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United States

US market shows first signs of slow recovery

UNITED STATES: America's ailing wind market is slowly improving - but it will be years before it has completely recovered, analysts believe. The first quarter of 2011 saw the first yearly increase since the third quarter of 2009.

Just over 1.1GW of projects were completed, up 108% on the same period last year, according to the latest figures from the American Wind Energy Association (AWEA).

The quarter ended with another 5.6GW under construction, nearly twice the amount being built during the same period in both 2009 and 2010, but just below the approximately 5.7GW under construction by the end of 2010.

Ready for growth

Two-thirds of those megawatts under construction in the first quarter of this year were already locked in under long-term power purchase agreements, noted AWEA.

"These first-quarter figures indicate an industry poised for a renaissance," says Denise Bode, AWEA's chief executive. "Refined technologies, affordable prices and continued demand for clean, homegrown energy - these are all reasons why wind has consistently posted strong growth numbers, adding 35% of all new generating capacity since 2007."

But the volume of completed wind projects remained well below the levels of the first quarters of 2008 and 2009, down 27% and 63% respectively. Project starts in the first quarter of 2011 were also a modest 850MW, down 8% compared with a year earlier. This is the weakest quarter reported since project financing first dried up because of the economic crisis.

"This data confirms the soft medium-term outlook for the US wind market," says analyst Julien Desmaretz of Paris-based investment bank Bryan Garnier. "We maintain a cautious view of the market, given the current level of depressed gas prices, which impacts the signing of power purchase agreements (PPAs) and the project financing market globally." Desmaretz also cites the lack of federal support for wind.

And although AWEA reports that much wind output has already been spoken for with PPAs, heated competition for contracts has depressed the prices owner-operators can secure for their product, analysts say. Construction times are currently likely to be longer too, with many projects started by the end of 2010 to qualify for the US Treasury's Section 1603 grant, which had been expected to finish in December.

Bryan Garnier has a modest outlook for the entire year of 2011 for US wind, with a growth in installed capacity of 6.5GW. This is 27% higher than the 5.1GW installed last year and in line with the industry consensus. Around 10GW was installed in 2009.

Brighter future

For 2012, the investment bank anticipates a 30% growth in installed US capacity, with a healthier yearly total of 8.5GW. However, Desmaretz cautions that this figure assumes an extension of Section 1603 grants, a programme currently slated to expire in December this year.

For IHS Emerging Energy Research (EER), 2011 will be a year of modest recovery. The company foresees 5.7GW installed, compared with 2010 installations of about 5GW. "That's a significant bump up from 2010 - there are some large projects out there (under construction)," says analyst Tim Stephure.

"But we don't see the fundamental situation improving until around 2015. In the near-term, the industry will still be struggling a little, compared with the boom years of 2009," he says. Capacity in the wind sector will far outstrip demand in the near-term, and consolidation can be expected among developers, independent power producers and within the supply chain.

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