The U.S. wind market is expected to “peak” next year as the federal production tax credit phases down, according to a new report from Wood Mackenzie.
A tightening window for developers to complete projects – before the wind PTC fully expires in 2021[*] – will trigger 14.6 gigawatts of added wind capacity in 2020 before a pronounced downturn, the analysis said. The consultancy forecasts a more than 50% drop in wind capacity between 2020 and 2022, as the industry’s primary federal incentive reaches its end.
The Scotland-based firm estimates that 5.9 GW of wind will be added in 2024. But the 2020 figure is unprecedented, said Dan Shreve, head of wind research at Wood Mackenzie.
“We’re able to support that number because the wind energy market has globalized,” Shreve said, with the U.S. market able to leverage a mature global supply chain for substantial growth.
Shreve added that today’s investors have a strong understanding of wind, both its strengths and “very limited” shortcomings.
But the impending rush to capitalize on the PTC – which was last extended by Congress in 2015 – will also prompt logistical bottlenecks, the report said.
Not all projects scheduled for 2020 – some 6.6 GW – will reach completion by year-end but will be able to connect to the grid in 2021, according to the analysis. Roughly 1.5 GW of additional capacity will be canceled outright, analysts forecasted. Wood Mackenzie said that more than 23 GW of contracted wind projects are publicly estimating a 2020 commercial operation date.
Challenges facing the industry in the year ahead include timely equipment delivery to project sites, as the urgency to advance projects accelerates schedules and pushes delivery windows outside the third quarter period, the report said.
If turbine manufacturers can’t deliver components ahead of that quarter, they will incur higher transport costs so that haulers can transfer resources and get equipment delivered on time, analysts said. Still, the seriousness of these issues won’t be “fully evident” until the first two quarters of 2020.
Another obstacle could be tariffs, with major U.S. manufacturing facilities essentially at their limits with output serving 2019 to 2021 installations. In 2012 – the last peak year of U.S. wind installation – Chinese and other turbine original equipment manufacturers stepped in to meet needed demand.
“But those players are uniquely hindered from playing a similar role in 2020,” the report said. Wood Mackenzie referenced President Trump’s tariff measures broadly, saying they have been challenging for the wind supply chain and components such as blades and gearboxes.
Many wind companies also did not immediately take advantage of the PTC, with “relatively subdued” installation in 2017 and 2018, according to Wood Mackenzie. Shreve said the timeline outlined in current PTC legislation was longer than the wind industry was used to, which gave the market an ability to “take a breath” and prioritize projects.
But Shreve added that the time pinch should not come as a surprise to anyone in the sector and the question now is “how well folks have actually prepared.”
John Hensley, vice president for industry data and analysis at the American Wind Energy Association, said previous policy stability created by the five-year PTC phasedown has helped trim the cost of wind energy by close to 70% in the last decade. A “slight slowdown” wouldn’t be surprising, he said, but Hensley did express concern around tariffs raising costs for the domestic wind power manufacturing chain.
“Wind is ready and able to compete on a level playing field,” Hensley said. “AWEA supports energy tax policy that would establish parity between clean technologies in the form of a technology-neutral tax credit that values carbon emissions reductions or by putting a price on carbon.”
A spokesman for General Electric Co., which made up 40% of all turbine installations in the United States last year, declined to comment on the report.
On top of bottlenecks for logistics and interconnection queues, solar is starting to compete more effectively with onshore wind on cost, the report said. Solar and battery storage together will be more efficient at capturing wholesale price spikes, it said.
The solar industry has pushed for a 30% extension of the federal investment tax credit.
Abigail Ross Hopper, president and CEO of the Solar Energy Industries Association, described the ITC as “transformative” since it was implemented in 2006. Ross Hopper said while there is competition among all energy sources, “wind and solar are going to advance together because of the growing appreciation that the American public has for the attributes of both power sources.”
A separate report from the Department of Energy last month predicted a similar downturn in new U.S. wind capacity, citing the PTC phaseout in its analysis. Those projections put wind additions at 11,000 to 15,000 GW in 2020, according to the DOE report, which place the Wood Mackenzie forecast at its upper limits (Energywire, Aug. 13).
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