Policies and Market Factors Driving Wind Power Development in the United States

In the United States, there has been substantial recent growth in wind energy generating capacity, with growth averaging 24% annually during the past five years. With this growth, an increasing number of states are experiencing investment in wind energy. Wind installations currently exist in about half of all U.S. states. This paper explores the policies and market factors that have been driving utility-scale wind energy development in the United States, particularly in the states that have achieved a substantial amount of wind energy investment in recent years. Although there are federal policies and overarching market issues that are encouraging investment nationally, much of the recent activity has resulted from state-level policies or localized market drivers. In this paper, we identify the key policies, incentives, regulations, and markets affecting development, and draw lessons from the experience of leading states that may be transferable to other states or regions. We provide detailed discussions of the drivers for wind development in a dozen leading states—California, Colorado, Iowa, Kansas, Minnesota, New York, Oregon, Pennsylvania, Texas, Washington, West Virginia, and Wyoming. Two fundamental messages resulting from this research are:

1. State tax and financial incentives, as well as state renewable portfolio standards (RPS), can and do have an important effect on wind energy development. This impact is most pronounced when wind generation is already nearly competitive with more traditional generation resources (e.g., gas-fired generation).
2. The increasingly lower cost of wind generated electricity – due in part to a movement toward larger, more efficient turbines, and facilitated by federal tax incentives – is now an important driver for new wind installations. Simply said, there are some regions of the United States in which wind power is the lower-cost resource option.