Decline in US wind generation raises bigger concerns than El Niño

Good morning, and welcome back to Energy Source. 

The US oil and gas industry is flourishing under the Biden administration. Production sits at record levels, and the scale of annual profits have been unprecedented. The country’s top-10 listed operators amassed a combined net income of $313bn in the first three years of his presidency, almost triple the amount in the same period under Trump.

For many in the oil and gas industry, however, these successes have occurred in spite of the White House — not because of it. My colleagues Myles McCormick, Jamie Smyth and Sam Learner outline in today’s Big Read why US producers are pouring money into thwarting a second Biden victory.

In today’s newsletter we look at the US wind sector. Slower breezes weakened wind generation across the country last year, leading to the first decline in output in almost three decades.

‘Everything dropped’: slower breezes lead to a drag on US wind output

The wind is blowing slower these days in the US.

Wind power fell last year for the first time since the 1990s, despite new installed capacity, the Energy Information Administration reported last week. While the overall reduction was small (roughly 2 per cent), crucial wind states reported larger drops, such as Iowa, where output fell 8.5 per cent year over year. Preliminary figures for early 2024 also show similar declines.

Slower wind speeds from the naturally occurring El Niño weather phenomenon drove lower generation. Consultancy DNV, which advises on US wind projects, saw a 5 per cent decline in wind speeds in 2023 from the 20-year average. Conditions are expected to normalise later this year.

“Everything dropped,” said Beatrice Brailey, head forecaster at DNV, adding that the current El Niño event was the “third-strongest in the past 25 years”. “Fluctuations on this sort of timescale do happen, but this is the strongest one that we’ve seen for quite a long time.”

NextEra Energy Resources, the largest US renewable developer, reported that 2023 was the lowest year on record for wind resources at its facilities in the past 30 years. While they have recovered to the 30-year average in 2024, January marked the lowest wind resources the company has tracked in the first month of the year, according to a company spokesperson.

“Every asset that was already existing in the grid or even the new ones were operating at a much lower or much suboptimal manner,” said Atin Jain, a senior wind associate at BloombergNEF.

But Matthew Hendrickson, chief executive of advisory firm Hendrickson Renewables, added a caveat: despite lower output, 2023 remains the second-best year for wind power. “There’s a swing from a really good year to a slightly below-average year,” Hendrickson said.

Wind is the largest source of renewable energy in the US, making up 10 per cent of the country’s electricity generation. President Joe Biden’s landmark climate law extended lucrative tax credits to support the buildout of wind power while creating new subsidies to establish a domestic supply chain.

While wind energy is inherently variable, its small decline last year comes at a moment of flux for US electricity generation.

The US is witnessing rapid power demand growth for the first time in two decades driven by the swift development of artificial intelligence processing centres and factories. Meanwhile, the source of electrons is changing as the deployment of solar challenges wind’s position as the leading renewable electricity source.

The lower wind generation raises questions over grid stability as more renewables come online. What will fill the gap if wind or solar is lower than expected and demand for power is surging?

Typically, when wind generation falls, gas power plants fill the gap, although this is slowly changing as battery storage deployment grows across the country. The Midcontinent Independent System Operator, which serves large wind producing states, said it maintains a “diverse” energy mix to ensure reliability.

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The “bigger story” was the shift among developers from wind to solar, said Kris Cheney, EDP Renewables’ executive vice-president of the central and western US region. While wind generation and installations are expected to continue growing, solar is expected to catch up in the next couple of years and has become the fastest-growing electricity source in the country.

“Frankly, from a development standpoint, wind is more challenging,” Cheney said. “The expectation is there’s going to be more solar constructed than wind.”

Renewable industry advocates also told Energy Source that a lack of transmission capacity and the country’s rickety grid infrastructure pose a greater risk to wind growth than slower breezes from El Niño. The US has to grow its interregional transmission lines by more than fivefold by 2035 to meet decarbonisation targets, the US Department of Energy estimates (we dived into this topic in last week’s newsletter).

“I’m not concerned about some natural phenomenon,” said Jeff Clark, president of the Advanced Power Alliance, which represents renewable developers. He added that “billions” have been lost from wind projects due to the lack of transmission available to connect power to customers.

“I’m more concerned that when we have the wind available, we are not taking full advantage of the wind energy . . . because of our lack of infrastructure.”

Job Moves

• Siemens Energy has appointed Vinod Philip to lead its troubled wind turbine business, succeeding Jochen Eickholt, who took over in March 2022.

• Energy consultant Wood Mackenzie has appointed Jason Liu as chief executive, succeeding Mark Brinin. Liu served as the CEO of Zywave, a software provider.

• Ilham Kadri, chief executive of Syensqo, will head Cefic, the European Chemical Industry Council, succeeding Martin Brudermüller, who last month stepped down as chair of BASF.

• Aurubis, Europe’s largest copper producer, has appointed Steffen Hoffmann as chief financial officer, succeeding Rainer Verhoeven. Hoffmann most recently served as vice-president treasury and investor relations at the Mercedes-Benz Group.

• Parminder Kohli will serve as Shell’s UK country chair and executive vice-president of sustainability and carbon, succeeding David Bunch at the oil major.

Power Points

• UAE’s al-Jaber invites business chiefs to climate talks ahead of COP29

• Traders boost bullish bets on European gas prices

• China’s BYD and Neta target Indonesian market with EV investments

Energy Source is written and edited by Jamie Smyth, Myles McCormick, Amanda Chu and Tom Wilson, with support from the FT’s global team of reporters. Reach us at energy.source@ft.com and follow us on X at @FTEnergy. Catch up on past editions of the newsletter here.