July 13, 2016 Read More →

Macquarie Report: Unsubsidized U.S. Wind Energy Will Be Cheaper Than Gas-Fired Electricity

Matthew Bandyk for SNL:

Wind energy in the U.S. will become competitive with natural gas and other forms of electricity generation — without subsidies — by the middle of the next decade, just after the federal production tax credit for wind expires, according to a July 11 analysis from Macquarie Research.

Reaching that milestone could make the U.S. the global center of the wind industry. “We believe the US is now the most attractive wind market in the world due to the increased visibility of demand in the long term,” the Macquarie analysts wrote. “We believe it supplants China, which has dominated wind demand over the last five years, and prior to that Europe, which was the key market a decade ago.”

The timing of the production tax credit’s expiration “makes it the perfect bridge for the technology to mature into an economically viable method of power production,” the report said.

Macquarie Research calculated that the 2016 subsidized levelized cost of electricity, including 100% of the tax credit, is $23 per MWh for an onshore wind farm, compared to $50 per MWh for a new natural gas-fired combined-cycle power plant. While the production tax credit expires in 2020, it effectively is in place for several more years because recent U.S. Internal Revenue Service guidance made clear that as long as construction of a project is completed in four years, a wind project can still qualify for the tax credit that was in effect during the year it started construction.

By 2023, with the expiration of the credit, the levelized cost of wind will be $42 per MWh while a natural gas combined-cycle plant will cost $57 per MWh, Macquarie forecasts. By 2030, wind will cost $38 per MWh and the gas plant will cost $66 per MWh.

The report pointed to several reasons besides the tax credit as to why wind is making progress. U.S. electric utilities are continuing to build wind capacity. This is especially true of utilities in the Midwest that want to find other capital investments to put into their rate bases following the retirements of many coal plants. The report indicates that it may become more common for utilities to place wind farms in their rate bases compared to buying wind energy from third-party developers through long-term contracts.

Full article ($): Unsubsidized wind poised to become cost-competitive soon, report says

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