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Can Emerging Wind Markets Compensate for Stagnating European Growth?

Growing speculation that the wind market in Western Europe is currently hitting a growth plateau has gathered weight in recent months. The EU as a whole has suffered significant reductions in forecast wind capacity growth as a result of the ongoing economic crisis.

Justin Wu, head of wind insight at Bloomberg New Energy Finance, believes that western European onshore wind installations face "a slow decline". BNEF predicts that the 27 countries of the EU will have installed a record 9.3 GW of onshore capacity in 2012, but then will decline to less than 7 GW per year in 2013 and 2014.

However, the bright spot on the horizon is forecast to be emerging markets in Eastern Europe.

Wu points to key new markets such as Romania, Serbia, Croatia and Ukraine, all of which feature growing electricity demand, excellent wind resources and new policies intended to encourage wind development, and all of which are retiring old coal-fired power plants, seeking energy independence and increasing their use of renewables in line with EU standards.

The First Wave: Romania

A recent surge of wind development in Romania adds weight to the argument that emerging eastern markets are growing and could balance decline in the west.

Heading the list of developments in the country's Dobrogea region is a newly completed 240 turbine, 600-MW project which has been developed by Czech utility major CEZ. The Fantanele-Cogealac wind park uses 2.5-MW GE machines. More recently, Italian energy powerhouse Enel Green Power has connected three new wind farms to the Romanian grid, with a total installed capacity of 206 MW. Total investment in these projects was €340 million. And Iberdrola has recently awarded Nordex a contract for the supply and installation of wind turbines for an 80-MW project. Under the terms of the deal, 32 Nordex 2.5-MW machines are destined for the wind farm, which is due to begin commercial operations late this year. With financing provided by the European Bank for Reconstruction and Development (EBRD) and a consortium of commercial banks, the wind farm claims to be the first true non-recourse financed renewable power project in Romania.

The Second Wave: Ukraine

One emerging market, Ukraine, had installed 301 MW by the end of 2012.  According to Andriy Konechenkov, chairman of the Ukraine Wind Energy Association (UWEA), the country established a programme for wind farm construction in 1997 under a presidential decree, but due to financing problems and a lack of experience on the part of developers and the power industry, the project failed. But since 2009 and the adoption of the country’s green tariff, Konechenkov says that "changes happened in the mentality of the people. When the state program was adopted in 1997 the main idea was to establish the production of wind turbines in Ukraine, at which time nobody cared about the production of electricity. Now the main goal is to produce electricity."

UWEA says its country offers excellent wind resources, ample space for development and an attractive green tariff fixed until 2030. The current tariff is 11.31 €cents/kWh; it will be reduced by 10 percent in 2015, 20 percent in 2020 and 30 percent in 2025 if new power plants that use renewable energy sources are commissioned. For UWEA, development not only of wind farms but of an entire supply chain is a priority. In September  2012, Fuhrländer Wind Technology opened a factory in Kramatorsk to produce towers, anchor baskets and nacelle frames for 2.5-MW wind turbines. UWEA considers this a positive step in wind industry development in the country, but "just to have one plant is not enough for a country; we need competitiveness in the market", says Konechenkov.

Local content laws specify that in 2013 30 percent of the value of a Ukrainian wind farm must be produced in the country, and in 2014 the requirement will rise to 50 percent. Konechenkov terms this "very challenging" and UWEA has pressed the government to reduce the percentage or postpone the introduction of the requirement. UWEA is unable to predict the outcome of these efforts, but says it remains hopeful. Other issues include a transmission system that, according to Konechenkov, "needs to be greatly upgraded", a process which has begun but has not yet achieved a major transformation.  

This year, for the first time, UWEA will sponsor a pavilion at the European Wind Energy Association (EWEA)’s annual event with the goal of attracting international investors to their country, and they are hopeful that their attractive tariff, plentiful wind and abundance of available resources such as steel will produce success. Eventually, once the home market is established, UWEA hopes that Ukraine will become a manufacturing powerhouse making wind components for the countries of the former Soviet Union.

What’s Ahead

The crucial question for analysts such as Birger T. Madsen of Navigant’s BTM-Consult is whether this new market activity will compensate for the loss of activity in mature European markets. According to Madsen, the emerging markets are still in an early phase of exploiting their huge potential – but are predicted to maintain their momentum.

In keeping with this sea change in the European wind market, a focus on emerging markets characterises this year’s EWEA annual event, which will take place on 4-7 February in Vienna, Austria. The event will feature a two-day workshop on emerging markets, plus a session specifically on emerging Central and Eastern European markets, which will include a paper on Ukraine’s feed-in tariff and other support mechanisms. EWEA will also launch its own report on emerging European wind markets at the event.

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