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Slightly cautious on growth prediction

Uncertain that some markets will meet expectations and dubious about the claims being made for offshore wind, BTM Consult has made a slight downward adjustment to its still significant expectations for wind market growth

Global wind power capacity is projected to grow at an average 21% a year over the next five years and 177,000 MW is likely to be in operation within ten years, according to the latest World Market Update on international wind energy development from Denmark's BTM Consult. While the projected growth is slightly down on the 180,000 MW by 2011 predicted by BTM last year, wind will still account for nearly 2% of global electricity generation in ten years compared to just 0.40% today.

The downward revision on installed capacity is the result of a more pessimistic assessment by BTM of the French, UK and US markets in the next few years. But, "If the growth trend continues, penetration will increase even faster beyond 2010," the report notes.

BTM confirms a record year in 2002. New wind capacity was 7227 MW -- 403 MW more than the record set in 2001 -- increasing worldwide capacity to 32,037 MW and confirming a compound annual growth rate for the decade of 29%. Europe contributed 85% of the total. BTM bases its statistics on shipments of turbines, not installations, and its megawatt totals tend to be higher than other market overviews.

The rate of expansion has slowed, however. Growth of annual installations for 2002 from 2001 was the lowest since 1996, down to just 5.9%, compared with 52% a year earlier. The annual rate of installations is expected to increase again though, with BTM predicting it will average 11.2%, or 12,300 MW of new capacity each year for the five years to 2007. This is down on the 16.2% (14,500 MW a year) BTM predicted last year and significantly lower than the 35.7% average over the five years from 1997.

In monetary terms, cumulative sales of wind turbines by the end of 2007 will be $30 billion, down on last year's projection of $38 billion by end-2006. The total value of the wind market, including installation and operations, will be worth $41.8 billion by 2007, with annual sales rising to $9320 million from $5766 million in 2002.

From 2007 the average annual growth in new installations is likely to be 14.4%, BTM says. This means by 2012, around 24,000 MW will be going up every year. Europe is expected to account for 11,000 MW a year by that time, while the Americas, Asia and the rest of the world will, respectively, be adding 7000 MW, 5100 MW and 1500 MW. Offshore will account for just over a fifth of Europe's installations.

BTM's forecasts have been consistently exceeded by the wind industry, though they remain far more optimistic than those of the International Energy Agency (IEA). The agency expects 112,000 MW to be installed by 2020 -- compared with BTM's 177,000 MW for 2012 -- and 195,000 MW by 2030. Despite its caution, the IEA is considerably more confident about wind than in its previous forecasts. "A large fluctuation will be seen from one year to another," says BTM of the next few years. "This is the result of political uncertainty in some markets, such as the US, and caused by the fact that the bulk of demand is still concentrated in a few countries." The projected average growth of 11.2% over the next five years ranges from 24% for 2003, dips and then rises again to 13.7% and 11.3% in 2006 and 2007, respectively.

Demographic shift

BTM maintains that by 2004 there will be a 15% improvement in the economics of wind power compared with 1999, while after 2005 the price of wind powered electricity will fall to $0.03-0.035/kWh. "There is a strong belief that the decrease in the cost per kWh will continue," it says.

BTM predicts a demographic shift in the wind market. Following a record performance in 2002, Europe will see more moderate growth over the next few years and its market share will fall from 85% to 67% by 2007. Even so, the European Wind Energy Association's target for 60,000 MW by 2010 is likely to be met well ahead of schedule, BTM says, while the EU's target for 40,000 MW of wind by 2010 is set to be smashed. Total global wind capacity is predicted to be 83,000 MW by the end of 2007, of which 58,000 MW will be in Europe. Significantly, 34,800 MW of the European capacity will be installed between 2003-2007.

Germany will remain the largest market up to the end of 2007 and is forecast to account for 25% of all installations in the next five years. Forecasts for France and the UK are lowered by some 1000 MW each to a total of 2350 MW and 2850 MW in new capacity, respectively, for the period 2003-2007 due to "doubts about their ability to achieve their own political targets." France has a target to get 5000 MW online by 2010, but just 69 MW was added in 2002. Projects have been delayed due to poor administration, says BTM. "There is no doubt that France will be a big market in years to come," adds BTM, but it "will have to change its regulatory framework" and make itself more attractive for the larger players.

The UK forecast is revised downward because "progress on offshore is yet to be seen." In addition, there are concerns about the grid's ability to cope with planned offshore capacity and uncertainty about how the process of environmental impact assessments will affect the number of offshore projects proceeding. BTM notes, however, that the British government's new energy white paper (Windpower Monthly, March 2003) "may revitalise the market and make it among the largest in the world."

BTM is optimistic that Denmark will see 1000 MW of new capacity by 2008. Of this, 460 MW will be offshore, while the remainder will come from new initiatives. "History has shown that players in the Danish market react immediately when a new opportunity comes visible," says BTM. "There remains a large potential for repowering, and with the right incentives in place, this activity could be extended rapidly."

Country forecasts

The US will remain a large market, although BTM has lowered its expectations for 2005 and 2006. Around 6900 MW is expected to be installed in the period 2003-2007. The forecast for annual US installation ranges from a low of 1200 MW to a high of 1600 MW. With more positive policies in place, the emerging markets of Italy, Australia and Japan are expected to show steady growth. Half of Italy's target for 3000 MW by 2010 is expected to be delivered before the end of 2007, while Australia has some 1700 MW already in the pipeline. The forecast for Japan remains at 200 MW a year at the start of the 2003-2007 period to 300 MW a year by the end.

While BTM is cautious about offshore wind, it acknowledges the market got underway seriously in 2002 with 183 MW installed (all in Denmark), amounting to 2.5% of the total market last year and almost tripling the world's offshore capacity. Over the next few years, BTM says 700 MW a year in new offshore capacity will be installed, jumping to around 1700 MW a year for 2006 and 2007. In all, some 4765 MW in offshore capacity will be installed between 2003-2007, BTM says.

The prediction is pessimistic compared to a report commissioned by the British government which says global offshore capacity could increase to almost 11,000 MW by 2007 (Windpower Monthly, April 2003). BTM is not convinced: "While there is no doubt about the offshore wind potential, the capacity which is a practical exploitable may, at least in the short to medium term, not be as high as claimed." Unanswered questions remain, it says. In particular, it expresses doubts about whether the additional investment and operational costs of offshore projects will be balanced by the extra electricity generated. It also asks: "Is there a realistic prospect that offshore wind farm kWh prices will in time reach a similar level to those of land based MW class turbines?"

Suppliers

Danish turbine manufacturers still dominate the world market, but their share has fallen by 2.9% to 43.5%. Vestas maintained its position as the world's largest, although it lost market share (as did Bonus, Mitsubishi, and GE Wind). In 2002, Vestas had 22.2% of the market, compared to 24.1% in 2001, selling 1604 MW compared to 1648 MW in 2001. Significantly increasing its market share, Germany's Enercon again came in second, installing 1334 MW and taking 18.5% of the market, followed by Denmark's NEG Micon in third place with 14.3%.

With a large domestic market, Gamesa of Spain became the fourth largest wind turbine supplier, selling 854 MW and taking 11.8% of the world market. Germany's REpower (which has moved from tenth position to ninth) and Spain's Ecotècnia (ousting Mitsubishi from the top ten) achieved the highest relative growth -- with 3.1% and 1.7%, respectively. Both almost doubled their share, with REpower installing 223 MW and Ecotècnia installing 120 MW. Together the four leading companies (Vestas, Enercon, NEG Micon and Gamesa) accounted for two thirds megawatts sold. While the Danes still dominate, the German manufacturers are closing the gap -- their share of the market in 2002 was 30.5%, up from 24.9% in 2001.

Bigger is better appears to be the continuing mantra for the industry. The upscaling of machines continues to be the main trend, says the report, devoting an entire chapter to the subject. During 2002 the average size of a wind turbine installed was 1.087 MW, up from 915 kW in 2001. While the market for small turbines (less than 750 kW) decreased significantly, the markets for those between 750 kW and 1.5 MW increased to 55.7% and to 30% for turbines of 1.5-2.5 MW. Wind turbines greater than 2.5 MW were also introduced to the market. Similarly, the increase in centralised wind generation is continuing, rather than dispersed development with single or a few turbines. Projects greater than 5 MW accounted for 65.5% of the market.

The players in the industry are also getting bigger. Big utilities continue to enter the sector and more are likely to, BTM says, particularly in light of the decreasing market value for the shares of listed companies like Vestas, NEG Micon, Nordex and Gamesa. "The only major cost component in wind energy production, namely the interest rate, has dropped to a 40 year low," it says. "The combination of low prices for publicly available shares and low interest rates will create interest among the large conglomerates looking to get a bite of the still growing market for wind energy installation."

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