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Question of the week: What will grid parity mean for the wind industry?

As the cost of onshore wind comes down globally, and a number of markets move closer to grid parity, Windpower Monthly asked Henrik Stiesdal of Siemens, Simon Cooke of 6 Alpha Associates and Aaron Barr of Make Consulting, what this would mean for the wind industry.

QUESTION: What effect will grid parity have on the development of wind power?

Henrik Stiesdal - CTO Siemens Wind Power

When we reach genuine grid parity (which we will surely do onshore within a few years, and most likely also offshore within the 2020s) we will be at par or better on energy – but not on power or capacity as it is often called. The final constraint is still there – the constraint that wind is an intermittent energy source.

The immediate solution is straightforward and is already widely implemented: use gas or hydro as backup. The added cost is moderate. However, due to the climate consequences of gas and the scarcity of hydro, the long-term solution is large-scale storage of wind electricity.

This is something where a suitable technology is not yet available: Most of the known solutions, such as batteries or compressed air simply do not scale to full-blown regional or country-level storage with days' duration.

So a considerable amount of technology development work remains – and also not least the establishment of market arrangements that make it possible for a storage provider to have a viable business case.

Once we reach grid parity and solve the storage question, we will genuinely offer the most attractive source of electricity – we will have beaten coal.

Simon Cooke - Managing director 6 Alpha Associates

Achieving grid parity would mark a significant industry shift; fostering enhanced competition with other energy generating assets while decreasing political influence.

At a time when there is wavering support for onshore wind in favour of big-ticket offshore deals, grid parity would enable smaller developers to redress the balance with the build-out of portfolios that are not directly dependent on subsidy support.

Interestingly, in key emerging markets such as Mexico, this shift has already taken place – and the interests of manufacturers and developers are becoming increasingly aligned, reducing construction and installation costs in the medium to long-term.

In the European market, removing the subsidy hurdle should allow developers to focus their energy on addressing the current situation as far as the planning and consenting of sites is concerned. Onshore, an increasing proportion of project proposals are being blocked, while in the marine environment the complexities of the consenting process and current concerns about land access rights continue to thwart developments.

From this perspective it's crucial that developers continue to present the best possible case for the long-term future of their projects by making key manufacturer and contractor choices in a timely fashion and undertaking comprehensive site studies early, to guarantee that further obstacles to electricity generation are not encountered once planning and consent has been granted.

Aaron Barr - Technology advisor Make Consulting

Realisation of global grid parity furthers the collective goal of the wind energy industry: a viable market based on sound economics without dependence upon government subsidies. Loosening the reins of government support is the final hurdle to create a stand-alone industry resilient to the looming threat of politically-driven market fluctuations.

Global wind energy markets continue to make progress on the march toward grid parity. Wind projects are increasingly productive due to larger rotor diameters and increasingly reliable through improved operations and maintenance practices. Economies of scale gained through higher turbine megawatt ratings and larger wind power plants continue to show promise in further reduction in wind energy's cost of electricity.

The long-term trends indicate that electricity prices, in general, will increase modestly in global markets, driven by pockets of demand growth and long-term price escalation of fossil fuel sources. This dynamic presents an opportunity for wind energy costs to drop below electricity prices in many regions.

There are some isolated examples where grid parity has already been achieved. The success of wind in the most recent Brazilian power auctions illustrates that productive wind energy assets can compete against other power generation sources in the right environments. The coming years will see more markets realise grid parity, and will result in sustained long-term installations of wind energy projects.

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