Dive Brief:
- Weaker than expected winds in the Western and Southwestern U.S. have caused wind-generated electricity to drop 20% to 50%, forcing power producers to turn to alternative resources and electricity markets, SNL reports.
- Weather analysts, which wind investors and developers increasingly rely on, say the diminished resource is from an early-2015 weather pattern change. However, an El Niño weather pattern is expected to drive stronger winds in the West and Southwest for the rest of 2015 and 2016. The changing climate is likely to cause long-term increased wind output.
- The weak winds hit developers and utilities in their pocketbooks. NRG Yield reported lower than expected Q1 earnings and reduced 2015 expectations. Pattern Energy Group’s Q1 available cash fell nearly 48% year-on-year. Southern California Edison was forced to buy electricity on the open market after Q1 wind production fell 50%.
Dive Insight:
"[T]he absence of wind compared to historical data was virtually unprecedented," according to NRG Yield Chair, President, and CEO David Crane.
NRG Yield benefited from a diverse portfolio and NextEra Energy Partners reported that its solar production offset the wind slump. Pattern Energy, a wind sector specialist, holds cash reserves in anticipation of wind’s seasonal variability.
Wind resource assessment tends to be a subject for “wonks” while project finance engages “deal makers,” according to a recent essay from AWS Truepower. It is “largely underappreciated” that the amount of debt raised for a wind project increases as uncertainty about its long-term energy production decreases and “uncertainty is strongly linked to how well known the hub-height wind resource is.”
Good resource assessment can therefore obtain benefits much greater than its cost. In an example from AWS CEO Bruce Bailey, a few hundred thousand dollar assessment of wind resources earned a $9 million increase in debt investment. Assessment can also provide insight into the selection of turbine technology, expectations about curtailment, and needs for operations and maintenance.
