Onshore, Project Development, Wind Power

Growth on all fronts: The BTM wind market update

Issue 4 and Volume 10.

The last 18 months have been an interesting time for the international wind industry, with new markets coming to the fore as old ones decline, and an increasingly diverse and international flavour to the business. This year’s BTM World Market Update provides an authoritative review of 2006, along with predictions for the future. Alasdair Cameron reports on its main findings.

In 2006, total worldwide capacity increased by 15,016 MW, the most ever installed in a single year, bringing cumulative global capacity to 74,300 MW. This 15 GW of new installation represents an industry worth €19 billion a year and an annual growth rate of 25%. This means that over the last five years the wind industry has grown by an average of 17% per annum.

Global review

Despite the increasing internationalization of the wind business, Europe continued to account for over 51% of all new installations, down from 56% in 2005 and 70% in 2004.While it lost overall market share, Europe grew as a whole and remains the most important region for wind power development, installing 7658 MW in 2006. Pushed on by rapid growth in India and China, Asia (including the OECD-Pacific) was the second largest region, accounting for 24.7% (3711 MW). The Americas were just behind Asia, with 23.4% (3515 MW), largely on account of the continuing boom in the US market. Africa installed just 106 MW in 2006, while the Middle East outside of North Africa and the Transition Economies (former Eastern Bloc) installed no new wind power capacity.


Thanks to the extension of the PTC, the US retained its position as the single largest wind market in the world NORDEX

In 2006, the United States remained the single largest market for onshore wind, installing 2454 MW, roughly the same as in 2005 (Table 1). The principle driver behind this was the continuing existence of the Production Tax Credit (PTC), which has now been extended until the end of 2008. Within the US, growth is uneven, with just two states – Washington and Texas – accounting for 59% of growth. Indeed, Texas is now the leading state in the country, having recently overtaken California in terms of total installed capacity. Elsewhere in North America, Canada had a good year, with 776 MW of new wind constructed.

 
TABLE 1. The top 10 wind turbine markets in 2006 (MW installed) Source: BTM Consult ApS – March 2007

In Europe, Germany kept its place as the lead market in 2006 with 2233 MW of new capacity installed, despite several years of declining growth as the market there matures. This sustained German growth has surprised many analysts and is higher than expected, showing the German onshore wind market to be more robust than previously thought. Altogether, Germany now has more than 20,000 MW installed (Table 2), nearly twice as much as the next highest country. Spain was Europe’s second largest market (fourth globally) with 1587 MW installed, down from 2005, but still a significant expansion. Other leading markets in Europe were France, which installed a surprise 810 MW, followed by the UK with 631 MW and Portugal with 629 MW.

 
TABLE 2. Top 10 wind turbine markets in 2006 by cumulative capacity (MW). Source: BTM Consult ApS – March 2007

In Asia-Pacific, the market is dominated by China and India. In 2006, India overtook Spain to become the third largest wind market in the world, installing 1840 MW, up from 1388 MW in 2005. China also grew rapidly, with 1334 MW of new installations, compared with just 498 MW in 2005. Japan was the third largest market in the region, building 298 MW, followed by South Korea with 106 MW. Australia had a poor year in 2006, with just 79 MW of new wind installed.

Turbine manufacturers

2006 saw little dramatic change in the wind turbine manufacturing industry, with all the major companies except for GE gaining market share. One of the reasons for this was that in 2006 more turbines were sold than were installed (turbine output was 106% of installations), meaning that there was more share to go around. This is the opposite situation from 2005, when output was only 98% of installation.

Of the 11,127 wind turbine generators shipped worldwide in 2006 (representing 16,000 MW), Vestas of Denmark had the largest share of the market with 28.2%. It was followed in quick succession by Gamesa (15.6%), GE Wind (15.5%) and Enercon (15.4%). India-based Suzlon came in fifth place with 7.7%, followed closely by Siemens with 7.3%. Nordex accounted for 3.4%, followed by REpower (now owned by Suzlon) on 3.2%. 2006 saw two new entrants into the top 10 in the shape of Spanish company Acciona (2.8%) and China-based Goldwind (2.8%). Ecotècnia and Mitsubishi were the losers in this change, with both dropping out of the top 10 suppliers. Altogether. the top 10 manufacturers saw their market share hold steady at around 95%.

 
FIGURE 1. Top 10 wind turbine manufacturers in 2006 Source: BTM Consult ApS

In spite of the increasing globalization of the market, many turbine manufacturers remain heavily reliant on their domestic markets. GE dominates in the US, Gamesa in Spain, Enercon in Germany, Suzlon in India and Goldwind in China. The big exception to this is, of course, Vestas, which exports almost all of the turbines it produces as the Danish market was the first to become saturated.

2006 also saw demand continue to outstrip supply, with most manufacturers reporting that order books were full up for 1.5-2 years in advance. This huge growth has placed strain on the supply of components such as gearboxes, generators and bearings. Supply and demand are expected to achieve a balance by 2011, says BTM.

Wind turbine technology

Once again, upscaling was the overarching theme in wind turbine technology, with the average size of turbines installed continuing to grow, reaching 1.419 MW, over 100 kW higher than in 2005. In Asia, smaller turbines are popular, with the average size around 926 kW, compared with the US at 1.6 MW and the United Kingdom with 1.953 MW.

2006 also saw the installation of the first 5 MW turbine offshore, at Beatrice in Scotland. The development of 5 MW turbines is important, particularly for the German offshore market, where many developers feel that the projects will not be economically viable without the high returns which large turbines can bring.

Five-year forecast

The next five years look encouraging for the wind market, with continued growth expected on all fronts. BTM predicts that the combined annual growth rate until 2011 will be 17%, roughly the same as for the last five years. This means that by 2011 the global market will represent about 33,000 MW per year.

Regionally, Europe will continue to be the most important area, with an estimated installation of around 59,150 MW over the five years. If realized, this would bring the total installed wind power capacity in Europe to 107,777 MW, more than double its current level. This growth is expected despite the increasing maturity of traditional markets such as Spain and Germany.


While the wind turbine market is becoming increasingly international, many suppliers are still reliant on their home markets SUZLON

The next largest region in 2011, according to BTM, will be the Americas, with 33,050 MW of new wind installed for a total of 46,627 MW. The US will continue to be the lead market, although other countries such as Canada and Brazil will play an increasing role.

In South and East Asia, the market is expected to grow rapidly, with a total of 27,850 MW of new wind by 2011, up from 8963 MW today.

The OECD-Pacific region will roughly triple its total installed capacity, reaching 8142 MW by 2011, while the rest of the world will expand rapidly but remain marginal – it is only predicted to have a total combined capacity of 3792 MW by 2011.

Offshore forecast

Throughout 2006, the offshore sector developed as expected, contributing just 198 MW to the global market from two projects – the 90 MW Barrow wind farm in the UK and the 108 MW Egmond an Zee development in the Netherlands. Total offshore capacity now stands at 878 MW. One of the reasons for this slow progress, says BTM, is that prices and delivery times for wind turbines have increased due to the boom in onshore wind. In effect, it is a “sellers’ market”. Despite this, things are looking up for 2007 and 2008, with a number of new contracts being signed and consents granted. Indeed, two new wind projects are already under construction. These are the 110 MW Lillgrund development in Sweden and the 90 MW Burbo Bank project in the UK. A further 360 MW is well under way at the Robin Rigg and Lynn and Inner Dowsing wind farms in the UK.


Despite approaching saturation point Germany has surprised many analysts with its sustained levels of growth REPOWER

Over the next few years, BTM expects that the UK and Sweden will continue to take the lead in developing the offshore sector. By 2011, BTM predicts that the remainder of the UK’s Round 1 projects will be built (10 in all, totalling over 1000 MW). The first German project could be a 60 MW project at Borkum West, although this is unlikely to be finished before 2009-2010. Denmark too has a couple of 200 MW developments which will be realized around 2010, while about this time the first of the UK’s Round 2 projects will start construction. The earliest of these are likely to be the 300 MW Thanet wind farm and the 1000 MW London Array.

US

Thanks to the extension of the Production Tax Credit through to the end of 2008, the US looks set to remain the single most important market for the next two years, with an installation rate of 3000-4000 MW per year. Longer term, there is legislation being drafted to extend the PTC until 2013, and BTM believes that it is unlikely that this, or some other measure, will not be adopted. On top of this, an increasingly large number of states have introduced Renewable Portfolio Standards, providing additional support for wind energy developments. Assuming that the PTC is extended, BTM predicts that the US will install an additional 22,400 MW of wind over the next five years, for a total capacity of 34,035 MW in 2011.

Germany

Thanks to its high level of deployment, the onshore wind market in Germany is reaching saturation point, with BTM predicting a decline in installations until the offshore market picks up. By the end of 2006, the total installed capacity stood at 22,652 MW, with a further 9300 MW predicted to be installed over the next five years.

Offshore development is unlikely to occur before 2010-2011 and will be dependent on whether commercial turbines in the 5 MW class are available. However, offshore wind may be given an additional boost at the end of 2007 when the REFIT (feed in law) is to be redesigned, with possible benefits for the offshore sector.

Re-powering (the replacement of old turbines with newer more efficient ones) is likely to become a significant feature of the German market in years to come, with BTM predicting that this could begin in around 2-3 years.

India

In 2006, India over took Spain to become the third largest wind market in the world, installing 1840 MW. Assuming that the Indian economy as a whole continues its impressive growth, the wind industry is expected to continue its rapid development. One of the interesting things about the Indian market is that about 70% of the customers are large manufacturing companies developing wind electricity to use themselves. Utilities and IPPs account for only around 20% of the market. By 2011, BTM expects that India will have installed an additional 11,800 MW, for a cumulative capacity of 18,028 MW.

Spain

Despite slipping to fourth in terms of new installations, Spain remains the second most important market in Europe and has the third highest installed capacity in the world. From 2007-2011, BTM estimates that Spain will install 9500 MW of new wind, taking its cumulative total to over 20,000 MW. Part of the reason for the continuing strong growth in Spain is the growing demand for power, which has helped encourage new wind development. While there have been concerns that a lack of grid access might constrain development, this has now been partially overcome.

China

In 2006, China nearly doubled its installed wind capacity, installing 1344 MW and bringing its total to 2588 MW. BTM expects this rapid development to continue as long as China’s rapid economic development is maintained. In 2006, the Chinese government announced a target of 10% of electricity from renewables by 2015. while this will be mainly hydropower, BTM predicts that by 2011 China will have a total installed capacity of 14,800 MW of wind, and will be the second largest market in the world (after the US).

France

With 810 MW installed in 2006, France became the third largest wind market in Europe and showed the highest growth rate in the region. One of the major reasons for this rapid expansion, says BTM, is that France has finally lifted the 12 MW ceiling for single wind farms. Offshore, plans are also moving ahead in France with consent awarded for the first demonstration off the coast of Normandy. Although the government has set a target of 13,500 MW by 2010, BTM estimates that by 2011 the figure will be nearer 8785 MW, implying 7200 MW of new installation over the next five years.

Canada

Things are finally starting to move forward in the Canadian market and BTM expects significant growth in the next few years, estimating a total of 7000 MW by 2011. While the Canadian Wind Energy Association has a target of 10,000 MW by 2010, BTM believes that this is unlikely, despite the increasing number of regional incentive programmes.

Portugal

After France, Portugal has the fastest growth rate in Europe and installed 629 MW in 2006. Thanks to its generous feed-in tariff and the availability of interest-free loans, BTM expects the country’s cumulative installed capacity to reach 5500 MW by 2011. Major drivers for wind power development include Portugal’s heavy dependence on imported fossil fuels and its adherence to the European Union Renewables Directive.

United Kingdom

The UK has the best wind resources in Europe, and some of the best in the world (average capacity factors in the UK are 30%, compared with 20% in Germany). The market grew substantially in 2006, with 631 MW of new capacity installed. Over the next five years, BTM estimates that 8900 MW of new capacity will be installed, making the UK the third largest market in Europe by the end of the forecast period. Around 3100 MW of this new capacity is likely to come from offshore wind. After years of slow growth, things are finally looking brighter for the UK.

Italy

Italy continues to show steady but unspectacular growth, installing 417 MW in 2006, slightly less than in 2005. The country has now passed the 2000 MW landmark in terms of installed capacity and BTM expects it to reach 6918 MW by 2011, significantly higher than the official target of 2500 MW by 2010.

South Korea

South Korea continues to invest in wind power development, and is the second largest market in the OECD-Pacific (fourth largest in Asia), installing 106 MW last year. Although the government has an official target of 2200 MW by 2011, the country is also investing heavily in trying to develop turbines for export, part of the government’s plan for energy independence.

Japan

While Japan remains the third largest market in Asia, growth will still be modest, with a predicted target of 3707 MW by 2011.

Other countries to watch

In addition to the main markets, there are a number of other countries worth watching. Brazil, for example, has long been tipped as an exciting future wind market, with huge potential for development. In 2006, the country installed its first 200 MW of wind, with plans to increase this to 1400 MW over the next few years. Norway too has great potential, with some of the world’s finest wind resources. Over the next five years, BTM expects 2100 MW of new installation. Elsewhere in the world, North Africa could see some development, with Egypt in particular aiming to install 3500 MW over the next decade. Other African leaders could be Tunisia, Morocco and Libya, while South Africa is also considering some large projects.


Offshore is expected to grow more strongly in the next five years, with several wind farms already under construction, such as here at Burbo Bank DONG ENERGY

In addition to its five-year predictions, BTM makes longer-term forecasts on the general direction of the wind industry for the coming 10 years, in this case up to 2016. Overall, the market is expected to continue performing well, with new regions consistently opening up as old ones become saturated. By 2016, Europe will still be the lead market with an annual installation rate of 23,000 MW per year, closely followed by Asia with 19,700 MW per year and the Americas with 17,800 MW per year. The rest of the world will continue to lag with an annual installation rate of only 3000 MW. If all this comes to pass, then the combined global market will be more than 60,000 MW per year (worth around €75 billion in today’s terms), and the total installed capacity around 450,000 MW – of which around half will be in Europe.

Alasdair Cameron is former Assistant Editor of Renewable Energy World
e-mail: [email protected]

International Wind Energy Development – World Market Update 2006 was published in March 2007 by BTM Consult ApS Ringkøping, Denmark. Copies are available from BTM at the details given below.
e-mail: [email protected]
web: www.btm.dk