The renewal of federal tax incentives hang in the breeze, but industry experts point to a policy extension as the cornerstone of continued growth for the green power source.
Costs are dropping and technology is improving, so what's keeping wind energy from reaching its full potential? Wind has been a popular — and growing — source of renewable energy in the United States in recent years, but whether its sweeping success will continue into the immediate future remains to be seen.
Experts on the matter agree that policy is the major sticking point for the power source. The expiration of federal tax credits have some wondering whether the technology will continue to hold its pace of growth; others remain hopeful that a handful of factors will help to maintain current momentum.
The picture painted by the U.S. Department of Energy (DOE) shows fairly steady growth in the addition of wind capacity between 2003 and 2012, with a sharp decrease in 2013 and strong upsurge in 2014. While federal incentives have played a notable role in the implementation of new wind power systems across the country, falling implementation costs and advancement have also helped to lure utilities providers, governments and private companies.
Ryan Wiser, researcher with the Lawrence Berkley National Laboratory, is one of the authors of the DOE’s 2014 Wind Technologies Market Report. From his perspective, 2015 and 2016 are poised to follow the pattern of vigorous growth. Past that, who knows?
According to the August 2015 report, more than $8 billion in new wind energy investments were made in the last year alone.
“In fact, 33 percent of all new electric power capacity added in the U.S. from 2007 through 2014 has come from wind power. Wind is among the fastest growing components of the U.S. electricity mix,” he said via email. “Wind growth in 2015 and 2016 will be robust. Growth after 2016 is more uncertain given uncertainties in federal tax policy toward wind.”
The extension of “safe harbor” deadlines until 2016 will allow projects additional time to come online and promise continued industry activity through 2015. Since the inception of the federal Production Tax Credit in 1992, numerous expirations and extensions have been a norm for the program.
Predictions made in the DOE report allude to a “steep downturn” post-2016, but additions are expected to regain traction and climb again through 2020. The wind industry points to this policy unpredictability as a significant barrier in making the power source “fully cost-competitive.”
“The primary barriers to continued growth of wind at present include policy, specifically lack of clarity on federal tax incentives, and lack of adequate transmission in some of the windiest parts of the country,” Wiser said.
From an industry perspective, the Clean Power Plan, announced in early August, could be a powerful reinforcement for the success of energy source as states look for new tools to comply with the new rules. The controversial plan targets carbon emissions from energy producers throughout the country, and demands new focus on renewable energy sources like wind and solar.
David Ward, spokesperson for the American Wind Energy Association (AWEA), said while it remains to be seen whether tax incentives will get the extension the industry is hoping for, efforts to meet the demands of the federal carbon reduction plan will likely prompt some states and private industry to deploy wind power.
“States are looking for cost-effective ways to comply with the recently announced Clean Power Plan and we’ve been talking about and pointing to lots of different third-party reports and studies showing that wind energy is going to be the largest way to cost-effectively comply," he said. "So by tapping into the U.S.’s homegrown wind resource, it’s going to be a great way to keep costs low for consumers while also cutting carbon."
Ward said the 2014 policy expiration hasn’t immediately halted the momentum of the alternative power industry, but he noted that a push still needs to be made to convince Congress to extend industry-growing federal credits into the future.
“We are continuing to gain strength. We see a near-record amount of construction of new wind farms this year. That’s largely due to past iterations of the [federal] production tax credit (PTC). The PTC has yet to be renewed this year, but we’re working to educate members on both sides of the aisle about the benefits of wind energy and the need for an extension this year for as long as possible,” he said. “We’re very optimistic the renewable energy tax credits will be extended this year. There has been strong bipartisan support.”
The spokesman said a move to renew the federal program would ultimately translate to more jobs and economic stability for the United States.
Despite uncertainty in the policy realm, Ward said many businesses are proactively circumventing utility companies and states in a move toward fixed-cost wind power.
“Another important emerging development over the last year or so has been the market opportunities for successful U.S. companies to invest in wind energy. We’ve seen a lot of tech-savvy companies like Google and Facebook invest in wind farms and do power purchase agreements as a way to ‘walk the walk’…” he said. “But they’re also pointing to wind energy’s low-cost nature as a way to balance out and keep cost low for their budgets over the long term, because they can sign these contracts for up to 20-plus years and know exactly what they are going to get in terms of cost for electricity.”
While the wind industry is hopeful all will go as planned, it continues to face stiff competition in the form of low natural gas prices, solar energy and such barriers as inadequate infrastructure limitations.