Dec 15 A year after Congress extended generous
tax credits for renewable energy projects, the U.S. wind
industry is thriving.
Solar power companies, meanwhile, are hunkering down for a
The tax credit renewal has boosted the long-term outlooks
for both industries. But in the short term, the subsidies are
far more attractive for wind power, which has spurred utilities
to launch wind projects while they scale back or delay solar
Advances in wind turbine technology are also opening up new
locations for development and driving a wave of spending to
upgrade existing projects.
In the last few weeks, power companies with large renewable
holdings - including Southern Co, NextEra Energy Inc
and Xcel Energy Inc - have announced plans to
invest billions of dollars in wind.
"We're making a pivot now away from solar," Southern Chief
Executive Tom Fanning told a meeting with Wall Street analysts
The wind industry tax credit is largest for projects that
break ground in 2016 and will decrease each year after that
before expiring at the end of 2019. Solar's tax credit, by
contrast, doesn't start to decline until 2020, giving developers
an incentive to focus on wind projects first.
The most popular wind power tax credit, which lasts for ten
years, is worth 2.3 cents for every kilowatt-hour of electricity
produced. After this year, however, the credit's value will drop
by 20 percent each year for projects that start construction
from 2017 through 2019.
The tax credit used most by solar developers is worth 30
percent of the value of the project and must be claimed entirely
in the first year.
WINDS OF CHANGE
Competition from wind power is hitting solar companies that
are already reeling from a global glut of panels. Prices have
dropped 30 percent since the first half of 2016.
SunPower Corp and First Solar have both
announced deep cost cuts and forecast a challenging market in
2017. Stocks in both companies have fallen to their lowest
levels in nearly four years, with SunPower shares down 76
percent for the year and First Solar shares down 51 percent.
The number of new U.S. solar installations is expected to
fall by 4 percent in 2017 - after rising 88 percent this year,
according to GTM Research. A sharp decline in utility projects
is expected to offset growth in residential and commercial
systems. It would be the first annual decline in the industry's
history, based on additions tracked back to 2000, GTM Research
As developers have scaled back solar plans, wind projects
under construction are approaching record levels, and new power
contracts for wind facilities are up 39 percent so far this
year, according to the American Wind Energy Association.
Xcel Energy this year announced a major strategy to boost
wind energy, with its Chief Executive Ben Fowke saying the cost
of projects is lower now than it will be for at least a decade.
"This was the time to take advantage of wind," he said.
"While it's on sale, let's get it."
Xcel plans to spend $3.5 billion on renewables, mostly wind,
over the next five years, more than double what it spent over
the previous 10 years.
Fowke said he expects his company will focus on solar again
in coming years, noting that some of its coal plants are
scheduled to be retired after the wind credit becomes less
attractive but before the solar tax credit is scaled back.
"Solar, just like wind, will continue to improve in cost,"
he said. "The best time to bring on a lot of large scale solar
will be towards the end of this decade."
Recent advances in turbine efficiency are also driving wind
power development. Until recently, projects only made sense in
the windiest areas.
"Now, wind projects can be built in areas of medium and
lower wind speeds," said Navigant Research analyst Jesse Broehl.
Some wind farm owners plan to use the federal tax credit to
replace older turbines, a practice known as repowering.
NextEra Energy, for instance, said in October that it will
spend at least $2 billion to $2.5 billion on repowering projects
over the next four years. The company also plans to develop up
to 3.8 GW of wind projects over the next two years, compared
with up to 1.3 GW of solar.
Those announcements and others should benefit turbine
providers General Electric Co, Vestas Wind Systems A/S
and Siemens AG, which account for more than
three quarters of the U.S. turbine market. In the third quarter,
GE said it received $404 million in orders to repower U.S. wind
"Solar had its run of driving down cost," said Ed Zaelke,
chair of the project finance practice at law firm Akin Gump
Strauss Hauer & Feld LLP. "Now wind is coming on strong with
improvements in technology."
(Reporting by Nichola Groom)