110302 Lucintel Brief Us Wind Opportunity Final

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110302 Lucintel Brief Us Wind Opportunity Final

  1. 1. Creating the Equation for Growth US Wind Market Opportunity 2011-2016 Lucintel Brief Published: March, 2011 Lucintel 1320 Greenway Dr., Suite 870, Las Colinas, TX 75038, USA. Tel: +1-972-636-5056, E-mail: helpdesk@lucintel.com Creating the Equation for Growth Copyright © Lucintel
  2. 2. Table of Contents • Executive Summary • US Wind Opportunity and Attractiveness Analysis • Govt. Policies, Tax Credits and RPS Targets • Emerging Trends • Conclusions • About Lucintel Creating the Equation for Growth2 2
  3. 3. Executive Summary• US renewable energy capacity grew at a CAGR of 25% during the last 5 years (2005-2010) while cumulative wind energy capacity exhibited a CAGR of 34% over the same period• Value of the US wind energy market was $ 10 billion in 2010, after a decline of 49% compared to 2009• By 2016, US wind energy market expected to reach $24 billion (15% CAGR), with a cumulative capacity of 94 GW• Federal government subsidies and political willpower to continue incentives, continued environmental consciousness, increase in demand for electricity, oil price increases and interest in strengthening national energy independence will drive wind energy growth to new horizons• South Dakota, Kansas and California are prominent among states having the most attractive prospects for wind energy growth• Future wind market expected to be more fragmented and international due to emerging economies Creating the Equation for Growth 3
  4. 4. Table of Contents • Executive Summary • US Wind Opportunity and Attractiveness Analysis • Govt. Policies, Tax Credits and RPS Targets • Emerging Trends • Conclusions • About Lucintel Creating the Equation for Growth4 4
  5. 5. US renewable space still young with tremendous growth potential Total Electricity Capacity in 2010: ~ 1,050 GW Key Insights Renewable Energy: ~ 60 GW Nuclear Solar • Renewable energy is expected to grow at 18 10% 5% Biomass % (CAGR) in next 5 years (excluding Hydro) Hydro 22% due to: 9% • Government subsidies 6% 7% • Extension of cash grants to 2011 75% Renewable 66% • Continued environmental Others Wind consciousness Conventional • Expected oil price increases Total Electricity Capacity in 2016: ~ 1,190 GW • Expected slow growth of nuclear energy Renewable Energy: ~ 155 GW • Obama administration FY 2010 budget Solar Nuclear significantly reduced funding to $ 20 9% 25% million in 2010 vs. $ 177 Million in 2009 8% Hydro Biomass 11% 70% 4% 13% Others 60% Renewable Wind Source: LucintelConventional Creating the Equation for Growth 5
  6. 6. Wind energy in particular offers huge growth potential Wind market has experienced Key Insights significant growth MW • Wind energy has witnessed significant growth during50,000 last 5 years with 34% CAGR40,000 • Government incentives +34% • Cost of generating electricity from wind is lower30,00020,000 compared to other renewable energy sources10,000 • Expected robust growth of wind energy in next 5 years 0 • Strong state level RPS goals 2005 2006 2007 2008 2009 2010 • Expected natural gas price increase Source: Lucintel • Government subsidies Wind market expected to grow @ 15% U.S wind market expected to reach $ 24 Billion in 2016 MW $ Billion100,000 +15% 30 +16% 20 +23% 50,000 10 0 0 2011 2012 2013 2014 2015 2016 Source: Lucintel 2005 2010 2016 Creating the Equation for Growth 6
  7. 7. US wind energy market experienced a strong 2010 downturn due toseveral factors that are expected to return to favorable growth conditions 4.500 New US MW Installations 4.000 3.500 3.000 2.500 2.000 1.500 1.000 500 0 1Q 2008 2Q 2008 3Q 2008 4Q 2008 1Q 2009 2Q2009 3Q 2009 4Q 2009 1Q2010 2Q2010 3Q2010 4Q2010 Challenges as wind market declined in 2010 Solutions • Overall energy demand expected to increase• 3-4% drop in energy demand at 2% CAGR in next 5 years• Fall of natural gas prices • Expected 7% CAGR increase in natural gas• Connectivity issues impacting new projects prices in next 5 yrs• Lack of robust long term federal targets for renewable • Texas leading way to new connectivity• Lack of credit / financing • Political support for renewable expected to• State level targets are still well into the future remain Creating the Equation for Growth 7
  8. 8. Several states in the US possess significant wind energy potential Key Insights + Texas Kansas • US has strong wind energy potential in a Montana large number of states: Nebraska • US total potential capacity is 10 TW ofWind energy potential South wind energy vs. the current installed North Dakota Dakota capacity of 40 GW Iowa • Texas and Kansas have the highest Wyoming wind potential Oklahoma • Texas has achieved higher annual New Mexico capacity additions than other states • Relatively highly developed wind energy states such as California still offer lot of potential California • Mississippi is the only state to show – no potential for wind energy + – Source: Lucintel Percentage of wind energy penetration vs. potential Creating the Equation for Growth 8
  9. 9. Relative market attractiveness of top wind energy potential statesParameter Texas Kansas Montana Nebraska South North Iowa Wyoming Oklahoma New California Dakota Dakota MexicoWindpotentialNet electricityimportWindopportunityrelative tonatural gasreserveNeed foradditionalcapacityShortfall RPSTransmissionwind gridconnectivityOverall windattractiveness High Medium Low- Medium Low No Creating the Equation for Growth 9
  10. 10. Table of Contents • Executive Summary • US Wind Opportunity and Attractiveness Analysis • Govt. Policies, Tax Credits and RPS Targets • Emerging Trends • Conclusions • About Lucintel Creating the Equation for Growth10 10
  11. 11. US has recently renewed cash grant wind incentives associated with the Economic Recovery Act Wind energy projects under various Key Insights incentives in 2009 • Cash grants program established in 2009 to support Others* renewable energy sector during global financial crisis 35% • Extension of cash grants to 2011 from 2010 • Wind project developers may choose a 30% Investment 65% Tax Credit (ITC) or 30% cash grant in lieu of Cash Grant Production Tax Credit (PTC) *Others-PTC and ITC • ITC will expire at the end of 2016 PTC has a strong impact on growth of wind • PTC increased to 2.2 cents/KWh in 2010 from 2.1 cents energy /KWh in 2009 9,992 90% 76% 79% • PTC will expire at the end of 2012 8,244 drop drop drop • Wind power capacity additions declined in the three 5,249 years (2000, 2002, and 2004) when the PTC was allowed to expire 2,424 2,426 1,697 1,687 • PTC is the better incentive option (6% greater benefit 659 410 353 67 than ITC) with a capacity factor of 30% and a project1999 2000 2001 2002 2003 2004 20052006 2007 2008 2009 cost of $ 1,800/KW Annual Capacity Installed (MW) Source: Lucintel Creating the Equation for Growth 11
  12. 12. New administration has put tremendous support behind wind energy US renewable energy policies Wind energy budget history driving wind energy space US wind energy budget history • Many states have not achieved 140 123 RPS their renewable energy portfolio 120 100 80 US$ M 80 goals 60 49 50 53 40 20 • Wind energy budget request of 0Budget 2007 2008 2009 2010 2011 $ 122.5 Million for FY 2011 vs. $ (Requested) Financial Year 80 Million for 2010 • Increase PTC to 2.2 cents/KWh Key Insights PTC in 2010 compared to 2.1 cents/ • DOE provided budget of $2.3 billion for energy KWh in 2009 efficiency and renewable energy in FY 2011Cash • Renewable energy budget for FY 2011 • Extend cash grants to 2011Grant increased by 16% compared to FY 2010 • Budget for wind energy grew more in FY 2011 compared to other renewable sources ITC • Tax credit option for 30% of the • Senate approved $858 billion in tax cuts and credits, cost of development including extensions of ethanol tax credits and renewable initiatives Creating the Equation for Growth 12
  13. 13. State policies play a significant role in directing wind powerdevelopment; most states have a Renewable Portfolio Standard goal 20% by 40% by 15% by 2017 2017 2020 30% (Xcel) 10% by 23.8% by 25%(others)by 2010 30% by 2025 2025 2020 25% by 15% by 2025 10% by 30% by 2020 10% by 2015 10% by 2015 16% by 2015 2015 2019 1 GW 18% by 27% by wind by 12.5% 2020 2020 2010 25% by 2025 22.5% by 25% by 30% (IOUs) (75% 2025 15% 2020 20% by 10%(C0-0ps 15%by Wind) 15% 20% by by 2025 25% by 2025 and munis)by 2021 2025 by 2025 33% by 2020 2020 2025 2020 12.5% (IOUs) by 20% by 15% by 2012 10%(C0-ops 2022 15% by 20% (IOUs) 2015 and munis)by 20% by 50% by 2025 10%(C0-ops) by 2018 2020 2025 2020 10000 MW by 2025 500 MW by 2015 (Non wind) Mandatory RPS Non Binding Goal 40% by 2030 Creating the Equation for Growth 13
  14. 14. Seven states have achieved their RPS goal, while the majority still offer ample opportunity for renewable energy States Target % Renewable Current renewable States Target % Renewable Current renewable % Year Target % Year Target Arizona 2025 15% 6% New Mexico 2020 20% 5% California 2020 33% 18% New York 2015 30% 22% Colorado 2020 30% 10% North Caroline 2021 12.5% 4% Connecticut 2020 27% 5% North Dakota* 2020 10% 9% Delaware 2019 20% 2% Ohio 2025 25% 1% Hawaii 2020 40% 8% Oklahoma* 2015 15% 7% Iowa 2010 1 GW from wind ~ 4 GW Oregon 2025 25% 63% Illinois 2025 25% 2% Pennsylvania 2020 18% 3% Kansas 2020 20% 4% Rhode Island 2019 16% 2% Massachusetts 2020 15% 5% South Dakota* 2015 10% 5% Maryland 2022 20% 6% Texas 2025 10,000 MW ~ 10,000 MW 2015 500 MW (Non wind) ~ 350 MW Maine 2017 40% 50% Utah* 2025 20% 2% Michigan 2015 10% 4% Vermont* 2017 20% 28% Minnesota 2020 30% 12% Virginia* 2025 15% 5% Missouri 2021 15% 4% Washington 2020 15% 75% Montana 2015 30% 37% Wisconsin 2015 10% 5% New Hampshire 2025 23.8% 7% West Virginia* 2025 25% 2% New Jersey 2021 22.5% 2% District of 2020 20% 0% Alaska* 2025 50% 18% Columbia* Non binding goal State achieved RPS goal Creating the Equation for Growth 14
  15. 15. Growth opportunities for renewable energy to meet RPS targets abound in several of the highest wind energy potential states State Target % Renewable Expected year Year Target in which RPS Key Insights achieved * • Illinois, Ohio, Pennsylvania, and California have Texas 2025 10,000 MW Achieved 2015 500 MW (Non- Already large capacity opportunities to meet their wind) renewable energy targets Kansas 2020 20% Not achieved before 2015 • Washington, Texas, Iowa, Montana, and Oregon Montana 2020 30% Achieved have little to no capacity increases needed to meet Already Nebraska No RPS target their current renewable policy targets South Dakota 2015 10% 2012 • Expect that North Dakota and South Dakota will North Dakota 2015 10% 2011 achieve their RPS goal before 2015 Iowa 2010 1 GW of wind Already achieved 60% of total RPS goals not achieved Wyoming No RPS target RPS Achieved Texas Oklahoma 2015 15% Not achieved 10% before 2015 40% New Mexico 2020 20% Not achieved before 2015 60% California 2020 33% Not achieved 90% before 2015 Others* If annual renewable installations are same as 2009 for next 5 years Source: Lucintel RPS not Achieved Creating the Equation for Growth 15
  16. 16. Three major wind energy states have surpassed their RPS goal and 15 years ahead of scheduleParameter Texas Kansas Montana Nebraska South North Iowa Wyoming Oklahoma New California Dakota Dakota MexicoTotal electricity ~ 105 ~ 14 ~6 ~8 ~4 ~7 ~15 ~8 ~21 ~8 ~66capacity (GW),2010% Renewable 10% 8% 54% 6% 56% 31% 25% 20% 10% 9% 27%capacity of totalelectricity capacity(GW) by 2010% Renewable 5% 4% 37% 2% 45% 9% 10% 4% 7% 5% 18%electricitygeneration by2010 (MWh)Surpassed RPS Yes No Yes NO RPS No No Yes NO RPS No No Nogoal ? Target Target Key Insights• Texas, Montana, Iowa achieved their Renewable Portfolio Standard (RPS) goal before the target date • Texas leads the country in cumulative installed wind energy capacity• California regulators raised the state’s Renewable Portfolio Standards to 33% from 20% by 2020 • Opens the door to more clean energy• North Dakota, South Dakota and Oklahoma have voluntary goals for adopting renewable energy • Majority of electricity produced in South Dakota comes from hydroelectric power (42%) • Hydro energy (on or before 2008) is not considered in the RPS goal Creating the Equation for Growth 16
  17. 17. Table of Contents • Executive Summary • US Wind Opportunity and Attractiveness Analysis • Govt. Policies, Tax Credits and RPS Targets • Emerging Trends • Conclusions • About Lucintel Creating the Equation for Growth17 17
  18. 18. Lucintel believes that there are six key trends shaping the businessof wind energy Ban on controversial method of drilling natural gas New Strong State administration level RPS target provide tremendous support Growing players Increase in involvement in average turbine offshore wind size and blade market length Transmission development gaining some traction Creating the Equation for Growth 18
  19. 19. Growing OEM involvement in offshore wind market Introduced a new 4.0 MW wind turbine for offshore applications • Acquired a Norwegian company that builds offshore wind turbine called ScanWind • Provide direct drive wind turbines to LEEDCo’s of 20 MW offshore wind project in the Ohio waters of Lake Erie Introduced a new 3.0 MW direct drive wind turbine for offshore applications • Opened offshore wind office in Boston • Selected by Cape Wind to provide wind turbine of 3.6 MW for its wind project off the coast of Nantucket in Massachusetts Introduced 3.0 MW wind turbines for offshore wind turbine • Selected by Trillium Power Wind Corporation to provide offshore wind turbine of 3.0 MW on the Ontario of the Great Lakes • Opened sales office in Toronto for offshore wind turbine Designing and developing 5.0 MW offshore wind turbine • Alliance with Northrop Grumman Shipbuilding to install offshore wind turbine in US by the end of 2012 Creating the Equation for Growth 19
  20. 20. Transmission development appears to be gaining some traction Approved a $ 4.93 billion wind power transmission project • Carry electricity from remote western parts of the state to major population centers such as Dallas, Houston, Austin and San Antonio • Handle 18,500 MW of power Approved a $ 1.4 Billion for a 350 mile transmission line • Provide Maine wind power project greater access to southern New England Allocated $ 60 million in Recovery Act funds to promote collaborative long term analysis and interconnection wide transmission planning for the Eastern, Western, and Texas interconnection in 2009 Invest $ 5 billion in a project to build 350 miles of transmission off the Atlantic Coast from New Jersey to Virginia to tap into gigantic offshore wind potential Creating the Equation for Growth 20
  21. 21. New York could be first state to ban controversial drilling practices Key Insights • Fracking allows drillers to harvest valuable natural gas trapped in underground rock known as shale rock. • 2 to 5 million gallons of water necessary to fracture one horizontal well in a shale gas formation • Fracturing fluids (water and chemical additives) then returned back to the surface which polluting water • Expected that natural gas price increase by 7% CAGR in next 5 years Creating the Equation for Growth 21
  22. 22. Seven states have achieved their RPS goal, while the majority still offer ample opportunity for renewable energy with new administration has put tremendous support behind wind energy RPS Achieved Texas Key Insights 10% • Illinois, Ohio, Pennsylvania, and California have 40% large capacity opportunities to meet their renewable energy targets. Recently California 60% increase the RPS target to 33% from 20% 90% • Washington, Texas, Iowa, Montana, and Oregon Others have little to no capacity increases needed to RPS not Achieved meet their current renewable policy targets • Renewable energy budget for FY 2011 increased US wind energy budget history by 16% compared to FY 2010 140 123 120 • Budget for wind energy grew more in FY 100 80 2011 compared to other renewable sourcesUS$ M 80 49 50 53 • Senate approved $858 billion in tax cuts and cred 60 40 its, including extensions of ethanol tax credits an 20 d renewable initiatives 0 • PTC increased to 2.2 cents/KWh in 2010 from 2.1 2007 2008 2009 2010 2011 (Requested) cents/KWh in 2009 Financial Year • Extension of cash grants to 2011 from 2010 Creating the Equation for Growth 22
  23. 23. Average wind turbine size capacity has increased by 22% in 2010 comparedto 2005 with increase in the blade length Average wind turbine size trend Key Insights 1,65 1,66 1,74 1,76 1,60 • Growth of turbine size has slowed: 1,44 • Dominance of GE’s 1.5 MW turbine • Logistical challenges associated with transporting larger turbines • Average hub height and rotor diameter have scaled with time 2005 2006 2007 2008 2009 2010 • Expected average blade length reach to 43 Average wind turbine size (MW) Meter by 2016, which help: Meter • Need for higher –to – weight ratio 38 38 38 39 40 material40 36 • Reduce transportation cost30 • Increased power generation20 • Need of new bonding material10 0 2005 2006 2007 2008 2009 2010 Average blade length Creating the Equation for Growth 23
  24. 24. Wind energy becomes cost competitive by 2015, if natural gas pricesincrease 15% annually and current incentives are continued Creating the Equation for Growth 24
  25. 25. Table of Contents • Executive Summary • US Wind Opportunity and Attractiveness Analysis • Govt. Policies, Tax Credits and RPS Targets • Emerging Trends • Conclusions • About Lucintel Creating the Equation for Growth25 25
  26. 26. Conclusions• US renewable energy, and wind energy in particular, has high potential and will continue double digit growth over the 2011-2016 period• US markets driven by Statelevel dynamics with RPS targets playing a significant role in directing wind power development• While strong growth is expected, potential for continued volatility in the US market remains – Lack of long term Federal Energy Policy – State Level connectivity issues – Budget deficits make State economic competitiveness a priority• Companies with diversified business portfolio better positioned for managing growth – China, Brazil and other markets represent strong and complementary markets – Clipper’s heavy dependence on US market for instance facilitated its sale to UTC – Future market may be characterized by new entrants and increased competition in boom years and large overcapacity in others• Strong growth expected in the foreseeable future, led by Kansas, California and South Dakota – Emergence of California opens interesting potential to disrupt market as current supply chain focused on MidWest• Understanding value chain shifts and roles of non US markets in supply chain will prove important for success Creating the Equation for Growth 26
  27. 27. Table of Contents • Executive Summary • US Wind Opportunity and Attractiveness Analysis • Govt. Policies, Tax Credits and RPS Targets • Emerging Trends • Conclusions • About Lucintel Creating the Equation for Growth27 27
  28. 28. About Lucintel Lucintel is the premier global management consulting & market research firm Lucintel creates your equation for growth and is committed to actionable results that deliver significant value and long term growth to our clients. Lucintel has been creating measurable value for over 10 years and for more than 1000 clients in 70 + countries worldwide. Visit http://www.lucintel.com/imovie/ for a short 3.5-minute movie on Lucintel solutions. Creating the Equation for Growth 28
  29. 29. Lucintel Products & Services: Over 200 market reports on variousmarket segments to optimize your market research investment Market Reports Consulting Aerospace Growth and Strategic Consulting Transportation Benchmarking Marine Opportunity Screening Construction Partner Search and Evaluation Renewable Energy Due Diligence and M&A Recreational Composite Materials Market Entry Strategy Creating the Equation for Growth 29
  30. 30. . . . with Project Teams with an appropriate mix between technicaland business expertise for results that drive the bottom line Senior level consultants and analysts PhDs, MBAs, MS in Market Research Past projects ranging from start up to multi-national Fortune 500 companies on following: Strategic Growth consulting Market Assessment and forecasting Market Entry Strategy Due diligence Opportunity Screening Creating the Equation for Growth 30
  31. 31. Clients around the world value our services Creating the Equation for Growth 31
  32. 32. Lucintel has an extensive toolkit to address key strategic questionsfor increasing your company’s profitability and market presence Market Key Questions Entry Strategy • Is market space / opportunity of current Opportunity Voice of product offerings sufficiently robust? Screening Customer • Markets are focus for many: how can my company profitably differentiate? Lucintel • Based on our core skills, where should Consulting Strategic we focus? Due GrowthDiligence Consulting • Should we build or buy? Is build even an option? • What game changer actions exist and/or Salesforce is a more incremental approach best? M&A Optimizati on • What is the order sequence of market entry segments / products? Creating the Equation for Growth 32
  33. 33. Reach LucintelFor your business requirements and cutting edge consulting solutions, contactLucintel at helpdesk@Lucintel.com or Tel. +1-972-636-5056 or call one of thefollowing. Norman Timmins, MBA Roy Almaguer VP, Consulting, USA Sales Manager, USA Norman.timmins@lucintel.com Email: roy.almaguer@lucintel.com Cell :+1-940-597-3786 Tel. : +1-210-878-7693 (Office) Alan Clark Nigel Odea Director of Sales, UK Business Development Manager, UK Alan.clark@lucintel.com nigel.odea@lucintel.com Tel :+44 (0) 7875 708825 Cell : +44 (0) 207 558 8798 Creating the Equation for Growth 33

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