The new administration in the United States is promoting wind power at the cost of solar through extended tax cuts.
With the U.S. Congress extending generous tax credits for renewable energy projects, wind industry in the country is thriving. However, solar power companies are facing a rough time and in 2017 they appears to be headed for rough weather.
Renewal of the tax credit has boosted the long term outlook of both solar and wind industries. However, in the short term, subsidies for wind power are far more attractive than solar. This could spur the launch of wind projects and hold back or delay solar installations.
Furthermore, advances in wind turbine technology have also opened up new avenues for development and is driving a wave of expenditures to upgrade existing projects.
Recently, power companies with significant renewable holdings, including Xcel Energy Inc., Southern Co., and NextEra Energy Inc. have all announced plans to pour in billions of dollar into wind energy.
“We’re making a pivot now away from solar,” said Tom Fanning, CEO of Southern to Wall Street analysts.
Interestingly, tax credit for the wind industry is largest for projects that break ground in 2016. Tax breaks will decrease each year after that and expire by the end of 2019.
In contrast tax credits will not start to decline until 2020.
Clearly wind energy projects are in focus and are prioritised over solar.
The most popular tax credit for wind power, which lasts for a decade, is worth 2.3 cents for every kilowatt-hour of electricity produced. However, after 2016 the tax credit’s value is set to drop by 20% for projects that start construction from 2017 through 2019.
For solar developpers, the tax credit for most solar developers is worth 30% of the value of the project. However, it must be claimed in total in the first year itself.
Furthermore, solar companies are already reeling from a glut of panels. Prices of solar panels have dropped by 30% since the first half of 2016.
First Solar and SunPower Corp have both announced deep cost cuts and have forecast market challenges in 2017. Shares of both companies have fallen to their four year low with SunPower’s shares down by 76% and First Solar’s shares was down by 51%.
The number of new U.S. solar installations is expected to fall by 4% in 2017. In 2016, the industry grew by 88% as per GTM Research. It went on to add, this would be the first annual decline in the industry’s history.
According to the American Wind Energy Association, developers have scaled back solar power plans while wind power projects have approached record levels. New wind power contracts have gone up by 39% in 2016.