The global pandemic resulting from the coronavirus will introduce serious downside risk to onshore and offshore wind energy market growth in the United States of America this year, said IntelStor in an enewsletter.
The marketing intelligence platform believes that a necessary part of the economic stimulus being planned by the current administration must include at least a one-year extension of the production tax credit (PTC) in order to alleviate the stress being placed on the industry at the moment.
IntelStor analysis indicates that while the U.S. market had installed just under 9 GW of new capacity last year in 2019, approximately 4.3 GW of additional wind energy capacity was supposed to complete construction last calendar year, but was deferred to 2020.
That excess capacity was held over in order to take advantage of the full value of the PTC for start of construction in 2020 versus the lower PTC value being offered in 2019. The delay to start of construction of that capacity also helped alleviate the cost crunch being induced by lack of sufficient transportation and logistics carriers for turbine components as well as availability of installation cranes to handle the full capacity.
The net result is that up to 22.56 GW of onshore and offshore wind is currently triggering a start of construction in 2020 in order to qualify for the full value of the PTC. The significant downside risk resulting from the global coronavirus pandemic will limit new capacity additions in the United States to a worst case of only 3.5 to 4.0 GW fully commissioned this year. This assumes that the global coronavirus pandemic subsides by the end of May or mid June.
Currently set to expire at the end of 2020, the PTC provides a boost to the ongoing construction efforts as well as more than 2.1 GW worth of asset repowering which is currently underway and slated to complete within the next 18 to 24 months.
In response to the impacts which the global coronavirus pandemic is causing, some project developers are already triggering force majeure clauses in their contracts to grid connect their under-construction wind energy capacity.
Similarly, supply chain companies are also triggering force majeure related to their inability to provide turbine components. This comes in response to shutdowns of some global production facilities in China and throughout Europe brought on by positive tests for coronavirus by plant employees.
Additionally, restrictions on travel for construction crews will unavoidably hamper what was otherwise shaping up to be a record year for wind energy capacity additions in the US in 2020. These travel restrictions will also have an impact on the servicing of operational assets if the coronavirus pandemic does not subside by late May. Major corrective repairs may have to be postponed in case crane crews or specialist technicians cannot access the wind park sites.
Several asset owners throughout the United States have already introduced restrictions to non-essential personnel and all non-critical repairs are being deferred.
At this time of great crisis, IntelStor believes failure to act on a PTC extension through 2021 could have even more dire consequences for the industry in the mid to long-term as project capital flows can be restricted if the United States and the rest of the world faces the possibility of a prolonged recession. Much of the capacity which is already under construction and in the pipeline may never see full commissioning if immediate action is not taken on extending the PTC.
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