US Wind Developers Struggle To Ink Power Contracts
Mar 23, 2010 - Dow-Jones
The number of wind-power projects coming online in the U.S. is expected to decline this year, even with an influx of cash from the federal government, as developers struggle to find buyers for the electricity.
A big drop in power demand, expectations that wind-turbine prices will fall further and uncertainty over federal policy are making utilities hesitant to sign multiyear power-purchase agreements to supply their customers. At the same time, wind-farm developers and their financial backers are less willing to bet on future power prices and are increasingly looking to seal these long-term contracts.
The amount of new wind-power capacity coming online this year, largely spurred by federal grants, is projected to dip 18% to 8,000 megawatts before rebounding in 2011, although this will be slightly below last year's record level, according to Emerging Energy Research, a Cambridge, Mass., research firm.
The projected dip comes as the federal government pumps money into wind-power projects through a grant program. This program can fund up to 30% of a project, with developers having to start construction by the end of the year.
Yet even with increased federal support, the wind-power industry is struggling to reach agreements to sell their output. The main driver for wind-power demand is state-level renewable energy mandates, which require a percentage of annual electricity sales to come from wind, solar and other renewable sources.
Although state mandates rise over time, the math right now doesn't favor wind energy. Power demand has fallen 5% over the last two years to levels last seen in 2004, trimming the amount of renewable generation needed to meet the state standards. Wind-turbine prices are falling as well, causing utility buyers to hold off inking deals with developers in the hope of negotiating lower power prices in the future, said Matthew Kaplan, a senior analyst at Emerging Energy Research.
Developers are expected to face the greatest difficulty securing power purchase agreements in the Midwest and Southeast. Demand in the Mid-Atlantic states is likely to be mixed, while the Northeast and California will likely see strong demand, according to a Macquarie Capital report earlier this month.
"It is not an easy environment to get utilities to buy the output of a wind farm," said Gabriel Alonso, chief executive of Horizon Wind Energy, a North American unit of EDP Renovaveis SA (EDRVF, EDPR.LB), in an interview.
Horizon will cut its U.S. build-out by nearly 30% from last year to 500 megawatts for 2010 and 2011. Developers such as Horizon--and the manufacturers that supply them--say they need a stable federal policy around renewable generation to grow. They favor a national renewable-energy mandate, similar to the state-level programs now in place.
For now, Kaplan said the federal grants should help wind-power development grow year-over-year in 2011. Developers must get their projects started by the end of the year in order to qualify for the grants, so many of the projects should be completed next year.
But without a federal renewable standard, the wind-power industry is likely to continue on a boom-and-bust cycle dictated by short-term federal policies promoting development, said Elizabeth Salerno, director of industry data and analysis at American Wind Energy Association, an industry trade group.
"We could be hiring people, or downsizing, at the end of the year," she said.
Despite efforts by the Obama administration and several U.S. senators to get an energy and climate bill passed, any action remains uncertain this year because of the partisan divide and a focus increasingly shifting to November's mid-term elections.
-By Mark Peters, Dow Jones Newswires; 212-416-2457; firstname.lastname@example.org
Email this page to a friend
If you speak another language fluently and you liked this page, make
a contribution by translating
it! For additional translations check out FreeTranslation.com
(Voor vertaling van Engels tot Nederlands)
(For oversettelse fra Engelsk til Norsk)
(Для дополнительных переводов проверяют FreeTranslation.com )