DOE sees capacity growing through 2015, uncertainty beyond

Source: Nick Juliano, E&E reporter • Posted: Tuesday, August 19, 2014

A Department of Energy report out today suggests the wind industry is on an upward trajectory thanks to last year’s brief renewal of a key tax credit — and the likelihood it could continue to thrive thanks to a combination of technological improvements and the effect of U.S. EPA rules on power plant emissions, among other factors.

DOE’s annual wind technologies market report predicts capacity will increase at least through 2015 as developers finish projects they started last year to qualify for the production tax credit (PTC), the industry’s primary federal incentive. However, the pace of installations over the next two years is not expected to reach the record set in 2012, and the PTC’s expiration at the end of last year creates significant uncertainty beyond 2016.

While it remains an open question whether Congress will renew the PTC this year as wind developers and manufacturers have asked for, DOE’s report notes other policies could create favorable conditions that would replace at least some of the tax credit’s impact.

“At the same time, recent declines in the price of wind energy have been substantial, helping to improve the economic position of wind even in the face of relatively low natural gas prices and boosting the prospects for future growth even if state and federal incentives decline,” the report says, pointing to further public and private research and development to continue to reduce the costs of wind power.

“Additionally, new and proposed EPA regulations, and the impact of those regulations on fossil plant retirements and demand for low-carbon energy sources, may create new markets for wind energy,” it adds.

The report focuses on activity in 2013, a year that saw just 1,087 megawatts of wind installed, down more than 90 percent from the earlier year.

General Electric Co. was the leading domestic wind company last year, capturing more than 90 percent of U.S. market share, according to the report. Siemens AG was a distant second at around 8 percent of market share.

Prospects for this and next year look much better, thanks to the requirement that developers merely start building projects last year to qualify for the tax credit. A variety of independent estimates rounded up by DOE project additions of between 4,400 and 6,400 MW this year, 6,000 and 9,100 MW next year, and 2,800 and 8,400 MW in 2016. The estimates make different assumptions as to whether the PTC is extended, among other factors.

“Projections for 2016 and beyond are much less certain. Despite the lower price of wind energy and the potential for further technological improvements and cost reductions, federal policy uncertainty — in concert with continued low natural gas prices, modest electricity demand growth, and the aforementioned slack in existing state policies — may put a damper on growth,” the report says.

DOE also released a separate report today on distributed wind installations, which typically involve just one or two smaller turbines near homes, farms or schools. About 2,700 units were installed last year, with a total capacity of 30.4 MW, the report says.