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

1. 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

2. 2DOE/NREL Internal Use Only - Do Not Cite or Distribute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

3. 3DOE/NREL Internal Use Only - Do Not Cite or Distribute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

4. 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

5. 5DOE/NREL Internal Use Only - Do Not Cite or Distribute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

6. 6DOE/NREL Internal Use Only - Do Not Cite or Distribute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

7. 7DOE/NREL Internal Use Only - Do Not Cite or Distribute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

8. WIND AND WATER POWER PROGRAM
8
Regional Boundaries Overlaid on a Map of
Average Annual Wind Speed at 80 Meters

9. 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
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45
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70
0
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14
1998
1999
2000
2001
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2005
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2008
2009
2010
2011
2012
2013
Annual U.S. Capacity (left scale)
Cumulative U.S. Capacity (right scale)
CumulativeCapacity(GW)
AnnualCapacity(GW)

10. 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
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35
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45
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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

11. 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

12. 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

13. 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

14. 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

15. 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

16. 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

17. 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

18. 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

19. 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

20. 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

21. 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:

22. 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%

23. 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

24. 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

25. 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

26. 26DOE/NREL Internal Use Only - Do Not Cite or Distribute
Considerable interest in developing Offshore Wind an
projects - Gross Resource = 4,000 GW

27. 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)
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)
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

28. 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

29. 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

30. 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)
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

31. 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. 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/