both 2008 and 2009. The delayed impact of the global financial crisis, relatively low natural gas and wholesale electricity prices, and slumping overall demand for energy countered the ongoing availability of existing federal and state incentives for wind energy deployment. Nonetheless, cumulative wind power capacity still grew by a healthy 15% in 2010, and most expectations are for moderately higher wind power capacity additions in 2011 than witnessed in 2010, though 2011 additions are also expected to remain below the 2009 high.

Notwithstanding the slowed growth in 2010, the wind power sector is dynamic, making it difficult to keep up with evolving trends in the marketplace. This annual report – now in its fifth year – meets the need for timely, objective information on the industry and its progress by providing a detailed overview of developments and trends in the United States wind power market, with a particular focus on 2010.

As with previous editions, this report begins with an overview of key installation-related trends: trends in wind power capacity growth; how that growth compares to other countries and generation sources; the amount and percentage of wind energy in individual states; the status of offshore wind power development; and the quantity of proposed wind power capacity in various interconnection queues in the United States. Next, the report covers an array of wind power industry trends, including: developments in turbine manufacturer market share; manufacturing and supply-chain investments; wind turbine and component imports into and exports from the United States; wind turbine size, hub height, and rotor diameter; project financing developments; and trends among wind power project owners and power purchasers. The report then turns to a discussion of price, cost, and performance trends. In so doing, it reviews the prices paid for wind power in the United States, and how those prices compare to short-term wholesale electricity prices. The report also describes trends in installed wind power project costs, wind turbine transaction prices, project performance, and operations and maintenance expenses. Next, the report examines other policy and market factors impacting the domestic wind power market, including federal and state policy drivers, transmission issues, and grid integration. Finally, the report concludes with a preview of possible near-term market developments.

This fifth edition of the annual report updates data presented in previous editions, while highlighting key trends and important new developments from 2010. New to this edition is a more in-depth summary of developments in offshore wind energy; an expanded discussion of curtailment, with more (but still incomplete) data from several regions of the country; and further information on domestic nacelle assembly capacity. The report concentrates on larger-scale wind turbines, defined here as individual turbines that exceed 100 kW in size. The U.S. wind power sector is multifaceted, however, and also includes smaller, customer-sited wind turbines used to power residences, farms, and businesses. Data on these latter applications are not the focus of this report, though a brief discussion on Small Wind Turbines is provided on.

The 100 kW cut-off between ‘small’ and ‘large’ wind turbines is strictly used for 2009 and 2010 projects, in part justified by the fact that the U.S. tax code makes a similar distinction; in years prior to 2009, however, different cutoffs are used to ensure that older utility-scale wind power projects in California are not excluded from the sample.

Much of the data included in this report were compiled by Berkeley Lab, and come from a variety of sources, including the American Wind Energy Association (AWEA), the Energy Information Administration (EIA), and the Federal Energy Regulatory Commission (FERC). The Appendix provides a summary of the many data sources used in the report, and a list of specific references follows the Appendix. Data on 2010 wind power capacity additions in the United States are based largely on information provided by AWEA; methodological differences exist in the processing of those and other data, however, and the data presented here therefore vary somewhat relative to AWEA (2011a). For example, large wind turbines are defined in this report as exceeding 100 kW, and by AWEA (2011a) as equal to and exceeding 100 kW. The accounting of older wind power plants also differs to a certain degree, yielding modestly different estimates for installed wind farm capacity. Other methodological differences between AWEA (2011a) and this report are noted as appropriate in the pages that follow.

In other cases, the data shown here represent only a sample of actual wind power projects installed in the United States; furthermore, the data vary in quality. As such, emphasis should be placed on overall trends, rather than on individual data points. Finally, each section of this document primarily focuses on historical market information, with an emphasis on 2010; with some limited exceptions (including the final section of the report), the report does not seek to forecast future trends.

Wind Power Additions Slowed in 2010, with Roughly 5 GW of New Capacity Added in the United States and $11 Billion Invested

The U.S. wind energy power market slowed in 2010, with 5,113 MW of new capacity added, bringing the cumulative total to more than 40,000 MW. When reporting annual wind power capacity additions, this report focuses on gross capacity additions of large wind turbines. The net increase in capacity each year can be somewhat lower, reflecting turbine decommissioning. Some of the reasons for the modest differences between the figures presented here and by AWEA (2011a) are summarized. These differences lead AWEA (2011a) to report 5,116 MW of wind power capacity additions in 2010, for a cumulative total of 40,181 MW, in comparison to 5,113 MW and 40,267 MW in this report. This growth translates into $11 billion (real 2010 dollars) invested in wind power project installation in 2010, for a cumulative investment total of $78 billion since the beginning of the 1980s.

These investment figures are based on an extrapolation of the average project-level capital costs reported later in this report, and do not include investments in manufacturing facilities, research & development expenditures, or operations and maintenance (O&M) costs.

2009 wind farm capacity additions were largely determined by decisions made prior to the economy-wide financial crisis that was at its peak in late 2008 and early 2009, whereas decisions on 2010 capacity additions were often made at the height of the financial crisis.

These drivers overwhelmed the countervailing trends of continued and expanded federal and state incentives for wind energy deployment in 2010 (including elements of the Recovery Act, most prominently the Section 1603 Treasury Grant Program, and state renewables portfolio standards (RPS)), demonstrating that growth is not solely determined by the availability of incentives. Nevertheless, with federal incentives for wind energy in place through 2012, an improved project finance environment, and lower wind turbine and wind power pricing, growth in annual wind power capacity additions appears likely in 2011 relative to 2010.

Additions in 2011 are expected to remain well below the 2009 high, however, due in part to relatively low wholesale electricity prices and limited need for new electric capacity additions, and in part to existing state-level RPS programs that, in aggregate, are not sizable enough to support continued wind power capacity additions at 2008 and 2009 levels.

Small Wind Turbines

Small wind turbines can provide power directly to homes, farms, schools, businesses, and industrial facilities, offsetting the need to purchase some portion of the host’s electricity from the grid; such wind turbines can also provide power to off-grid sites. Wind turbines used in these applications are often much smaller – generally ranging in size from a few hundred watts to 100 kW – than the larger-scale turbines that are the primary focus of this report. The sales of small wind turbines, 100 kW and less in size, into the U.S. market from 2005 through 2009; data on 2010 sales are not yet available but will be released by AWEA later in 2011. More than 20 MW of small wind turbines were sold in the U.S. in 2009; most of this new capacity came from turbines manufactured by U.S. companies. These installation figures represent a 15% growth in annual sales – in capacity terms – relative to 2008, yielding a cumulative installed capacity of small wind turbines in the United States of roughly 100 MW by the end of 2009 (AWEA 2010). Within this market segment, there has been a trend towards larger, grid-tied systems. Sales of turbines <1 kW in size (often used off-grid) were flat from 2006-09 at roughly 3 MW. Sales of 1-10 kW turbines (often used in the grid-tied residential market), on the other hand, grew from less than 2 MW in 2006 to 8 MW in 2009, while sales of 11-100 kW turbines (often used in the grid-tied commercial / light industrial / government market) grew from around 3 MW in 2006 to almost 10 MW in 2009 (AWEA 2010).

Growth in this sector has been driven – at least in part – by a variety of state incentive programs. In addition, wind turbines equal to or under 100 kW in size are eligible for an uncapped 30% federal investment tax credit.

Wind Power Comprised 25% of U.S. Electric Generating Capacity Additions in 2010

Wind power has recently represented one of the largest new sources of electric capacity additions in the United States, though a considerable drop in wind energy’s contribution occurred in 2010. Breaking a streak of five years in which wind power was the second-largest new resource added to the U.S. electrical grid in terms of aggregate gross capacity, in 2010 wind power placed third, behind the 7,200 MW of new natural gas and 6,000 MW of new coal-fired generation capacity. Data presented here are based on gross capacity additions, not considering retirements. The results presented in Figure 2 differ somewhat from AWEA (2011a), which reports that wind maintained its second-place showing in 2011, due to differing data sources for coal-fired generation capacity additions. 

New wind farm projects contributed roughly 25% of the new nameplate capacity added to the U.S. electrical grid in 2010, compared to 42% in 2009, 43% in 2008, 34% in 2007, 18% in 2006, 12% in 2005, and less than 4% from 2000 through 2004.

EIA’s (2011) reference-case forecast projects that total U.S. electricity supply will need to increase at an average pace of roughly 41TWh (0.9%) per year from 2010 to 2035 in order to meet demand growth. On an energy basis, the annual amount of electricity expected to be generated by the new wind power capacity added in 2010 represents roughly 35% of this average annual projected growth in supply. By extension, if net wind power additions continued through 2035 at even the relatively slow pace as set in 2010, then roughly 35% of the nation’s projected increase in electricity generation from 2010 through 2035 would be met with wind electricity. Although future growth trends are hard to predict, it is clear that a significant portion of the country’s new generation needs is already being met by wind.