A great time to invest in wind power
The saying goes that good things come in threes, and the wind industry has certainly delivered on a trio of positives this past year. For one, the industry started 2016 with a five-year extension of the Production Tax Credit (PTC), which provides wind developers with a credit (of $0.023/kWh at full value) for generated power. After years of policy uncertainty, this good news meant the industry would begin 2016 with welcomed stability.
As Tom Kiernan, CEO of the American Wind Energy Association (AWEA) pointed out at the time of the announcement: “Our industry will now get a break from the repeated boom-bust cycles that we’ve had to weather for two decades of uncertain tax policies.”
The performance-based PTC has helped drive down wind power’s costs by two-thirds in the past six years. For 2016, it has meant a nearrecord amount of wind farms are under construction or in advanced stages of development. As of the third quarter, more than 18,200 megawatts (MW) of wind capacity were under construction or in final development stages across 23 states.
”There’s never been a better time to buy American wind energy,” stated Kiernan in a related press release. And he was right. The multi-year PTC extension came with a phase down that encouraged developers and utilities to invest in wind early to receive the full value of the tax credits. As of the end of 2016, the 2.3 cents per kilowatt-hour credit is set to decrease to 80% of that value for projects that start construction in 2017, 60% in 2018, and 40% in 2019.
This brings us to our second good news item: U.S. windpower projects are growing in number and size. The industry is thinking big. Case in point: The 2,000-MW Wind XI Iowa project proposed by MidAmerican Energy.
“Wind XI puts Iowa on track to be the first state in the nation to generate more than 40% of its energy needs from wind power — far ahead of any other state,” said Iowa’s Governor Terry Branstad. The project is slated for completion in 2019. Although not quite as large, there were other big projects announced in 2016, including a proposed 600-MW Rush Creek project in Colorado by Xcel Energy and a 500-MW Whispering Willow project expansion in Iowa by Alliant Energy. Even big contracts are on the rise, such as the one New York’s Empire State Connector signed with wind developer Invenergy for 600 MW of wind power.
What’s more, corporations and mainstream companies are jumping on board and signing up for wind power (think Google, but also Walmart, IKEA, and Procter & Gamble). In fact, Procter & Gamble announced plans to meet its electricity demands with a long-term goal of using 100% wind energy, which means products such as Tide and Dawn will in future be manufactured by wind-generated power. According to AWEA, corporations and non-utility customers accounted for more than half of the wind capacity sold through power purchase agreements in 2015 — a trend that has continued in 2016.
The wind industry is also expanding its reach, which is our third positive to note. Onshore projects are growing in size and number, and at long last so are plans for offshore wind in the U.S. Much credit goes to Deepwater Wind for developing and commissioning America’s first offshore wind farm, the five-turbine, 30-MW Block Island project south of Rhode Island. The project has inspired interest and plans for an offshore market.
The Department of Energy has released a national strategy to facilitate the development of offshore wind energy in the country, which it maintains could help enable 86 GW of offshore wind in the U.S. by 2050. New York has created an offshore wind alliance with the goal of developing 5,000 MW of offshore wind power by 2030. And Massachusetts has put forth a bill that requires large utilities to buy up to 1,600 MW of offshore wind energy. This is the first legislation of its kind dedicated to offshore wind, and at a scale necessary to establish a viable market in the U.S.
But the wind industry has more than three good things to report on. For instance, it is growing quickly and showing no signs of slowing down. Perhaps the best news is that now over 75,000 MW of installed wind-power capacity is on the grid, which means that wind is on track for meeting the Department of Energy’s Wind Vision. This report maintains that wind power could grow from supplying around 5% of U.S. electricity today to 10% by 2020, and 20% by 2030. With policy certainty now in place, it seems the wind industry is just getting started.