Demand for US wind energy is anticipated to be slow in the next few years due to low power prices and an unlikely federal renewable energy mandate, according to Merrill Lynch Global Research.

Wind energy is increasingly becoming less competitive as power prices dropped to between $40 and $50 per Mwh, about $20 lower than what it historically sold for in recent years through purchase power agreements.

The research suggests that demand could still take off if the federal government set a renewable portfolio standard for utilities to get a portion of their power from renewable sources such as solar or wind.

However, it is unlikely that such a mandate will be passed and many states with individual standards have surplus renewable capacity, according to the report.

The US wind market, as a result, is likely to be tough in 2010 and will remain tough in 2011 before starting to revive in 2012.

Bank of America Merrill Lynch predicts that wind installations will fall to 7,000MW this year and recover gradually.