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Despite Slowdown, China to Hold Wind Power Market Leadership to 2020

China’s determination to reduce its carbon footprint and increase electricity production in rural areas is good news for the nation’s wind power market, according to a new study.

The report, from analysis firm GlobalData, forecasts that China will continue to be the world’s largest wind power market to 2020. According to the analysis, China has doubled its cumulative wind capacity each year between 2006 and 2011, growing at a compound annual growth rate (CAGR) of 76 percent.

However, the report also states that China’s growth began to slow in 2012. Jonathan Lane, GlobalData’s head of consulting for power and utilities, explained that some aspects of the nation’s wind power strategy have proved challenging.

China’s plan has been two-fold, Lane said, with aims both to connect more renewables to the grid in order to reduce carbon emissions from electricity generation, and to support the development of a Chinese manufacturing base for wind turbines and other equipment which can then be exported.

The latter objective has largely been achieved, with several Chinese manufacturers now global players. But China’s own grid has been unable to fully accommodate the wind capacity the nation has already added, Lane said, especially in more remote areas where wind yields are at their highest. As a result, Chinese wind generation is often disconnected from the transmission system when supply exceeds demand or there is system congestion. “This is a major economic disincentive for all but the most favourable projects,” Lane said.

Lane sees China’s slowdown as likely to continue as the nation looks to upgrade its grid infrastructure to integrate existing and new wind generation. This process is likely to take at least five years, he said, and will limit the size of the Chinese market compared to previous highs. “This puts extra onus on the Chinese firms to improve their exports, so one would expect some significant price competition globally over the next few years,” Lane predicted.

According to the report, China, with number two market the U.S. and top markets Germany, the UK, Italy, Spain and India, accounted for 74 percent of global installed wind capacity in 2012.

The U.S. was the second largest wind power market in terms of cumulative installed capacity base and annual capacity addition in 2012, but the economic slowdown and the nation’s lack of long-term policy certainty have caused a 43 percent drop in installations, the report said. By the end of 2012 the nation recorded annual wind power installations of 13.1 GW, and reached a cumulative installed capacity of 60 GW. GlobalData predicts that growth in U.S. wind power installations will be slow to 2020 given the possible, and perennially anxiety-inducing, expiration of the Production Tax Credit (PTC) after 2013.

“The extension of the PTC is a political decision so it’s difficult to predict what will happen,” said Lane. “I personally would expect it to be extended due to the U.S. economic recovery and its importance for jobs and manufacturing. If it is not extended it will impact the market significantly, especially due to the low cost of natural gas for power generation found in the U.S. at this time,” he said.  

But Lane “would not expect the market to fall to zero,” he continued, “as there are other support mechanisms for wind in the U.S. including the state-based renewable portfolio standards which require a certain (and increasing) proportion of electricity consumed to be renewable. Its non-extension would, however, undermine the economics of most projects in the pipeline.”

GlobalData expects growth in the major wind power markets to slow to 2020 as emerging markets from the Asia-Pacific region and South and Central America gain significant market share. The growing Asia-Pacific market, led by India, China and other emerging countries such as Korea, Thailand and the Philippines, will continue to drive growth, the report said, while embryo wind markets such as Argentina, South Africa, the Philippines, Ukraine, Brazil, Korea and Mexico are projected to expand rapidly by 2020. GlobalData expects the world’s installed wind power capacity to reach 607.5 GW by 2020.

Lead image: Wind turbines in the grassland, Xinjiang, via Shutterstock

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