News•March 12, 2013

Forecast Dims for Future Growth in Wind Power

Despite a recent report trumpeting a record year for wind power in 2012, the numbers are not as encouraging as they seem.

Because even though total wind power capacity grew by 30 percent last year, with 13,000 megawatts in new wind turbines, the actual portion of our electricity coming from wind energy did not increase proportionally. Also, the forecast for future growth in the next few years is not robust, which means wind power will not keep up with the faster growing use of natural gas.

Cedar Creek Wind Farm, Weld County, Colorado.
Credit: BP_images/flickr

According to newly released data from the Energy Information Administration, about 140 terrawatt-hours of our electricity — enough to power over 12 million homes — came from wind power last year, up about 17 percent from 2011. But overall, wind power contributed only about 3.5 percent of all the electricity generated in the U.S. last year, up from 2.9 percent of the share in 2011.

For perspective, that number pales when compared to the blistering growth of natural gas, which produced 10 times more new electricity last year than wind power. In 2012, nearly a third of our electricity came from natural gas, which was a 21 percent increase from 2011.

In addition, there is reason to believe 2012’s record growth in wind energy capacity isn’t something we’re going to see again soon.

Last year, developers rushed to build new wind power capacity largely because a federal tax credit was set to expire at the end of the year. That credit gave wind farm operators a rebate for each kilowatt-hour of electricity generated via wind power. That rebate helped keep the price of wind power competitive with more traditional forms of electricity, but in order to qualify, those wind farms needed to be constructed before Dec. 31, 2012. The future of that tax credit remained uncertain throughout last year, so developers rushed to complete as many projects as they could. The cumulative effect created more new wind power than ever before.

As it turns out, the tax credit was renewed for another year as part of the “fiscal cliff package,” but there aren’t many new projects in the pipeline and 2013 is likely to be slow for the wind industry.

The boom-bust impact of the tax credit for the wind industry is not new. The industry saw immense growth in 2001, 2003 and 2009, all years when the tax credit faced expiration. And in 2002, 2004, and 2010, new installations dropped off, even though the credit was extended in every case.

According to the Wind Technologies Market Report, published by the Department of Energy, the absolute best-case scenario for 2013 is that the wind industry sees level growth. More realistically, new wind power installation will be just a fraction of what was built in 2012 and we may not see another big year until 2014 or 2015.

The news isn’t all bad, though. This year’s tax credit renewal is better than it’s been in the past. Now to qualify, new installations will only have to start construction by the end of the year, rather than be completely finished. With extra time to complete new projects, developers may actually start more than they would have if they only had one year.

And beyond the tax credit, the overall price of electricity from wind continues to decrease as wind turbine technology improves. This is helping make wind power more competitive with nuclear and coal-powered electricity. As Bloomberg reported earlier this week, particularly windy conditions have already temporarily driven down power prices in some regions.

And even if the wind industry slumps in the next couple years, the U.S. could still transition a sizeable portion of its electricity generation to wind energy over the next two decades. According to the Energy Department’s strategy to get 20 percent of electricity from wind power by 2030, the U.S. would need to see consistent growth at or above the 2012 pace, starting within the next few years. A couple of slow years now will be a setback, but recently the U.S. has been ahead of its target, so the goal isn’t entirely out of sight.