Wind Power Price Trends in the United States: Struggling to Remain Competitive in the Face of Strong Growth

The amount of wind power capacity being installed globally is surging, with the United States the world leader in terms of annual market share for three years running (2005-2007). The rapidly growing market for wind has been a double-edged sword, however, as the resulting supply-demand imbalance in wind turbines, along with the rising cost of materials and weakness in the U.S. dollar, has put upward pressure on wind turbine costs, and ultimately, wind power prices. Two mitigating factors--reductions in the cost of equity provided to wind projects and improvements in project-level capacity factors--have helped to relieve some of the upward pressure on wind power prices over the last few years. Because neither of these two factors can be relied upon to further cushion the blow going forward, policymakers should recognize that continued financial support may be necessary to sustain the wind sector at its current pace of development, at least in the near term. Though this article emphasizes developments in the U.S. market for wind power, those trends are similar to, and hold implications for, the worldwide wind power market.