Broader global role replaces rapid growth

WORLDWIDE: The wind industry has grown up. This is one way of interpreting the findings from the latest edition of BTM Consult's annual market report and forecast to 2016, International Wind Energy Development: World Update 2011.

It is no longer a booming baby industry with double-digit growth rates year in, year out; instead it is an industry that in most markets can expect a more sedate but steadier growth in installations. It is slowly but surely increasing its geographic reach and its share of the overall energy mix.

Annual installed global capacity has risen by an average of 23% over the past five years, with 42% and 35% growth in 2008 and 2009 respectively, according to BTM's analysis. However, this growth rate fell dramatically to just 3.4% in 2010 and, despite last year being a record year for wind installations with global added capacity of 41.7GW, the growth rate was only a modest 5.9%.

BTM attributes the slowing in growth rates, particularly in Europe, to the global financial crisis and the impact of the subsequent sovereign debt crises. In addition, China, the world's single largest wind market and responsible for much of the rapid growth in recent years, has also slowed due to government attempts to ease pressure on an overwhelmed grid. China still managed to install the most capacity of any country in 2011, with 17.6GW, but this represents a 6.9% drop from 18.9GW the previous year.

Maturing Europe

The combination of China's rampant growth in recent years, shortages of available capital and the cutting of support mechanisms has seen Europe's share of new installations more than halve, from 51% five years ago to 24.5% in 2011.

BTM Consult director Birger Madsen says that in addition to the reasons mentioned above, there is also a simple technical explanation for Europe's rapid fall in the share of new installations. "Yes, there are economic problems, but also the market is becoming more and more mature and close to saturation," says Madsen.

"For example in Germany (Europe's largest wind market) you are getting very close to a situation where you only get new installations when repowering existing turbines."

Having said that, Germany is predicted by BTM to install more offshore turbines than any other nation between 2012 and 2016, with around 6.9GW of capacity expected to be put into German waters. Indeed, BTM regards offshore as one of the bright hopes for growth in European wind. Offshore will account for 8.5% of global turbine demand by 2016, with Europe leading the way and predicted to install 16GW between 2012 and 2016 to reach 20GW by 2016. Next in the offshore pecking order after Germany is expected to be the UK, with 4.4GW of installations anticipated by 2012. Its total installed capacity will be 6.5GW. Outside Europe, the only nation in the same league as Germany and the UK for offshore capacity is China, with a predicted 5.4GW by 2016.

However, despite the significant offshore contribution, the BTM report sees Europe accounting for just 27% of demand for new turbines between now and 2016, whereas Asia will account for 44.3% of demand over the same period. As a result, Asia will also overtake Europe in terms of total installed capacity during BTM's forecast period of 2012 to 2016. Europe in 2011 accounted for 40% of global wind capacity with 97.6GW installed, then Asia accounted for 33% with 79.3GW and the Americas accounted for 23% with 56.6GW.

While Europe's capacity to 2016 is predicted to grow to 170.7GW, its share of global capacity will have shrunk to 33%, while Asia's increases to 37% with 188.7GW predicted. The Americas' market share will hit 25%, with 125.8GW predicted capacity.

Global slowdown

It is clear from these figures that BTM sees the wind market continuing to grow in all geographic regions. But following single-digit growth in turbine installation rates in 2010 and 2011, the consultancy has decided to revise down its growth predictions - by more than five percentage points - for the first time in the report's 17-year history.

BTM now envisages an average annual growth rate for 2012 - 2016 of 10.3%, with global capacity reaching 510.9GW. This is a 5.2% drop from last year's report, which forecast an average growth of 15.5% during the period 2011-2015, with global capacity expected to be 513.7GW by 2015.

Madsen says the adjustment reflects the fact that in all markets, not just Europe, wind is becoming a more established energy source and, as a result, the rapid growth trajectory of earlier years is difficult to maintain.

"In any new market you will see strong growth at the start and then later on that growth curve will become more flat," he says.

"Of course, we're not close to that globally - the flatter end of the curve is 15 to 20 years ahead of us - but we will not continue to see such high levels of growth (as in previous years). Instead, we will see a more modest growth rate as the industry as a whole becomes more mature."

Emerging markets

The modest overall growth rate is likely to be a combination of lower growth in more established markets and strong growth in emerging wind nations. With Europe floundering, China putting on the brakes and US installations likely to fall dramatically in 2013 if its production tax credit (PTC) subsidy is not extended or replaced by a similar scheme, the BTM report says it is up to the emerging markets of India, Canada, Latin America and Eastern Europe, as well as the ambitious European offshore industry to compensate and help guide the wind industry into long term stability.

These are all countries and regions that posted strong growth in 2011 and are expected to continue to do so for the foreseeable future. Canada, for example, had a record year for installations, adding 1.27GW, up 84% from 2010. Brazil installed 583MW in 2011, up 90% from 2010.

India was the world's third-largest market for newly installed capacity behind China and the US, with 3.3GW, up from 1.17GW in 2010. Central and eastern Europe also posted impressive growth; Poland and Romania, for example, grew by 14% and 53% respectively. Sweden managed a record year with 763MW of new capacity, up from 604MW in 2010.

For Chinese turbine manufacturers, who saw their overall market share increase in 2011, the trend away from the more established markets will provide a timely boost to their nascent export businesses, according to Madsen.

"We have seen a growing number of exports from Chinese companies, and it's interesting because in China we do not predict strong growth," he says.

"However, China has an overwhelming production capacity, so the turbine manufacturers have a need to get exports started, and the best chance for selling is in the emerging markets; there they start more on an equal level than in established markets."

During 2011 five Chinese turbine manufacturers installed 140 turbines in five different foreign markets. Goldwind installed 79 of its direct drive 1.5MW units in the US, 34 turbines of 1.5MW in Ethiopia and 11 units in Ecuador, making it the largest Chinese exporter.

Turbine titans

Indeed, Goldwind led the charge for Chinese manufacturers, jumping into second position in BTM's league table of turbine suppliers, with a 9.4% share of sales. Three other Chinese firms made the top ten: Sinovel at number seven, United Power at eight and Mingyang at ten. As well as firms making gains abroad, Chinese companies also further cemented their control of the domestic market: foreign-owned manufacturers only achieved a 9.2% share of the Chinese market in 2011, down 1.3% from 2010 and a 4.8% drop from 2009.

Vestas is still the world's largest turbine supplier, although its market share dropped by 1.4% to 12.9% in 2011. This ceding of market share was a common theme among the top ten - even Goldwind saw a fall from 2010, when it held 9.5%. In fact, the companies outside the top ten increased their market share to 21.5%, up from 20.2% in 2010. Before 2007, the report notes, "it was usually the case that the group of companies below the top ten accounted for 5-6% of the market".

Madsen says the change is due to the rapid expansion of Chinese manufacturing capacity.

"You now have a lot of companies (in China) that have installed 200MW or so, and these companies didn't exist four or five years ago," he says.

Looking ahead

The BTM report predicts that 2012 will be another year of global growth, although at 3.6% it will be slower than last year's 5.9%. China and the US are again expected to lead the way, with 15GW and 8.25GW of capacity to be installed respectively. The high rate in the US, however, is likely to represent a glut of capacity coming online to secure PTCs before the scheme's possible lapse at the end of the year, and BTM predicts 2013 installations to fall at least as low as 7.5GW, and probably lower, should a PTC extension or replacement subsidy fail to materialise.

As Madsen points out, wind is now a maturing industry, and this maturity is also reflected by wind's increasing role in utilities' overall energy mix (see box on previous page). BTM predicts that this trend will continue, with penetration of wind power in the world's electricity supply expected to reach 4.38% in 2016 and 8.02% in 2021, up from 2.26% in 2011.

BIGGER IS BETTER - THE SHIFT TO UTILITY OWNERSHIP CONTINUES

BTM's report makes it clear that when it comes to wind farm ownership - and turbine manufacturers' customer base - in Europe, the traditional Danish and German model of developers backed by private equity investment has its best days behind it.

Likewise, in the US, independent power producers are no longer the key players when it comes to developing projects. In Europe and North America there is an ongoing trend that is seeing turbine manufacturers increasingly receiving their orders from utilities, while in China the five large state-owned generators already account for 50% of cumulative wind capacity.

Big players boost share

In total, the market share of the top 15 operators has increased from 23% of global installations in 2003 to 33% in 2011, with Spain's Iberdrola and China's Longyuan Power Group the largest players, followed closely by US utility NextEra Energy Resources and Portugal's EDP Renovaveis.

BTM identifies three key issues driving the global trend towards utility ownership. First, increased environmental awareness by the public is causing utilities to seek to replace their public image as polluters with that of green companies. Second, the large capital requirements of major wind projects, combined with a shortage of available bank debt available to smaller and medium-sized companies, is making utilities in many cases the only possible developers for schemes.

Finally, wind now plays an essential role in utilities' overall energy portfolio and it is clear that many are viewing renewable energy technologies such as wind as a way of hedging against the risk of gas and oil prices rising in the future.

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