Windicator: Slowdown in former strongholds makes for sluggish year

WORLDWIDE: With approximately 23GW of new capacity installed globally so far this year, the final total is likely to be well short of the 50GW installed in 2012. Further capacity is, however, expected to come online and the year-end cumulative total is likely to be in the 305-310GW range.

The overall slowdown this year has been due to reduced activity in some of the best-performing markets of previous years, particularly the US and Spain. However, there is nearly 4GW of pipeline capacity in the US where construction has begun, according to the Windpower Intelligence database of projects, and a number of other markets are showing promise for 2014.

Europe as a whole — with the exception of the UK — has been somewhat sluggish in 2013, and the Asia-Pacific region was also less buoyant in 2013. Strong performances were, however, recorded in the UK, Australia and Latin America. The UK is showing a 22% increase in its capacity so far this year, taking its total installed capacity to more than 10GW. This includes 3.6GW of offshore wind that is now operational — by far the highest level in the world.

global index

Although a number of experts expect the amount of capacity installed in 2014 to be higher than in 2013, the signals are mixed. Danish wind turbine manufacturer Vestas has recently upgraded its market forecast, but other manufacturers are more cautious. Strong performances are expected in the US, North Africa — particularly Morocco — and South Africa.

Offshore

The contribution of offshore wind to the global total is still quite modest, but the UK continues to surge ahead. Meanwhile, a number of large German offshore wind farms are likely to be commissioned in 2014.

After a long period of uncertainty, when offshore installation costs appeared to be static — or even rising — there are now signs that they may be on a downward trend and an expectation that costs may fall significantly by 2020.

But a chilling signal was sent in late November, when German utility RWE announced that it was pulling out of the 1.2GW Atlantic Array offshore wind farm in the Bristol Channel, western England, after spending five years and an estimated £13 million (EUR 15.6 million) on the project.

Also, trade body RenewableUK is concerned that momentum may be lost as there have recently been mixed messages from politicians about support for offshore wind and these may have an impact on investor confidence. Although the UK's level of installed offshore wind is high, nearly 10GW more is needed to reach its ambition of at least 13GW of offshore wind by 2020.

Germany needs to install offshore wind at a similar rate, as its 2020 target is 10GW, but current installations only total 520MW. All the same, plans have been approved for 24GW of wind farms in the North Sea and the Baltic Sea.

Solar competition

Although a number of organisations have recognised that wind energy is drawing closer and closer to cost competitiveness with the fossil-fuel generating sources, it is also facing stiff competition from another renewable-energy source in the form of photovoltaics. It is anticipated that 30GW of PV will be installed worldwide in 2013, which is likely to exceed the wind capacity installed.

PV, however, is not yet competitive with wind except in a few locations with high-incident solar radiation and, perhaps, low winds. But the cost of PV installations is following a steady downward trajectory. Although module prices are now hovering around $1/W, prices for complete systems are significantly higher and show wide variations. PV load factors — or capacity factors — are generally about half those of wind installations, and so generation costs are about double.

The competitive position of wind relative to coal and gas is unlikely to change because the prices for these fossil fuels is expected to remain largely level over the short to medium term. However, continuing decreases in the generation cost from wind should strengthen its competitive position.

Now that the mists have cleared over the generating costs of nuclear power, with the publication of the UK "strike price" of £92.5/MWh (EUR 111.7/MWh), it appears, at first sight, to be cheaper than onshore wind's £100/MWh. However, the UK nuclear strike price is somewhat artificial, and a truly commercial price level would be higher — probably around £100/MWh — because investors would want a higher rate of return than is possible at this level. As the first of the new nuclear power stations to be built as part of the UK programme is not expected to be complete until after 2020, it is likely that the generating costs from onshore wind will be significantly below the nuclear strike price by that time.

The quarterly Windicator is an indicator of the state of play. Changes in the table overleaf can be corrections received rather than additions or subtractions. We welcome corrections.

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