Energize Weekly, September 25, 2019
The U.S. wind industry has a strong supply chain, a solid investment pipeline and growing employment, but could face a downturn in the 2020s from natural gas, low growth in electricity demand and the loss of federal tax incentives, according to a U.S. Department of Energy (DOE) assessment.
A key element for lowering wind generation costs and raising investment dollars has been the federal production tax credit (PTC), which is being ratcheted down and is scheduled to end in 2021, although projects have a “safe harbor” to get the tax credits as long as they are begun before set deadlines.
“The magnitude of growth beyond the current PTC cycle remains uncertain, however, given declining tax support, expectations for low natural gas prices, and modest electricity demand growth,” the DOE’s 2018 Wind Technologies Market Report said.
Some of tax break losses could be offset by the continuing fall in prices for wind power technologies, the market report said. In 2018, the average installed cost of a wind project was $1,470 a kilowatt (kW), a $1,000 decline from 2009. Some developers had reported costs in the range of $1,100 to $1,250 a kW.
The industry’s supply chain was “reasonably stable” in 2018, but faces “conflicting pressures, including significant near-term growth, but also strong competitive pressures and anticipated reduced demand in the medium term,” the DOE said.
Domestic wind sector employment reached a new high of 114,000, an 8 percent increase over 2017, at roughly 140 wind turbine and component manufacturing facilities. No wind-related manufacturing facilities opened in 2018, but two are slated to begin operations in 2019.
Betz Industries plans to build a new iron-casting facility at its Walker, Mich. campus, which will employ 45 workers. RMC Advanced Technologies – a subsidiary of Sigma Industries – is building a composite parts plant in Surgoinsville, Tenn., with 54 jobs.
Overall domestic nacelle-assembly capacity reached a record 15 gigawatts (GW) 2018, with the capability to annually produce blades for 9.2 GW of capacity and towers for 8.9 GW.
While domestic manufacturing was strong for some components – particularly nacelle assemblies and blades and hubs – the U.S. industry remained dependent on imports in other areas, the DOE said
Asian imports accounted for 44 percent of the total import value into the U.S. in 2018, led by China. Europe, led by Spain, accounted for 35 percent.
Nearly a third of those components entered the U.S. through Houston-Galveston, with another 10 percent entering at Port Arthur, Texas.
Wind developers raised between $6 billion and $7 billion in tax equity in 2018, comparable to previous years. “Looking ahead, 2019 and 2020 should continue to be active, given the abundant backlog of turbines that met safe-harbor requirements to qualify for 100 percent PTC,” the DOE said. “Post 2020, another reported 10 GW of safe-harbored turbines are available at the 80 percent PTC, with 6.6 GW of 60 percent PTC qualified equipment.”
Given the safe-harbor window in which to bring projects online, projects receiving 80 percent of the PTC and those receiving 60 percent might be expected to be online by the end of 2021 and 2022, respectively.
A total of 7.6 GW of new wind capacity was built in 2018 with a total $11 billion in investment, raising the country’s total wind capacity to 94.4 GW.