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Wind will be cheapest US post-PTC power in 2020s: NextEra

The US leader is bullish over the industry's outlook as technology and financing efficiencies will make wind the low-cost option even without federal help

Wind is positioned to be the cheapest source of US electric generation even after the federal production tax credit (PTC) steps down in 2023 and it will then experience 15% annual growth through 2030, according to market leader NextEra Energy Resources.

The company estimates $30-35/MWh levelised cost of energy (LCOE) for wind in 2020 (pre-tax over project life) including about $20/MWh PTC value and $10-15/MWh PPA value. The PTC sunsets on 31 December.

After 2023 when all remaining projects eligible for the PTC come online, LCOE on an unsubsidised basis will be around $20-25/MWh.

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The expected $10/MWh reduction from present levels will result from roughly 10% annual industry productivity gains, according to NextEra in a presentation made at the Edison Electric Institute conference this week.

Several factors will continue to drive future wind LCOE reductions. First, increased generation as a result of larger turbines. Second, capital cost savings as larger turbine size results in fewer numbers per project and lower balance of system (BOS) costs.

Third, continued O&M cost reduction on the strength of advanced analytics and fourth, financing efficiencies as there will no longer be need for more expensive tax equity with the PTC gone.

Strengthening wind’s ability to compete on price next decade will be continued declines in battery costs to enable near-firm wind (NextEra assumes 25% of a facility’s generating capacity for a four-hour duration).

Automotive industry investment will drive engineering innovation and reduce costs of battery packs, while BOS savings and improved financing efficiencies will continue, according to NextEra.

The company believes its wind development opportunities have never been stronger as evidenced by its 5-7.8GW project pipeline plus more than 2GW of re-powering initiatives through 2022.

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“Energy Resources’ competitive advantages position us to continue to capitalize on what we believe is the best renewables development environment in our history,” it said in the presentation.

Those advantages include scale – NextEra has a 15GW wind portfolio – and a strong execution track record that enables it to buy, build, finance and operate projects cheaper than most rivals.

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