The early 2020s are shaping up to be better than expected for US wind installations in spite of the fading production tax credit (PTC), thanks in part to recent momentum in the repowering market.
A “diverse” group of wind developers purchased enough equipment last year at the 60% PTC value to build 6.6GW of capacity in 2022, an “encouraging signal” that hints at an upside to previous forecasts, according to market researcher Wood Mackenzie.
This year and next are slated to be two of the biggest in history for US wind installations, as developers race to beat the end-2020 deadline for bringing projects to completion at the full PTC – a subsidy worth about $24/MWh for 10 years.
The PTC is phasing down along a 100%-80%-60%-40% schedule from 2016-19, and developers have four years to complete a project once qualified at a given level.
Many in the industry believe that 2021 will be a big year for US wind even at the 80% PTC, and perhaps nearly on a par with 2020 as projects spill over due to logistical and supply-chain constraints.
By any estimate, 2022 looks set to be a down year for US wind, but strength in the repowering market and anticipated advances in turbine technology could soften the blow significantly.
A softer landing for the market would give the industry more time to readjust to life without subsidies.
“Despite the PTC phase-out, the relative stability of the US market compared to more volatile international markets, along with the security and ability to monetise 10 years of tax credits, continues to attract long-standing investors in the US wind power market, as well as newcomers to the market,” says Luke Lewandowski, research director at Wood Mackenzie Power & Renewables.
WoodMac notes that more than 3GW of US projects were repowered – or partially updated with new equipment – in 2017-18, adding that developers’ repowering strategies are getting more sophisticated.
GE, one of the leading equipment suppliers and investors in repowered US wind farms, recently told Recharge that it expects the repowering market to diversify this year beyond a core group of developers led by NextEra Energy.
One looming challenge for wind in 2022 and beyond is the solar industry, with competition between the two sectors set to intensify, WoodMac says.
The solar investment tax credit (ITC) has later qualification dates than the wind PTC, with solar developers still able to qualify for the ITC’s full 30% value this year, before it phases down to 26% and 22% for new projects in 2020-21.
That gives solar an advantage over wind in the early 2020s from a subsidy standpoint, and unlike the PTC – which will expire completely – the solar ITC will remain at 10% for commercial projects indefinitely.
Additionally, the Trump administration’s tariffs on imported PV equipment will have phased out by the early 2020s, putting another tailwind at solar’s back.
But the wind industry still has a number of tricks up its sleeve, including the bigger turbines models set to hit the US market over the next few years.
By 2022, two-thirds of the US market will go to turbines between 3MW-5MW, with 4MW+ machines accounting for nearly one-third of installations, Lewandowski says. That’s a big jump from today.
“Not only is cost expected to decrease for this class of turbine models by 2022, but productivity will be significantly higher than legacy models,” he says.