Report: Lapse of U.S. tax credit threatens wind market stability

A research note from MAKE Consulting says that the uncertainty of the U.S. wind energy tax credit, combined with low natural gas futures, could make 2013 a sub-par year for wind energy installations.

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MAKE Consulting (Chicago, Ill., USA) has issued a research note that says the current tax incentives for wind energy in the United States are set to expire at the end of 2012, and what will extend or replace them is highly uncertain. The wind energy production tax credit (PTC) expires Dec. 31, 2012; the U.S. Congress is currently considering legislation that would extend the PTC.

The report says this has forced a rushed 2011 and 2012 build cycle while new development plans for 2013 have plummeted. MAKE says the wind supply chain is reluctant to expand amidst market challenges and policy uncertainty, causing bottlenecks in some component areas.

Analysis of publically announced orders for expected project completion in 2012 shows the top tier turbine OEMs solidifying market share. A market where developers and utility counterparts insist on only the best is partly a driving force, along with advances from the top tier OEMs with turbine units designed for profitabilty at lower wind speed sites and better production at marginal sites.

MAKE says shifts in policy, however, will favor continued turbine portfolio evolution since a PTC-only market will again favor higher capacity factor sites. Cost cutting alone will not suffice. Turbine prices have eroded steadily since 2008 but these aggressive sales tactics may not be sustainable. 

Recent market strength through the 2011/2012 build cycle has been supported by the flexibility, simplicity and higher returns of the soon to expire Section 1603 cash grant. The wind industry will see preciptious drops in 2013 installations without a PTC. MAKE says that even if the PTC is extended, market impact is likely to be muted due to more challenging macro-economic conditions – basic demand conditions remain weak and natural gas futures remain low. Even with a PTC, 2013 will not be the boom market of PTC years past, MAKE says. 

For more on the research note, visit www.make-consulting.com.