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Wind Growth Hinges on Non-OECD Demand

Wind power's global market grew by 6% in 2011, with 40.5 GW of new power brought on-line, according to the Global Wind Report for 2011. But the annual report from the Global Wind Energy Council (GWEC) finds that growth is tailing off in many of wind power's most established markets while China and India fuel the sector's continuing expansion.

In 2011 investment in new installations totalled €50 billion (US$68 billion) and brought global wind capacity up to almost 238 GW, a cumulative market increase of more than 20%. GWEC characterised this as ‘a respectable figure for any industry in this economic climate’ – while noting that it represents a slip from average growth of 28% over the past 10 years.

The ‘main drivers’ of wind power’s continuing expansion were China and India, said GWEC, which added that the pair accounted for more than half of the global market in 2011.

2012-16 Global Outlook

‘A bit sombre’ is how GWEC described its outlook for the coming period. The trade group forecasts that annual market growth will average 8% over the next five years, with a strong 2012 followed by a substantial dip in 2013.

Installations between 2012 and 2016 are expected to total 225 GW, with cumulative market growth running at 16%. Capacity is expected to hit 500 GW by the end of 2016, by which time the annual market will reach 60 GW. Growth on this scale is well below the 28% average of recent years.

Chronic oversupply is among the challenges facing the wind sector over the next five years, according to GWEC. Margins are expected to slip ‘dramatically’ with excess production compounding downward price pressure from general economic conditions. Furthermore, the council expects only a very gradual improvement over the short term.

Uncertainty over the future of the carbon market is another brake on expansion. Carbon development mechanism (CDM) markets are unlikely to revitalise in the next few years. Europe’s Emissions Trading System (ETS) also presents little prospect of a swift recovery. The biggest uncertainly is the future of the US Production Tax Credit (PTC). Amid the turbulence of an election year, GWEC says ‘anything may happen’. On the upside, potential new markets in South Korea and China may start to make an impact by the end of the period.

Developments in 2011

From its data for 2011, GWEC picked out several countries as showing great promise. These markets proved vital to the sector’s upward momentum as growth faltered in established markets. Both economic and political turmoil weakened wind’s prospects in Europe and North America. Meanwhile, the pace of China’s wind expansion also slackened after a decade of annual growth measured in two or three digits.

India retained its third place in the rankings for installations, although its 7% of the market was overshadowed by China’s 43% and 17% in the US. After passing 2 GW in 2010, India installed 3 GW last year as demand and policy combined to propel expansion.

Post-Fukushima Japan looked poised for a new round of growth, with new feed-in tariffs and connection regulations due by July. South Korea also embraced wind power within its ‘green growth’ strategy and has major offshore ambitions as well as improvements to the onshore regulatory regime.

Mongolia debuted on the commercial wind-generation map with a 50 MW farm near its capital city of Ulaanbaatar. Massive mining operators in the roadless, waterless and powerless Gobi desert could trigger rapid development of its huge untapped wind potential, according to GWEC.

China repeated its installation figure for the previous year of almost 18 GW. Grid issues loomed along with a hefty manufacturing oversupply as the market entered its consolidation phase.

In North America, the US market surged by more than 30% in 2011, adding 6810 MW to hit almost 47 GW, with cumulative growth at 17%. US manufacturers supplied about 60% of content for their domestic market, which is primed for continued growth.

Meanwhile, Canada passed 1 GW in new capacity in a bumper year. While federal support was scaled back, provincial governments stepped in to put it on track for its 10 GW target for 2015.

Europe repeated its 10 GW installation figure from 2010, bringing total wind capacity up to almost 97 GW. Germany led with 2086 MW of new capacity, followed by the UK with 1293 MW and Spain with 1050 MW.

Latin America’s wind market was spearheaded by Brazil, with 583 MW of new capacity taking the emerging nation’s tally past 1.5 GW. A pipeline of 7 GW is set to be installed by 2016. Honduras brought on line its first big project of 102 MW.

Africa’s established markets disappointed over 2011. The Arab Spring scuppered development across North Africa, although Cape Verde provided encouraging news by bringing a 23 MW farm on line. South Africa announced preferred bidders for 630 MW in installations, which could herald a big new player in the sector.

In the Pacific region, Australia added 234 MW to reach 2224 MW in total capacity, while passing landmark carbon legislation. New Zealand installed 109 MW to hit 623 MW.

Limits on Expansion

But GWEC stresses that growth in 2012-2016 will continue to be propelled by markets in Asia, Europe and North America, despite the many new glints of potential across Latin America and Africa.

While Brazil is on its way to totalling 1 GW each year by 2016, the rest of Latin America is unlikely to post significant additions. Similarly, the unquestioned potential of South Africa, Morocco and Egypt is unlikely to bring their continent among wind’s main markets by 2016.

On the other hand, Asia is forecast to install 118 GW over 2012-2016. The region’s cumulative capacity would overtake Europe’s in 2013 and hit 200 GW by the end of the period, says GWEC.

Europe is forecast for continued stability, underpinned by a clear policy framework and targets. Germany’s nuclear phase-out could provide a fillip to growth while Spain’s sputtering expansion is offset by developments in Romania, Poland, Turkey and Sweden.

Despite prospects for a strong 2012, North America risks a sizeable dip in 2013 with the likely withdrawal of the PTC. GWEC expects slightly more than 50 GW to be installed over 2012-2016, bringing total installed capacity up to just over 100 MW.

Prices and Finance

‘Competitiveness’ is the wind industry’s new byword, for GWEC. With prices under pressure from an oversupply of turbines as well as cheap gas, the wind industry must also confront dwindling finance.

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Balance sheet funding from utilities has hit its limits, while weak debt markets have raised the cost of project finance. Amid national budget deficits, several European nations have cut back support for renewables.

GWEC highlights the role of public financial institutions in plugging the gap in funding. But the council sees a need for developing new sources of finance. A failure to set a global carbon price could further dim the sector’s outlook.

But the report also highlights the positive news from 2011 of wind technology’s falling costs and growing productivity. They state the number of markets where wind now competes successfully with conventional energy is growing.


Small Wind: Still Overlooked in the Developing World

While utility-scale wind is surging ahead in emerging nations, small wind’s tremendous potential for regions such as Africa, Southeast Asia and South America is yet to be tapped, finds the World Wind Energy Association (WWEA).

A map of the global distribution of small wind manufacturers in WWEA’s 2012 Small Wind World Report reveals small wind is yet to broach areas where obsolete and deficient grids could make its technology highly attractive.

Market Leaders

In gathering data, WWEA picked 100 kW as the reference point for its report, which found that global capacity hit 443.3 MW by the end of 2010. The US hosts 40% of this total, putting it slightly ahead of China, with the UK coming a fairly distant third.

The US’s 179 MW of small-wind capacity reflects almost 30 different supportive policies and aid schemes. The nation is also home to 58 of a global total of 330 small wind manufacturers, who are now to be found in more than 40 countries.

China has installed 450,000 small wind turbines, although WWEA estimates that only 250,000 are still operating. Installed capacity is estimated at 166 MW and the Asian giant also ranks highly in production, with 57 small wind manufacturers. But the report highlights a fault-line between markets in nations such as China, where small wind is a competitive off-grid technology, and the ‘fragile’ incentive-driven sector in the developed world.

Technology and cost differs greatly between these types of market. China’s small wind turbines averaged 0.37 kW at the end of 2010, while those in the US averaged 1.24 kW and in the UK 2.0 kW. Installed cost in China is about a third that in the US, at RMB10,000/kW (US$1580/kW).

Unlocking Small Wind’s Potential

Cost of technology figures along with market incentives, fossil-fuel pricing, investor interest, consumer awareness, certification, permitting and wind evaluation as the key factors for small wind’s continuing expansion.

But financial, wind and energy experts concur in seeing a bright future for the sector if demand holds up, according to WWEA. The association makes its own forecast that the hectic 35% annual growth over recent years will continue up to 2015. Expansion will then ease to 20% in 2015-2020, leading to 750 MW in new capacity over 2020 to bring cumulative installed capacity up to 3817 MW.

In the longer term, WWEA expects the small-wind sector to be driven by rising fossil-fuel prices, global warming and ever-increasing electricity demand. In the meantime, the association calls for supportive policies and standards to prime the sector’s growth until economic appeal kicks in.

For now, in fact, small-wind development remains clustered around developed nations in North America and Europe. Emerging countries continue to show ‘relatively slow progress’, despite the technology’s perfect match for the creaking grids of Africa, Southeast Asia and South America.

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