Wind Energy Market Outpacing Manufacturing Capacity

Via Peak Energy
Excerpt from:
Despite Rising Costs, Wind Industry Thriving Worldwide
July 26, 2007 -- By Stephen Lacey, Renewable Energy Access

The wind industry is undergoing temporary growing pains similar to the silicon shortage experienced by the solar photovoltaic (PV) industry: there are simply not enough materials or manufacturing capacity to keep up with the increasing demand for wind turbines. The need for steel, copper, concrete and other materials has driven up project costs, restricted turbine supplies and created a difficult market for smaller wind developers.

But despite a two-and-a-half year stretch of materials shortages and rising costs, the global wind industry is experiencing steady growth worldwide and increased acceptance by utilities, governments and citizens.

"Between 2004 and 2005, the global wind turbine market experienced a rapid period of escalation...Within the span of just that year the global demand for wind turbine components and supply jumped to a new plateau and a new rate of growth," says Joshua Magee, senior analyst for Emerging Energy Research's (EER) North American Wind Advisory Group.

Much of that new demand was caused by the two-year extension of the production tax credit (PTC) in the U.S., which provided certainty for wind developers and encouraged a slew of new projects. In addition, China and India emerged as major players in the wind market, further straining supply of materials.

As the global market expanded rapidly starting at the end of 2004, the manufacturing capacity was not in place to handle demand. Since 2005, manufacturers have been playing catch-up and pumping out turbines as quickly as developers can put them into the ground. However, because it takes about 20 months to ramp up manufacturing capabilities, the cost increase and turbine shortage is not expected to level out until sometime in 2009, says Magee.

"Given that the global wind turbine industry is an inherently capital intensive industry, manufacturers have spent the last two years making the necessary investments to begin to regain parity with this new level of global demand," Magee says.

The point of parity couldn't come soon enough for some developers. Over the last two years, project costs have risen 50% in some cases, according to American Wind Energy Association Executive Director Randall Swisher. But the industry shouldn't be worried, says Swisher. The long-term economics of wind energy are still very attractive to utilities and their customers. While the price of fossil energies continues to rise, the cost of wind will always stay the same—free.