September 12 (Renewables Now) - The US wind industry will witness the addition of a record 14.6 GW of capacity in 2020 as developers are rushing to complete their projects ahead of the planned phase-out of the federal production tax credit (PTC), Wood Mackenzie says.
Late in 2015, the US Congress approved a five-year phase-out of the PTC for wind projects, starting from 80% in 2016 and down to 40% in 2019. In order to be eligible for the credit, projects must have completed construction within four years. After 2019, new facilities cannot claim the PTC subsidy.
Wood Mackenzie explained in its latest North America wind power outlook on Thursday that the phase-out, which will start in 2021, is causing major bottlenecks in both logistics and interconnection that are in turn disrupting the amount and timing of wind capacity additions. Its projections are that the grid-connection of 6.6 GW of projects scheduled for completion in 2020 will not be realised until 2021, while some 1.5 GW of additional projects will be cancelled outright.
The market researcher had earlier identified about 23 GW of capacity as under construction or contracted for commercial operation in 2020.
“Although the PTC phase-out schedule has been in place since 2015, offtakers were slow to act on procuring new capacity, yielding relatively subdued installation totals in 2017 and 2018,” the lead author of the report, Anthony Logan, said, adding that off-take deals have increased dramatically over the past six to 12 months. He pointed out that the lack of available logistical resources will lead to schedule changes and delays, expecting them to grow more significantly during the first two quarters of next year.
Wood Mackenzie projects that some 12.3 GW of fresh wind capacity will be added in 2021, before bottoming out at 5.9 GW in 2024.
Meanwhile, the consultancy group pointed out that the solar photovoltaic (PV) sector, which benefits from a 30% PTC, is starting to compete more effectively with onshore wind on cost. According to Logan, solar will keep a marginal advantage over wind due to a permanent ITC support of 10%, which PV projects will get after the PTC phase-out.