The US wind market will add 14,600MW of capacity in 2020, as developers rush to complete projects ahead of the production tax credit (PTC) expiration, according to Wood Mackenzie’s latest North America wind power outlook.
The PTC phase out beginning in 2021 will push developers to complete projects in 2020, driving major bottlenecks in both logistics and interconnection queues, the outlook stated.
As a result, project delays are mounting, negatively impacting the amount and timing of wind capacity installations.
Wood Mackenzie senior analyst and lead report author Anthony Logan said: “Although the PTC phaseout schedule has been in place since 2015, offtakers were slow to act on procuring new capacity, yielding relatively subdued installation totals in 2017 and 2018.”
Deals with virtually every offtaker type have increased dramatically in the last six to 12 months, according to Logan.
“The lack of available logistical resources will begin to cause schedule rearrangements and delays that will grow more apparent during the first and second quarters of 2020,” he said.
Wood Mackenzie’s forecast assumes 6.6GW of projects scheduled for 2020 will not reach completion by the end of this year but will connect to the grid in 2021.
The report estimates that roughly 1.5GW of additional capacity will be cancelled outright, typically ahead of project construction, with any attached offtakers likely choosing solar resources for subsequent power purchase agreements to replace the lost generation.
Solar photovoltaic technology, which benefits from the 30% solar investment tax credit (ITC), is beginning to compete more effectively with onshore wind on cost.
In the coming years solar will maintain a marginal advantage over wind due to a 10% ITC offered to solar PV in perpetuity after the wind PTC phases out.
A recent solar industry push to lobby for a 30% ITC extension would compound the impact of this and would be “devastating for post-2021” wind demand, Logan added.
In the near term, he said while wind will remain competitive in key states through 2021, the negative cost impact associated with the PTC declining to 60% and then 40% of its original value will outpace cost of electricity reductions in 2022 and 2023.
Wood Mackenzie forecasts the US to add 12.3GW of wind power in 2021, before bottoming out at 5.9GW in 2024.