An extension of the photo voltaic funding tax credit score (ITC) at its 30 p.c worth could be “devastating” to the long run U.S. wind market, in accordance with a brand new Wooden Mackenzie report.
The U.S. is on observe so as to add a file 14.6 gigawatts of recent wind capability in 2020, and almost 39 gigawatts throughout a three-year set up increase from 2019 to 2021, in accordance with Wooden Mackenzie’s 2019 North America Wind Energy Outlook.
However the market’s trajectory begins to look extremely unsure from the early 2020s onward, and photo voltaic is among the primary the explanation why.
Because the daybreak of the fashionable American renewables market, the wind and photo voltaic sectors have largely been allies on the nationwide stage, benefiting from most of the similar clean-energy insurance policies and sharing big-picture objectives. Till lately, wind and photo voltaic firms not often discovered themselves in direct competitors.
However the image is altering as photo voltaic catches as much as wind on price and the grid penetration of renewables surges. What was as soon as a obscure alliance between the 2 quickest rising renewables applied sciences might morph right into a critical rivalry.
Whereas many undertaking builders at the moment are lively in each sectors, together with NextEra Vitality Sources, Invenergy and EDF, the nation’s thriving base of wind producers might face more durable days forward.
The ITC’s inherent benefit
At this level, wind stays photo voltaic’s greater sibling in some ways.
The U.S. has almost 100 gigawatts of put in wind capability at present, in comparison with round 67 gigawatts of photo voltaic. With their considerably greater capability elements, wind farms generated 4 instances extra energy for the U.S. grid final 12 months than utility-scale photo voltaic crops, for a mixed wind-solar share of eight.2 p.c, in accordance with authorities figures. (Distributed PV programs additional add to photo voltaic’s contribution.)
But it surely’s lengthy been clear that wind would lose its edge in some unspecified time in the future. The annual photo voltaic market now recurrently tops wind. The price of photo voltaic power is falling extra quickly, and seems to have extra runway for additional discount. Photo voltaic’s inherent era sample is extra useful in lots of markets, delivering energy throughout peak-demand hours, whereas the wind usually blows strongest at evening.
After which there’s the matter of the photo voltaic ITC.
In 2015, each wind and photo voltaic secured historic multi-year extensions to their primary federal subsidies. The extensions gave each industries the longest interval of coverage readability they’ve ever loved, setting in movement a tidal wave of installations set to crest over the subsequent few years.
Even again in 2015, nevertheless, it was clear that photo voltaic obtained the higher deal in Washington, D.C.
Whereas the wind manufacturing tax credit score (PTC) started phasing down for brand new tasks virtually instantly, photo voltaic builders got till the top of 2019 to qualify tasks for the total ITC.
And critically, whereas the wind PTC drops to nothing after its sundown, commercially owned photo voltaic tasks will stay eligible for a 10 p.c ITC perpetually, based mostly on the prevailing laws. Over time, that quantities to an enormous benefit for photo voltaic.
In one other twist, the photo voltaic trade is now overtly preventing for an extension of the 30 p.c ITC, whereas the wind trade seemingly stays cooler on the prospect of pushing for the same prolongation — having stated the present PTC extension could be the final.
Loads of tailwinds, too
Wooden Mackenzie’s report catalogues a number of elements that would work for or in opposition to wind market within the “uncharted” post-PTC years, a lot of them past the trade’s direct management.
If issues go nicely, annual installations might bounce again to near-record ranges by 2027 after a mid-decade contraction, the report says. But when they go badly, installations might stay depressed at four gigawatts or under from 2022 by means of many of the coming decade, and that features an anticipated uplift from the offshore market.
An extension of the photo voltaic ITC with out further wind help would “severely compound” the wind market’s battle to rebound within the 2020s, the report says. The already-evident shift in company renewables procurement from wind to photo voltaic might intensify dramatically.
The opposite huge problem for wind within the 2020s is the shortage of progress on transmission infrastructure that might join doubtlessly huge low-cost wind farms in inside states with greater inhabitants facilities. A hoped-for nationwide infrastructure bundle which may tackle the difficulty has not materialized.
Even so, many within the wind enterprise stay cautiously optimistic in regards to the post-PTC years, and builders proceed to construct out longer-term undertaking pipelines.
Turbine know-how continues to enhance. And an extension of the photo voltaic ITC is much from assured.
WoodMac’s report outlines many different elements that would work in wind’s favor within the years forward, together with:
The nascent offshore sector, which regardless of lingering regulatory uncertainty on the federal stage seems set to blossom right into a multi-gigawatt annual market by the early-2020s. Lobbying efforts for an offshore wind ITC extension are gearing up, providing a possible space for cooperation between wind and photo voltaic.
The potential linkage of coverage help for power storage to wind tasks, constructing on the present linkage with photo voltaic.
Rising electrical automobile gross sales and a shift towards time-of-use retail electrical energy billing, which might increase energy demand throughout off-peak hours when wind era is powerful.
The land-use benefits wind farms have over photo voltaic in some agricultural areas.
Wooden Mackenzie wind purchasers can entry the report of their accounts right here. Not but a analysis shopper? Be taught extra in regards to the report right here.