The US is the second-largest wind power market in the world after China, with 60GW of cumulative wind installed capacity as of 2012, equivalent to around 21.4% of global installed wind capacity. Wind power accounts for 4.0% of total electricity generation and 55.0% of total renewable power generation in the country.

As a highly government-driven industry, the growth of the US wind market is supported by production tax credits (PTCs), treasury grants, subsidies and renewable portfolio standards in various states. Financial backing from the government has largely alleviated the difficulty of high costs and has helped to drive the growth of wind power in the country.

Although there has been a substantial reduction in the price of wind-generated electricity, due to technological advancement and market development, wind power generation is still not as cost-effective as generation from fossil fuels.

Consequently, financial and policy support from the government remains essential for the industry’s current and future development. The US wind industry has benefitted from federal and state support, as well as from standard utility contracts that guarantee a satisfactory market price for wind power.

Market overview

The provision of PTCs has been a major driver for wind power market development in the US since 1999. The scheme was first introduced as part of the Energy Policy Act of 1992 and has been extended four times since its inception. The expiry of PTCs in 1999, 2001 and 2003 led to a drastic decline in annual capacity additions being recorded in 2000, 2002 and 2004, respectively.

The continuous availability of PTCs ensured steady growth in annual wind capacity between 2005 and 2009. There was a 49.1% fall in annual capacity additions for wind power in 2010 due to a combination of factors, such as weak economic conditions in the US, reduced demand for electricity, competition from natural gas and a lack of long-term policies supporting wind power.

A large amount of wind power capacity, amounting to approximately 13.1GW, was installed in 2012, as the PTC was set to expire by the end of the year. The growth of wind power installations will be slow in 2013 with an expected installation of approximately 3.0GW. The wind power market is expected to grow steadily from 2014 onwards as a result of the extension of PTCs until the end of 2013; the introduction of a clause stating that all wind power installations under construction will be eligible for the incentive; and as a result of the anticipation of the introduction of long-term energy policies supporting the industry.

"The wind operations and maintenance market in the US grew from an estimated $355 million in 2006 to $1.5 billion in 2012."

The cumulative installed capacity of the US wind market is expected to grow from 60.0GW in 2012 to 105.2GW in 2020, at a compound annual growth rate (CAGR) of 7.3%.

The average size of an onshore turbine in the US in terms of capacity increased from 1.6MW in 2006 to 1.9MW in 2012 as a result of the improved efficiency and yield of large turbines. This is expected to reach 3.6MW by 2020. Large wind turbines are more efficient, which results in increased project cash inflows.

Construction is just the start

The wind operations and maintenance (O&M) market in the US grew from an estimated $355 million in 2006 to $1.5 billion in 2012, at a CAGR of 27.8%. It is expected to reach $2.6 billion in 2020, at a CAGR of 6.7%. Onshore wind accounted for 100.0% of the total wind O&M market in 2012, and it is estimated that the share of onshore wind will be 95.5% of the total market in 2020.

Although there will be a drop in the share of the onshore wind O&M market, it will rise to $2.5 billion in 2020 at a forecast CAGR of 6.1%. The offshore wind market is expected to start later in 2014, reaching $116 million by 2020.

The offshore wind market segment is still in its early stages in the US. The country does not have any offshore capacity online, but it has several offshore projects planned, and it is expected that construction will start on the first offshore wind plant during 2014.

Offshore wind attracts higher O&M costs than onshore wind. Lower turbine availability, high logistics costs and a lack of skilled manpower makes offshore wind service more challenging. Although onshore wind also faces logistics and manpower issues, the impact of these factors on the offshore segment is higher.

It is estimated that revenues from the offshore wind O&M market segment will grow in the US during the forecast period, and the share of the market in the US will be 4.5% by 2020.

OEMs dominated the wind O&M market with a share of 70.9% in 2012. GE Energy, Siemens, Gamesa, Suzlon, Mitsubishi Power Systems and Vestas are some of the major OEMs in the country. Independent service providers (ISPs) accounted for 16.7% of the share in the US wind O&M market in 2012, while the share of in-house O&M was 12.4%.

It is estimated that 57.4% of the wind capacity that was online until the end of 2012 was under manufacturer’s warranty. By the end of 2012, out of the cumulative installed capacity of 60GW, nearly 43GW was under five years old.

One of the major concerns for operators in the coming months will be choosing an O&M partner. Operators will also have to decide whether they will perform O&M in house or achieve it through outsourcing.

Meanwhile, ISPs and OEMs will compete for opportunities in the market. It is estimated that warranty or service contracts will expire for around 7,539MW of wind turbines in 2013, increasing to 11,257MW in 2020, of which 103MW will be offshore wind power capacity.

GlobalData estimates that the capacity of blade repairs in the US was 7.44GW in 2012. It is expected that the capacity of blade repairs will continue to increase during the forecast period to reach 27.1GW by 2020. An estimated 5.9GW of gearboxes will be refurbished in the US in 2012. Gearbox repairs and refurbishment overhauls will peak in 2019, with 288.2GW of turbines requiring replacement or refurbishment of the gearbox.

The generator repair market is also expected to increase from 0.5GW of turbines having generator repairs in 2012 to 25.1GW by 2020. The generator repair market is expected to dip in 2018 due to low annual installations during 2010.