Windenergy in the U.S. will become competitive with natural gas and other forms ofelectricity generation — without subsidies — by the middle of the next decade,just after the federal production tax credit for wind expires, according to aJuly 11 analysis from Macquarie Research.
Reachingthat milestone could make the U.S. the global center of the wind industry."We believe the US is now the most attractive wind market in theworld due to the increased visibility of demand in the long term," theMacquarie analysts wrote. "We believe it supplants China, which hasdominated wind demand over the last five years, and prior to that Europe, whichwas the key market a decade ago."
Macquarie Research calculated that the 2016 subsidized levelizedcost of electricity, including 100% of the tax credit, is $23 per MWh for anonshore wind farm, compared to $50 per MWh for a new natural gas-firedcombined-cycle power plant. While the production tax credit expires in 2020, iteffectively is in place for several more years because recent U.S. InternalRevenue Service guidance made clear that as long as construction of aproject is completed in four years, a wind project can still qualify for thetax credit that was in effect during the year it started construction.
By 2023, with the expiration of the credit, the levelizedcost of wind will be $42 per MWh while a natural gas combined-cycle plant willcost $57 per MWh, Macquarie forecasts. By 2030, wind will cost $38 per MWh andthe gas plant will cost $66 per MWh.
The report pointed to several reasons besides the tax creditas to why wind is making progress.
"We are not suggesting that US utilities will no longerbe open to [power purchase agreements], but in the absence of load growth,utilities need to focus on earnings drivers, and PPAs are earnings-neutralwhile using up the disposable income of utility ratepayers," the reportsaid.
Oneof the largest proposed wind projects in the country is subsidiaryMidAmerican Energy Co.
Thosethree technology companies and many others have been signing contracts withwind farms, and that trend of corporate wind purchases is another factordriving higher wind demand, the report said. Another factor comes fromimprovements in transmission infrastructure connecting wind farms to customers.
The Macquarie report called the IRS guidance "stronglypositive" for the wind industry. "It increases visibility over thelong term and is likely to stimulate strong new US turbine orders in the nearterm." The analysts saw Danish wind turbine manufacturer and Spanishmanufacturer Gamesa CorporaciónTecnológica SA as best-positioned to benefit from these ordersbecause they are the only companies the report found to show growth over thenext four years.