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The breeze has shifted over the U.S. wind industry – and, few have noticed. The prevailing wisdom over the past 20 years has been that federal subsidies, such as the production tax credit (PTC) and more recently the investment tax credit (ITC), have been the primary drivers of wind generation development. On the surface, the boom and bust development cycle of wind – driven by the continual expiration and renewal of the PTC – supports this view. While federal subsidies have certainly been a major historical driver of U.S. wind industry growth, it is presumptuous to assume that federal policy mechanisms will continue to play this role.
In less than a decade, several market shifts have meant wind has encountered heightened competition from other energy alternatives. Natural gas prices and solar installation costs have decreased to around one-third of 2008 and 2009 levels, respectively. That shift has drastically reduced the cost of competing gas and solar generation supply while the cost of wind generation has decreased by only a moderate amount. In addition, energy policies are increasingly favoring solar relative to wind generation. States with renewable portfolio standards (RPS) and/or net energy metering (NEM) regulations are witnessing higher solar growth trends than for wind.
While U.S. wind capacity additions peaked in 2012, U.S. solar capacity additions have been accelerating for the past half-decade. As a result, new solar installations will have exceeded wind installations in at least three of the last four years.
Matt Mooren, Barbara Sands and David Cherney are energy experts at PA Consulting Group
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