The wind industry has benefited immensely from falling costs, but the phaseout of a federal tax credit will likely derail the proliferation of wind projects across the country.
The price to generate electricity via wind turbines has declined in recent years. The national average was around $70 per megawatt hour in 2009, according to the U.S. Department of Energy. The average price now stands at $20 per megawatt hour — a $50 decline over eight years.
Plummeting costs have resulted in expansive growth for this renewable source of energy. Wind, which made up slightly more than 2 percent of the U.S.’ total electricity generation in 2010, increased to 6.3 percent in 2017. Development is higher in the middle of the country, where utilities have been able to capitalize on the more windy Rocky Mountain region.
However, much of this growth is attributed to the production tax credit (PTC), a federal incentive for wind energy production that is paid for by the American taxpayer.
Currently, the PTC provides a $0.024 per kilowatt hour credit for wind generation. This rate is due to decrease incrementally, with the PTC dropping 60 percent of its current value in 2022 and then another 40 percent in 2023. Analysts predict this rate change will have a negative effect on the industry.
“Energy analysts project that annual wind power capacity additions will continue at a rapid clip for the next several years, before declining, driven by the five-year extension of the PTC and the progressive reduction in the value of the credit over time,” read a report authored by the Lawrence Berkeley National Laboratory. “Forecasts for 2021 to 2025 … show a downturn in wind capacity additions in part due to the PTC phase-out.” (RELATED: Solar Energy Advocates In New York Are Begging For Their Subsidies Back)
The report — which was prepared for the Department of Energy — indicated the wind sector would also face competition from competitive natural gas prices, and called the growth of the wind industry beyond the PTC cycle as “uncertain.”
Wood Mackenzie, an analysis firm, also predicted a more bleak future for wind after the rollback the PTC, issuing a report in August that suggested the industry will struggle to compete without the help of the federal subsidy.
However, changing policies from regulators might change this trajectory, analysts predict. Increased renewable energy mandates from state legislatures, which force utilities to adopt wind and solar, could stave off much of this impact.
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