The US wind market is set to surge by 14,600MW in 2020 – due to slow uptake by buyers and federal tax credits for wind being cut.
Has the US federal government unwittingly pitted the two strongest resources fuelling the energy transition against each other? It appears so, according to the latest findings in US research agency Wood Mackenzie’s wind power outlook.
The motivation is understood to be the pressing deadline for federal production tax credits (PTC) for wind, causing developers to rush projects to completion ahead of the 2021 expiration of the credit offer, but this, according to Wood Mackenzie, will result in major bottlenecks in interconnection queues, and related logistics, which already plays a factor in negatively impacting project timelines with delays and ultimately, both the scale, and commissioning of wind energy installations.
Wood Mackenzie senior analyst and lead report author Anthony Logan said: “Although the PTC phase-out schedule has been in place since 2015, off-takers were slow to act on procuring new capacity, yielding relatively subdued installation totals in 2017 and 2018.”
Deals for wind energy purchases of almost every type have increased significantly over the last 6 to 12 months the outlook noted.
“The lack of available logistical resources will begin to cause schedule rearrangements and delays that will grow more apparent during the first and second quarters of 2020,” Logan said.
The research agency’s forecast presumes that 6.6GW of wind projects, due to start operations in 2020, will be delayed, and connect to the grid in 2021.
Risk can be found in the expected 1.5GW of capacity, the projects for which are expected to be cancelled outright, prior to construction, which may result in power purchase budgets redirected to solar power as an alternative generation source.
Solar photovoltaic technology, which enjoys a 30% federal solar tax credit, or ITC is starting to compare on the cost to onshore wind generation, and solar is expected to hold a minor advantage in coming years due to a 10% ITC, which, unlike wind power, has no expiration date in sight.
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The US solar industry has been lobbying for a 30% ITC extension, which, if passed, would be “devastating for post-2021” wind demand, Logan added.
In the immediate-term, the author notes that while wind will remain competitive in key territories until 2021, the possible impact of reducing the tax credit for the wind to 60%, and later, 40% of its current value will outpace the cost of electricity reductions in 2022 and 2023.
Wood Mackenzie forecasts the US the wind industry bottoming out at 5.9GW in 2024.