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PA IN THE MEDIA

Why US onshore wind faces a slowdown year – just as Biden needs it to gear up

PA Consulting clean energy expert Rafael McDonald discusses US onshore wind. 

Click here to read the full Recharge article

The article notes that after several years of record activity, US onshore wind installations are set for a sharp decline in 2022 – just as President Joe Biden is calling on the industry to do more to help accelerate the country’s transition away from fossil fuels.

Both BloombergNEF and IHS Markit expect about 9GW in new capacity versus 15GW and 12-16GW last year, respectively, while PA Consulting sees at least a 25% drop to roughly 14GW.

Those private forecasts did not factor in any effects from the $2trn Build Back Better Act, the centrepiece of Biden’s ambitious plan to reassert US global leadership on climate. A potential 9-10GW would still be a historically solid year for the US, surpassing the average 7.2GW installed annually last decade. That reflects continued strong corporate and utility demand that underpins the market.

Meanwhile, Covid-19 remains a headache and wild card for the industry. The new year began with the US having a record number of infections driven by the Omicron variant that has caused absenteeism to surge as workers either contract the virus or are exposed to it on factory floors and jobsites. The global supply chain remains under stress from the pandemic. This complicates delivery of foreign made components and materials with port congestion and a shortage of shipping containers causing freight and storage costs to soar. While US ports are a bit more fluid than last summer, logistics concerns remain a pressing issue for wind developers.

Bankers say the supply chain morass will likely cause further slippage in closure of certain project financing deals and construction schedules. Some sponsors have already approached off-takers to ask for more time to meet delivery commitments.

Transmission development will continue as a key bottleneck to the deployment and interconnection of low-cost, onshore wind generation resources this year. Much of the best untapped wind is in remote or thinly populated regions between the Rocky Mountains and Mississippi River

Rafael says: “The clean energy transition that has occurred over the last 10-12 years has been phenomenal, but it is certainly reaching its limits without additional investment in transmission.”

To interconnect a single project can cost tens of millions of dollars and sometimes exceed nine figures, and only a minority of states allow the developer partial or full cost recovery if the developer isn’t a regulated utility.

Rafael added: “That’s a real hurdle. Nobody wants to be the one to shoulder the entire cost. Projects just won’t pencil out that way.”

Contact the energy and utilities team

Aris Karcanias

Aris Karcanias

Matt Mooren

Matt Mooren

Liz Parminter

Liz Parminter

Jonquil Hackenberg

Jonquil Hackenberg

Ryan Hardy

Ryan Hardy