United States investor Warren Buffett’s utility company has decided to order about $1 billion of wind turbines for projects in the US state of Iowa.
The move shows how a drop in equipment costs is making renewable energy more competitive with power from fossil fuels.
According to data compiled by Bloomberg newsagency reports turbine prices have fallen 26 per cent worldwide since the first half of 2009, bringing wind power within 5.5 per cent of the cost of electricity from coal.
MidAmerican Energy Holdings, a unit of Mr Buffett’s Berkshire Hathaway, announced an order for 1050 megawatts of Siemens AG wind turbines in the industry’s largest order to date for land-based equipment.
Wind is the cheapest source of power in Iowa, and the deal indicates that turbines are becoming profitable without subsidies, according to Tom Kiernan, chief executive officer of the American Wind Energy Association trade group.
Bloomberg reports that’s a boost for suppliers including Siemens, General Electric and Vestas Wind Systems, and a threat to coal miners such as Peabody Energy.
“If Congress were to remove all the subsidies from every energy source, the wind industry can compete on its own,” Mr Kiernan said at a press conference at a Siemens factory in Fort Madison, Iowa, when the order was announced.
Other wind-turbine companies are recovering from slumps.
The market value of Vestas, Europe’s biggest turbine supplier, increased 86 per cent in trading and it’s expected to report net income in the current quarter for the first time since since mid-2011.
Bloomberg reports growing demand for wind power will offset waning use of fossil fuels, said MidAmerican Energy CEO Bill Fehrman.
The order for 448 turbines follows a December 2010 agreement to use 258 Siemens turbines for other projects in Iowa.
Wind farms provide “a hedge for our customers going forward in an era of reduced coal generation,” he said at the event.
The projects will qualify for the federal production tax credit for wind power, which is set to expire at the end of the year.
One of the five Iowa wind farms, the 44-megawatt Vienna II project, is already in operation.
The company expects another 506 megawatts of turbines to begin producing power next year and the rest will go online in 2015, Mr Fehrman said.
The company is investing a total of $1.9 billion in the five projects.
MidAmerican expects to close some coal-powered plants in 2015 as the price of wind power continues to slide, said Adam Wright, vice president of wind generation and development for MidAmerican’s Iowa utility.
Power from wind is now cheaper than power from newly built natural gas plants, said Amy Grace, a wind analyst for Bloomberg New Energy Finance (BNEF).
“Most people expect gas to become more expensive,” she said in an interview.
“I think in most windy areas in the US it will be competitive by 2020.”
Power from coal costs about US$78.30 a megawatt-hour to produce and gas costs US$69.71, compared with US$82.61 for onshore wind farms, according to data compiled by Bloomberg.
The cost of wind power has declined about 90 per cent in the past two decades, and 30 per cent in the past three years, Mr Kiernan said.
