Wind industry experts expect capacity additions to boom through 2020 but to level off between 4.3 GW and 5.7 GW a year through 2025, according to presentations made at a panel discussion May 21 at the American Wind Energy Association's annual WindPower conference in Houston.
The expiration of federal tax subsidies will cause the drop after 2020, but "corporate America is stepping up where federal policy is falling down," said Dan Shreve, Wood Mackenzie's head of global wind research. Increasing interest by corporate purchasers for renewable energy resources accounts for Shreve's expectations for continued capacity additions for the years after the federal production tax credit expires.
In contrast, this January's Annual Energy Outlook from the U.S. Energy Information Administration projected utility-scale annual wind capacity additions to fall to less than 150 MW each year through 2025.
Celeste Wanner, a senior analyst at the wind association, known as AWEA, said the U.S. has more than 39 GW of wind capacity under construction or in advanced development stages, in addition to the 97.2 GW of capacity already in place by the end of the first quarter of 2019. The U.S. is on track to top 100 GW of wind capacity in 2019, Wanner said.
Global offshore leadership seen
Those capacity additions will increasingly be offshore, as David Hostert, a Bloomberg New Energy Finance wind research analyst, said his group expects the U.S. East Coast to have about 11.5 GW of offshore wind online by 2030, "which makes the U.S. the fourth-largest offshore wind market by then," after China, the United Kingdom and Germany.
However, repowering existing sites and combining wind farms with other resources, such as solar or battery storage, will also be a factor, speakers said, despite the limited and site-specific economic advantages of such "hybrid" efforts.
Hostert said Bloomberg NEF's analysis of a wind farm in Texas combined with sufficient alternative resources to firm up 50% of the site's overall capacity improves the location's economics substantially, in terms of meeting peak demand at premium prices, but such results often vary by location.
"Even neighboring wind farms can have very different profiles," Hostert said.
Such capacity additions rely on power purchase agreements, or PPAs, for financing, and those prices have been "extremely low" in recent months, as little as $14/MWh to $15/MWh in the Southwest Power Pool, for example, Shreve said.
"We're hearing about single-digit PPA offers now," Shreve said, but the ability to make such low PPA prices work is getting tougher because of the U.S. government increasing tariffs on imports, such as steel.
The White House's increasingly tough trade stance "does hurt the overall cost position of wind in the near term," Shreve said, adding that he would not advocate extending the production tax credit, except perhaps to encourage offshore wind development.
Instead, Shreve said wind developers would benefit from increased investment in transmission, which he said "is going to be increasingly important, going forward."
One reason for the need for increased transmission could be seen in a presentation by Maxwell Cohen, research head for power and renewables at IHS Markit, which showed that the vast majority of capacity additions between 2019 and 2030 — about 40 GW — would occur in the Electric Reliability Council Of Texas, Midcontinent ISO and SPP.
A presentation by Ryan Wiser, senior scientist at the Lawrence Berkeley National Laboratory, showed how much of a difference transmission can make. For example, the development of the $6.9 billion Competitive Renewable Energy Zone, or CREZ, projects in Texas sharply reduced the incidence of negative pricing and wind power curtailment for the western part of the state.
A significantly smaller project in the southwestern part of SPP cut negative pricing and wind power curtailment in similarly dramatic fashion, Wiser said.
But Cohen said, "We don't really see another CREZ version two in the works; a lot of areas have what we call transmission fatigue with regard to expansion."
Much of what is driving wind development, especially for utilities, is "lower rates for customers," Cohen said, but some regulators continue to resist increasing reliance on intermittent renewables, which policymakers in other states have been increasing their renewable portfolio standards.
"To some extent, these policies are following the economics," Cohen said, cautioning that developing wind projects in areas such as California and the Northeast is limited by tough siting and transmission expansion regulations.
Mark Watson is a reporter for S&P Global Platts. S&P Global Platts and S&P Global Market Intelligence are owned by S&P Global Inc.