2014 wind technologies market report presentation

WIND AND WATER POWER TECHNOLOGIES OFFICE

2014 Wind Technologies Market Report: Summary August 2015 1

Ryan Wiser & Mark Bolinger

Lawrence Berkeley National Laboratory

2014 Wind Technologies Market Report Purpose, Scope, and Data: • Publicly available annual report summarizing key trends in the U.S. wind power market, with a focus on 2014 • Scope primarily includes wind turbines over 100 kW in size • Separate DOE-funded annual reports on distributed and offshore wind • Data sources include AWEA, EIA, FERC, SEC, etc. (see full report)

Report Authors: • Primary authors: Ryan Wiser and Mark Bolinger, Berkeley Lab • Contributions from others at Berkeley Lab, Exeter Associates, NREL

Funded by: U.S. DOE Wind & Water Power Technologies Office 2

Available at: http://energy.gov/eere/wind

Report Contents • Installation trends • Industry trends • Technology trends • Performance trends • Cost trends • Wind power price trends • Policy & market drivers • Future outlook 3

Key Findings • Annual wind capacity additions rebounded in 2014, with significant additional new builds anticipated for 2015 and 2016 • Wind has been a significant source of new electric generation capacity additions in the U.S. in recent years • Supply chain has been under duress, but domestic manufacturing content for nacelle assembly, blades, and towers is strong • Turbine scaling is boosting expected wind project performance, while the installed cost of wind projects is on the decline • Wind power sales prices have reached all-time lows, enabling economic competitiveness despite low natural gas prices • Growth after 2016 remains uncertain, dictated in part by future natural gas prices and policy decisions, though recent declines in the price of wind energy boost future growth prospects 4

Installation Trends

5

Wind Power Additions Rebounded in 2014, with 4,854 MW of New Capacity Added

• $8.3 billion invested in wind power project additions in 2014 • Wind build well off annual additions from 2007 through 2012 • Cumulative wind capacity up nearly 8%, bringing total to 65.9 GW 6

50%

80

40%

60

30%

40

20%

20

10%

0

s o A ty c p a C d in W

100

0% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Wind Gas Wind (% of Total, right axis)

Solar Coal

Other Renewable Other Non-Renewable

2%

-2 ) 4 1 0

100% 80%

o (% fT lA ta d iy c p C u n ) s

n lA ta o T iy c p C u W (G s )d

Wind Power Represented 24% of ElectricGenerating Capacity Additions in 2014

54%

49%

Interior

Great Lakes

27%

26%

Northeast

West

33%

60%

7 0 s(2 n o d cityA p a C

i fG o g ta rcn e P

40% 20% 0% Wind

7

Solar

Other Renewable

Gas

Coal

Southeast

U.S. Total

Other Non-Renewable

From 2007-2014, wind comprised 33% of capacity additions nation-wide, and a much higher proportion in some regions

The U.S. Placed 3rd in Annual Wind Power Capacity Additions in 2014 Annual Capacity (2014, MW) China Germany United States Brazil India Canada United Kingdom Sweden France Turkey Rest of World TOTAL

23,300 5,119 4,854 2,783 2,315 1,871 1,467 1,050 1,042 804 6,625 51,230

Cumulative Capacity (end of 2014, MW) China 114,760 United States 65,877 Germany 39,223 India 22,904 Spain 22,665 United Kingdom 12,413 Canada 9,684 France 9,170 Italy 8,556 Brazil 6,652 Rest of World 60,208 TOTAL 372,112

Source: Navigant; AWEA project database for U.S. capacity

• Global wind additions reached a new high in 2014 • U.S. remains a distant second to China in cumulative capacity • U.S. led the world in wind energy production in 2014 8

U.S. Lagging Other Countries in Wind As a Percentage of Electricity Consumption

Note: Figure only includes the countries with the most installed wind power capacity at the end of 2014 9

Geographic Spread of Wind Projects in the United States Is Reasonably Broad

Note: Numbers within states represent cumulative installed wind capacity and, in brackets, annual additions in 2014 10

Texas Installed the Most Capacity in 2014; 9 States Exceed 12% Wind Energy Percentage of In-State Generation

Installed Capacity (MW) Annual (2014) Texas 1,811 Oklahoma 648 Iowa 511 Michigan 368 Nebraska 277 Washington 267 Colorado 261 North Dakota 205 Indiana 201 California 107 Minnesota 48 Maryland 40 New Mexico 35 New York 26 Montana 20 South Dakota 20 Maine 9 Ohio 0.9 Massachusetts 0.6 Rest of U.S.

TOTAL

0

4,854

Cumulative (end of 2014) Texas 14,098 California 5,917 Iowa 5,688 Oklahoma 3,782 Illinois 3,568 Oregon 3,153 Washington 3,075 Minnesota 3,035 Kansas 2,967 Colorado 2,593 North Dakota 1,886 New York 1,748 Indiana 1,745 Michigan 1,531 Wyoming 1,410 Pennsylvania 1,340 Idaho 973 New Mexico 812 Nebraska 812 South Dakota 803 Rest of U.S. 4,941

Actual (2014)* Iowa 28.5% South Dakota 25.3% Kansas 21.7% Idaho 18.3% North Dakota 17.6% Oklahoma 16.9% Minnesota 15.9% Colorado 13.6% Oregon 12.7% Texas 9.0% Wyoming 8.9% Maine 8.3% New Mexico 7.0% California 7.0% Nebraska 6.9% Montana 6.5% Washington 6.3% Hawaii 5.9% Illinois 5.0% Vermont 4.4% Rest of U.S. 0.9%

TOTAL

TOTAL

65,877

* Based on 2014 wind and total generation by state from EIA’s Electric Power Monthly.

11

4.4%

• Texas has more than twice as much wind capacity as any other state • 23 states had >500 MW of capacity at end of 2014 (16 > 1 GW, 10 > 2 GW) • 2 states have >25% of total in-state generation from wind (9 states > 12%)

No Commercial Offshore Wind Turbines Commissioned; 1 Project in Construction and 18 in Various Stages of Development • 30 MW Block Island project (RI) started construction in 2015 • BOEM has granted 5 competitive leases; DOE funding 3 pilot deployments • Legal and political headwind for high-profile projects: • Cape Wind (MA) power purchase agreements cancelled by utilities • Fishermen’s Atlantic City (NJ) rejected by state PUC • Dominion (VA) announced delay due to cost

• Pressing challenges include cost, lack of PPAs and policy incentives, regulatory complexity 12

Interconnection Queues Demonstrate that a Substantial Amount of Wind Is Under Consideration Wind represented 30% of capacity in sampled 35 queues But… absolute amount of wind (and coal & nuclear) in sampled queues has declined in recent years whereas natural gas and solar capacity has increased

Not all of this capacity will be built….

• AWEA reports 13.6 GW of capacity under construction after 1Q2015 13

Larger Amounts of Wind Planned for Texas, Midwest, Southwest Power Pool, PJM, and Northwest

14

Not all of this capacity will be built‌.

Industry Trends

15

GE, Siemens, and Vestas Captured 98% of the U.S. Market in 2014

W y th k a S U M E O e in rb u T

100%

Other

90%

Suzlon

80%

Acciona

70%

Clipper

60%

Nordex

50%

Mitsubishi

40%

REpower

30%

Gamesa

20%

Vestas

10%

Siemens

0%

GE Wind

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

• Recent dominance of the three-largest turbine suppliers in the U.S. market • Globally, Vestas remained the top supplier, followed by Siemens and GE • Chinese suppliers occupied 8 of the top 15 spots in the global ranking, based almost entirely on sales within their domestic market 16

Manufacturing Supply Chain Continued to Adjust to Swings in Domestic Demand Realignment Continued…

• Uncertain medium-term demand and growing global competition led to 12 domestic manufacturing facility closures in 2014; only 1 new facility opened

Note: map not intended to be exhaustive 17

• Nonetheless, many supply chain manufacturers remain • Over last decade, manufacturers have localized and expanded U.S. presence • “Big 3” OEMs all still have at least one domestic facility • Wind related jobs increased from 50,500 in 2013 to 73,000 in 2014

Domestic Manufacturing Capability for Nacelle Assembly, Towers, and Blades Is Reasonably Well Balanced Against Demand Forecasts for 2015 and 2016

18

Turbine OEM Profitability Has Generally Rebounded Over the Last Two Years

19

Imports of Wind Equipment Are Sizable; Exports Continue to Grow Slowly 7

Exports of Wind-Powered Generating Sets

6

US Imports: Other wind-related equipment (est.)

Wind generators (2012-2014) Wind blades and hubs (2012-2014) Towers (estimated through 2010)

5

Wind-powered generating sets

4

S U $ 4 1 0 2 n ilo B

3 2 1 0

U.S. is a net importer of wind equipment

2006 2457 MW

2007 5253 MW

2008 2009 2010 8362 MW 10005 MW 5216 MW

2011 2012 2013 6820 MW 13131 MW 1087 MW

2014 4854 MW

Exports of windpowered generating sets increased modestly in 2014 to $488 billion; no ability to track other windspecific exports, but total tower exports equalled $116 million

• Figure only includes tracked trade categories; misses other wind-related imports • See full report for the assumptions used to generate this figure 20

Tracked Wind Equipment Imports in 2014: 42% Asia, 39% Europe, 20% Americas

21

Note: Tracked wind-specific equipment includes: wind-powered generating sets, towers, hubs and blades, wind generators and parts.

Source Markets for Imports Vary Over Time, and By Type of Wind Equipment Wind-powered Generating Sets 90% China

80% 70% 60%

Denmark

50% 40% 30% 20%

ls) fau (% ie n rtC o p Im

• Majority of imports of wind-powered generating sets from home countries of OEMs, dominated by Europe and Asia • Majority of imports of towers from Asia, but decline in recent years after tariff measures largely stopped imports from China and Vietnam • Majority of imports of blades & hubs from Brazil and China in recent years • Globally diverse sourcing strategy for generators & parts, dominated by Asian and European countries

100%

Spain

10% 0% 2005 0.58B

Annual Imports

100%

2006 1.42B

2007 2.72B

2008 2.75B

2009 2.52B

2010 1.33B

2011 1.3B

2012 1.01B

Wind Blades & Hubs

Wind Towers

2013 0.02B

2014 0.25B

Wind Generators & Parts

Germany

90%

Spain

Spain

80%

Denmark

70%

Canada

60%

Mexico

50%

Indonesia

Denmark Serbia

China Spain

40% Japan

30% South Korea

20%

Brazil

10%

Vietnam

0% 2011 0.46B

22

2012 0.85B

2013 0.1B

2014 0.25B

2012 0.92B

2013 0.28B

2014 0.49B

2012 0.47B

2013 0.2B

2014 0.33B

Domestic Manufacturing Content Is Strong for Nacelle Assembly, Towers, and Blades, but U.S. Is Highly Reliant on Imports for Equipment Internal to the Nacelle Domestic Content for 2013 – 2014 Turbine Installations in the U.S. Generators

Towers

Blades & Hubs

Wind-Powered Generating Sets

< 15%

70-80%

45-65%

> 90% of nacelle assembly

Imports occur in untracked trade categories, including many nacelle internals

Overall estimated domestic content: ~40% in 2012 for wind turbine equipment; ~60% if considering total projects costs, including balance-of-plant 23

The Project Finance Environment Remained Strong in 2014 12% 10% 8%

Tax Equity Yield (after-tax) 15-Year Debt Interest Rate (pre-tax)

6% 4% 2%

15-Year Debt Interest Rate (after-tax)

0% Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15

• Project sponsors raised $5.8 billion of tax equity (largest single-year amount on record) and $2.7 billion of debt in 2014 • Tax equity yields held steady, while debt interest rates trended lower 24

y c p d s In e tiv la m u fC o %

Utility Ownership of Wind Rebounded Somewhat in 2014; IPPs Still Dominate 100%

100%

90%

90%

80%

80%

70%

70%

60%

60%

50%

50%

40%

Other

40%

30%

Publicly Owned Utility (POU)

30%

20%

Investor-Owned Utility (IOU)

20%

10%

Independent Power Producer (IPP)

10%

25

4 1 0 2

3 1 0 2

1 0 2

1 0 2

1 0 2

9 0 2

8 0 2

7 0 2

6 0 2

5 0 2

4 0 2

3 0 2

0 2

1 0 2

0 2

9 1

0%

8 9 1

0%

2014 Capacity by Owner Type

IPP: 3,572 MW (74%)

IOU: 1,281 MW (26%)

Other: 1 MW (0%)

Long-Term Contracted Sales to Utilities Remained the Most Common Off-Take Arrangement, but Merchant Projects Continued to Expand, at Least in Texas 100%

100%

90%

90%

80%

80%

70%

70%

60%

60%

50%

50%

40%

On-Site

40%

30%

Power Marketer

30%

Merchant/Quasi-Merchant

o % u m tifC la e v c p d s In y

20%

10% On-Site: 23 MW 0% (0.5%)

IOU

IOU: 2,497 MW (51%)

POU: 720 MW (15%)

4 1 0 2

3 1 0 2

1 0 2

1 0 2

1 0 2

9 0 2

8 0 2

7 0 2

6 0 2

5 0 2

4 0 2

3 0 2

0 2

1 0 2

0 2

9 1

0%

8 9 1

Merchant: 1,613 MW (33%)

20%

POU

10%

2014 Capacity by Off-Take Category

â&#x20AC;˘ Recently announced wind purchases of ~2 GW from technology companies and business giants to hospitals, universities, and government agencies 26

Technology Trends

27

Turbine Nameplate Capacity, Hub Height, and Rotor Diameter Have All Increased Significantly Over the Long Term

28

Growth in Rotor Diameter Has Outpaced Growth in Nameplate Capacity and Hub Height in Recent Years Nameplate Capacity Rotor Diameter

Hub Height

29

Turbines Originally Designed for Lower Wind Speed Sites Have Rapidly Gained Market Share Specific Power

Specific Power by IEC Class 2 & 3

IEC Class

30

Turbines Originally Designed for Lower Wind Speeds Are Now Regularly Used in Lower and Higher Wind Speed Sites, Whereas Taller Towers Predominate in the Great Lakes and Northeast

By Region

31

By Wind Resource Quality

Performance Trends

32

le p Sam

1.20

35%

1.05

30%

0.90

25%

0.75

20%

0.60

15%

0.45

10% 5%

Capacity Factor Based on Estimated Generation (if no curtailment in subset of regions) Capacity Factor Based on Actual Generation (with curtailment) Wind Resource Index (right scale)

0.30 0.15

0% 0.00 Year: 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 # Projects: 10 30 73 84 106 129 153 196 240 339 452 516 602 748 597 # MW: 591 943 2,682 3,128 4,500 5,142 7,967 9,951 14,926 23,617 33,381 38,562 44,751 58,299 58,685 Note: The wind resource index is compiled from NextEra Energy Resources reports 33

-Term cIx u so R d in W

40%

g n Lo

-W r ctyFo ap eC id

Sample-Wide Capacity Factors Have Increased, but Impacted by Curtailment and Inter-Year Wind Resource Variability

Wind Curtailment Has Generally Declined in Recent Years; Higher in MISO and New England than in Other Regions 18%

2007

16%

2008

2009

2010

2011

2012

2013

2014

Notes to figure: • BPA's 2014 curtailment estimate was unavailable at the time of publication. A portion of BPA’s curtailment from 2010-13 is estimated assuming that each curtailment event lasts for half of the maximum possible hour for each event.

• SPP’s 2014 curtailment estimate is for March through December only.

• PJM's 2012 curtailment estimate is for June through December only.

14% 12% 10%

f cgo esP rtalm u C d in W

r G d ialW ten o P

8% 6% 4% 2% 0%

ERCOT

MISO

BPA

NYISO

PJM

ISO-NE

SPP

In areas where curtailment has been particularly problematic in the past – principally in Texas – 34 steps taken to address the issue have born fruit

TOTAL SAMPLED

Except for BPA, data represent both forced and economic curtailment

Even Controlling for These Factors, Average Capacity Factors for Projects Built After 2005 Have Been Stagnant, Averaging 32% to 35% Nationwide 60%

Weighted Average (by project vintage) Individual Project (by project vintage)

50% 40% 30% 20%

) g n v je r(b Fo city p a C 4 1 0 2

10% Sample includes 591 projects totaling 58.5 GW

0% Vintage: 1998-99 2000-01 2002-03 2004-05 27 38 28 # projects: 25 1,760 1,988 3,652 # MW: 921 35

2006 20 1,708

2007 37 5,282

2008 79 8,498

2009 96 9,578

2010 48 4,733

2011 68 5,917

2012 117 13,533

2013 8 969

Trends Explained by Competing Influence of Lower Specific Power and Build-Out of Lower Quality Wind Resource Sites

Reversal of buildout in lower wind speed sites in 2013 and 2014: likely to show up in capacity factor data next year

All else equal: â&#x20AC;˘ Drop in average specific power will boost capacity factors â&#x20AC;˘ Building projects in lower wind resource sites will reduce capacity factors 36

Controlling for Wind Resource Quality and Specific Power Demonstrates Impact of Turbine Evolution 50% 45%

Sample includes 568 projects totaling 58.2 GW with a commercial operation date of 1998-2013

40% 35% 30% 25% 20% 15%

td igh e W

-A 4 1 0 2 rn ctyFo p C alizd e vg.R

10% 5% 0%

Specific Power â&#x2030;Ľ 400 (33 projects, 3.0 GW) Specific Power range of 300-400 (391 projects, 41.3 GW) Specific Power range of 220-300 (127 projects, 11.6 GW) Specific Power < 220 (17 projects, 2.2 GW) Lower Medium Higher Highest 174 projects, 12.5 GW 107 projects, 13.8 GW 138 projects, 17.0 GW 149 projects, 14.9 GW

Estimated Wind Resource Quality at Site

Notwithstanding build-out of lower-quality wind resource sites, turbine design changes are driving capacity factors higher for projects located in given wind resource regimes 37

Controlling for Wind Resource Quality and Commercial Operation Date Demonstrates Impact of Turbine Evolution 50% 45% 40% 35% 30% 25% 20%

-A 4 1 0 2 rn ctyFo p C alizd e vg.R

15% 10% 5%

td igh e W

0%

Highest Wind Resource Quality Higher Wind Resource Quality Medium Wind Resource Quality Lower Wind Resource Quality 1998-992000-012002-032004-05 2006

2007 2008 2009 Project Vintage

2010

2011

2012

2013

Notwithstanding build-out of lower-quality wind resource sites, turbine design changes are driving capacity factors higher for projects located in given wind resource regimes 38

Regional Variations in Capacity Factors Reflect the Strength of the Wind Resource and Adoption of New Turbine Technology 60% 50%

Weighted Average (by region) Weighted Average (total U.S.) Individual Project (by region)

40%

2014CapcityFor

30% 20% 10% 0%

39

Sample includes 124 projects built in 2012-13 and totaling 14.4 GW West 32 projects 3,938 MW

Northeast 15 projects 1,147 MW

Great Lakes 18 projects 2,109 MW

Interior 59 projects 7,253 MW

Cost Trends

40

Wind Turbine Prices Remained Well Below the Levels Seen Several Years Ago

Recent turbine orders reportedly in the range of $850-1,250/kW 41

Lower Turbine Prices Drive Reductions in Reported Installed Project Costs 6,000 5,000

Individual Project Cost (743 projects totaling 54,014 MW) Capacity-Weighted Average Project Cost

4,000 3,000

(2014$/kW jcC ro P staled In )

2,000 1,000

8291 9831 9841 9851 9861 9871 981 981 901 91 921 931 941 951 961 971 981 91 02 012 02 032 042 052 062 072 082 092 012 012 012 0132 0142

0 Commercial Operation Date

â&#x20AC;˘ 2014 projects had an average cost of $1,710/kW, down $580/kW since 2009 and 2010 (up slightly from small sample of 2013 projects) â&#x20AC;˘ Limited sample of under-construction projects slated for completion in 42 2015 suggest no material change in costs

Economies of Scale Evident, Especially at Lower End of Project & Turbine Size Range 3,500 3,000 2,500 2,000

Project Size

1,500

)In /kW $ 4 1 0 s(2 o tC rjc P d ale

1,000 500

Capacity-Weighted Average Project Cost Sample includes projects built in 2014

0 Project size: ≤5 MW 9 MW # MW: # projects: 6 projects

5-20 MW 87 MW 6 projects

20-50 MW 88 MW 2 projects

Individual Project Cost 50-100 MW 312 MW 4 projects

100-200 MW 1,713 MW 11 projects

>200 MW 1,680 MW 7 projects

3,500 Sample includes projects built in 2014

3,000 2,500 2,000

Turbine Size

1,500

)In /kW $ 4 1 0 s(2 jctC ro P d le a

1,000

43

500 0 Turbine size: # MW: # projects:

Capacity-Weighted Average Project Cost Individual Project Cost >0.1 & <1 MW 1 MW 2 projects

≥1 & <2 MW 2,237 MW 22 projects

≥2 & <3 MW 1,445 MW 11 projects

≥3 MW 205 MW 1 project

Regional Differences in Average Wind Power Project Costs Are Apparent, but Sample Size Is Limited 3,500 Sample includes projects built in 2014 3,000 2,500 2,000 1,500

) W /k $ 4 1 0 (2 jcC ro P d le sta In

1,000

0

44

Capacity-Weighted Average Project Cost Individual Project Cost Capacity-Weighted Average Cost, Total U.S.

500

Interior 22 projects 2,961 MW

West 5 projects 274 MW

Northeast 2 projects 95 MW

Great Lakes 6 projects 519 MW

Southeast 1 project 40 MW

Different permitting/development costs may play a role at both ends of spectrum: itâ&#x20AC;&#x2122;s easier/cheaper to build in the US interior and harder/more expensive along the coasts

-2014

Operations and Maintenance Costs Varied By Project Age and Commercial Operations Date 90

Projects with no 2014 O&M data

80

Projects with 2014 O&M data

70 60 50

) h W (2014$/M

40 30 20

0

9821 1983 1984 1985 1986 1987 198 198 190 19 192 193 194 195 196 197 198 19 20 201 20 203 204 205 206 207 208 209 201 201 201

st20A o C M & lO u veragn

10

Commercial Operation Date

Capacity-weighted average 2000-14 O&M costs for projects built in the 1980s equal $34/MWh, dropping to $24/MWh for projects built in 1990s, to $10/MWh for projects built in the 2000s, and to $9/MWh for projects built since 2010 Note: Sample is limited, and consists of 147 wind projects totaling 10,350 MW; few projects in sample have complete records of O&M costs from 2000-14; O&M costs reported here DO NOT include all operating costs 45

Operations and Maintenance Costs Varied

By Project Age and Commercial Operations Date 40 35

Commercial Operation Date: 1998-2004 2005-2008

30

2009-2013 25 20 15 10

1

2

3

4

5

6

7

8

9

10

11

12

13

14

4 = n

4 = n

5 = n

5 = n

5 = n

6 = n

n 6 = 2 = n

5 = n n 6 =

n 4 = 1 = n

0

8 1 = n n 3 2 = 9 2 = n 1 3 = n 5 2 = n 9 2 = n 3 2 = n 5 2 = n 7 1 = n 1 2 = n 5 2 = n 3 1 = n 9 = n 5 2 = n 9 = n 6 = n 5 2 = n

) h /W $ 4 1 0 t(2 s o C & lO u A n ia d e M

5 15

Note: Sample size is limited

Project Age (Number of Years Since Commercial Operation Date)

O&M reported in figure does not include all operating costs: Statements from public companies with large U.S. wind asset bases report total 46 operating costs in 2014 for projects built in the 2000s of ~$21-25/MWh

Wind Power Price Trends

47

Sample of Wind Power Prices • Berkeley Lab collects data on historical wind power sales prices, and long-term PPA prices • PPA sample includes 363 contracts totaling 32,641 MW from projects built from 1998-2014, or planned for installation in 2015 or 2016 • Prices reflect the bundled price of electricity and RECs as sold by the project owner under a power purchase agreement – Dataset excludes merchant plants and projects that sell renewable energy certificates (RECs) separately – Prices reflect receipt of state and federal incentives (e.g., the PTC or Treasury grant), as well as various local policy and market influences; as a result, prices do not reflect wind energy generation costs 48

Wind PPA Prices Have Reached All-Time Lows, Dominated by Interior Region Interior (20,611 MW, 212 contracts) West (7,124 MW, 72 contracts) Great Lakes (3,620 MW, 48 contracts) Northeast (1,018 MW, 25 contracts) Southeast (268 MW, 6 contracts)

$120 $100 $80

150 MW

50 MW

$60 $40 75 MW

PPA Execution Date 49

-15 Jan

-14 Jan

-13 Jan

-12 Jan

-1 Jan

-10 Jan

-09 Jan

-08 Jan

-07 Jan

-06 Jan

-05 Jan

-04 Jan

-03 Jan

-02 Jan

-01 Jan

-0 Jan

-9 Jan

-98 Jan

-97 Jan

$0 -96 Jan

LevlizA )P h W 014$/M rc(2d

$20

A Smoother Look at the Time Trend Shows Steep Decline in Pricing Since 2009; Especially Low Pricing in Interior Region $100 $90 $80 $70 $60 $50 $40 $30

) h W /M $ 4 1 0 2 c(R P gLlizd ra ve A

$20 $10

$0 PPA Year: 1996-99 2000-01 2002-03 2004-05 2006 10 17 24 30 30 Contracts: 1,249 1,382 2,190 2,311 MW: 553 50

Nationwide

Interior

Great Lakes

West

Northeast 2007 26 1,781

2008 39 3,465

2009 49 4,048

2010 48 4,642

2011 42 4,572

2012 14 985

2013 26 3,674

2014 13 1,768

Relative Competitiveness of Wind Power Improved in 2014: Comparison to Wholesale Electricity Prices 100

Wind project sample includes projects with PPAs signed from 2003-2014

90 80 70 60

h W 2014$/M

50 40 30 20 10 0

Nationwide Wholesale Power Price Range (by calendar year) Generation-Weighted Average Levelized Wind PPA Price (by year of PPA execution)

PPA year: 2003 Contracts: 9 MW: 570 51

2004 13 547

2005 2006 2007 2008 2009 2010 2011 17 30 26 39 49 48 42 1,643 2,311 1,781 3,465 4,048 4,642 4,572

2012 14 985

2013 2014 26 13 3,674 1,768

• Wholesale price range reflects flat block of power across 23 pricing nodes across the U.S. • Price comparison shown here is far from perfect – see full report for caveats

Comparison Between Wholesale Prices and Wind PPA Prices Varies by Region 100

Average 2014 Wholesale Power Price Range

90

Individual Project Levelized Wind PPA Price

80

Generation-Weighted Average Levelized Wind PPA Price

70 60

h W 2014$/M

50 40 30 20 10 0

Wind project sample includes projects with PPAs signed in 2012-2014 Interior 37 projects 5,275 MW

Great Lakes 10 projects 755 MW

Northeast 1 project 69 MW

West 5 projects 329 MW

Total US 53 projects 6,427 MW

Wind PPA prices most competitive with wholesale prices in the Interior region 52

Notes: Wind PPAs included are those signed from 20122014. Within a region there are a range of wholesale prices because multiple price hubs exist in each area; price comparison shown here is far from perfect â&#x20AC;&#x201C; see full report for caveats

Recent Wind Prices Are Hard to Beat: Competitive with Expected Future Cost of Burning Fuel in Natural Gas Plants 100

Range of AEO15 gas price projections AEO15 reference case gas price projection Wind 2012 PPA execution (985 MW, 14 contracts) Wind 2013 PPA execution (3,674 MW, 26 contracts) Wind 2014 PPA execution (1,768 MW, 13 contracts)

90 80 70 60 50 h W 2014$/M

40 30 20 10

204

2039

2038

2037

2036

2035

2034

203

203

2031

203

209

208

207

206

205

204

203

20

201

20

2019

2018

2017

2016

2015

0

Price comparison shown here is far from perfect â&#x20AC;&#x201C; see full report for caveats 53

Renewable Energy Certificate (REC) Prices Remain High in Northeast, While Rising Modestly among Mid-Atlantic States New England Class I

Mid-Atlantic Tier I, Texas, & Voluntary Mkt

$80

$40 CT

MA

ME

NH

DC MD OH (O-S) Vol. (natn'l)

RI

$30

$40

$20

$20

$10

$0

$0

IL (wind) OH (I-S) TX

REC prices vary by: market type (compliance vs. voluntary); geographic region; specific design of state RPS policies 54

5 1 0 2

4 1 0 2

3 1 0 2

1 0 2

1 0 2

1 0 2

5 1 0 2

4 1 0 2

3 1 0 2

1 0 2

1 0 2

1 0 2

h W /M $ 4 1 0 2

$60

DE NJ PA Vol. (west)

Policy and Market Drivers

55

Availability of Federal Incentives for Wind Projects Built in the Near Term Has Is Leading to a Resurgent Domestic Market, but a Possible Policy Cliff Awaits • Near-term availability of the PTC/ITC for those projects that reached the “under construction” milestone by the end of 2014 will enable solid growth in 2015 and 2016; uncertain prospects after that • Prospective impacts of more-stringent EPA environmental regulations, including those related to power-sector carbon emissions, may create new markets for wind energy

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State Policies Help Direct the Location and Amount of Wind Development, but Current Policies Cannot Support Continued Growth at Recent Levels WA: 15% by 2020 OR: 25% by 2025 (large utilities) 5-10% by 2025 (smaller utilities)

CA: 33% by 2020

MT: 15% by 2015

NV: 25% by 2025

MN: 26.5% by 2025 Xcel: 31.5% by 2020 WI: 10% by 2015

NY: 30% by 2015 PA: 8.5% by 2020 MI: 10% by 2015 OH: 12.5% by 2026

IA: 105 MW by 1999 IL: 25% by 2025 MO: 15% by 2021 CO: 30% by 2020 (IOUs) 20% by 2020 (co-ops) 10% by 2020 (munis)

AZ: 15% by 2025 NM: 20% by 2020 (IOUs) 10% by 2020 (co-ops) TX: 5,880 MW by 2015 HI: 100% by 2045 Source: Berkeley Lab

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ME: 40% by 2017 NH: 24.8% by 2025 VT: 75% by 2032 MA: 11.1% by 2009 +1%/yr RI: 16% by 2019 CT: 23% by 2020 DE: 25% by 2025 NJ: 22.5% by 2020 DC: 20% by 2020 MD: 20% by 2022 NC: 12.5% by 2021 (IOUs), 10% by 2018 (co-ops and munis)

• 29 states and D.C. have mandatory RPS programs • State RPS’ can support ~4-5 GW/yr of renewable energy additions on average through 2025 (less for wind specifically)

Solid Progress on Overcoming Transmission Barriers Continued • Over 2,000 circuit miles of new transmission built in 2014; lower than 2013 but consistent with 2009-2012 • 22,000 additional circuit miles proposed by March 2017, with half having a high probability of completion • AWEA has identified 18 near-term transmission projects that – if all were completed – could carry 55-60 GW of additional wind power capacity

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• FERC continued to implement Order 1000, requiring public utility transmission providers to improve planning processes and determine a cost allocation methodology for new transmission investments

System Operators Are Implementing Methods to Accommodate Increased Penetrations of Wind $20 $18

$14 $12 $10

W /M s($ C n io ra g )te I h

Integrating wind energy into power systems is manageable, but not free of additional costs

$16

$8 $6 $4 $2 $0 0%

10%

20%

30%

40%

50%

Wind Penetration (Capacity Basis)

60%

70%

APS (2007) Avista (2007) BPA (2009) [a] BPA (2011) [a] BPA (2013) CA RPS (2006) [b] ERCOT (2012) EWITS (2010) Idaho Power (2007) Idaho Power (2012) MN-MISO (2006) [c] Nebraska (2010) NorthWestern (2012) Pacificorp (2005) Pacificorp (2007) PacifiCorp (2010) PacifiCorp (2012) PacifCorp (2014) Portland GE (2011) Portland GE (2013) Puget Sound Energy (2007) SPP-SERC (2011) We Energies (2003) Xcel-MNDOC (2004) Xcel-PSCo (2006) Xcel-PSCo (2008) Xcel-PSCo (2011) [d] Xcel-UWIG (2003)

Notes: Because methods vary and a consistent set of operational impacts has not been included in each study, results from the different analyses of integration costs are not fully comparable. There has been some recent literature questioning the methods used to estimate wind integration costs and the ability to disentangle those costs explicitly, while also highlighting the fact that other generating options also impose integration challenges and costs.

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Future Outlook

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Sizable Wind Additions Anticipated for 2015 & 2016; Downturn and Increased Uncertainty in 2017 and Beyond

Wind additions in 2014 and anticipated additions from 2017-2020 fall below the deployment trajectory analyzed in DOEâ&#x20AC;&#x2122;s Wind Vision report 61

Current Low Prices for Wind, Future Technological Advancement and New EPA Regulations May Support Higher Growth in Future, but Headwinds Include…

• Lack of clarity about fate of federal tax incentives • Continued low natural gas and wholesale electricity prices • Modest electricity demand growth • Limited near-term demand from state RPS policies • Inadequate transmission infrastructure in some areas • Growing competition from solar in some regions 62

Conclusions • Annual wind capacity additions rebounded in 2014, with significant additional new builds anticipated for 2015 and 2016 • Wind has been a significant source of new electric generation capacity additions in the U.S. in recent years • Supply chain has been under duress, but domestic manufacturing content for nacelle assembly, blades, and towers is strong • Turbine scaling is boosting expected wind project performance, while the installed cost of wind projects is on the decline • Wind power sales prices have reached all-time lows, enabling economic competitiveness despite low natural gas prices • Growth after 2016 remains uncertain, dictated in part by future natural gas prices and policy decisions, though recent declines in the price of wind energy boost future growth prospects 63

For More Information...

See full report for additional findings, a discussion of the sources of data used, etc.

• http://energy.gov/eere/wind

To contact the primary authors • Ryan Wiser, Lawrence Berkeley National Laboratory 5474, RHWiser@lbl.gov

510-486-

• Mark Bolinger, Lawrence Berkeley National Laboratory 4937, MABolinger@lbl.gov

603-795-

Berkeley Lab’s contributions to this report were funded by the Wind & Water Power Technologies Office, Office of Energy Efficiency and Renewable Energy of the U.S. Department of Energy under Contract No. DE-AC02-05CH11231. The authors are solely responsible for any omissions or errors contained herein.

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