The American wind power industry is barreling toward an important inflection point. The production tax credit (PTC), which provides a subsidy for each kilowatt-hour of electricity generated from wind farms in their first 10 years of production, is about to be phased out. Wind projects need to begin construction before the end of 2019 and begin operations before the end of 2020 to be eligible for the last PTC subsidies.
The phaseout makes sense. The PTC has done its part to help nurture a robust domestic industry. In fact, wind power eclipsed hydroelectric power as the nation's top source of renewable energy just this year. The United States will end the year with over 100,000 megawatts of installed wind power capacity and should add at least 10,000 megawatts annually for the foreseeable future.
But maturity brings its own set of challenges -- and opportunities. Investors interested in renewable energy stocks can't overlook the significance of these two trends reshaping the wind power industry.