US wind factory expansion uneven despite rising installations
TL/DR –
Since the introduction of new tax credits by the Biden administration in the 2022 Inflation Reduction Act, onshore wind manufacturers have expanded U.S. factory capacity 15 times. This move comes as suppliers look to take advantage of increasing wind installations coupled with easing supply chain disruptions and stable global costs. The growth in the production of key wind components such as towers, nacelles, and blades is, however, influenced by whether developers are required to source these parts from America to qualify for additional tax credits.
US Wind Energy Boom Sparked by Biden Administration’s Tax Incentives
Since the Biden administration introduced new tax credits in the 2022 Inflation Reduction Act, onshore wind manufacturers have announced 15 expansions of US factory capacity, according to Department of Energy (DOE) data. The rise in wind installations and stabilising global costs and supply chain disruptions have incentivised suppliers.
Research group Wood Mackenzie predicts 7 GW of US wind installations in 2022, 11 GW in 2025, and an average of 14 GW annually from 2025 to 2030. Manufacturers are expanding US production of key components, including towers, nacelles, and blades.
New factory investments stand to gain from the advanced manufacturing production tax credit (AMPTC), allocated on a $/watt rate per component, along with the production tax credit (PTC) or the investment tax credit (ITC) offered to wind developers.
The PTC provides 2.6 cents per kilowatt-hour for the first ten years of electricity generation, and the ITC covers up to 30% of project capex. Developers also receive bonus tax credits for domestic content worth 10% of capex if they source towers and steel or iron rebar domestically, and 40% of the total component value is sourced from US manufacturers.
According to Aubryn Cooperman, a wind energy analyst at the National Renewable Energy Laboratory (NREL), prices may fall due to “dynamic competition” from domestic and foreign suppliers. The advanced manufacturing tax credits “could allow domestic manufacturers to sell products cheaper than imported goods.”
Nacelles are in high demand. The US was capable of manufacturing 19,750 onshore wind towers per year, 6,400 nacelles, and 7,826 blades as of November 2023, according to NREL data. Wind developers sourced 85% of their nacelles domestically in 2022, and production is set to increase.
US turbine supplier GE Vernova, for example, plans to construct a $50 million nacelle facility in New York. Other companies such as Siemens Gamesa, Vestas, and Nordex also have announced similar plans to increase nacelle production.
US blade manufacturing capacity is also growing, albeit less so due to new domestic content incentives. Vestas and Siemens Gamesa are investing in restarting or expanding US blade manufacturing capacity, and GE Vernova has signed long-term agreements to source blades from TPI Composites factories in Iowa and Mexico.
Developers are not required to source gearboxes from US factories to qualify for the domestic content bonus. Leading gearbox manufacturer Flender plans to supply the US market from manufacturing facilities in India and Finland, and also plans to invest in expanding its US service and repair operations.
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