Frost: N. American Wind Energy Generator Market Benefits Foreign Investors
February 20, 2008 // Published as a news service by IHS
This compels domestic companies to compete more aggressively.
Recent analysis from Frost & Sullivan of the North American wind energy generator market found earned revenues between $4 billion to $5 billion in 2006, with estimates to reach $50 billion in 2013.
The wind power market in Canada is becoming increasingly dynamic due to federal and provincial efforts to promote this market. Analysts said the country will greatly benefit from the new wind legislation aimed at achieving 10,000 megawatts (MW) of wind power generation by 2010.
Analysts said the U.S. wind energy industry is well on course to add more than 3,000 MW to its power-generating capacity in 2007, topping its 2006 record of 2,454 MW. The country's production tax credit (PTC) is an influential growth factor, as installations increase and decrease depending on PTC’s extension and termination.
"Industrial investments in production base and developer confidence are also affected due to wavering PTC policy," said Frost & Sullivan research analyst S. Prem Anand. "However, state-based policies, such as renewables portfolio standards (RPS), renewable electricity standards and [the] Renewable Energy Production Incentive (REPI) moderately compensate for inconsistency in PTC implementation."
U.S. companies can take heart from the issuance of renewable energy certificates (REC), which encourage domestic generation renewable energy. Analysts said market participants are beginning to understand that future trends will be influenced more by RPS than PTC, although the latter will still function as a developer confidence indicator.
The U.S. market witnessed a late surge in new wind turbine installations in the past two years, analysts said, but it still trails Germany in the global ranking. According to the Global Wind Energy Council, the U.S. is only a notch below Spain in wind power production.
To extend this good form and augment turbine installations, wind turbine vendors will have to sort out issues regarding gearboxes, castings and blades in the supply chain. Analysts said they can achieve this by developing close ties with component suppliers. The high demand for turbines will encourage suppliers to increase capacity during the design of their manufacturing facilities.
This exponential demand triggers a simultaneous and proportional rise in cost, which helps offset the imbalance in supply and demand. However, market participants will not have this advantage in the future, when demand drops. Analysts said wide variations in cost also challenge the wind industry, as winds are sporadic and windy spots are far away from vast urban centers, which use most of the power.
"Wind energy generators should find a solution to rectify the cost issue if they are to survive in the long term," said Prem Anand. "They can achieve this by increasing the scale of production to derive economies of scale or outsource the manufacturing of smaller components to reduce the cost involved in production."
Source: Frost & Sullivan.