The U.S. wind industry will likely see a downturn in added capacity after production tax credits are phased out, according to three new reports on the wind market from the Department of Energy.
While analysts expect new wind generation to average more than 9,000 MW annually between 2017 and 2020, forecasts afterwards show a drop-off, according to the "2016 Wind Technologies Market Report" released on Aug. 8. It cites competition from cheap natural gas and solar, modest growth in electricity demand growth and the leveling off of new resource needs to meet state renewable portfolio standards to slow down wind's growth.
"At the same time, declines in the price of wind energy over the last half decade have been substantial, helping to improve the economic position of wind even in the face of challenging competitive pressures," the authors, Lawrence Berkeley National Laboratory scientists Ryan Wiser and Mark Bolinger, wrote. "The potential for continued technological advancements and cost reductions enhance the prospects for longer-term growth, as does burgeoning corporate demand for wind energy and continued state RPS requirements."
Meanwhile, there is more industry confidence in the emerging U.S. offshore wind market after Deepwater Wind's 30-MW Block Island wind farm became the first commercial American offshore wind project to come online at the end of last year, according to National Renewable Energy Laboratory's "2016 Offshore Wind Technologies Market Report." Winning bid prices for European auctions have dropped from roughly $200/MWh for projects slated to operate in the next two years to about $65/MWh for projects with a 2024/2025 commercial operation date.
"News of the declining costs for offshore wind projects in Europe has spurred confidence in the domestic U.S. offshore wind market this year," the report's authors wrote. "Several states including Massachusetts, New York and Maryland have enacted new policies or bolstered their existing policies to incentivize the development of offshore wind."
However, the report said the American offshore wind market will need to address whether or not it can replicate cost reductions that have been seen in Europe and if the project development pipeline, which includes more than 20 projects totaling 24,135 MW of potential installed capacity, would be enough to grow and sustain a domestic market.
Overall, the U.S. wind industry added 8,203 MW of new capacity and invested $13 billion in 2016, the DOE report said. Wind power was the third-biggest source of the country's generation capacity last year, behind solar and gas, making up 27% of new capacity. The Interior region, from Texas up to North Dakota, and Great Lakes region both had about half of their new generation capacity come from wind power over the last decade. In the northeastern and southeastern parts of the U.S., natural gas was the biggest new source of added capacity over the past decade.
The U.S. was the second-biggest wind producer in the world last year, but other countries have wind make up a bigger portion of their electricity demand. Wind power made in Denmark, where offshore wind is booming, supplied more than 40% of its electricity demand last year, while wind met between 20% and 35% of demand for countries such as Ireland, Portugal and Spain. In the U.S., wind capacity met 6.4% of the country's energy needs.