I have just returned from AWEA’s annual conference and exhibition – WINDPOWER 2011 – at the Anaheim Convention Center. I must say it was impressive, three days of high quality presentations, several meetings of industry working groups and committees, and a simply enormous exhibition with a an impressive array of hardware and services. It’s clear that wind has arrived. Its economics are well understood, its technological direction is well charted and it has all the pieces in place to play a significant role in the global energy mix.
Global is the operative word. Without doing a detailed survey I would estimate that more than half of the exhibitors came from outside of North America – component and turbine suppliers from Europe, China, India and Korea. There are over 20 turbine manufacturers in China, three of which are successfully competing on a global scale (NRG Systems' booth was overlooked by Goldwind of China). India has a global competitor in Suzlon, and of course Europe has several global competitors – Vestas, Gamesa, Siemens are the three largest.
In contrast, there are two US utility scale turbine manufacturers – GE and Clipper, with only GE truly competing globally. In my view it is cold comfort that several of the European manufacturers have built US facilities.
In my three days in Anaheim, I have to say that I heard no good news about the US wind energy market in the near term – i.e., under three years. Our recovery is proceeding slowly with continued depressed demand for electricity. Our banks continue to hold cash, with little appetite for long-term project financing. Shale gas extraction in a depressed energy market is holding natural gas prices at long-term lows and we have no national energy policy, nor any prospect of one, which would sustain the development of the industry beyond the expiration of the PTC in December 2012.
Now market forces are one thing, broad-based and generally time delimited, but bad or non-existent policy is another, affecting only the US while the rest of the world pushes into the 21st century and offering no fair prospect of change. Even in the unlikely event that the Congress goes Democratic in 2012, it is almost certain that party and special interests will still wield sufficient power to block any comprehensive long-range energy policy which drives the US toward a sustainable energy future.
NRG Systems manufactures products that are used to confirm the energy potential of a site. Our products are deployed 18 to 24 months before a project is constructed. NRG Systems is a leading indicator of the primary metric for industry performance – installed capacity in gigawatts. Thanks to China, Europe and the emerging markets of Africa and South America, our overall business is fine, but the news from NRG Systems for the US is not good. With the PTC expiring in 19 months, site development is way down because new projects cannot be generating before the expiration. And in this market with current prices, PPA’s without the PTC for most projects will not support developers’ ROI objectives.
What Needs to Happen
So, what do I think will happen between now and 2013? For what it’s worth, I think the energy markets will firm up slowly, shale gas will begin to monetize its environmental costs pushing natural gas prices upward and the PTC will be renewed at the last possible moment encouraging new project development once again in the second quarter of 2013. In the meantime, hard times, strategic refocusing and consolidation will remove from the market many companies – some manufacturers as well as many component suppliers and service providers. Ultimately the iron logic of the environmental imperatives, resource depletion and market forces will assert themselves over politics and entrenched interests. The industry will return to its appropriate growth track, but in the meantime, what a waste of time and resources!