Greg Napolitano NYU Stern School of Business The most prevalent form of renewable energy used to generate electricity in the United States has been and will most likely continue to be wind power. Currently, wind power accounts for nearly 3% of electricity generation in the US and stands as the current global leader. The landscape of the US makes wind generation ideal. Our expansive great plains region combined with our continental electricity grid made a large scale wind project feasible. The Department of Energy has provided tax incentives for large wind producers in the US, which increases the return on equity of wind farmers, allowing them to be a viable competitor in the deregulated US electricity market. The increased magnitude of wind energy projects and wind farms is a technology that is somewhat recent due to its scalability, thanks in part to companies like GE Energy that have heavily invested in the development and manufacture of turbines. Countries such as China have also invested a large stake in several US wind farms due to a strengthening economy and return on US investment. Turbines will continue to increase in size and efficiency as generators and other electrical components are improved. There are several constraints to large-scale turbine generation that lie within building higher towers and offshore facilities. US Highway regulations and the size of bridges and tunnels used during transportation of turbines currently constrain the height and size of the turbines in use. The first offshore facility in the US was recently approved to commence and will operate off the coast of Massachusetts.1 This major political hurdle illustrates the magnitude at which these types of projects are growing. Most scientists and tech funds tend to agree that the major road block in greening the nation is not caused by a technological S-curve, rather by a policy issue masked as a technological or financial issue. Most importantly, financiers and scientists alike will echo the same opinion about the economic viability of such projects: In the long run, they can prove to be more economically viable than oil or coal at any $/bbl or MT price. The global economic situation also poses a threat to new wind projects, which require as much as a 10-year negative NPV project life before revenues can be generated. Constrained lending and illiquidity of lenders poses a threat to new investment, which requires substantial upfront capital. Also, at current yield rates, the return on equity required to make a new wind farm NPV positive may not be attainable. Lastly, many tax incentives in the US for renewable energy projects expired at the end of 2009 with the fiscal stimulus bill. If these tax incentives are not rolled forward, this could pose a major threat to wind farmers who rely on tax incentives to generate competitive MwH.
1http://www.pointcarbon.com