Wind Power and Wind Farms

Commodities, Investing & Retiring


The Department of Energy (DOE) recently released the 2014 Wind Technologies Market Report, providing a comprehensive update on the state of wind power within the US and the challenges that lie ahead. The report shows that while US wind power capacity has been increasing, the lack of a coherent and comprehensive governmental policy will likely keep the wind industry apprehensive about future direction and growth beyond the next few years.

For a bit more depth on the issues, see the categories below.

  • Capacity – 2014 was a recovery year for wind power additions, with 4.85 gigawatts (GW) of new capacity and $8.3 billion in investments. That’s 24% of the additional capacity installed in 2014 across all power sources, behind natural gas (38%) and solar power (30%). Total US wind capacity is now at 65.88 GW, second only to China with 114.76 GW. However, total US wind capacity is still just below 5% of the overall annual US energy consumption.
  • Local Breakdown – Wind farms and capacity improvements are very localized thanks to various state investment programs and mandates — not to mention the fact that wind power is just more efficient in certain areas thanks to Mother Nature.

The Great Plains and the West have greatly increased capacity, offshore wind farms are increasing along the East Coast, and Texas now has 14 GW of the total US capacity. However, the Southeastern US has a negligible wind power presence, at only 2% of power capacity growth generated since 2007. Check the US Wind Farm Map for local details.

  • Cost – Wind power is becoming competitive with natural gas, having dropped to a bit under two cents per kilowatt-hour (kWh). It is not just due to subsidies — turbines are much larger and more efficient. Other technological improvements and the economies of scale are also improving the economics of wind power. However, a bottleneck remains in the queue for approval to connection to the grid. 30% of the total wind capacity is sitting idle waiting for the final connection to be made.
  • Subsidies – Critics argue that the industry is too heavily subsidized, but unpredictability of funding support may be a bigger problem. Wind power projects take considerable time to bring from the drawing board through the approval and construction phases and eventual hookup to the power grid. It is difficult for developers and investors to make reasonable decisions when subsidies are continually allowed to expire and revived at later dates.

That is exactly what has been happening with the Production Tax Credit (PTC) since its first “expiration” in 1999. 2012 was a banner year and 2013 was a poor year for wind expansion, because the PTC was set to expire before the end of 2012. It was eventually renewed only to cover projects that started the “under construction” phase before the end of 2014. Thus, projections for capacity growth average in the 8 GW range for 2015 and a bit less than 7 GW in 2016 before falling to less than 2 GW in 2017.

  • Environmental Pushback – In some areas, environmental concerns are delaying wind projects. Offshore wind projects in the Northeast and along the Atlantic seaboard are being bitterly contested to the point where projects are effectively stalled. This may put a dent in the 2015/2016 wind capacity numbers as 16 wind-related projects are in various stages along the East Coast, comprising around 15GW of planned capacity.
  • Clean Power Plan – The recent rules announced by the EPA should be a boon for wind power, as the final version mandates a 32% reduction in carbon emissions by power plants (over 2005 baseline emissions) by the year 2030. Wind has some major advantages as the states with some of the toughest reduction tasks are in wind-friendly areas. However, credits from the corresponding Clean Energy Incentive Program (CEIP) do not take effect until 2020. Combine that with the PTC funding issue and wind could suffer from a lag time in investment while new natural gas plants fill the gap during the transition away from coal.

Anyone interested in a more detailed analysis can download the full DOE report here. In the meantime, keep an eye on Washington for policy changes, and contact your Congressional representatives if you have a strong opinion on wind power one way or the other. It may not seem like it at times, but the voices of the people do matter.

Photo ©iStock.com/Cameron Strathdee



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