The recent announcement by Vestas, the largest manufacturer of utility-scale wind turbines in the world, about a major shake-up at the management level and the loss of 2,300 jobs in Denmark, raises the question of whether wind – like solar photovoltaics (PV) in 2011 – may be entering a major shakeout and downsizing period.
While the growth of wind power is still an astounding success story, there are clouds on the horizon, particularly in the United States. Among the major challenges facing the industry today are record low natural gas prices, which have lowered the price of electricity, making it more difficult for wind to compete in wholesale power markets.
A rush to develop new supplies from shale deposits through the controversial practice of so-called “fracking” raises interesting questions about how we regulate future energy supplies. In Texas, it is possible to get a permit to drill for natural gas wells in a residential neighborhood within a week, without an environmental permit, and at a total cost of around $3,000. Contrast that streamlined approach – for a technology that has been implicated with polluting drinking water supplies and contributing to air quality concerns, as well as leading to possible lethal explosions – with wind (and solar) technologies.
Where I live, in Marin County just north of San Francisco, the county is imposing a height restriction of 40 feet for any wind turbine located in the western, rural part of the county, which, in effect, is an outright ban, even on small on-site wind turbines. Why? There’s just not enough wind at that height to generate power. Furthermore, local activists successfully filed a suit against NextEra Energy to block the erection of a meteorological tower to measure wind resources for a possible wind project near the town of Tomales, in the northwestern corner of the county. Since Marin County has set a goal of becoming completely powered by renewable energy over the long term through a community choice aggregation program, this reluctance may seem a tad ironic.
The good news (at least for the wind industry) is that the growing backlash against fracking, and the familiar boom and bust cycle in fossil fuel exploitation, may send prices for natural gas upward again within the next few years. Innovations and global competition appear to be driving prices for wind and solar down, and that trend will likely continue. How much would natural gas cost if it had to undergo the same kind of environmental scrutiny as wind and solar projects?
Wind power will always face greater opposition than solar PV, though trends toward utility-scale solar PV projects have engendered intense debates over land use. In this case, wind power may actually have fewer impacts, since turbines have small footprints and allow farmers and ranchers to continue their traditional way of life, whether grazing livestock or growing crops. Solar arrays, on the other hand, blanket the entire landscape.
The other major challenge facing the wind industry is continued uncertainty around the extension of the production tax credit (PTC), the federal government’s prime vehicle for making wind more cost-competitive with traditional fossil fuel resources. Vestas has announced it may trim another 1,600 employees here in the U.S. (mainly in Colorado) if the PTC is not passed. At a time of great economic uncertainty, it seems unwise to send mixed signals to the private sector about the U.S. commitment to clean energy.
Given the fracking/natural gas dynamic – and the poisoned political environment in Washington, DC in regards to government support for renewables, the “austerity and delays” scenario in the graph above may be the best current forecast for the future of wind power worldwide.