The US wind market is changing. Global players like Google are discovering their green heart and investing in the wind industry. The industry has achieved a lot of success creating its own value chain.

Except for the political support which is as ­uncertain as ever, the US wind industry itself is not only in good economic shape, but so is its economic environment. Those are the findings of the latest industry report from Germany Trade Invest (GTAI). The world’s largest national economy is ­humming. Gross domestic product is expected to grow by 3.8 % in 2015 with a very low inflation rate of 1.6 %.

Over the last few years, the American wind sector has made great leaps forward and has left traditional wind energy countries like Germany far behind some time ago. According to the American Wind Industry Association (AWEA), installed capacity amounted to 61 GW at the end of 2013. In early 2014, another 12 GW was in the pipeline. By the end of this year, ­total installed capacity is therefore expected to be over 75 GW. The increase will be distributed among at least 20 states, according to AWEA.

With this rapid growth, attitudes about this ­renewable energy are visibly changing. Climate ­protection is taking centre stage in the public interest with the industrial policy interests associated with wind energy playing a significant role. The growing interest in renewable energy can also be seen in the increasing number of consumers using power they themselves have generated, with their capacity likely to grow by an average of 8.3 % annually.

The winds have changed in the US. It is not just pension funds and insurance companies that are jumping on the wind energy bandwagon, but ­increasingly also commodity industries. The Americans are making huge strides in building their own value chain.

A variety of funding instruments

Wind energy in the US is supported in numerous ways. To date, it has been mostly based on the ­production tax credit (PTC), which expired in late 2013. The last version of the PTC granted a tax credit of 2.3 US$-ct/kWh. There is a chance that the PTC will be extended once again for another two years. This, at least, is the proposition that the Senate Finance Committee has passed and that now needs to go through the political voting marathon. According to the GTAI, the federal government in ­Washington is making some effort to harmonize support for ­renewable energy. Whether this can be implemented – considering the Republican majority in the House of Representatives – remains to be seen. ­However, small wind turbines will certainly ­continue to be supported. Until the end of 2016, home owners will still be able to apply for a tax ­credit of 30 % of the installation cost.

In 29 of the 50 US states, demand is largely a ­result of the Renewable Portfolio Standards (RPS), which stipulate a certain share of renewable energy that is required in energy utilities’ generation port­folios. Industry experts estimate the effect of the RPS in the entire United States to amount to 4 GW per year.In addition, some individual states and local ­governments have feed-in tariffs along the lines of the German model.

It’s the heavyweights’ turn

“The market structure has changed quite a lot over the last few years,” Annette Nüsslein observes. ­Providing consulting services with her agency ­WindConsultant has given her in-depth knowledge of the American wind market. “The big investors are coming now, the who’s who of global companies – like Google.” The IT Group has signed seven power purchase agreements (PPAs) since 2011, the largest of which comprises 407 MW of wind power in Iowa. MidAmerican Energy, the regional energy utility in that area, uses this ­electricity to supply Google’s ­data centre.

Is this all for the environment? An article in news magazine Forbes wonders about the new ­heavyweights in the industry: “Not surprisingly, the purchase of large contracts and certificates by big tech companies to green their images is driving a new wave of interest in renewable energy. But will utilities need to significantly expand their capacity to meet this demand?”

That is exactly what they should do, according to not only the Obama administration and the wind ­power lobby. According to a survey, a majority of ­Americans are ready to spare US$ ten dollars a month – no matter how – to support wind energy. This ­involves no risk of insolvency, though it is quite ­remarkable nonetheless in a country wherein a ­considerable portion of the population still believes that both evolution and climate change are ­considered a crazy idea of Europeans. The list of companies that cover 100 % of their electricity demand with their own renewable electricity sources has now grown to more than several dozen, including such illustrious names as Intel, Microsoft and retail chains like ­Staples.

Site parameters for wind energy

In the US, energy and industrial policy fall within the scope of the individual states, which have quite a lot of power in relation to the federal government in Washington. “There are actually 50 individual ­markets,” Nüsslein says. As a result, both funding and political activities for wind energy are highly ­fragmented.
Having even one wind turbine is not necessary for a state to see some economic benefits.  Take Georgia: in 2012, the southeastern state was pleased to be in 9th place in the ranking of the most industry-friendly states in the US. A decidedly business-friendly ­policy, plus low costs for wages, energy and living were the secrets of this success.

Wind resources only exist on the coast, so there are virtually no wind turbines in the state. ­Nonetheless, the wind industry profits from ­Georgia’s economic vigour. In 2011, the ZF Group opened a ­production facility for gear drives in Gainesville. The company invested US$ 98 million, creating 250 jobs in the plant. At least five other companies in the state, with a total of 1,000 jobs, considered themselves to be a part of the wind industry in 2011.

Calls for tenders are popular

Even though the way wind energy is perceived is slowly changing, people in the US are chiefly viewing it from an industrial policy perspective. AWEA ­specifies the number of wind energy-related ­manufacturing companies to be “at least 560”, very unevenly distributed among 43 states. The value chain for key components is made up of 12 ­manufacturing plants for large rotor blades, 14 for towers and 9 for nacelles in 19 states (as of 2013).

Government contracts are generally awarded through tendering procedures. The demand of the last few years has had an impressive effect on value creation. The share of components “made in the USA” accounted for some 25 % of American wind turbine production in 2005, while in 2012 it already stood at 72 % – and the trend is rising.  However, the figure varies quite a bit for individual key turbine ­components. According to the US Department of ­Energy estimates, it’s around 25 % for generators, between 50 and 70 % for towers, 60 to 80 % for rotor blades and hubs, and more than 80 % for nacelles.

Hardly any other industry in the US economy which is, in general, already on the upswing, is ­expected to achieve such good results in building its own value chain as the wind industry is. In ­comparison, the British wind sector is years behind, although its boom – which is largely offshore – has been going on considerably longer than the one in the US.

Jörn Iken