Windicator: Promising start to 2014 in some regions

WORLDWIDE: Earnings at major wind-turbine manufacturers have improved markedly, but global installed wind capacity increased by a modest 4% during the period covered by our analysis.

The cut-off dates vary by country, but the average period covered is probably about four months, taking the relevant date to late April/May.

The 4% increase suggests that the yearly growth rate may be about 10%. But this is highly uncertain at this stage and there is no reason to doubt the more optimistic projections from the Global Wind Energy Council (GWEC) and the American Wind Energy Association (AWEA).

GWEC's Global Wind Report Annual Market Update 2013 report, released in April, suggests that 47GW of capacity will be installed globally this year.

Another report in April, from Bloomberg New Energy Finance, reported that renewable energy investments during the first quarter of 2014 were up by 10% compared with 2013. The review covered all renewable-energy sources, in the case of wind putting particular emphasis on large projects in Kenya, Canada and Denmark.

A glance at the first-quarter reports from some of the major manufacturers suggests that 2014 may indeed be a better year than 2013. Vestas, for example, reported an increase of 84% in its order intake in megawatts, delivering wind-power systems with an aggregate capacity of 988MW, an increase of 21% over the same period last year. Goldwind does not report detailed quarterly sales volumes in megawatts, but there was an increase in first-quarter sales in 2014, compared with 2013 (see the stock-price analysis).

Regions

Further reasons for optimism come from AWEA, which reports that more than 13GW of wind capacity is now under construction in the US, with strong activity in Texas and Iowa. The fact that the production tax credit has now been extended to 2015 has given the US wind industry a measure of stability.

In Europe, a gloomier picture emerges, with Windicator data registering a modest 1.8% increase in capacity across the region during our period of observation.

GWEC suggests that European capacity added this year will be less than in 2013, and progress in Germany and Spain — which have been the star performers for some time — is distinctly sluggish.

Although Germany delivered the highest amount of new capacity during the period under review — 868MW — the increase was only about 3%.

Solid additiom

One other solid market among EU states with large amounts of wind power was the UK, which added 382MW, an increase of 3.6%. Another 3.2GW is under construction, and that will bring total capacity to 14GW.

Although the short-term prospects for wind in Europe are good, the medium and long-term prospects are more uncertain until post-2020 targets are set.

Progress in South America is still sluggish. But in Africa there has been notable progress: in South Africa, installed wind capacity has risen nearly 260MW from the 10MW where it long lingered previously, and Tunisia has also made strides.

Market forecasts

The GWEC report suggests that growth in Asia this year will be about double that in Europe and, as a result, Asia will overtake Europe in capacity terms. Asia is forecast to have 136GW by year end, and Europe 132GW. The growth projections for North America is 10GW, and for Latin America 7.8GW. Total capacity by the end of the year is forecast to be 365GW. As world nuclear capacity is 370GW, wind is likely to overtake nuclear, in capacity terms, early in 2015.

Winter offshore

Unsurprisingly, there was no significant increase in worldwide offshore capacity during the period under review, as offshore construction is centred on the northern hemisphere and generally comes to a halt during the winter period.

The GWEC report voices doubts as to whether the European aspiration of having 40GW by 2020 will be realised, but notes that activity in Germany — hitherto rather lackadaisical — is likely to pick up soon.

Progress in the UK - until now rather sanguine - has been inhibited by the protracted, evolutionary progress of the country's electricity market reform. Some 1.4GW of offshore capacity is under construction, according to industry body RenewableUK, and another 4.3GW has been consented. The latter includes some projects that have been approved up to two years ago.

Wind's competitive position strengthened during the period, with gas prices moving upwards following the realisation that the US shale gas boom has peaked. Although wind's installed costs are moving down slowly, that advantage is being offset by the need to develop more difficult sites in many places now that the supply of easily accessible sites is dwindling.

There is no sign of a nuclear industry breakthrough in reducing costs and the construction costs of the nuclear plants being built in Finland and France continue to increase.

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