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Wind Power Gains Traction in US and Canada EER Study Predicts Record Growth in 2005 Cambridge, MA: 20 December 2004 - Wind plants have become commercially viable sources of power for US and Canadian utilities, according to a study just released by
Emerging Energy Research (EER), a Cambridge-based research and advisory firm. While not all North American utilities have embraced wind energy technology, a growing number are beginning to purchase substantial amounts of wind power, and many more
are beginning to experiment with new projects. These and other findings are contained in US/Canada Wind Power Markets and Strategies, 2004-2010, EER’s newest study of wind power growth.
“Wind plants are no longer the relics of environmental activism in the 1980s,” says William
Ambrose, president and founder of EER. “Wind power has now become mainstream for US and Canadian utilities.”
Record growth expected in 2005
After a dismal year in 2004, with new wind power installations reaching less than half of 2003 levels, the North American market will see record growth in 2005, according to EER.
Annual wind power investment in 2005 is expected to surpass the US$ 2 billion mark for the first time.
According to the study, state and provincial renewable-portfolio mandates in the US and
Canada and the growing competitiveness of wind technology, particularly in light of rising natural gas prices, are prompting utilities increasingly to commit to long-term power
purchasing agreements. EER predicts that leaders in wind power procurement in the US and Canada, including
Southern California Edison, Xcel Energy, Pacific Gas & Electric, TXU Energy, PacifiCorp and Hydro Quebec, will be joined in 2005 by a long list of utilities across the region, many of
which will be procuring large-scale wind power for the first time.
Major wind power purchasers in the US Market Share – 2000 Market Share – 2003 Total: 2,579 MW Total: 6,374 MW M idAm e rican OK M un Pw r Auth/OK G&E Wis cons in Southe rn Ele ctric Califor nia Bas in Ele ctric Southe r n Califor nia M idAm e r ican Wis cons in Xce l Ene rgy Ele ctr ic TXU Ene r gy City Public Se r. of San Pacific Gas & Ele ctr ic Pacific Gas & Exe lon Pow e r Ele ctr ic Xce l Ene r gy TXU Ene r gy PacifiCor p Public Se r . Co. of Ne w M e xico Te xas -Ne w M e xico Pow e r
Source: Emerging Energy Research. Growth of wind power attracts traditional energy players
North America is expected to experience more than a three-fold increase in wind power capacity by 2010, according to EER. US wind power capacity is expected to grow from
over 6,800 MW in 2004 to over 21,700 MW by 2010. Canada will experience faster growth from about 500 MW in 2004 to nearly 4,500 MW in 2010.
Utilities in the US and Canada typically purchase wind power from specialized independent power producers (IPPs) such as FPL Energy, which owns about 50% of all wind power
capacity in the US. But with wind energy’s steadily improving prospects, some of the largest energy companies in the world, including Shell, Scottish Power/PPM Energy and
AES Corp, have undertaken to challenge FPL as wind IPPs in the region. According to EER, these new entrants are changing the nature of the game, creating an intensely competitive environment that is leading to the largest onshore projects and
some of the lowest realized cost of energy from wind power in the world. As these corporate giants bring new scale to the wind industry, smaller wind IPPs and
developers will find it increasingly difficult to compete. Niche strategies and partnerships will proliferate as smaller players attempt to defend market segments on the basis of their
core competencies. “Many will become prime acquisition targets for the larger players looking in and consolidation will likely happen,” predicts Godfrey Chua, Research Director
of EER’s global wind advisory services. US/Canada Wind Power Capacity 2002-2010 (MW installed)
Wind turbine manufacturers struggle with US uncertainty
Failure by the US Congress to renew the Production Tax Credit (PTC), a renewable energy
incentive, at the end of 2003 resulted in a complete shutdown of wind energy projects in 2004, according to the EER study. Passage of the PTC in October 2004 restarted most of those projects but the future is still uncertain as current PTC is due to expire at year-end
2005. According to the study, if the PTC is not extended, the market is expected to spike in 2005, as projects are accelerated to meet the deadline, but will come crashing to a halt
in 2006. “Unfortunately US policies to date have discouraged local manufacturing,” says Ambrose, forcing windfarm builders to consider expensive imports from Europe or Japan. “At this
point the industry would fare better without a PTC altogether rather than with a start-and-stop policy that scares off investors and prevents manufacturers from scaling their business.”GE Wind, the only wind turbine manufacturer with full-scale facilities in North America,
has emerged as the dominant market leader. GE Wind has benefited from the weakness of the dollar against the euro, providing it with a decided cost advantage vis-à-vis its
European competitors, according to EER. World market leader Vestas of Denmark has recently announced plans to establish a manufacturing facility in 2005 after having
abandoned similar plans in 2003 when the PTC was allowed to expire. Spanish wind turbine manufacturer Gamesa is in the process of selecting a site in Pennsylvania for a blade plant.
“If we can stabilize the regulatory environment,” says Ambrose, “the industry would scale dramatically, creating thousands of US jobs in manufacturing, engineering, and
construction; reducing our dependency on foreign and polluting energy; and ultimately rendering wind power as a low-cost energy source.”
ABOUT THE STUDY EER’s just released study, US/Canada Wind Power Markets & Strategies 2004 – 2010, examines the key regulatory and market mechanisms driving wind power growth, as well as the market players that define the industry. More information on the study’s contents can be found in EER’s Media Summary available by clicking here.
ABOUT EMERGING ENERGY RESEARCH
Emerging Energy Research (EER) is an independent research and advisory company that provides pragmatic forward-thinking advice about new energy technologies, markets and
strategies. For more information, please visit www.emerging-energy.com
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