The current bull market is now over eight years old, interest rates are rising, and the labor pool for construction is very tight. If your company is involved in public construction, you are very aware that spending levels have remained stagnant for quite some time. Although companies should always be on the lookout for new opportunities, this might be a particularly good time to explore the possibilities available in the field of renewable energy. In this article, we will concentrate on one of the main areas of renewable energy – wind power.
For centuries humanity has used wind energy for transportation in the form of boats and ships, but it was not until the late 19th century in Scotland when the first known wind turbine was built. More than 150 years later, NASA developed a wind turbine program for utility-scale turbines, which served as a springboard for the industry as we now know it. By 2000, there were 97 wind farms online in the US providing electricity to power nearly 600,000 homes. At the end of 2016, the installed wind capacity was 82,143 megawatts (MW) - enough to power nearly 25 million homes.
The wind energy industry celebrated another important milestone in 2016 when it displaced hydroelectric power as the country’s leading generator of renewable energy. And prospects for the future look strong. According to the Department of Energy, 142,000 MW of new and proposed wind capacity sits in the pipeline.
Reductions in wind energy costs are primarily due to larger, more efficient turbines. Bigger turbines with longer blades can produce maximum energy at lower wind speeds. What used to require winds of 20 knots can now be done at 10 knots.
The real area of potential growth seems to be in offshore wind. The country’s first major offshore wind project, the Block Island Wind Farm in Rhode Island, was operating as of the end of 2016 and will produce 30 MW of electricity, or enough to power 17,000 average homes. In January of this year, the 90 MW South Fork Wind Farm was approved by the state of New York’s Long Island Power Authority. When complete, it will be capable of powering 50,000 homes. The largest approved wind farm to date is proposed by a private developer, Cape Wind Associates, will be located of off Cape Code, Massachusetts, and is projected to generate 1,500 MW of electricity. There are many other major offshore wind projects being considered, including a couple of experimental floating wind turbines.
According to a new report from McKinsey, offshore wind still costs about 40% more than onshore wind and 20% more than the levelized cost of solar PV. However, because offshore wind in still in an earlier stage of development, “its prices can be expected to fall further, faster, thus improving its competitive position.” In Europe, new project bids are coming in much lower than expected. Some of the bids from a German auction in April of this year came in at the wholesale electricity price, meaning that they were competitive without any subsidy.
Despite the current administration’s attempts to alter the energy landscape by favoring fossil fuels over renewables, it is quite likely that the future of America’s energy will be determined by market and financial drivers. As more wind and solar farms are built, their cost will continue to fall to the point where in several regions of the country, wind and solar will be cheaper to build than coal and natural gas. This will lead to more opportunities for those who choose to participate in the renewable energy field. Should your company be considering renewables?