States such as New York, Massachusetts and New Jersey have added ambitious offshore wind procurement targets.
Source: Deepwater Wind
The global wind market is expected to double in size by 2027, with capacity additions amounting to more than 65,000 MW, according to a research note from MAKE Consulting. The exception is the U.S., where installations are expected to fall dramatically after the production tax credit expires in 2019.
Worldwide capacity additions will grow at a compound annual growth rate of 4% from 2018 to 2027, the study found, thanks to contributions from the offshore wind sector and emerging markets. MAKE forecasts that from 2023 to 2027, installed capacity will grow by more than 30%.
"Success over the next 10 years will depend on the global wind power industry's ability to continue winning capacity awards at auction, and even more so to execute awarded capacity on time and within budget," researchers wrote in the note. "The precipitous drop in pricing globally over the last year, particularly in the offshore sector, is certainly a rallying point for industry achievement, but it needs to be proven."
In the U.S., where policy on subsidies for renewable energy has zigged and zagged, Congress considered getting rid of the production tax credit, or PTC, altogether during tax reform negotiations in late 2017. The scheduled phase-out of the tax credits through 2019 was left untouched, but new policy has pushed back some projects' online dates. While developers will be working on subsidized projects for the next years, annual new capacity additions are projected to drop off in 2022-2027 by 300% compared to the 2018-2021 period.
"The U.S. forecast after the PTC bubble starts to really decline and then reach a new normal level from 2022 on," Luke Lewandowski, a research manager for MAKE, said in an interview.
As the onshore market begins to reach a saturation point, offshore wind will start to take on a larger share of overall new build in the U.S. market. Currently, Deepwater Wind's 29.3-MW Block Island Offshore Wind project in Rhode Island is the only project of its kind in the U.S., but nearly 7,800 MW of offshore wind capacity is scheduled to come online between 2019 and 2030, according to S&P Global Market Intelligence data. Both the private sector and the government are working on initiatives to help the industry grow, from funds for job training to simplifying project design regulations.
While the market is still in its early stages, several states have announced plans to procure offshore wind. From 2025 onward, offshore wind will start to contribute 1,000 MW in added capacity annually, according to the report. The combination of projects coming online in the 2020s and the declining levelized cost of electricity will help the offshore wind industry mature and become a more attractive market.
"It should create a much more stable market in the next decade and start really picking up steam," Lewandowski said.