Developers' Guide - Industry rallying after slow year in 2013

WORLDWIDE: The global wind industry took a battering in 2013, with few developers committing to new projects. But the sector now looks to be heading in the right direction, driven by a buoyant China and new growth in the US.

If the rate at which developers acquire new sites for future projects is a reflection of the confidence of the wind industry, it would appear that confidence is currently in rather short supply. It is not quite an emergency stop but there is no doubt that the brakes have been very firmly applied to wind-power development during 2013.

There will be close to 320GW of installed capacity across the globe by the end of the year, a quarter of which has gone online since January 2012. But the rate of installation and commissioning slowed markedly in 2013, and the appetite for acquiring new sites for development also diminished significantly.

The latest data from Windpower Intelligence, Windpower Monthly's market analysis unit, reveals the extent of the slowdown. In 2012, 44.6GW of wind power went online and around 32GW in terms of sites acquired was added to the global pipeline. By the end of 2013 it is forecast that only 35.7GW will have gone online, while just 19GW of new sites were acquired between 1 January and 31 October.

The outlook appears even bleaker if you take just one country out of the equation: China. Of the 19GW added to the pipeline this year, China has been responsible for 11.45GW, or 60%. The action is spread across 168 projects, mostly onshore and in the 50-100MW range.

The biggest is China Huadian's 400MW Maojing project in Gansu, while China Datang Corporation's 300MW Liu'ao offshore development on China's southern coast is the year's only new offshore project with a site acquired outside Europe.

China's "big five" owner/developers - Datang, Guodian, Longyuan, Huaneng and Huadian - between them have acquired 6GW of sites in 2013. Guodian has the largest total pipeline, 7.4GW in sites acquired, but the companies' combined share of the industry pipeline adds up to 25.6GW. While the brakes have been on in the rest of the world, China continues to steam ahead, with these five leading the way.

Quiet year in Europe

By contrast, it has been an exceptionally quiet year in Europe. The UK added only 724MW to its pipeline, 400MW of which is accounted for by the Statkraft/Statoil Dudgeon offshore project. Germany's onshore acquisitions have similarly ground to a near standstill; its only wind power announcement of note in 2013 was Windprojekt's offshore 800MW Baltic Energy Bridge development. Even the Scandinavian countries largely steered clear of buying new sites. Nordisk Vindkraft's 144MW onshore project near Stockholm in Sweden was the region's only new site acquired up to 31 October this year. And France, Italy, Spain? Rien, niente, nada.

US rush

There was more sign of life across the Atlantic however, as the US picked itself up from the last burst of the bubble in readiness for the next PTC extension-inspired mini-boom. In the first ten months of 2013 the US added nearly 4GW of new sites to its pipeline. MidAmerican's five-site 1.05GW project in Iowa, Wind VIII, is the single largest acquisition anywhere in the world so far this year, and where the Warren Buffett-owned energy developer goes, others tend to follow. The Iowa acquisition is particularly good news for Siemens, which was selected in November as the exclusive turbine supplier.

Latin America's highest profile acquisitions in 2013 have been in Argentina and Chile, with both Brazil and Mexico, the usual leaders in this sector, preferring to consolidate healthy looking pipelines rather than expand further.

Jordan is the only country in the Middle East and Africa region to have acquired new sites in 2013.

Globally, there is hardly a pressing need for new sites, certainly in the developed markets. Measuring development potential by the amount of projects in the pipeline with sites already acquired, Windpower Intelligence suggests a global potential of approximately 400GW. Europe accounts for nearly half that total, and Asia-Pacific more than a quarter. The lion's share of the remainder is in North America, although Latin America and the Middle East and Africa are showing steady growth, albeit from a much lower base.

How much of that 400GW potential will actually be built, and when, is a moot point. A clearer picture of the extent to which wind projects are moving from concept to reality is provided by the figures from our database for turbine purchase agreements (TPAs).

Turbine purchase agreements

This reveals that while Europe's total pipeline dwarfs those of other regions (see main map, top), a much smaller proportion of projects have reached the stage where the owners and developers are sufficiently confident to place firm orders for wind turbines. Europe has more than 190GW in the pipeline in terms of sites acquired, but only 21.7GW (11.3%) have TPAs. By comparison, 18.5% of sites in the Asia-Pacific region, and 29% of those in North America are endorsed by TPAs. More impressive still is the extent to which wind projects in the emerging markets of Latin America and the Middle East and Africa have passed the TPA hurdle - 35% and 43% respectively.

Offshore leaders

The European pipeline picture of selected sites with no turbine purchase agreements is particularly pronounced in the UK, the continent's biggest wind market thanks to its position as offshore leader. The UK has 42GW of sites in its offshore pipeline alone, but only four projects - Dong Energy's West of Duddon Sands and Westermost Rough, RWE's Gwynt y Mor, and E.on's Humber Gateway, adding up to 1.4GW - have TPAs, three of the four going to Siemens. The huge developments that have yet to select turbines include Forewind's 12.8GW Dogger Bank project, announced back in 2010, and the 6GW East Anglia ll-Vl project being developed by Vattenfall and Scottish Power, announced in 2012.

Europe's second major offshore power, Germany, appears to be making rather more solid progress than the UK in this respect. It has 6.4GW of its 31.4GW offshore pipeline covered by TPAs, or just over 20%.

But it is clear that the pace of offshore development has slowed in both countries. The German industry, once aiming to have 10GW of installed offshore wind by 2020, is now aiming for a more realistic figure of 6.5GW.

The direction of UK energy policy — a debate that tends to generate more short-term heat than long-term light — remains uncertain. The overall mood of the country's coalition government has turned sharply against onshore wind, while offshore wind is considered too expensive. The UK's decision to commission a new nuclear plant, together with political rows over the degree to which green subsidies are pushing up energy prices, suggests a future direction of travel in a rather less wind-friendly direction.

Turbine suppliers

Siemens' exclusive deal to supply MidAmerican's 1.05GW cluster of wind projects in Iowa pushed the German turbine maker further ahead in the manufacturer's league table. According to our database Siemens has just short of 12GW in its order books, of which 4.9GW is for offshore units.

Onshore, it is the 2.3MW platforms that predominate; offshore, the 3.6MW variants continue to live up their reputation as the industry's workhorse. But the company has taken some serious orders for its new 6MW offshore turbine. Dong has selected it for four of its biggest projects in UK waters, a total of 188 turbines for an installed capacity of 1,128MW.

Vestas is not far behind Siemens, with just over 10GW in its order books, and several projects at a very advanced stage. They include the 410MW Talinay Oriente project in Chile, which uses mainly Vestas 3MW turbines and is due to go online in 2014. Other sizeable developments scheduled for commissioning over the next 12 months include the 396MW Vientos del Istmo project in Mexico, two 300MW-sized projects in Alberta, Canada, and Forewind's 216MW offshore site in the Belgian North Sea.

Vestas added 400MW in TPAs during the first ten months of 2013, with US owner and developer Duke Energy specifying the company's 2MW turbines for its Los Vientos lll and lV wind farms in Texas. For all the talk of a new generation of bigger and more powerful turbines coming on to the market, most developers are sticking with the smaller, well tried-and-tested models.

GE lies third in the turbine maker list in terms of its order book, some way behind Siemens and Vestas with 5.47GW of TPAs signed. The company has been accused of being too dependent on the domestic but volatile US market in the past, but the figures in the pipeline suggest that it is taking steps to redress the situation.

According to the Windpower Intelligence database, GE has 2.28GW, or 41%, of its order book committed to US projects, plus another 630MW in Canada. But the company also has a solid presence in Brazil (545MW) and in central and eastern Europe, with 654MW of orders spread across Poland, Romania, Bulgaria and Slovakia. Turkey has proved a particularly fertile ground of late, with GE now supplying 385MW of installed capacity across 11 projects.

However, both of GE's signed TPAs in the first ten months of 2013 have been for new US developments.

EDF opted for the company's 1.85MW turbines for its 200MW Hereford project in Texas, while NextEra Energy chose the 1.7MW model for its 100MW Tuscola ll wind farm in Michigan. Both projects are expected to go online in 2015.

Gamesa's new business in 2013 has largely been conducted in India, where the company added 324MW to its TPA order book across four projects, all of which are being developed by the company itself or its Indian subsidiary. Although Gamesa has a total of 4.7GW in its pipeline, and a presence in all five regional markets - including 1.25GW in China - it has yet to make any impact on the offshore sector. The G128-5.0MW offshore turbine, now being tested onshore in the Canary Isles, has yet to feature in the pipeline figures.

The database places Enercon close behind Gamesa in fifth place with 4.13GW in TPAs. This figure does not include any agreements for the 2.5GW Dragaliden long-term development in Norbotten, Sweden. As Enercon owns 25%, it can confidently be expected to supply the necessary hardware. Add that to Enercon's total and it shifts the German turbine maker above both GE and Gamesa.

Repower, soon to be rebranded as Senvion, has 3.33GW of capacity in its order book and is making good headway with its large-capacity offshore turbines. The biggest project it is currently involved is E.on's 400MW offshore Arkona Becken development in Germany's Baltic Sea, for which the developer has ordered 80 of Repower's 5MW turbines. The later and larger 6.0 and 6.15MW turbines have been specified by RWE Innogy for the 332MW Nordsee 1 and 295MW Nordsee Ost projects in Germany's North Sea. EDF has also chosen the 6.15MW machine for Belgium's Thornton Bank 3 offshore project.

Next year's ambition

The Windpower Intelligence database points to more than 60GW of projects that have a good chance of being completed and commissioned in 2014. This is almost certainly an optimistic figure and a more realistic assessment would point to perhaps three quarters of that total being fully up and running by December 2014.

China, as you might expect, is way out ahead with nearly 12GW of projects scheduled to go online in 2014, the biggest of which is the 800MW Kushui No 4 project in Xinjiang province, developed by the China Three Gorges Corporation.

The US is on course for adding 4.7GW of installed capacity during 2014, which includes 17 projects of more than 100MW. The most eye-catching development is the 600MW Conway project in west Texas, developed by Cielo Wind Power, Renewable Energy Group and Shenyang Power.

Germany's attention in 2014 will be focused on completing nine substantial offshore developments that add up to just over 3GW. They include PNE Wind's 480MW Nemo project in the North Sea, Dong's two Borkum Riffgrund sites, accounting for 720MW between them, and the 400MW Global Tech 1 project. It does not seem likely that all nine will be completed by end of 2014, but Germany's total installed wind power capacity should show some healthy growth over the next year.

It looks like 2014 will be a busy year for wind power in Australia, too, with 30 projects adding up to 3.14GW at a reasonably advanced stage. Owned by Trust Power and developed by Siemens, which is supplying its direct-drive 3MW turbines, the 270MW Snowtown ll project in South Australia is the headline act next year.

The UK has 2.6GW of projects close to completion, most of them modestly sized onshore sites. Offshore three big developments - RWE's Gwynt y Mor (576MW), and Dong Energy's West of Duddon Sands (389MW) and Westermost Rough (210MW) - could be added to the country's installed wind capacity by the end of 2014.

Canada has 2.5GW well on the road to completion, with EDF the main developer behind the biggest two developments - the 350MW Riviere du Moulin project in Quebec and the 300MW Blackspring Ridge l wind farm in Alberta. Both have TPAs, with Repower and Vestas respectively, and power purchase agreements (PPAs).

The remaining countries with more than 1GW scheduled for commissioning during 2014 are: Sweden (2.73GW), Brazil (2.26GW), Romania (2.25GW), Turkey (1.7GW), Norway (1.47GW), France (1.36GW), New Zealand (1.34GW), the Philippines (1.30GW), and Chile (1.16GW).

Growth parallels

If three quarters of the 60GW is achieved next year, 2014 will deliver 45GW of new generating capacity, the same figure as the record growth of 2012. For an industry that has known exponential growth on a regular basis, this may not seem particularly good. But for an industry that has suffered such a deep decline over the past 12 months or so, this is a very positive growth plan. The figures show that there is still a huge amount of untapped potential, and plenty of work in the pipeline for developers and suppliers alike.

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