Summary of trends in the U.S. wind energy market - Aaron smith nrel

32
NREL is a national laboratory of the U.S. Department of Energy, Office of Energy Efficiency and Renewable Energy, operated by the Alliance for Sustainable Energy, LLC. Summary of trends in the U.S. wind energy market THE COST AND VALUE OF WIND ENERGY Aaron Smith 26 May, 2014

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Summary of trends in the U.S. wind energy market presentation by Aaron Smith at the Cost and Value of Wind Energy

Transcript of Summary of trends in the U.S. wind energy market - Aaron smith nrel

Page 1: Summary of trends in the U.S. wind energy market - Aaron smith nrel

NREL is a national laboratory of the U.S. Department of Energy, Office of Energy Efficiency and Renewable Energy, operated by the Alliance for Sustainable Energy, LLC.

Summary of trends in the U.S. wind energy market

THE COST AND VALUE OF WIND ENERGY

Aaron Smith

26 May, 2014

Page 2: Summary of trends in the U.S. wind energy market - Aaron smith nrel

2 DOE/NREL Internal Use Only - Do Not Cite or Distribute

Objectives

1. Introduction to the US wind market

2. Land-based wind a. Market context

b. Cost trends

c. Technology and performance trends

d. Cost and pricing

3. Offshore wind in the United States a) Market context

b) Cost trends

c) Outlook

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3 DOE/NREL Internal Use Only - Do Not Cite or Distribute

Disclaimer

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WIND AND WATER POWER PROGRAM

4

2013 Wind Technologies Market Report

Purpose, Scope, and Data:

• Publicly available annual report summarizing key trends in the U.S. wind

power market, with a focus on 2013

• Scope primarily includes wind turbines over 100 kW in size

• Separate DOE-funded annual reports on distributed and offshore wind

• Data sources include AWEA, EIA, FERC, SEC, etc. (see full report)

Report Authors:

• Primary authors: Ryan Wiser and Mark Bolinger, Berkeley Lab

• Contributions from others at Berkeley Lab, Exeter Associates, NREL

Available at: http://www1.eere.energy.gov/wind/ [coming later in year]

Funded by: U.S. DOE Wind & Water Power Technologies Office

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5 DOE/NREL Internal Use Only - Do Not Cite or Distribute

Introduction to the US wind market – market structure

• Project developers/owners are generally independent power producers (IPPs) although some direct ownership by investor owner utilities (IOUs) and publicly-owned utilities (POUs)

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6 DOE/NREL Internal Use Only - Do Not Cite or Distribute

Introduction to the US wind market – market structure

• Wind power is generally sold through long-term power purchase agreements (PPAs) with 15 to 20 year terms with POUs and IOU counterparties, some is sold through merchant arrangements

• Long-term contracts are negotiated individually; prices are unique and reflect both project cost structure and local market conditions

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7 DOE/NREL Internal Use Only - Do Not Cite or Distribute

Introduction to the US wind market – incentives

Production Tax Credit (PTC)

Investment Tax Credit (ITC)

Renewable Energy Credits (RECs)

Federal Policies

State Policies

Accelerated Depreciation

• Tax credit valued at $23 (€17) per MWh of production for the first 10 years of a project

• 30% of eligible CapEx is returned to investors as tax credit in first year of operation (Recovery Act)

• Majority of investment can be depreciated over a 5 year period for tax purposes

• Investors earn credits based on production • RECs are generally bundled with power in PPAs; but can

be sold independently as separate revenue stream • RECs priced by market, with demand set by state-

mandated renewable energy penetration levels

Carbon Credits • Nascent revenue stream based on emerging regional

GHG markets

Tax Credits/ Other Support

• Myriad of programs among states

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WIND AND WATER POWER PROGRAM

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Regional Boundaries Overlaid on a Map of

Average Annual Wind Speed at 80 Meters

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WIND AND WATER POWER PROGRAM

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• Capacity additions in 2013 were just 8% of 2012 additions

• $1.8 billion invested in wind power project additions

• Cumulative wind capacity up by less than 2%, bringing total to 61 GW

Wind Power Additions Stalled in 2013, with Only 1,087 MW of New Capacity Added

0510152025303540455055606570

0123456789

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1998

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Annual U.S. Capacity (left scale)

Cumulative U.S. Capacity (right scale)

Cu

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GW

)

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• Capacity additions in 2013 were just 8% of 2012 additions

• $1.8 (€1.3) billion invested in wind power project additions

• Cumulative wind capacity up by less than 2%, bringing total to 61 GW

Wind Power Additions Stalled in 2013, with Only 1,087 MW of New Capacity Added

0510152025303540455055606570

0123456789

1011121314

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Annual U.S. Capacity (left scale)

Cumulative U.S. Capacity (right scale)

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PTC Expires

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WIND AND WATER POWER PROGRAM

• Led by decline in U.S. market, global additions 20% lower in 2013

• U.S. remains a distant second to China in cumulative capacity

The U.S. Fell to 6th Place in Annual Wind Power Capacity Additions

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Annual Capacity (2013, MW)

Cumulative Capacity (end of 2013, MW)

China 16,088 China 91,460 Germany 3,237 United States 61,110 India 1,987 Germany 34,468 United Kingdom 1,833 Spain 22,637 Canada 1,599 India 20,589 United States 1,087 United Kingdom 10,946 Brazil 948 Italy 8,448 Poland 894 France 8,128

Sweden 724 Canada 7,813 Romania 695 Denmark 4,747 Rest of World 7,045 Rest of World 51,031

TOTAL 36,137 TOTAL 321,377

Source: Navigant; AWEA project database for U.S. capacity

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WIND AND WATER POWER PROGRAM

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U.S. Lagging Other Countries in Wind As a Percentage of Electricity Consumption

Note: Figure only includes the countries with the most installed wind power capacity at the end of 2013

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Wind Turbine Prices Remained Well Below the Levels Seen Several Years Ago

• Recent turbine orders in the range of $900-1,300/kW (€660-€950/kW),

with more-favorable terms for buyers and improved technology

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Lower Turbine Pricing Showing Up In Reported Total Project Costs

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Individual Project Cost (708 projects totaling 50,210 MW)

Capacity-Weighted Average Project Cost

• Limited sample for 2013 had average cost of $1,630/kW or €1,195/kW

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Projects installed within the past decade have, on average, incurred lower O&M costs than those installed earlier

• 2013 data has not yet been updated

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Performance Is Impacted by the Physical Characteristics of the Turbine Fleet, Including Larger-Rotor Machines…

• Two periods of rapid scaling: 1998-2006 and 2009-present

• 2006-2008 mostly stagnant, as OEMs focused on meeting demand 16

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Average Nameplate Capacity (left scale)

Average Rotor Diameter (right scale)

Average Tower Height (right scale)

MW

Met

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WIND AND WATER POWER PROGRAM

And the Increased Use of Lower Wind Speed Turbines, Now Also Often Used in Higher Wind Speed Sites (IEC Class)

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And the Increased Use of Lower Wind Speed Turbines, Now Also Often Used in Higher Wind Speed Sites (Specific Power)

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Somewhat Offset By Curtailment…

Estimated Wind Curtailment (GWh and % of potential wind generation)

• ERCOT, NYISO, MISO numbers represent both forced and voluntary curtailment; other regions may only show only forced curtailment

• Curtailment way down in ERCOT (thanks to CREZ), steady or rising elsewhere

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WIND AND WATER POWER PROGRAM

…And the Build-Out of Projects in Lower-Quality Resource Areas (some reversal since 2011), Enabled By Low Wind Speed Technology Advancements

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Competing Influences Result in Lackluster Trend in Capacity Factor by Project Vintage

Sample-wide average not strongly trending higher with more-recent vintages

as might be expected based on rotor and hub height scaling trends: does

not incorporate 2013 scaling and does not control for wind resource quality

0%

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Generation-Weighted Average (by project vintage)

Individual Project (by project vintage)20

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Cap

acit

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Sample includes 543 projects totaling 56.1 GW

Vintage:# projects:

# MW:

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WIND AND WATER POWER PROGRAM

Controlling for Wind Resource Quality (and Curtailment) Demonstrates Impact of Turbine Evolution

• Still too early for latest batch of large-rotor turbines to be fully reflected

in empirical capacity factor data: expect many projects in “highest”

resource areas to have 50%+ capacity factors in years ahead 22

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Medium(138 projects, 15.9 GW)

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Highest(67 projects, 6.6 GW)

Wind Resource Quality

Specific Power range of 200-220 (11 projects & 1.6 GW)

Specific Power range of 220-300 (116 projects & 11.0 GW)

Specific Power range of 300-400 (351 projects & 38.5 GW)

Specific Power range of 400-500 (29 projects & 2.7 GW)

Sample includes 507 projects totaling 53.8 GW with a commercial operation date of 1998-2012

Wei

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apac

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Fact

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Wind Resource Quality is based on AWS site estimates of gross capacity factor at 80 m:

• Lower = 25%-35%

• Medium = 35%-42.5%

• Higher = 42.5%-50%

• Highest = 50%-60%

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WIND AND WATER POWER PROGRAM

Lower Costs and Better Capacity Factors Enable Aggressive Pricing for Recent PPAs

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Interior (16,840 MW, 184 contracts)

West (6,885 MW, 69 contracts)

Great Lakes (2,364 MW, 33 contracts)

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Southeast (268 MW, 6 contracts)

Leve

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h)

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• Lowest prices we have ever seen in the U.S. market, despite the

trend towards lower-quality wind resource sites in general

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WIND AND WATER POWER PROGRAM

A Smoother Look at the Time Trend Shows Steep Recent Decline in Pricing; Especially Low Pricing in Interior Region

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Great Lakes West

Northeast

PPA Year:Contracts:

MW:

• Lowest prices we have ever seen in the U.S. market, despite the

trend towards lower-quality wind resource sites in general

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WIND AND WATER POWER PROGRAM

Wind Prices (w/ PTC) Are Hard to Beat: Below the Current & Expected Future Cost of Burning Fuel in Natural Gas Plants

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Range of AEO14 gas price projections AEO14 reference case gas price projection Wind 2011 PPA execution (3,533 MW, 34 contracts) Wind 2012 PPA execution (721 MW, 9 contracts) Wind 2013 PPA execution (1,788 MW, 10 contracts)

20

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$/M

Wh

Page 26: Summary of trends in the U.S. wind energy market - Aaron smith nrel

26 DOE/NREL Internal Use Only - Do Not Cite or Distribute

Considerable interest in developing Offshore Wind an projects - Gross Resource = 4,000 GW

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27 DOE/NREL Internal Use Only - Do Not Cite or Distribute

To date, no offshore wind projects have been installed in the US; 11 projects, however, have made substantial progress+

WindFloat Pacific

(OR)

LEEDCo (OH)

Fisherman’s Phase I (NJ)

Block Island Wind (RI)

Cape Wind (MA)

Galveston Offshore (TX*)

Rio Grand Wind Farm (TX*)

Notes

+ Projects with “substantial progress” have: (1) signed a PPA and/or (2) received a commercial lease

* The proposed wind farms in TX have obtained leases, but specific wind farm plans remain TBD

** NRG Bluewater Wind obtained leases and a PPA for a project in DE, but development is on hold and the PPA

has been canceled

Project Size Legend

< 100 MW

100 - 500

MW

1,000 MW

Jurisdiction Legend

State Waters

Federal Waters

Deepwater (MA/RI)

Aqua Ventus (ME)

VOWTAP (VA)

Dominion (VA)

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US Offshore Wind: Proposed Nameplate Capacity by State

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28 DOE/NREL Internal Use Only - Do Not Cite or Distribute

CapEx for E.U. projects have risen significantly since 2005; projections suggest that CapEx might be stabilizing

CapEx for U.S. offshore wind projects seem broadly consistent with E.U. cost structure (though limited data)

-

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Esti

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apit

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ost

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Installed Construction Contracted1 Approved2

E.U.

U.S.

Note: Bubble size represents project capacity Source: NREL Offshore Wind Database

1 Has executed supply contract with 1 or more parties 1 Has received approval of permits and/or off-take contract

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29 DOE/NREL Internal Use Only - Do Not Cite or Distribute

Significant potential for cost reduction: reduced risk, technology advancement, and increased scale

Grid Parity

Risk

Technology

Scale

Deployment (MW)

Current Cost

Present Year

Off

sho

re W

ind

Co

st o

f En

erg

y

Pu

blic

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stm

en

t

(Po

licy

Sup

po

rt)

Market Hurdle Price

Page 30: Summary of trends in the U.S. wind energy market - Aaron smith nrel

30 DOE/NREL Internal Use Only - Do Not Cite or Distribute

DOE is funding offshore wind projects that are demonstrating technology with potential to reduce LCOE

WindFloat Pacific (OR) Principle Power, Inc. 5 x 6MW direct drive turbines; Semi-submersible foundation

Virginia Demonstration (VA) Dominion Power 2 x 6 MW direct drive turbines Innovative foundations

Atlantic City I (NJ) Fishermen’s Energy Up to 6 turbines Advanced shallow-water foundations

Floating foundation

Fixed-bottom foundation

In May 2014, the DOE Wind Program selected three projects to proceed to the design, fabrication,

and deployment phase with commercial operation scheduled for 2017. Anticipated funding (subject

to conditions) is $47 million (€35million) each

See Energy.gov for more information: http://energy.gov/eere/wind/offshore-wind-advanced-technology-demonstration-projects

Page 31: Summary of trends in the U.S. wind energy market - Aaron smith nrel

31 DOE/NREL Internal Use Only - Do Not Cite or Distribute

DOE is funding offshore wind projects that are demonstrating technology with potential to reduce LCOE

Aqua Ventus (ME) Engineering and design only University of Maine 2 x 6 MW direct drive turbines, Concrete semi-submersible foundations

Floating foundation

Fixed-bottom foundation

DOE selected two additional projects projects (Icebreaker and Aqua Ventus) to complete

engineering and design studies for their innovative technologies

Icebreaker (OH) Engineering and design only LEEDCo 9 x 3 MW direct drive turbines Ice resistant monopile foundations

See Energy.gov for more information: http://energy.gov/eere/wind/offshore-wind-advanced-technology-demonstration-projects

Page 32: Summary of trends in the U.S. wind energy market - Aaron smith nrel

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Thank you for your attention!

Aaron Smith Technical Analyst

Offshore Wind Program National Renewable Energy Laboratory

[email protected]

For more information see: http://www1.eere.energy.gov/wind/

http://www.nrel.gov/wind/

http://emp.lbl.gov/