What is the Future of the US Wind Market in 2020?

New wind power infrastructure will see a near-record year of growth in 2020, as sponsors are lining up as much as 14 gigawatts (GW) of new projects to start operation ahead of the end-of-year deadline to qualify for the full federal PTC.

By mid-2020, much of the push to complete the record year will be in the hands of construction and tax equity finance professionals (and lawyers). This leaves many in the industry to plan for what happens in the coming years of more modest levels of new project development.

1. Point of Entry Acquisitions.

Despite the phase out of federal tax credits, the US will remain one of the largest and most attractive renewable energy development markets. As several large, conventional energy companies advance plans to build low carbon energy businesses, several leading independent wind developers will be acquired as “point of entry” acquisitions. We expect to see as many as three acquisitions, not including the closing of the acquisition of Pattern Energy by the Canadian Pension Plan Investment Board.

2. More Proxy Offtake.

The proxy revenue swap (PRS) is one of the best recent innovations in the US wind market. Over 3 GW of projects use PRS, and these structures provide superior risk management relative to conventional energy hedges. PRS and related risk management structures like proxy generation PPAs will proliferate in the US wind industry in 2020 and going forward.

3. Services War.

Operations and maintenance (O&M) services have consolidated in the hands of manufacturers (OEMs) and asset owners. As fleets of wind assets grow in size, these two groups will compete for ascendancy. Winning odds in this war for service dominance are in heavy favor of asset owners as the decision makers for project operations. OEMs will have to introduce compelling, value-enhancing innovations if they hope to retain, let alone grow, their services businesses beyond 2020.

4. Ownership Transition.

The fleet of uncontracted projects in the US continues to grow with nearly 30 GW of assets reaching the tenth year of operating life over the coming two years. Many wind asset owners have already started to manage their fleets through divestiture of legacy, uncontracted assets. New wind owners among both strategic and financial investors have entered the US wind industry through acquisition of legacy assets, and we expect this ownership transition to continue and expand.

5. New Financing Structures.

The first four predictions will drive the need for new financing structures that consider new risks, and approaches to risk management and operation across the growing fleet of wind power plants in the US. A key focus for us in 2020 will be to work with our clients and bring forward new forms and sources of financing to support growth in US wind. We look forward to Financing Wind, North America in Boston in May among other occasions to advance new financing ideas with our prospects and clients.

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