March 13, 2011
U.S.

‘Naked’ wind turbines hurt GE, Vestas as utilities cut contracts

Christopher Martin And Mark Chediak, Bloomberg News, via: www.ctpost.com 11 March 2011

U.S. wind-power developers say utilities are increasingly reluctant to buy electricity through long-term contracts, forcing producers to sell output from their turbines for less money on spot markets.

NextEra Energy Inc., the largest U.S. generator of wind power, said it hasn’t been able to obtain multiyear contracts for about $1 billion in turbines capable of generating 612 megawatts of electricity. These so-called naked wind farms increased as cheaper natural gas and the lack of a federal clean-energy mandate reduced pressure on utilities to buy renewable power.

That has cut the number of power-purchase agreements, or PPAs, for wind energy and slowed turbine demand in the U.S., the world’s largest market until China surpassed it last year.

Fairfield-based General Electric Co. and Vestas Wind Systems A/S, which make turbines, forecast slower sales from customers such as NextEra and Exelon Corp.

“In the U.S., PPAs have been challenging,” Ditlev Engel, chief executive officer of Randers, Denmark-based Vestas, said in an interview March 8 at the CERAWeek conference in Houston held IHS Cambridge Energy Research Associates.

After signing contracts to sell a record 8,753 megawatts of turbines globally last year, Engel said he expects that will decline to as little as 7,000 megawatts this year. A megawatt is enough to power about 800 typical U.S. homes.

Turbine installations in the U.S. from all makers this year will exceed those last year while remaining about 30 percent below 2009 levels. State renewable-energy mandates, a force behind turbine sales, require a total of 4,800 megawatts annually through 2020.

State Standards, Obama

Twenty-nine states, the District of Columbia and Puerto Rico have standards requiring the use of renewable energy, according to data compiled by North Carolina State University with funding by the Energy Department.

President Barack Obama called in January for 80 percent of U.S. electricity to come from “clean” energy sources by 2035, including solar, wind, nuclear, cleaner coal and natural gas.

Congress hasn’t taken up his proposal.

“We’re not building additional wind farms without contracts,” Lewis Hay, chief executive officer of Juno Beach, Fla.-based NextEra, said in an interview. “Contracting these megawatts continues to be a high priority for us, and I am comfortable with the progress that we are making. Adding more wind will largely depend on our ability to secure attractive long-term PPAs.”

NextEra’s Contracts

NextEra added 754 megawatts of wind power last year and signed power-purchase agreements to build and sell 1,238 megawatts for utilities. About 553 megawatts have contracts and will be completed this year, and as many as 500 megawatts may be added if there are contracts, Hay said on a Jan. 25 conference call.

Utility solicitations for wind power may not improve until 2013 or 2014 as new transmission lines from Texas to North Dakota open rural areas to development and as tighter environmental rules shutter some nuclear and coal plants, according to Nick Gibbons, an analyst at Gradient Analytics in Scottsdale, Arizona.

“Load growth is coming back more slowly than we had hoped even though the economy has begun to emerge from such a terrible recession,” said Bill Von Hoene, executive vice president for finance and legal issues at Chicago-based Exelon.

Exelon’s Acquisition

Exelon bought Deere & Co.’s wind unit last year, adding 735 megawatts of wind turbines and their long-term sales contracts.

Exelon plans to spend as much as $500 million to develop 230 megawatts of wind power in Michigan.

American Electric Power Co., which distributes power to customers in 11 states, may sign one power-purchase agreement this year for 100 megawatts of wind, said Jay Godfrey, managing director of renewable energy for the company based in Columbus, Ohio. Last year, American Electric signed two power-purchase agreements for 198 megawatts, after adding 528 megawatts in wind capacity in 2009.

“An awful lot of this has to do with the fact that we were in the middle of a recession where demand dropped off,” Godfrey said in an interview. “Now some regulators are backing off new renewable generation because of a concern over raising customer rates.”

URL to article:  https://www.wind-watch.org/news/2011/03/13/naked-wind-turbines-hurt-ge-vestas-as-utilities-cut-contracts/