As American solar power surged in the third quarter of 2016, adding the equivalent of 1 MW every thirty-two minutes, American wind power continued its equally-rapid expansion. The difference, wind advocates point out, is in the future.
By some estimations, solar had a rough year. Prices fell, along with demand worldwide, as friendly tariffs in China were removed, inventories expanded in the U.S. and supply reached new heights as the cost of new panels continued to decline. Chinese demand, a major factor in pushing the expansion of solar worldwide, looks set to decline by as much as 40 percent in 2017, even as price-per-panel dropped another 9 percent.
Volatility in the aftermath of the bankruptcy of SunEdison (formerly the world’s largest solar power developer) has been making an impact as the company, once valued at $10 billion, sells off assets and works through legal squabbles. The company was undone in part due to an aggressive, ambitious expansion plan that overestimated growth in energy demand; SunEdison’s business model, which focused on the marketing of solar power without the liability of constructing new solar power facilities, was soon jettisoned in favor of rapid acquisitions. There were also questions that its executives cooked the books, leading to investigations from the Department of Justice and SEC.
SunEdison is the year’s cautionary tale in solar power, akin to the widely publicized bankruptcy of Solyndra in 2011 after the company had received over $500 million in federal aid. Yet that company’s failure was largely the result of bad timing, as the collapse in silicon prices left it unable to compete with conventional solar panel developers (Solyndra’s panels were made of a special super-thin copper compound that was, in theory, meant to be more economical).
SunEdison’s woes, though particularly serious, may not augur well for other solar providers, such as SunPower Corp and First Solar. Both companies have announced deep cost cuts in the New Year, and have seen their stock prices plunge. SunPower’s CEO predicts the long decline in panel price to end in 2017. Related: How Vision 2030 Will Transform The Oil World
After eight years of enjoying support from the federal government, the solar industry is bracing for potential changes in regulation and the rise of a fossil fuel-friendly administration. The anticipated expiration of the solar power tax credit in December 2016 pushed the industry into a late-year construction boom, though the tax credit was unexpectedly extended last year. That extension, however, came with a slow-phase out for solar power that will make construction in 2017 and 2018 more expensive, hence the late year rush in new construction.
President-Elect Trump’s intention to slash corporate tax rates and boost infrastructure spending may create federal deficits, necessitating a reduction in subsidies for renewable energy. There is speculation surrounding the extension of existing tax credits, valued at $1.4 billion.
By contrast, wind power may well increase its competitiveness in 2017. New construction contracts are up thirty-nine percent this year, reflecting declining costs and improvements in turbine technology. This means that wind farms can be built in areas which do not necessarily enjoy higher-than-average wind levels (formerly a sine qua non for wind power).
Midwestern energy provider Xcel Energy intends to boost its support for wind power in 2017, spending $3.5 billion over the next five years. Like solar, wind power will eventually lose the support of the tax credit, which makes this a particularly promising time.
The first U.S. off-shore windfarm, after some controversy, was inaugurated and is now commercially operational off Block Island, RI. The farm produces 30 MW of power and mirrors similar off-shore facilities in Europe, where off-shore wind has expanded its profile. Europe has roughly 11 GW of off-shore wind power, and despite the U.S. Department of Energy feeding $200 million into research, it looks like an expansion in the U.S. is some years off, primarily due local political resistance: “not in my backyard” is a fairly powerful argument directed against off-shore wind. Related: The Self-Driving Vehicle Revolution Has Begun
The DOE has directed support to a number of off-shore projects which could be operational by 2020, but the change in administration may scupper those plans, as attention and support for new energy projects shifts towards fossil fuels. A possible question mark in that equation is the new Secretary of Energy, former Texas Governor Rick Perry. Selected to run a department he famously once proposed should be eliminated, Perry oversaw a huge expansion in Texas wind power during his time as governor, and has close ties to executives in the industry. The 2016 election marked the first time renewable energy companies donated more to Republicans than to Democrats, a sign that the industry is trying to move away from its close connection with liberal environmentalist politics. It’s possible that Perry may advocate continued research funding and support for wind power projects, though he will face opposition from the many fossil fuel advocates in the rest of the Cabinet.
Both solar and wind expanded during 2016, according to EIA projections, with solar seizing a larger share of overall energy generation and adding 9.5 GW of new power. Wind power, by comparison, added 6.8 GW and now accounts for 7 percent of American electricity generation, with the DOE expecting it to reach 10 percent by 2020.
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Whether wind can continue to surge even as solar stumbles rests on the new political climate in 2017. But even if subsidies are cut and fossil fuel use is encouraged, wind power will retain some powerful support, including Google (which seeks to run on 100 percent renewable energy) and Berkshire Hathaway chief Warren Buffett, who according to Fortune has “fallen in love with wind energy.” With friends like these, wind may weather the coming storms of a Trump Administration.
By Gregory Brew for Oilprice.com
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