Slow and Steady: The continued growth of distributed wind

Offshore and large-scale wind facilities have been dominating the renewable energy news, but distributed wind installations at homes and farms have grown significantly within the past decade. Homeowners are seeking new solutions to reduce utility bills and take control of their own energy needs.

Since 2006, hundreds of thousands of American families have taken advantage of the Federal Residential Investment Tax Credit (ITC) to install their own renewable energy systems. The ITC has driven innovation across the renewable energy industry, from technology breakthroughs, to manufactured cost reductions, to new financial products such as renewable energy leases.

One result of the ITC is that distributed wind is narrowing the gap on reaching cost parity with grid-sourced electricity. Continuation of the ITC beyond 2016 is vital to keep this promising, domestic-based industry on this cost improvement path.

Although the terms “distributed wind” and “small wind” can be used interchangeably, “distributed” better reflects that smaller-scale wind turbines are a form of dispersed generation that’s net-metered and credited at retail rates. Because distributed wind operates in the shadows of the solar industry and utility wind power, many aren’t necessarily aware of the strides the industry has made over the past decade.

Present size & scope
Of the 100,360 turbines sold in the United States between 2003 and 2012, 68% are small wind turbines (up to 100 kilowatts in size), according to the 2012 Market Report on Wind Technologies in Distributed Applications, prepared for the US Department of Energy (DOE) by numerous partners, including the American Wind Energy Association (AWEA) and the Distributed Wind Energy Association (DWEA).

In recent years, two separate certification bodies, the Small Wind Certification Council (SWCC) and the Interstate Turbine Advisory Council (ITAC), have introduced much-needed standardization and consumer protection to the industry. This parallels the increased focus on third-party quality testing in the photovoltaic (PV) module industry.

The dominant trend in renewable energy for the past five years has been the notable cost reduction of solar energy equipment, which has not been matched by manufacturers of distributed wind turbines.

The initial cost to deploy a small or residential turbine varies on numerous factors, but a capacity-weighted average cost per installation was $6,960 per kW according to the DOE. The number is even less for US-made turbines, at $6,510 per kW, yet it’s still too high for broad market penetration in the absence of incentives.

Future depth & growth
Despite their conceptual simplicity, small wind turbines are more expensive than comparable products of similar size: for example, a residential wind turbine is 10 times more expensive on a per-pound basis than a riding lawn mower. If turbines were manufactured and marketed as efficiently as lawn tractors, they would sell for $0.46 per watt—less than the cost of imported PV modules.

To spur more growth in residential wind, manufacturers clearly have to drive down costs. Component-level innovations, designs that enable better manufacturing methods, and system-level issues that reduce installation time and cost all are needed to achieve parity with other energy costs. Innovations that increase performance and reduce maintenance also will contribute, as will technology that enables homeowners to integrate solar solutions into their home energy network to create an affordable hybrid energy solution. Turbine manufacturers are working on all of these issues, but they require investment in research and development.

The National Renewable Energy Laboratory has played a key role in recent R&D advancements in distributed wind through its recent Competitiveness Improvement Project (CIP). The CIP was developed to help the US wind industry develop competitive, high-performance technologies needed to compete in the global distributed wind market, and to lower the levelized cost of energy (LCOE) so that it can compete with retail electricity rates.

By far, the biggest factor that has driven the US renewable energy industry forward is the availability of incentives and tax credits, including the residential ITC. The ITC enables homeowners to deduct from their taxes 30% of the capital cost for renewable energy systems, such as for wind and solar power. Homeowners can fund their installation in smaller increments (say, installing a wind turbine one year, and solar equipment the next) and earn the 30% credit in each year.

The game-changing effect of the ITC is just as clear for distributed wind as it has been for solar. Since the Residential ITC was implemented in 2006, distributed wind projects have received close to $63 million in credits. This represents approximately $220 million in capital investment in the United States, according to the DOE. Distributed wind energy capacity has increased by more than 24-fold since 2003, according to AWEA. By comparison, solar installations have grown more than 1,600% in the country over this time period, according to the Solar Energy Industries Association (SEIA).

The ITC is good for homeowners, for US manufacturers, and for the US economy. It gives homeowners a significant incentive to choose the renewable technology that’s best suited to their environment and their needs. It also enables manufacturers to make the investments that drive technological innovation. This effect is most striking in the distributed wind industry, where domestic sales from US small wind suppliers rose from 80% of the market in 2011 to 86% in 2012, according to the DOE report. And the ITC creates jobs: According to The Solar Foundation’s 2013 National Solar Jobs Census, solar industry employment grew by 53% between 2010 and 2013, to more than 142,000 jobs. Wind power accounted for more than 80,000 jobs in the US, according to AWEA.

The ITC is set to expire at the end of 2016. Now is the time to ensure its renewal, so that US renewable energy manufacturers can plan on making the investments needed to drive the market forward, create new jobs, and better secure our energy future.

Ben Polito is president and co-founder of Pika Energy, which develops a new generation of cost-effective wind and solar energy technologies. Pika Energy recently received two CIP grants from the National Renewable Energy Laboratory to develop new processes, which will lower the cost of distributed wind.

Pika Energy
www.pika-energy.com