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Report sees record amount of new wind capacity in 2020, with solar set to soar

The U.S. wind market will add 14.6 GW of wind power capacity in 2020, a record-setting figure, according to a report released Sept. 12 by Wood Mackenzie Inc. But solar power will become more attractive to an increasing number of corporate buyers as tax credits wind down.

Already, the U.S. wind industry is surging, with 2.4 GW installed in the first six months of 2019, according to S&P Global Market Intelligence data published Sept. 12. That is the strongest push in the first two quarters in the 2014-2019 period.

Wood Mackenzie identified 23 GW of new wind capacity additions in the pipeline for construction in 2020, with 28% of that coming online in 2021. Such project delays underscore logistical bottlenecks that could slow the rush to get projects across the line before the production tax credit phases out.

Dan Shreve, head of wind research for Wood Mackenzie, said in an interview that the lack of availability of engineering, construction and procurement contractors, who do much of the heavy lifting to build wind farms, will likely slow developers' plans.

"There are only so many well-qualified crews out there," Shreve said.

Solar power projects have a permanent 10% investment tax credit, giving developers certainty that they can take advantage of tax equity. Uncertainty about whether Congress will extend the production tax credits for wind is throwing a wrench in financing for new wind projects.

Roughly 1.5 GW of additional wind capacity in the 23-GW pipeline will be canceled outright as off-takers instead opt for solar power purchase agreements, Wood Mackenzie forecast.

An extension of the current 30% investment tax credit for solar would compound solar's advantage, said Anthony Logan, lead author of the report.

While wind will remain competitive 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," the report said.

The report forecast that the U.S. will add 12.3 GW of wind power in 2021, then bottom out at 5.9 GW by 2024.

Transitioning to a post-PTC world, wind developers are going to have to adjust to a new reality. With the U.S. lacking a cohesive federal energy policy, commercial and industrial off-takers will be even more crucial, Shreve said.

A Sept. 12 Fitch Solutions Ltd. report underscores this reality.

Fitch Solutions forecast wind and solar capacity growth to average 3.9% and 7.9%, respectively, between 2022 and 2028, "with upward forecast revisions likely as more corporations commit to renewable electricity targets and the procurement process is further simplified."

But permanent tax credits still make solar more attractive than wind.

"Solar power projects are likely to overtake wind power projects as the primary technology choice for corporate renewable energy procurements within the next couple of years, supported by a more favorable tax credit phaseout schedule and a favorable generation profile as solar irradiation peaks during the day when many companies' electricity demand is highest," the Fitch Solutions report said.