Wind Energy is Winning but Fears Competition

Wind energy has won its battle to become a market leading mainstream power generation resource.  It should celebrate that victory and turn its attention to sustaining it by weaning itself from its dependence upon subsidies and renewable portfolio standards by driving down its costs and improving its efficiency to assure its long term success.

In 2005, in a Global Energy Decisions market study called Renewable Energy: The Bottom Line we stuck our necks out and declared that renewable energy was transforming the power generation landscape.  We said achieving the renewable portfolio standards of the 20 states that then had such requirements would require $53 billion in investment in 52,000 MW of to achieve the goals.  We forecast that wind energy would win 76% of the new renewable energy market share given its better cost position relative to solar and other technologies.

We were accused of being ‘politically correct’ and pandering to regulators and politicians favoring renewable energy when utilities and merchant power generators preferred to build natural gas fired combined cycle generators.  We stuck to our conclusions because our independent analysis found that wind was rapidly reaching the stage where it not only would become a mainstream resource options but its cost would fall to bring it to grid parity.  I confess we were less optimistic about solar PV in 2005 but falling prices for solar panels and growing market penetration has driven down the costs of solar as well—not as far as wind but enough to make it competitive.

In 2009, wind energy capacity additions accounted for 62 percent (17 GW) of all new power generation installed in the European Union (EU). Renewable energy use in Europe grew to 18.4 percent of the European Union’s primary energy production, an increase of 8.3 percent from 2008, according to Eurostat.  This compares to 19.3 percent of EU electricity consumption produced with natural gas which was down 10 percent in 2009.  Coal fired generation fell 9 percent in the same period.  Total energy consumption fell 5.5 percent in 2009 due mostly to the recession but energy intensity is down for a sixth consecutive year across the EU.

In the United States, wind energy penetration of new generation was 39 percent.  The U.S. Department of Energy recently released 2009 Wind Technologies Market Report said the 2009 US market investment was $21 billion.

So what?

The wind industry complains that 2010 is not going to be a great year for wind installations.  It’s solution is for Congress to enact a national renewable portfolio standard to keep the momentum going, the real issue is that wind energy is finding it increasingly difficult to sustain its meteoric growth rates.  2011 will most likely be a better year for wind but it should not count on a national RPS to sustain its growth.

Competition is growing as the sector consolidates and big players with deep pockets compete for global leadership. The Chinese are driving down the cost of both wind turbines and solar panels but the competitive cost for falling prices is growing Chinese market share.  Competition is good for consumers and it will prove good for the wind and solar industry long term if they embrace it instead of evading it by protections and subsidies.

Consolidation is driving this fierce competition faster as bigger players compete for global market share in a vicious shakeout of smaller, weaker players in favor of the strong and big.  There is likely one additional benefit of the emergence of big scale players—-they recognize the importance of building transmission to get the renewables to market and scale their business.  Smaller players have typically whined about access, big players can make it happen.

Wind by all metrics is now a mainstream resource and it is having a tough time in weaning itself from subsidies and a preferred procurement position in the power generation portfolio building process.  The recession has reduced demand and the growth of solar as a competitive alternative to wind adds to its worries.  But this is a good news story.

Wind has won the race to become the undisputed leader in renewable energy resources.  But it will not always have its preferred and protected position at the top.  Now it must focus on driving down the costs, improving the efficiency of its technology and turbine equipment and join forces with friends and foe alike in getting the new transmission built to bring wind energy and other renewables to market.