For all the talk of boom and bust in the US market, it’s apt that AWEA 2014 opens in Las Vegas later today.
When the American Wind Energy Association unlocks the conference doors in the world’s gambling capital, it will enthuse about a US wind boom. More wind farms are being built in the US than at any time in history, it will declare. It is claiming a pipeline of 13GW.
But wait a moment before cashing in the chips and buying the casino’s most expensive bottle of Champagne. Here’s our quick pre-conference reality check.
Yes, 13GW may be under construction, but that takes in all projects where any small element of work has already started on site. It does not mean that 13GW worth of turbines are going up across the US. And it doesn’t mean all of that 13GW will be built.
The reality is more sobering. Projects totalling 214MW were completed in the first quarter of 2014, and only 1GW was completed in the whole of last year. These are small numbers in a country with total installed wind capacity of 61GW.
Talk of a boom also ignores the fact that installations in the US fell more than 90% year-on-year in 2013 because of uncertainty in 2012 about the future of the production tax credit (PTC). The PTC was eventually extended through 2013 but it has now lapsed again.
In other words, this isn’t the best time to be talking about a boom.
Developers and investors are now experiencing the same sort of uncertainty they felt back in 2012. The Senate has backed the extension of the PTC as part of the tax extenders bill, but Congress now has to decide whether this extension will happen. And there is no clear timetable on when this will happen.
The US market still relies heavily on the PTC and, if it isn’t extended, there won’t be any long-term boom.
Some analysts have suggested that as little as 2.5GW of new capacity would be added annually between 2016 and 2020 if the PTC is not extended.
We expect Congress to extend the PTC this time around, but we don’t expect it to give any long-term commitment. It hasn’t before. Relying on subsidies will make it tough for investors and developers to come up with long-term business plans.
There is a lot riding on the roll of the PTC policy dice, and it isn’t the right time to suggest to legislators that everything is rosy.
Rather than tucking this under the carpet, at AWEA 2014 this week US wind businesses must take steps to improve the prospects for their schemes without betting on the support of the PTC.
For the most ambitious developers this should include courting the corporates, and securing deals like BNB Renewable did last week when it agreed a major power purchase agreement with Mars Corporation.
Deals like these can turn schemes that would be a gamble into a safe bet.
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