American wind power had a strong entrance into 2014, bolstered by nearly a decade of record growth. Today, the US has well over 60GW of installed wind capacity, making it the largest in the western hemisphere and the second largest globally. This upward swing was driven by critical developments in manufacturing and technology that have lowered the cost of US wind power by 43% in the past four years.
From coast to coast, 550 factories in 44 states make up the US wind power supply chain, a network that has produced 72% of a turbine's value domestically. New wind power attracts up to $25 billion in private investment in a given year. As many as 85,000 workers in all 50 states have made up the backbone of the industry, establishing American wind power as a unique, homegrown energy source. Emerging from an economic downturn, the industry has reached achievements that are both impressive and important.
In the first quarter of 2014, US wind power witnessed the largest-ever surge in demand in its history, with 12GW of new wind capacity under construction as the year began. Looking towards the future, the industry is eager and optimistic.
Growth, however, has not been consistent year to year. Key federal policy support in the form of the production and investment tax credits (PTC/ITC) has been unpredictable given their short-term policy extensions and resulting threatened expirations. While individual states have worked hard to provide their own policies such as Renewable Portfolio Standards (RPSs), inconsistency at the federal level has injected uncertainty into nearly every aspect of the industry.
Iowa takes the prize
Total generation by wind energy on the US grid at the start of 2014 was up 19% from the year before, bringing American wind power to just over 4% of US electricity generation overall. At the state level, Iowa took the prize for largest percentage of its electricity generated from wind in 2013, at 27%. Wind power's contribution to the grid will keep growing. The 90-plus projects under construction at the beginning of 2014 will generate enough electricity to power an additional 3.5 million households.
Land-based projects are currently under construction in at least 20 states. There are more than 7GW under construction in Texas alone - more megawatts than any other state currently has installed. Iowa has the second-most megawatts under construction (1.05GW). Other top states for construction activity include Kansas (722MW), North Dakota (632MW), Michigan (342MW) and New Mexico (317MW).
Last year was also important for the US's budding offshore wind industry. In a pilot project, the University of Maine's DeepCwind Consortium deployed a quarter-scale floating turbine. In addition, the Interior Department held auctions for areas off Rhode Island, Massachusetts and Virginia, while Maryland passed legislation to support 200MW of offshore wind power.
But the unpredictability of the PTC's status in Congress is still stifling American wind power's growth.
The lead-up to the most recent PTC expiration on 31 December 2012 was a prime example of its effects on the industry. Following the late extension of the PTC and ITC on 2 January 2013, the US wind industry installed only 1.6MW of new capacity during the first quarter of 2013, and nothing at all in the second quarter. In the third quarter, 68MW was installed through the completion of projects in Alaska, California, and Colorado, and the pace picked up in the fourth quarter with 1.02GW added. Wind power capacity installations for 2013 totalled 1.09GW, a 92% reduction from the 13.13GW installed during 2012. Despite the effects of the PTC's expiration, wind power's growth during the last few years saw over 60GW of installed wind capacity in the US - enough to power over 15.3 million homes.
Technological improvements are rapidly making wind turbines more productive while reducing costs; further, expanded US manufacturing is achieving economies of scale and reducing transportation costs, which can comprise up to a fifth of the price tag of a wind farm. As mentioned, the Wind Technologies Market Report 2012 from the US Department of Energy (DOE) confirms that the cost of wind energy has declined by 43% over the past four years.
The report explains: (1) the capital cost to develop wind power projects continues to drop; (2) the average cost to purchase electricity provided by wind is falling; (3) the productivity of wind turbines continues to increase; and (4) 72% of a wind turbine's value was made-in-the-US as of 2013.
Wind energy is beneficial to consumers. Because it requires no fuel, it directly displaces the output of the most expensive and least efficient power plants currently operating. Power plant rank order is based on the cost of producing an incremental amount of electricity.
It is not surprising, therefore, that more than a dozen studies conducted have found that wind energy benefits consumers by reducing electricity prices. To keep growing and providing affordable electricity to ratepayers, the wind industry must have a greater degree of policy certainty. The PTC, a performance-based incentive, has been a tremendous success.
With this in place, the US wind industry was the number one source of new electricity generation capacity in 2012. As scored by Congress, the credit is estimated to be worth $1.3-$1.8 billion in tax relief per year. That investment means jobs in construction, manufacturing and operations, as well as federal, state, and local tax payments by the resulting wind farms.
A poll conducted by USA Today in December 2013 reported that 73% of Americans supported continued tax incentives for renewables like wind and solar.
The industry needs the PTC extended for the longest practical term to provide our businesses with the ability to invest in improvements in technology which will continue to bring consumer costs down. But extending the PTC is only half the story.
American wind power must continue to develop its markets by leveraging its available resources, encouraging further development of RPS state policies and a federal clean energy standard.
This year, therefore, will be one of transformation as US wind takes on new challenges, while maintaining its position as an energy source that crosses party lines and promotes economic development.
Tom Kiernan is CEO of the American Wind Energy Association