Leading world players in wind energy were in bullish mode at the first ever Global Windpower conference, held last month in Paris, as they reported how global growth of wind power has far outstripped industry projections. But with the broad policy frameworks now in place in the major wind markets, the conference heard that the time has come to widen wind's penetration in the developing world and face up to the remaining challenges of financing, grid infrastructure and regulatory reform.
The event, held April 2-5, was organised jointly by the European Wind Energy Association (EWEA), the American Wind Energy Association (AWEA) and the Indian Wind Turbine Manufacturers Association. It was the first time a major wind conference has been aimed at a global audience and, with its accompanying exhibition, drew more than 4000 people from more than 50 countries. "Wind energy today is a global phenomenon. It's the fastest-growing power technology," said conference co-chair Rakesh Bakshi. "The world has taken about 25 years to reach 25,000 MW, but over the next five years, we expect to reach 60,000 MW."
EWEA president Arthouros Zervos commented that so far, the rate of installation has always surpassed the industry's projections. He added: "Five countries account for more than 80% of the world's installation." These are Germany, USA, Spain, Denmark and India. This domination of the wind scene by just a few players is a double-edged sword, he explained. On the one hand it gives an indication of the huge potential in the rest of the world, but on the other hand, if something went wrong in the markets of one or two of those leading countries, the overall rate of development could drop dramatically. Wind has now become a more mainstream form of power generation, Zervos claimed. "We don't have just wind turbines, we have wind power stations." He pointed out that over the past three years more wind capacity had been installed worldwide than nuclear; and in 2001 more power was generated from new wind installations than from new nuclear.
Summing up the state of play in America, Jamie Chapman of AWEA said: "We've come to a market that is denominated in multi-millions of dollars per year. It is large enough to emerge from being a sleeper market to one that is attracting well-capitalised players."
The opening day of the conference was mainly devoted to scene setting and regional and national overviews. Government ministers from six countries vied to present their policies to promote renewables. Meeting national commitments for greenhouse gas abatement emerged as the key driver for renewables in each country's case.
The French industry and energy minister, Christian Pierret, reported that he had just put in place the final building block of his strategy to boost renewable technologies -- a reform of administrative procedures. A key plank of the latest reform is that grid reinforcement costs will be shared by all network users, so that dispersed generation -- and wind in particular -- will not be disadvantaged. France needs up to 10,000 MW of new wind capacity by 2010, representing some EUR 10 million of investment, to meet its European commitments, said Pierret. "The challenge is immense, but the industry is ready to meet the challenge," he asserted.
India plans some 6000 MW of new wind capacity by 2012, said Shri M. Kannappan, India's Minister for Non-Conventional Energy Sources. The country's wind program is private-sector driven, with commercial projects accounting for over 90% of wind capacity, he explained. He added that the Indian government is framing an electricity bill containing provisions to accelerate development of renewable energy, including preferential tariffs for renewables and other promotional measures.
UK Energy Minister Brian Wilson cautioned against complacency over meeting national targets for greenhouse gas reduction, pointing to the UK's own increase in CO2 emissions last year, due to increased coal powered generation. "That served as a useful reminder of the challenges we face and why it's impossible for a responsible government to stand aside and leave it all to the market." Wilson called on developed countries to "practice what we preach" when expecting less developed economies to combat global warming. "There must be major behavioural changes in our approach, both in the production and use of energy and no country is entitled to opt out of that responsibility," he said.
Wilson's warning was wasted in the case of the United States -- the only major developed nation which has refused to sign up to the Kyoto Protocol: the US assistant Secretary for Energy Efficiency and Renewable Energy, David Garman, failed to show for his scheduled presentation. Garman's absence was a disappointment, said AWEA director Randy Swisher. Still, from a US standpoint, the event was "wildly successful" in helping forge relationships among wind energy advocates and opening the door to increased collaboration.
"We had low and I think very unclear expectations coming into this conference," admitted Swisher at the end of the week in Paris. "But I'm very optimistic and pleased with what we've been able to do here this week. I think we're on the verge of being able to do things together in ways that were never possible in the past, simply because we have stronger personal relationships."
For Julie Rickerd, senior advisor to Canada's Ambassador for the Environment, the conference helped put that country's challenges in perspective. "I knew we were behind. I didn't know how far behind," she said. Rickerd was impressed by the pragmatism with which the conference tackled the issues facing wind power development. The absence of rhetoric, she said, will be important when wind advocates take their message to the broader international stage, like September's world summit on sustainable development in Johannesburg, South Africa.
In need of convincing
But if the world's decision makers and governments are going to act, they have to be really convinced, argued the International Energy Agency's Robert Priddle. "Convinced not only of the benefits of wind power, but that across the whole range of criteria -- reliability, environment and above all cost -- that wind energy comes out on top."
He warned against taking government goodwill towards wind for granted. "The wind energy sector is vibrant and exciting," he agreed. It has caught the attention of governments that have shown readiness to intervene in markets in support of wind power beyond what might reasonably be expected given their free market philosophy, he said. "They might yet be persuaded to intervene a lot more; wind generation is on a roll, but don't assume it has a right to prevail whatever it takes. Don't treat governments as morally committed to a given proportion of wind power whatever the cost."
Despite wind's impressive growth, Priddle pointed out that it still accounts for less than 1% of total world electricity generation. In some circumstances it is already cost competitive, but mostly this is not yet the case, he said. "Wind power cannot rely on perpetual subsidy," he added. "It has to be able to compete in the market, albeit a market embodying features such as greenhouse gas emissions credits, which reflect mature judgements about external values." This form of market support for wind is preferable to short term interventions which cannot be relied upon: "Political judgements can change."
xWhile Global Windpower delegates were attending seminars on specialist issues on the Thursday of conference week, the main hall was taken over for the fourth annual meeting of the French Syndicate for Renewable Energies (SER), a campaigning organisation that has until now enjoyed a higher profile than the French Wind Energy Association (FEE). Under the nominal patronage of President Jaques Chirac and supported by the French environment agency (ADEME) and the utilities Electricité de France (EDF) and Gaz de France, the SER conference attracted three government ministers as speakers: environment minister Yves Cochet, energy minister Pierret, and housing minister Marie Noëlle Lienemann.
Pierret declared his intention to issue a call for tenders for France to reach 1500 MW of installed capacity offshore by 2010. Developers looking offshore, however, did not hear much about their main concerns: how legal and planning procedures for France's coastal waters are to be clarified.
The planning delays on land which have slowed France's progress in wind up until now were being dealt with, said the minister, and he would soon be issuing instructions in a circular sent to all préfets (local authorities). Another issue of importance to developers, the need for grid improvements, was also being dealt with, but all producers would have to share the bill for new and better transmission lines.
The French government's commitment to renewables and to wind energy in particular would mean that the consumer will have to pay more for electricity in the medium term, Pierret explained, but the French wind industry would be expected to make good for this over the longer term with gains in competitiveness.
In an election year, some people in the French wind power industry are wondering how far the government's commitment to renewables is a political gesture and how much it will be translated into effective action. The final session of the SER conference discussed the need (or not) for a dedicated Renewables Energy Act to be passed by parliament.
Developing world challenge
While the host country focused on national detail, a dominant theme of 2002 Global Windpower was the question of how to broaden wind's reach beyond the developed markets into the rest of the globe. The wind sector's main challenge still lies ahead -- in the developing world, said the World Bank's Francisco Tourreilles. The projected rate of growth in energy consumption is 40% for developed countries over the next 20 years, but it will be four times this figure in developing countries, he said. The challenge for the Third World is threefold, he explained. Countries must increase access to power for a large and increasing population; usually, there is a program of sectoral reform to be implemented; and they have to attract large amounts of financing and private sector sponsorship.
The key impediment for wind, by far, is its cost. "The issue of competitive power generation goes to the core of the question one needs to address in any country -- particularly in developing countries," said Francisco Toureilles from the World Bank. There are very few places in the developing world where wind is close to the least cost generating option. Reductions in the cost of wind power have been impressive, he said. Nonetheless, its environmental benefits will need to be quantified and "monetised" to provide an incentive for more investment. "Either you use local fiscal resources or use transfers of payments from industrialised countries to developing countries, such as through carbon credits or targeted subsidies," he added.
Richard Spencer, also from the World Bank, drew attention to the worrying withdrawal of private sector interest and investment from developing countries. A staggering 90% of potential sponsors of power projects withdraw from the developing world, he said. "When asked why, they say: why take all that risk on board to go to a developing country when the action is in Europe?"
This point was pressed home by Dana Younger from the International Finance Corporation (IFC). Private investment interest in developing countries peaked in 1997 and has been contracting since 1998, he said. This is not only due to more promising opportunities in European and North American markets, but most importantly, it is driven by lower expectations of return in emerging markets. "As a consequence, debt is becoming more difficult to mobilise and also more expensive. Basically, foreign investments have under-performed."
RPS versus REFITs
The question of what policy tools countries should use to stimulate wind energy was never far from the debate. As Spencer commented: "Policy matters." The issue is more of a hot potato in Europe than in America. The European Commission is due to report in four years' time on the relative merits of different types of policy mechanism, before proposing a single Europe-wide approach.
The three leading European countries in terms of wind power capacity -- Germany, Spain and Denmark -- had all achieved their high levels of wind development under fixed price systems, pointed out German member of the European parliament Mechtild Rothe. She explained that the Commission's report will look in particular at the effectiveness of different policy approaches in stimulating renewable capacity -- not merely at their cost-competitiveness. Therefore, she said, she was "optimistic" about the outcome -- a reference which appeared to mean she believed the Commission would favour fixed price schemes.
But while accepting that German style fixed price "renewable energy feed-in tariffs (REFITs) had been a resounding success in stimulating the growth of wind, most opinion from the platform was that only a system that is compatible with a liberalised market would be sustainable in the longer term. Fixed feed-in tariffs stimulate wind energy but do not foster competition, or encourage cost reduction or cross-border trade, said Brian O'Gallachóir from the University of Cork, Ireland. Wind energy policies are needed that can be adapted to a liberalised market, he maintained. "This is going to be necessary for the wind industry as a whole to be able to compete in the future."
In the longer term, cost-competitiveness will be a stronger driver than environmental pressures, he said. "Market liberalisation is happening anyway, and if wind energy stays out for too long it is going to make it more difficult to compete in the long term." Meantime, any changes needed to adapt market regulations to accommodate wind energy are only likely to be put in place if wind is operating within the liberalised market.
Spencer pointed out that capital cost per MW installed declines faster in the USA and Australia -- two countries with renewables portfolio standard (RPS) legislation mandating minimum levels of renewable power in electricity supply portfolios, facilitated by green credit trade mechanisms -- than in Germany and Spain, which both use fixed tariffs.
"Remember," he said, "provision at least cost is still going to be the major driving force in any power system in developing countries." He refuted the World Bank's reputation for opposing subsidies. Subsidies are OK if they reflect the underlying economic reality by trying to correct financial distortions, he said, adding: which is why intervention like the RPS is acceptable.
A lot of interest centred on the Texan RPS model. Over 900 MW of wind was developed in Texas last year, said Mike Sloan from Texas-based Virtus Energy Research Associates. "RPS really works," he insisted. "If anyone is looking for a model that has produced results, it's Texas."
Yet without the initial growth promoted by REFITs, wind power -- including in Texas -- would not be where it is today, pointed out Volkmar Lauber, a social scientist from the University of Salzburg. But while fixed feed-in tariffs are still stimulating growth today, by 2012 things may look different, Lauber continued. As the price of wind power continues to come down -- particularly in the windiest countries -- RPS legislation should be able to bring about a rapid breakthrough to competitiveness with conventional sources; and there is a danger that REFITs will actually hold back growth, he said.
In the nearer term, Lauber did not believe that a uniform EU-wide scheme would emerge in practice. The REFIT system is too inefficient for countries with good wind regimes, while a uniform RPS with a single green certificate market would be incompatible with existing national renewables targets, he said.
The future awaits
While conference participants tackled the fundamental challenges still facing the wind sector, several speakers urged delegates to consider new ways of moving forward. "One of my thoughts is that perhaps we should begin thinking about redefining our product. It's not electricity per se, it's really energy," said Chapman. "Our wind flow can be converted not only into electricity, but also into hydrogen. This gets us not only into the very, very large transportation and fuels market, but it also gets us into having large wind installations being baseloadable as opposed to intermittent."
The shift to a hydrogen economy is one of two scenarios developed by Shell in its attempt to define the long-term future of the energy business. "As the hydrogen economy takes off, it may have a short term negative impact on renewables, but longer term renewables will be the primary energy source used to manufacture hydrogen," said David Jones of Shell WindEnergy BV.
Shell's second scenario, without an immediate leap into hydrogen, is less revolutionary, envisioning a progression from coal through gas to renewables according to the dynamics that drive the energy business now. Government incentives, environmental concerns and green power demand drive strong growth until around 2020, when renewables bump up against grid constraints and a saturated green power market.
"It's really only after 2025 or 2030 that we actually have the next generation of renewable technology produce our electricity truly competitively cheaper," said Jones. It is also only then that effective storage technologies are developed. Building from these breakthroughs, by mid-century all new incremental energy supply is from renewable sources.
In the much nearer term, Bakshi told the event's closing session, the Johannesburg summit and other international meetings will be an important test of the industry's resolve to develop a worldwide agenda for wind. "We have to have a strong message endorsing wind energy as a sustainable global energy source and that should come out of this conference," he said. Bakshi emphasized the need to develop an action plan to continue the process leading to the next global wind conference, planned for Chicago in 2004. "The fact of the matter is that a global technology has to be addressed universally," he said. "Yes, regional and national organisations are very important, but there has to be a structure where there is a unified voice."