After Three Record Breaking Years, Is The US Wind Energy Boom Over?

Authored by Irina Slav via OilPrice.com,

In 2019, the U.S. wind power industry recorded its third record-breaking installation year in a row, with new wind capacity hitting 9.14 GW. To date, there are another 44 GW under construction or in advanced development. Yet there are clouds on the horizon: competition from gas and solar, and the phase-out of the production tax credit that has driven the industry’s growth until now.

The Energy Information Administration is rather pessimistic about the immediate future of U.S. wind power. In a report from March last year, the agency cautioned that wind power installation additions could slow down in the next few years as the expiry of the PTC leads to higher costs. Another factor that will affect new additions is the fact that the best sites for onshore wind farms are already taken. Yet over the long term, the EIA said it expected wind to regain its popularity because of the continued fall in turbine installation costs.

Some expect the popularity growth to come much earlier. Maxx Chatsko from the Motley Fool, for example, earlier this week wrote in an article that investors may soon begin flocking back to wind after a so-called wind drought appears to have subsided.

In the first half of 2019, Chatsko wrote, electricity produced by onshore wind farms in the United States was just 1.6 percent more than the electricity produced from onshore wind in the first half of 2018. This disappointing number was attributed to what the industry calls lower wind resources, meaning there was less wind blowing where there were wind farms. In the second half of 2019, however, electricity output from onshore wind farms rose by 22.4 percent from a year earlier, signaling what could be the end of the wind drought.

Meanwhile, wind farm developers are in a rush to add as many megawatts of new capacity as they can before the production tax credit expires at the end of this year. In fact, the EIA said last month that wind installations will dominate new power generation capacity additions this year as a whole. Wind and solar together will account for a whopping 76 percent of all new capacity additions, the agency added.

Some 18.5 GW of new wind power capacity is slated to come online this year. After that, however, new additions will likely decline until the industry handles the end of the production tax credit. But, as Forbes’ Joshua Rhodes noted in a recent overview of the state of U.S. wind and the challenges it faces, renewable portfolio standards could mitigate the effect of the PTC expiry. Specifically, these could extend to offshore wind in the next few years, Rhodes said, which would spur faster growth in that segment.

Renewable portfolio standards could support wind continually: there are already 39 states enforcing these standards, which require that a certain portion of the state’s power must come from renewable sources, and some are even committing to 100 percent renewable power, Zoe Dawson wrote in an article for the Council on Foreign Relations. The number of these states is still small but it is growing. All these commitments could provide a significant push for more wind power capacity. The question is, will the officials making the commitments succeed in seeing them through.

It’s election year and anything could happen, including changes in state governments that could lead to a change in climate commitments. Then there is the solar challenge: solar is in many places cheaper than wind and it is likely to continue getting even cheaper as the sector works on cutting costs while maintaining or even enhancing efficiency. Lastly, there is the wind drought problem. It could happen again. Potentially serious as these challenges are, industry observers seem to believe the industry is strong enough to deal with them and keep growing even if it suffers temporary setback if production tax credits are not renewed yet again.