The Department of Energy released a report Tuesday indicating onshore wind farm annual additions would likely dip this year and next year from the 13.4 GW that were installed in 2021, partly because of the expiration of federal tax credits for wind.
That forecast, however, was shredded when President Joe Biden on the same day signed the Inflation Reduction Act, or IRA, which includes 10-year extensions and expansions of clean energy tax credits.
On average, analysts expected wind additions to fall to about 11 GW this year and 7 GW in 2023 before increasing to 9 GW the following year, according to the report, which was drafted before the IRA was unveiled in late July.
Those estimates should be thrown “out the door,” Ryan Wiser, a senior scientist at Lawrence Berkeley National Laboratory and one of the report’s authors, said during a press briefing on the annual land-based wind market report.
The Princeton University-led REPEAT Project, for example, estimated earlier this month that under the IRA wind installations could increase to 39 GW a year. They cautioned that factors like permitting, transmission development and labor issues could limit that potential growth.
“That Inflation Reduction Act is going to give America's wind energy industry more long term certainty than ever before thanks to the 10-year extensions on these key tax credits, including the production tax credit,” DOE Secretary Jennifer Granholm said during the briefing.
The IRA will end the boom-and-bust cycles of wind development that had been driven by one- to two-year extensions of federal clean energy tax credits, which will help the clean energy sector build its workforce, according to Heather Zichal, American Clean Power Association CEO.
“As an industry, because we now, with IRA, have that 10-year-plus horizon, we are very much focused on leveraging resources from the federal government, working directly with unions, to build that workforce,” Zichal said at the briefing.
There are 120,000 employees in the wind sector, and wind turbine technician was the second fastest growing job this decade, according to Granholm.
Meanwhile, average wind power purchase agreement prices have been drifting higher to a range of roughly $20/MWh to more than $30/MWh since around 2018, DOE researchers said in the report.
Even so, wind and solar PPA prices have been generally competitive with the projected fuel costs of existing gas-fired combined cycle power plants since around 2017, according to the report.
“The once-wide gap between wind and solar PPA prices has narrowed considerably in recent years, as solar prices have fallen more rapidly than wind prices,” the researchers said. “With the support of federal tax incentives, both wind and solar PPA prices are now below the projected cost of burning natural gas in gas-fired combined cycle units.”
The researchers found that the amount of proposed wind projects in grid operator transmission interconnection queues has grown to a record 247 GW, but there is even more proposed solar and energy storage in the queues, following a recent surge that is outpacing wind.
The long-term prospects for the wind sector will be affected by its ability to continue to improve its economic position even in the face of competition and near-term supply chain constraints, the researchers said.
Corporate demand for clean energy and state policies will continue to affect wind deployment, along with the buildout of transmission infrastructure and uncertain future natural gas prices, they added.
Texas installed the most wind capacity last year with 3,343 MW, followed by Oklahoma at 1,403 MW, New Mexico at 1,368 and Kansas at 1,228, according to the report.
The cost of building wind farms held steady last year at about $1.5 million/MW, but the cost may rise this year given a 5% to 10% increase in average turbine costs last year, the researchers said.