US Wind Industry To Install 59 Gigawatts Over Next Decade, Forecasts MAKE Consulting
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MAKE Consulting has published its latest forecast for the North American wind industry, predicting that the United States will install approximately 59 gigawatts of new wind capacity between 2017 and 2026, driven by a “precarious boom and bust” cycle.
The new 2017 North America Wind Power Outlook unsurprisingly places the United States as the only real player in North America, with demand for wind power in Canada dwindling and Mexico’s wind power sector currently only classified as “burgeoning.” However, MAKE Consulting is currently forecasting a significant “boom period” over the next four years for the United States, as the full-value Production Tax Credit drives nearly 40 gigawatts (GW) of new capacity between 2017 and 2020 — more than two-thirds of the total 10-year forecast. Such a boom would be the largest four-year wind installation total in the country’s market history, and is primarily driven by demand from utilities under state renewable energy mandates.
However, while MAKE believes that the four-year span of the full-value Production Tax Credit (PTC) will drive significant new capacity, it nevertheless raises the specter of a Trump administration modifying policy, making completion of projects in the later years of the four-year period a risky proposition. Traditional challenges of any project development could be complicated by policy decisions made by the Trump administration, such as a border adjustment tax or other tariff action which could destabilize the wind supply chain. This is especially concerning considering a significant portion of the US wind supply chain has grown increasingly reliant on imported components, “imported” being a bugbear for the country’s new President. Corporate tax reform also threatens to reduce the US appetite for tax equity investments that have so far financed more than half of all US wind installations over the last few years.
All in all, a race to concentrate installations prior to and during 2020 could end up creating a significant strain on the country’s engineering, procurement, and construction sector, especially if there is also significant demand for repowering work.
MAKE Consulting also highlighted an extensive repowering campaign in which aging turbines will undergo part-replacements, with 1 GW of turbine nacelle and blade units being replaced with new components, while smaller components will be replaced in another 6 GW of existing turbines with the aim of extending their operational lifespans and requalifying for the Production Tax Credit.
By 2022, MAKE Consulting is expecting onshore wind energy to be effectively left to compete solely on a levelized cost of energy (LCoE) basis. MAKE believes that, “Due to competition amid sustained low natural gas prices and the rapidly falling cost of solar power, wind installations in this environment will be limited to a fraction of US states with favourable land availability, wind resources, and available transmission capacity.” However, the growing demand for wind energy across the United States highlighted in recent figures published by the American Wind Energy Association and the US Energy Information Administration this week could put the lie to that statement. While transmission capacity will remain an issue as long as there is no grand overhaul (with a few exceptions), land availability and wind resources across the United States nevertheless remain competitive. As can be seen below, there is a concentration throughout the center of the country, but that does not rule out the potential for other states to begin opening up land leases and attractive policies for the wind energy sector — especially as the economic benefit of wind energy is seen to exceed other, traditional energy sources.
Of course, states in the US “wind belt” will still be the best positioned to compete on LCoE, but according to MAKE “will require major transmission build-out to access distant demand centers.”
Finally, the demand for wind energy will slow in the latter-half of the forecast period due to a number of factors — ” sustained large-scale natural gas capacity additions, slowed coal retirements under a weaker EPA, and meagre growth in demand for electricity.” This is the result of a business-as-usual situation, and we can certainly hope that the new 2021 Administration will look more favorably on creating policy to help drive wind energy growth. Offshore wind will be the exception to the economics-driven rule, thankfully, with at least one new offshore wind development to be installed annually through 2026, with up to 2.2 GW of offshore wind to enter operation across the next decade.
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