The Makings of a Champion Or, Wind Innovation for Sale: the Wind Industry in the U.S
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1 The Makings of a Champion or, Wind Innovation for Sale: The Wind Industry in the U.S. 1980-2010 Matt G. Hopkins University of Massachusetts Lowell 2011 2 INTRODUCTION Long before GE or Clipper were spreading turbines around the country a handful of companies, government agencies, and academicians were inventing the wind industry from which GE is today generating billions in revenue and a strong global presence. The roots of the industry are international, and there is not a clear central person, group, or collection of companies that can be said to have provided a clear origin. Rather, many actively pursued wind power at the same time even though the outcomes of these efforts were different for every country. In addition, the mere suggestion to use wind as an electric energy source dates all the way back to the late 19th century, and some of the first experiments followed shortly thereafter. The use of wind by society is also an ancient practice most clearly symbolized by the Sail and the Windmill or Windpump. Hence there is little necessarily “new” about the idea of using wind as an energy source, though we can credit the last several decades as clearly ushering in the clear arrival of a new industry which provides a glance at what has potential to user in a revolution in the design and execution of energy infrastructure around the world. Such revelutions have provided the basis for mass economic This paper argues that despite its uneven performance the United States nevertheless succeeded in establishing a wind energy industry in the decades following the 1980s. Core technologies for wind turbines were advanced during the industry's formative years and U.S. based wind companies competed successfully against incumbent energy technologies and foreign suppliers of turbines. The early U.S. wind industry accomplished this within a rapidly changing energy and research policy context that took shape in the late seventies and morphed continually throughout the 1980s and 1990s, climaxing with the decision to deregulate energy markets in the 1990s. These changes began to restructure the entire energy infrastructure in the U.S. and altered the competitive landscape, starting a search for profits within a highly competitive market for energy. Early mistakes of the wind industry and a loss of policy support cost the U.S. a decade of development before it began a rapid ascent marked by the rise of General Electric as a major wind turbine supplier, after a string of bankruptcies in the mid 1990s destroyed the leading U.S. wind company and Enron, having acquired another, collapsed under its own corruption. The early wind energy pioneers of the U.S., who answered the call for energy security in an environmentally damaged world doubly faced a changing policy environment and the imperative to compete with incumbent technologies that had lower average costs. The advent of wind energy meant not only that development of wind resources had to occur, but also that a cost effective and technically advanced manufacturer had to emerge to compete with an international supply chain. The irony behind the task for the U.S. was that all incumbent energy technologies were still in fact enjoying actively subsidized R&D and other costs by the government. Amidst the wreckage of the changes taking hold, General Electric became quite suddenly in the early 2000s the world's 4th largest wind manufacturer in the world, a position it improved upon but which has yet to answer to competitive challenges from abroad. This pathway is far removed from the technological path suggested by the late 1970s, when large aerospace companies were selected to lead the U.S.'s charge into the wind industry. 3 PART I. GROWTH OF GLOBAL AND NATIONAL WIND POWER At the end of 2010 the Global Wind Energy Council (GWEC) estimated that approximately 194.39 GWs of installed wind capacity existed in the world. Not more than 0.01 GWs existed in 1980. Just 5 of the 73 countries developing wind resources have developed in excess of 10 GWs. This list includes the United States, China, India, Germany, and Spain. Together these countries represented approximately 74 percent of all the wind capacity in the world in 2010, suggesting by extension that these are also the largest markets for wind power in the world. According to Pernick et al. (2011), Wind Power was a $4 billion dollar global market in 2000 (p.4). By 2009 it peaked at $63.5 billion before succumbing to sour economic markets. It was $60.5 billion in 2010 (p.4). Until the early 1990s, world wind power development was overwhelmingly a result of U.S. development activities, but the loss of policy support from the mid 1980s to the early 1990s caused wind power development to shift overseas to Europe (especially Germany) and eventually to Asia (especially China). The U.S. represented close to 100 percent of all wind energy production in the world during the period of 1980-1987 before eroding to a low point of perhaps 14 percent in 2004. Correspondingly Europe, with the leadership of Germany in particular but also Spain, Italy, France, Denmark, the UK, Portugal, the Netherlands, Sweden, Ireland and others arose as aggressive adopters of the technology. In many European countries wind now represents as much as 20 percent of the total amount of energy generation, wherein the U.S. wind represents only about 2 percent of total energy generation (Flowers, 2010).1 Regionally, Europe leads world wind power development with about 86.08 GW or 44 percent of the world's existing wind capacity in 2010. As figure 1 illustrates below, world wind power development has tended to be a result of activities in the U.S., Germany, Spain and now China and India. Figure 2 illustrates the change in development leadership, as understood by wind capacity installed.2 During the last several decades, global competition for wind energy markets has seen countries leapfrogging each other several times already in terms of the amount of wind capacity installed. As illustrated in figure 3 below, the U.S. led the world in installed wind capacity in the early years between 1981 to around 1997, before Germany took the lead between 1997 to 2007. The U.S. then again dominated the world in installed wind capacity briefly in 2008 and 2009, only to be surpassed by China in 2010. China's dramatic rise to the top of the charts suggests a possible shift in wind industry momentum. In just four years, China has managed to approximately double its installed wind capacity every year, reaching 42 GWs in 2010 from just 1 GW in 2005. It should be viewed as a stunning ascent which eclipsed the best attempt by the U.S. so far to add to its own wind capacity, which was approximately 10 GWs in 2009. Only a handful of countries have so far managed to add much over 1 GW of wind capacity on an annual basis, though the U.S., China, and Germany began adding capacity at this rate around 1999. As figure 3 below illustrates, net annual additions of wind capacity have grown most rapidly in China while the U.S. has not managed a consistent growth trajectory despite 1 These are estimations per Flower's report: Denmark 20.5%, Portugal 14%, Spain 13.9%, Ireland 11.5%, Germany 8.1%, Greece 4.1%, Netherlands 4%, UK 3.2%, Italy 3%, India 2.9%, Austria 2.7% 2 Obviously installed wind capacity is not necessarily a good proxy for understanding wind manufacturing leadership or leadership in wind energy development activities. However, my research has tended to show that countries leading in wind capacity installations have tended also to have dominant shares of wind turbines supplied by domestic wind manufacturers. This is true for GE in the U.S., and Enercon for Germany. It is likely true for China as well. Government incentives and a strong domestic market for development (typically also a result of government support) has tended to aid the emergence of a strong domestic manufacturer. showing an appetite similar to China's in recent years. 200,000 180,000 160,000 140,000 s att 120,000 Fig 1. Installed Global Wind Capacity 1980-2010, Megawatts aW 100,000 eg M U.S. 80,000 4,000 3,500 Spain 3,000 60,000 2,500 2,000 40,000 1,500 1,000 Germany 20,000 India 500 0 Source: Earth Policy Institute,0 Global Wind Energy Council 45,000 1980 China 40,000 1995 Rest of World 35,000 1982 Fig. 2 Installed Capacity of the U.S., Germany, and China 1980 - 2010 s 30,000 att 1996 1984 aW 25,000 eg 20,000 1997 1986 M 15,000 10,000 1998 1988 5,000 China U.S. 1999 1990 Germany 0 Source: Earth Policy Institute, Global Wind Energy Council 2000 1992 1980 1994 2001 1982 2002 1984 2003 1986 4 2004 1988 2005 1990 2006 1992 2007 1994 2008 1996 2009 1998 2010 2000 2002 2004 2006 2008 2010 5 Figure 3: Net Annual Wind Capacity Additions (MWs) 1999-2010 18,000 16,000 Net Addition U.S. 14,000 Net Addition Germany 12,000 Net Addition China s t t 10,000 a W a 8,000 g e M 6,000 4,000 2,000 0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Source: Earth Policy Institute, Global Wind Energy Council The National Market for Wind in the United States Wind energy has, despite a turbulent past, survived in the United States as an increasingly important form of renewable energy.