Texas leads the US in Production Tax Credit revenue, but Oklahoma has top efficiency
The Day County Wind Energy Center. Source: NextEra Energy Resources (www.nexteraenergyresources.com).
The Production Tax Credit (PTC) in the US has been a powerful tool for asset owners to ensure the favourable financial health of their projects. To date, more than 75% of the 138 GW of operational capacity in the US has taken advantage of the PTC. Historically, it has provided between a USD 10 – 26 per MWh incentive on top of the power purchase contract price or merchant market rate.
The latest analysis from IntelStor indicates that since the PTC programme was instituted, wind energy asset owners in the US have generated more than USD 47.5 billion in total revenue from the PTC alone. Even though Texas has generated more than USD 12 billion in PTC revenue by themselves, if we look at the normalised annual PTC revenue per MW, Oklahoma generates USD 58,125 worth of PTC revenue per MW per year, with Kansas second at USD 57,893 per MW per year and Nebraska third with USD 57,266 per MW per year.
NextEra Energy Resources has been the single largest beneficiary of PTC revenue based on their net production data through December 2021, but this type of perspective is slightly skewed given the size of their fleet in the US. In fact, the normalised PTC revenue per installed MW per year indicates that many of the top asset owners in the US are hovering around the capacity weighted market average of USD 47,416.
The proactive financial investors have tended to outperform this market average thanks to more financial savvy and selective investment criteria. Indeed, there is a strong correlation between asset owners with the largest portion of their operational fleet at or above a P50 energy yield and the returns they see from PTC revenue annually.
IntelStor also benchmarked the capital efficiency of an asset owner’s project CapEx expenditure relative to the amount of PTC revenue they earn. Some asset owners are only able to recoup single digit to low double-digit returns, but some savvy asset owners have managed to see a return on their project CapEx of upwards of 40 – 50% just through PTC revenue alone. While this is highly project site dependent, it still underscores why site selection, the right equipment supply, and a proactive maintenance approach can have a profound influence on your financial outcomes.
Due to NextEra’s high dependence on GE wind turbines, it should come as no surprise that GE leads amongst the OEMs, with more than USD 12 billion of the USD 47.5 billion in PTC revenue associated with GE turbines alone. However, some asset owners are better than others at extracting value from their fleet. Out of the top 10 wind energy asset owners in the US, EDF North America’s fleet of Vestas turbines is the most productive at generating PTC revenue with USD 65,664 per MW per year. They are followed by Berkshire Hathaway Energy’s Siemens Gamesa fleet at USD 61,100 per MW per year and EDP Renewables fleet of Siemens Gamesa turbines at USD 54,427 per MW per year.
Now that the PTC is permanent thanks to the Inflation Reduction Act, all wind energy asset owners in the US can ensure everyone else in the industry will capitalise on these trends by attracting additional investment.
Philip Totaro is the Founder & CEO of IntelStor, a market research and strategic advisory company focused on renewable energy. He has over 11 years of experience in the power generation industry, having previously worked for General Electric as well as Clipper Windpower. His company has helped cultivate over 600 inventions and file over 350 patents. Their strategic market analysis has led to the funding justification of over USD 600 million in R&D investment, and they have advised on over USD 1.8 billion in M&A transactions.