Wind Market Seeing Results Despite Uncertain U.S. Policy Future
Like many of you, I saw this headline about Siemens’ US wind business and was impressed. Since Siemens is TEC’s sponsor, I was able to request an interview on the topic, and I spoke with Mike Revak- Siemens’ VP of Technical Sales and Proposals of the US Wind Group. We had an interesting chat- he is bullish on US wind, with or without the government incentives. Phew, because I’ve been worried … my questions are italicized.
Yes, these deals were part of our expectations… they are nice orders to have, and we’re glad of that, and they represent a significant amount of units that will be installed next year. It was good to get that done and behind us… obviously in our minds the market for 11 and the market for 12 in the US will be more robust than people forecasted. Industry analysts are adjusting their forecasts up a little in terms of the number of installed units to be placed into operation between this year and next year. This year, I’d say 6-7GW, and AWEA says the same, which is up a little bit from where it had been in the past. Most people would have thought 5-6. For 12, the analysts are saying much higher. Some analysts are saying it could approach the level it was at in 2009, which was about 10 GW.
What is accounting for the growth in 2012? I thought the tax credits were looking grim.
They are, and the tax codes and incentives are a big driver of wind deals. Those incentive programs – the tax program and the grant program- expire at the end of 12. So, there’s a lot of reasons for projects to go commercial in 12 to qualify. With the uncertainties around the extension, a lot of people are targeting the end of 12. Another driver is that wind technology, innovation and development, and the cost improvements on the product side have made wind much more competitive with other fuels- alternative energy and even conventional forms of power generation. Wind is really competitive at this stage. It will become a little less competitive if the PTC doesn’t get extended, but we think it would still be in the competitive range.
Historically, with the PTC unwinding or not being extended, has caused wind to drop significantly. There is a chance for decline in 13, we can’t deny it. But when you look at what’s published in terms of power price levels for different technologies, you can see where wind is even not counting the PTC. The fact that it’s competitive doesn’t mean people will put it on the ground… the industry is concerned, and we are concerned about the lack of certainty. It becomes more challenging to consider the future beyond 12.
From a Siemens’ perspective, we believe the future of energy is going to be a diversified mix. We think that wind, and gas and coal, solar, hydro, and even gasification technologies and things like that are going to be part of the future mix. Gas tends to be the marginal fuel, so it impacts the price levels for different energies, and we don’t fear it from that perspective. Again we think there needs to be everything. In fact in some instances, wind and gas compliment eachother in the design of modern combined cycle plants. With flexible ramp times, and features like duct burning, and evaporative cooling… The shape of those power cycles actually compliment wind where you can design a plant at peak efficiencies, and provide additional capacity when wind isn’t there.
What do you think is the biggest challenge for US wind, and for Siemens?
I think the biggest challenge is the uncertainty of the future, as we mentioned before. Also, what happens with government policy and regulation is big, in terms of those influencing wind like the PTC, ITC and tax credit grants, or in terms of EPA regulations. Will the clean air be more stringent? Will have have a carbon tax on fossil technology? It’s the uncertainty that is a challenge, particularly when you get beyond 12. The wind industry, and Siemens, we’d like to see a further extension of those programs and policies to continue to allow wind to mature, and to drive innovation so in the long run wind is a true source of diversity in the energy mix.
Are there any parts of the US that you think look most promising for wind in the next couple years?
The midwest has a high wind resource and wind capability; it’s is a key market, but it’s also great to be able to bring renewables to a new location at a competitive price level, and to bring put new markets into play. That is what you see in Pennsylvania and Nevada. It’s nice to be able to bring renewables to new locations.
Is Europe’s market for wind more robust than the US and if so, why?
I think the US has been substantial over the last 5-6 years, but I’d just get back to the policies and the programs. One of the reasons wind has grown so well in the last years in Europe is that there has been a consistent and long term view of what’s required to really address clean and renewable energy. That has allowed the industry to grow, develop, and create jobs and all the things that go with it. That’s what we could do better on in the US.