photo: Todd Woody
CEDAR RAPIDS, Iowa – For the past four years, the global wind industry has grown at a Google-like 30% clip as wind farm developers and turbine makers met demand for the one renewable energy source that has become competitive with fossil fuels. In the United States alone, new wind capacity will have jumped 50% in 2008.
Now the credit crunch is taking its toll – at least when it comes to forecasts for the industry’s prospects in 2009. Over the past week, analysts and industry insiders have ratcheted back growth predictions due to uncertainty over whether developers will be able to secure financing for the ever-bigger wind farms on the drawing boards.
“There is little visibility into the project finance market over the next 18 months,” wrote HSBC analysts Robert Clover, Charanjit Singh and James Magness in a report issued last week. “Thus far, company management in the wind sector continues to say that it is not experiencing a slowdown in growth, although developers say that finance is more expensive than it was. We do not believe that the long-term growth story has been undermined, but expect a period of reduced growth.”
The HSBC analysts predict the industry won’t grow at all next year. Meanwhile, the American Wind Energy Association, a Washington, D.C., trade group, also expects a slowdown in 2009.
“Clearly the market’s perception of growth for the wind industry has declined dramatically, but against a backdrop of virtually no industry data points,” the HSBC analysts acknowledged.
Ah, there’s the rub. Aside from the fear of the future that threatens to paralyze just about every industry, absent a complete collapse of capitalism the wind industry would seem poised to continue its run, albeit at a slower pace. (The nascent Big Solar business, in contrast, finds itself in a more precarious situation.)
In the U.S., state mandates that require utilities to obtain a growing percentage of electricity from renewable sources will drive growth for years into the future. That’s the reason you’re seeing plans for gigawatt-sized wind farms like the 4-gigawatt one T. Boone Pickens is building in Texas. As analysts were souring on the industry’s prospects last week, oil giant BP’s (BP) wind subsidiary finalized a deal with California turbine maker Clipper Windpower to build a five-gigawatt project – the world’s largest, sorry T. Boone – in South Dakota. (Of course, that’s little comfort to investors who have seen wind stocks take big hits in recent weeks. Nor is it good news for two U.S. startups that have filed for IPOs – First Wind and Noble Environmental.)
The wind developers and turbine makers Green Wombat has talked to in recent weeks for an upcoming Fortune magazine story say the long-term impact of the financial crisis remains unknown at this point. A large pipeline of orders for windmills – Danish turbine king Vestas’ orders spiked 52% from the first quarter to the second, according to HSBC – suggests that growth will continue unless wind farm developers start canceling projects – something that hasn’t happened to date.
The wombat happened to be at Clipper’s Cedar Rapids, Iowa, turbine factory on Tuesday and put the question to Bob Gates, the Carpinteria, Calif.-based company’s vice president of operations. Clipper is only one of two U.S. turbine makers, the other being General Electric (GE). (GE acquired its turbine operations from a bankrupt Enron, which itself had bought the business in 1997 from Clipper’s founder.)
“I think growth will be flat next year and that may continue to 2010 and then go back up,” said Gates as workers assembed gigantic drive trains for Clipper’s 2.5-megawatt Liberty turbine. “You have to put in your order for some components a year in advance, so if demand drops in 2009 you’ll have fewer turbines to bring to market in 2010.”
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