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Drivers for growth stronger than ever

The wind power industry is still accelerating, despite the global financial turmoil. By 2013, the industry will be installing more than 58.5 GW a year, compared with the 29 GW installed in 2008 to bring the global total to 122 GW. Though some uncertainty is attached to growth during this year and next, within five years world wind power capacity will nearly triple, with the addition of 221 GW to today's 122 GW.

Support by governments for emissions reductions and resilient Asian economies are sustaining the wind industry through troubled times. BTM Consult's Annual Market Update not only maintains but also improves its optimistic five year forecast

The wind power industry is still accelerating, despite the global financial turmoil. By 2013, the industry will be installing more than 58.5 GW a year, compared with the 29 GW installed in 2008 to bring the global total to 122 GW. Though some uncertainty is attached to growth during this year and next, within five years world wind power capacity will nearly triple, with the addition of 221 GW to today's 122 GW. The five year forecast from Denmark's BTM Consult, contained in the latest edition of its annual World Market Update of the wind sector, is slightly higher than that made last year.

"The global drivers for wind power have been stronger than ever," says BTM. In Europe, the market push comes from governments eager to combat global warming; in America from a desire to reduce greenhouse gas emissions and improve energy security; and in China and India from still strong rates of economic growth raising demand for electricity. The narrowing of the price gap between wind power and electricity from fossil fuels is also playing a major role.

The global wind market's compound annual growth rate for the past five years was 24.8%. For the next five years it is expected to be 22.9%. BTM forecasts global wind turbines sales of some $103 billion in 2013, nearly twice the $55 billion expected this year. Over the five year period, total wind industry revenues will hit about $407 billion from manufacture of turbines, construction, grid connection and other activities. The market for turbines alone is estimated at $285 billion.

Looking ahead

Beyond 2013, growth will once more accelerate, moving from the 15.7% forecast for each year for the next five years to 17.2% a year from 2014 to 2018. By 2018, BTM predicts that global capacity will hit 878 GW, with wind meeting 8% of world electricity demand -- compared to 1.3% today -- assuming that demand will grow as forecast by the International Energy Agency. "If the growth trend continues, penetration will increase even faster beyond 2018," states BTM, which predicts that by 2020 wind could be supplying 10% of global electricity demand. Denmark already gets 20% of its electricity from wind, while the figure is 8% in Germany and 11% in Spain -- where in some provinces it nears 100%.

During 2009-2013, Europe will remain the biggest single wind market (chart), installing 79.2 GW and accounting for 36% of total world demand for turbines. France and the UK will now join Germany and Spain as European wind power leaders. All four countries will install at least 2 GW a year to 2013, more than achieved by both Spain and Germany in 2008, and up to 3 GW a year by the end of the period. Germany will lead, with the UK and France sandwiched between it and Spain in fourth place. Offshore development will account for 12.3% of the European market in the five-year period.

Over the same time span, China will add 42.8 GW to reach 54.9 GW on land and offshore and India will add an average 3 GW a year, to reach 15.9 GW, a 64% increase. The US will install 52 GW a year to reach 77.24 GW, nearly all of that on land, states BTM.

Top countries

Europe's two leading wind power countries, Germany and Spain, are no longer the primary drivers of world market growth. They were relegated to third and fourth places in the country rankings for installation of new wind capacity last year, reports BTM. By far the largest markets were the United States and China, installing 8358 MW and 6246 MW, respectively, followed by India with 1810 MW. The Spanish market declined, but still came in fourth with 1739 MW, followed by the stagnant German market at 1665 MW.

Neither was Europe the largest regional market in 2008, having been overtaken by both the Americas and Asia, according to BTM. Led by the US with 8358 MW, additions of 526 MW in Canada and 295 MW in Brazil contributed to total regional growth for North and South America of 9.5 MW in 2008, accounting for 33.8% of global new capacity and lifting cumulative capacity for the Americas to 28.9 GW. Asia-Pacific added 9.26 GW last year to reach 26.4 GW and take 32.8% of the global market just ahead of Europe at 32.6%, having added 9.18 GW to bring its total to 66 GW. The rest of the world accounted for less than 1% (0.23 GW) of the global market in 2008. It is home to 800 MW of wind power.

In a sign of the times, Germany is no longer the country with the highest installed capacity, a pole position it has held since 1997. The world wind leader is now the United States, which ended 2008 at 25.15 GW, a gigawatt ahead of Germany at 23.9 GW. Spain comes next at 16.5 GW, followed by China at 12.1 GW. These are the only four countries in the world with more than 10 GW of wind power, although India at 9.65 GW is not far behind. A big gap separates the top five from the rest. All other countries lie below 4 GW. China's average growth rate over the past three years, 112.4%, is the highest in the world, followed by 68% in France and 40.1% in the US (table).

Turbine suppliers

Overall, demand for wind turbines still outstrips supply, although the fallout from the current global financial turmoil on the one hand and a rapidly expanding wind industry on the other is likely to rectify that imbalance within the next year or two, says BTM. A total of 31 GW was shipped during 2008, 2 GW more than installed, indicating that a large number of turbines were in transit or under construction at the start of 2009.

Market shares among turbine suppliers shifted slightly, with Vestas continuing to lose out to its competitors -- GE in particular. Vestas' world market share dropped to 19.8% from 22.6% a year earlier, while GE's increased from 16.6% to 18.6%. The leading suppliers are being increasingly pressed by new entrants, particularly from China, with all top ten suppliers, except GE Energy and Nordex, losing market share in 2008 (chart). The leading turbine makers are being hard pressed by the growing number of wind turbine suppliers banging at the door of their top ten club. The newcomers represented just 5-6% of the market in previous years, but leapt to 17.6% in 2008, partly reflecting the arrival of a number of new domestic suppliers in the big Chinese market.

Vestas and GE together supplied 10.8 GW, or 38% of the world market last year. Within the top ten national markets in 2008, Vestas is among the top three suppliers in all of them, except for China and Portugal. GE, the second largest supplier, only ranks among the top three in one of the ten markets, the United States. After Vestas, Enercon is the most global company, having a presence among the top three suppliers in four markets, followed by Gamesa in three markets: Spain, Portugal and the United States.

Two Chinese companies ranked among the top ten wind turbine manufacturers worldwide in 2008: Sinovel, which takes over as the country's top manufacturer and ranks seventh in the world, and Goldwind, which ranks ninth. Wind turbines from Chinese companies supplied 72% of the domestic market in 2008, compared with 55% the year before. But Chinese manufacturers do not figure in any other market.

Turbines continue to grow in size, with the average of those delivered in 2008 slightly up from 1.49 MW in 2007 to 1.56 MW last year. By far the most popular size range is turbines with rated capacities of 1.5-2.5 MW, which made up 80.4% of all machines delivered. In China, the average size of installed turbines was smaller, at 1.2 MW rated capacity, and smaller still in India at 1 MW.

Based on a stabilisation of prices for wind turbines as supply catches up with demand and the price of raw materials and oil drops, BTM believes that over the next five years the installed cost of onshore wind farms will be EUR 1380/kW ($1747/kW). It will, however, increase significantly for offshore to EUR 3000/kW ($3797/kW), up from EUR 2380/kW a year ago.

Customers

Wind project ownership continues to shift toward utilities, which are under pressure to include renewable energy sources in their power generation mix under government-mandated targets. Main factors identified by BTM are the EU's agreement in December to commit to getting 20% of its energy from renewables by 2020, green energy mandate laws now adopted by 28 American states and similar laws in China. At the same time, because wind projects are capital intensive and turbine supply has been tight, investors have welcomed backing of deep-pocketed utilities -- particularly in the case of much larger and more costly offshore plant compared with those onshore.

Iberdrola Renovables, the renewables unit of Spanish power giant Iberdrola, owns more wind plant than any other company, with almost 9 GW of cumulative installed capacity, mainly in Europe and America. It is followed by second ranked American utility FPL Energy, with 6.4 GW in North America, and EDP Renovaveis, the clean energy unit of Portuguese utility EDP, with 5.1 GW across both continents (table right).

Carbon avoidance

Wind will play a chief role in the global effort to slash emissions of carbon dioxide and other greenhouse gases. BTM reports that the power sector accounts for 25% of all carbon dioxide emissions. "The increased penetration of wind power in the world's electricity systems can be a major source of stabilising or reducing the emission of carbon dioxide," points out BTM. Assuming BTM's prediction for wind capacity in 2018 is correct, "wind will account for avoided CO2 equal to 11% of the world's total emissions for power generation," states the report. By 2013, wind power will have facilitated a 4.3% reduction global emissions from power generation.

Wind's contribution to emissions reduction in 2018 could be higher with the replacement of vehicles with combustion engines with electric vehicles, increasing the requirement for wind power, says BTM. "Assuming further improvements in the technology and cost effectiveness of wind power, it is likely that wind power in the long term will be able to reduce somewhere around a quarter to a third of all energy related emissions," it predicts.

Currently, wind power fed into the grid around the world instead of fossil fuel generation avoids carbon emissions equal to 16% of the total emissions from electricity production in the European Union in 2006, BTM says. It forecasts that Europe's cumulative installed wind power capacity of almost 150 GW in 2013 will contribute to carbon dioxide reduction about 80% greater than the levels attained today and by 2020 wind will have delivered 40-50% of reductions required by the EU's emissions reduction target for that year.

Price variation

BTM notes that amid efforts to build an international "cap and trade" system for allowances for carbon dioxide emissions there has been no internationally agreed value for a tonne of CO2. In Europe, alone in having a regional CO2 trading market, prices for emission credits have varied between EUR 10-30/tonne of carbon dioxide. At EUR 10/tonne, the annual value of electricity generated by wind plant worldwide was EUR 2.3 billion, while at EUR 30/tonne it was EUR 6.9 billion, says BTM. The report points out that after 2013, the granting of all emission permits in the EU will move to central control and the volume of free quotas allocated by national governments will be reduced significantly. "When such a system is operating well ... the expectation is that it will establish a stable market for CO2," says BTM. A precondition for a well functioning market is sufficient liquidity, it adds.

Wind power has major advantages as a technology for CO2 reduction compared with other forms of energy, points out BTM. "Wind power development can move very fast, proven by the annual growth rates of +30% in the past four years. And time matters in the battle against global warming. What governments intend to do now should in fact have been started a decade ago."

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