US analyst Wood Mackenzie is suggesting that 2020 will be the peak of wind energy additions for some time, as the Production Tax Credit is phased out leaving 14.6 GW for the year. The following year, 2021 will benefit from about 6.6 GW of capacity being too late for the end of year 2020 deadline, and that around 1.5 GW of wind capacity will actually be cancelled because of this. Those delayed projects will earn less than forecast and that will come out of the margin of the developers. This means that there is around 23GW of wind pipeline contracted for commercial operation by 2020, before a slow-down.
The analyst firm puts wind additions at 14.6 GW for 2020, and says that because of the likely continuation of the solar tax credit, remaining capacity will shift to solar from the end of 2020. Wind is done.
It describes developers as “rushing to complete” projects in 2020, which is creating an interconnection queue. Delays are mounting, and timing of wind is sliding.
This is fairly unforgiveable given that the PTC phase out schedule has been in place since 2015, and too little was done in both 2017 and 2018 – are companies really that relaxed about earning a fortune?
Solar projects going forwards will continue to benefit from a 30% solar Investment Tax Credit, and it is these returns based on tax credits which controls the final LCOE for each technology and makes the difference in the cost of finance.
The solar tax credit will continue to have a 10% ITC after the 30% era ends and there remains a strong possibility that Congress will push through an extension for the 30% ITC, a move which might prove devastating for post-2021 wind demand.
The continued effectiveness of wind until 2022, is the slow wind down of tax allowances under the scheme.
It is true that there is always a lull after a tax credit or Feed in Tariff suspension as the particular renewables industry adjusts to the new reality. China is a real case in point around solar, which it has tried to aggressively push through to a parity position this year. As a result the first half of the year has halved in MW added, but by the end of a single year it is widely understood that Chinese solar capacity will make a comeback and fully adjust to the new reality. But then again that is a managed economy. Where companies have the luxury of considering other territories where they can better push their energies, they tend to do so, leaving only local firms with the problem of making money under a new, stricter set of rules, but eventually they all come back into the market.
But Wood Mackenzie says in the US the final 12.3 GW of wind power added in 2021, will lead to a drop to just 5.9 GW by 2024, so it sees no such comeback. On the back of some of the largest offshore wind projects in the world announced this year, it seems unlikely that neighboring states won’t look at what’s happening next door and build their own, shortened, initiatives in time for that 2024 timeline, especially as GE pushed its Haliade X turbine (see later in this issue).
Some companies as we say can push their wind efforts elsewhere, some can shift to solar just as readily, while others are now considering adding battery to installations that are already in place, depending upon what happens to those tax credit extensions in Congress.
Wood Mackenzie does track quarterly however and said that the residential market and says it has had its best quarter ever and said yesterday that US solar now has the largest pipeline it has ever had on 37.9 GW of contracted solar and also that it installed 11.2 GW in the first half of 2019 with Trump’s tariffs not making a penny’s worth of difference.