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

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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

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  • 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
  • 2DOE/NREL Internal Use Only - Do Not Cite or Distribute Objectives 1.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
  • 3DOE/NREL Internal Use Only - Do Not Cite or Distribute Disclaimer
  • 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
  • 5DOE/NREL Internal Use Only - Do Not Cite or Distribute Introduction to the US wind market market structure Project developers/owners are generally independent power producers (IPPs) although some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)
  • 6DOE/NREL Internal Use Only - Do Not Cite or Distribute Introduction to the US wind market market structure Wind power is generally sold through long-term power purchase agreements (PPAs) with 15 to 20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
  • 7DOE/NREL Internal Use Only - Do Not Cite or Distribute Introduction to the US wind market incentives Production Tax Credit (PTC) Investment Tax Credit (ITC) Renewable Energy Credits (RECs) Federal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
  • WIND AND WATER POWER PROGRAM 8 Regional Boundaries Overlaid on a Map of Average Annual Wind Speed at 80 Meters
  • WIND AND WATER POWER PROGRAM 9 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 0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Annual U.S. Capacity (left scale) Cumulative U.S. Capacity (right scale) CumulativeCapacity(GW) AnnualCapacity(GW)
  • WIND AND WATER POWER PROGRAM 10 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 0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Annual U.S. Capacity (left scale) Cumulative U.S. Capacity (right scale) CumulativeCapacity(GW) AnnualCapacity(GW) PTC Expires
  • 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 11 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
  • WIND AND WATER POWER PROGRAM 12 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
  • WIND AND WATER POWER PROGRAM 13 Wind Turbine Prices Remained Well Below the Levels Seen Several Years Ago Recent turbine orders in the range of $900-1,300/kW (660-950/kW), with more-favorable terms for buyers and improved technology
  • WIND AND WATER POWER PROGRAM 14 Lower Turbine Pricing Showing Up In Reported Total Project Costs 0 1,000 2,000 3,000 4,000 5,000 6,000 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 InstalledProjectCost(2013$/kW) Commercial Operation Date 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
  • WIND AND WATER POWER PROGRAM 15 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
  • WIND AND WATER POWER PROGRAM 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 0 10 20 30 40 50 60 70 80 90 100 0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4 1.6 1.8 2.0 1998-99 2000-01 2002-03 2004-05 2006 2007 2008 2009 2010 2011 2012 2013 Commercial Operation Year Average Nameplate Capacity (left scale) Average Rotor Diameter (right scale) Average Tower Height (right scale) MW Meters
  • 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) 17
  • WIND AND WATER POWER PROGRAM And the Increased Use of Lower Wind Speed Turbines, Now Also Often Used in Higher Wind Speed Sites (Specific Power) 18
  • WIND AND WATER POWER PROGRAM 19 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
  • 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 20
  • WIND AND WATER POWER PROGRAM 21 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% 10% 20% 30% 40% 50% 60% 1998-99 21 876 2000-01 22 1,601 2002-03 28 1,969 2004-05 26 3,401 2006 19 1,723 2007 37 5,282 2008 73 8,386 2009 92 9,197 2010 46 4,616 2011 64 5,661 2012 115 13,368 Generation-Weighted Average (by project vintage) Individual Project (by project vintage) 2013CapacityFactor(byprojectvintage) Sample includes 543 projects totaling 56.1 GW Vintage: # projects: # MW:
  • 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 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% Lower (114 projects, 8.5 GW) Medium (138 projects, 15.9 GW) Higher (188 projects, 22.8 GW) 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 WeightedAverageCapacityFactorin2013 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%
  • WIND AND WATER POWER PROGRAM Lower Costs and Better Capacity Factors Enable Aggressive Pricing for Recent PPAs 23 $0 $20 $40 $60 $80 $100 $120 Jan-96 Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 PPA Execution Date Interior (16,840 MW, 184 contracts) West (6,885 MW, 69 contracts) Great Lakes (2,364 MW, 33 contracts) Northeast (855 MW, 20 contracts) Southeast (268 MW, 6 contracts) LevelizedPPAPrice(2013$/MWh) 75 MW 150 MW 50 MW Lowest prices we have ever seen in the U.S. market, despite the trend towards lower-quality wind resource sites in general
  • WIND AND WATER POWER PROGRAM A Smoother Look at the Time Trend Shows Steep Recent Decline in Pricing; Especially Low Pricing in Interior Region 24 $0 $10 $20 $30 $40 $50 $60 $70 $80 $90 $100 1996-99 10 553 2000-01 17 1,249 2002-03 24 1,382 2004-05 30 2,190 2006 30 2,311 2007 26 1,781 2008 39 3,465 2009 48 4,040 2010 41 4,197 2011 34 3,533 2012 9 721 2013 10 1,788 AverageLevelizedPPAPrice(Real2013$/MWh) Nationwide Interior 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
  • 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 25 0 10 20 30 40 50 60 70 80 90 100 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 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) 2013$/MWh
  • 26DOE/NREL Internal Use Only - Do Not Cite or Distribute Considerable interest in developing Offshore Wind an projects - Gross Resource = 4,000 GW
  • 27DOE/NREL Internal Use Only - Do Not Cite or Distribute To date, no offshore wind projects have been installed in the US; 11 projects, however, have made substantial progress+ WindFloat Pacific (OR) LEEDCo (OH) Fishermans Phase I (NJ) Block Island Wind (RI) Cape Wind (MA) Galveston Offshore (TX*) Rio Grand Wind Farm (TX*) Notes + Projects with substantial progress have: (1) signed a PPA and/or (2) received a commercial lease * The proposed wind farms in TX have obtained leases, but specific wind farm plans remain TBD ** NRG Bluewater Wind obtained leases and a PPA for a project in DE, but development is on hold and the PPA has been canceled Project Size Legend < 100 MW 100 - 500 MW 1,000 MW Jurisdiction Legend State Waters Federal Waters Deepwater (MA/RI) Aqua Ventus (ME) VOWTAP (VA) Dominion (VA) 0 200 400 600 800 1000 1200 1400 ME OH NJ OR RI MA VA TX* ProposedCapacity(MW) US Offshore Wind: Proposed Nameplate Capacity by State
  • 28DOE/NREL Internal Use Only - Do Not Cite or Distribute CapEx for E.U. projects have risen significantly since 2005; projections suggest that CapEx might be stabilizing CapEx for U.S. offshore wind projects seem broadly consistent with E.U. cost structure (though limited data) - 2,000 4,000 6,000 8,000 10,000 2000 2002 2004 2006 2008 2010 2012 2014 2016 EstimatedCapitalCost(2012$/kW) Installed Construction Contracted1 Approved2 E.U. U.S. Note: Bubble size represents project capacitySource: 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
  • 29DOE/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 OffshoreWindCostofEnergy PublicInvestment (PolicySupport) Market Hurdle Price
  • 30DOE/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) Fishermens 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
  • 31DOE/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
  • 32 Thank you for your attention! Aaron Smith Technical Analyst Offshore Wind Program National Renewable Energy Laboratory Aaron.smith@nrel.gov For more information see: http://www1.eere.energy.gov/wind/ http://www.nrel.gov/wind/ http://emp.lbl.gov/

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