The study also found that the UK, Germany and India have powerful regulatory incentives; Chile and New Zealand have tremendous resource potential coupled with a desire for energy independence; China and India have an overwhelming demand for power to support economic development; and Argentina, Mexico, Chile and Australia have a market potential for distributed means of power generate for remote communities and industries.
The report, International Wind Farm Markets, is by a respected international accounting firm Arthur D Little. It was commissioned by the American Wind Energy Association (AWEA).
India needs pricing policy
Between 700-1200 MW in wind capacity will be added in India by 2000, says the report, released at AWEA's finance opportunities meeting in New York on November 10. This enormous growth, however, could be limited by India's Third World manufacturing capability. Even so, strong government support for the wind industry is coming from the Minister of Non-Conventional Energy, under whom a wind resource assessment programme, including monitoring and mapping in 22 states, was established. Also, 69 sites were identified in eight states totalling 2500 MW of installed wind capacity. State banks have been instructed by the Reserve Bank of India to prioritise financing of non-conventional energy projects. Incentives include 100% depreciation on capital equipment in the first year, and a five-year tax holiday. A ten-year tax holiday is being considered. Wind turbines are also exempt from excise duty and sales tax. The government support and incentives are meant to boost the country's domestic market while meeting the increasing demand for power.
But energy price rationalisation will be needed once there are no longer incentives in India if wind farms are to be profitable in the long term, says the report. Most State Electricity Boards (SEBs) are facing financial difficulties, partly because of low end-user rates, especially in the agricultural sector. And World Bank and Asian Development Bank loans are now contingent upon transparent pricing. Currently wind power purchase prices in India range from $0.04-0.072/kWh. In the states of Tamil Nadu, Andhra Pradesh, and Karnataka, buy back rates are higher than the average electricity rates, far higher than rates for agriculture, somewhat higher than residential rates, but lower than industrial and commercial rates.
China potential underestimated
China's Ministry of Electric Power anticipates 100 MW of wind power capacity additions by 2000, which represents just 0.66% of the country's expected total annual capacity additions. Arthur D Little, however, estimates the actual wind capacity installed could be 350-600 MW by 2000. New generating capacity is needed at the rate of about 15,000 MW annually. A European Commission study estimated grid connected wind resource potential in China at about 2500 MW, but technology and capital are needed for rapid economic expansion. The report cautions that under the country's current regime, policies and priorities can change rapidly, accelerating wind development or slowing it by shifting the focus to coal and gas projects to meet near-term demand. Although China may offer near-term potential for wind, risks are significant. There are concerns about being able to maintain control of an investment over time. Wind technologies imported to China may be at risk from the 42 indigenous companies that make small turbines and the ongoing wind research at some 38 institutions and universities. An unofficial cap of 12-15% on project returns and currency convertibility is a potential concern. And current electricity rates, of $0.02 to 0.05/kWh, are inadequate to cover costs, unless pricing incentives are established.
German growth rate
Germany is expected to see 7-10% annual growth in installed wind capacity over the next six years, says the report. Between 200-350 MW could be installed. The tremendous growth in the last six years has been stimulated by government programmes, strong environmental policies and mandated utility purchase of wind power at 90% of the average electric price for end-users, or for about $0.10/kWh, states the report. The German Ministry of Research and Technology's ten year "250 MW Wind Programme," started in 1989, has resulted so far in some 130 MW installed. Another 310 MW has been installed outside the programme in the same period. The ministry is now to focus on larger wind turbines over 1 MW.
Germany's market could be limited by economics. The 1991 Electricity Feed Law, which sets rates of pay for renewable energy, will be reviewed this year and buyback rates could be modified. Northern coastal areas have the greatest wind resource, but may not want to proceed with wind. For example, the state of Schleswig-Holstein recently ruled against the installation of a large turbine for aesthetic reasons. In Germany, electricity rates are also controversial, and the permitting process can be slow.
Long term in Mexico
Mexico may see 150-300 MW of wind development by 2000. It also has considerable long term potential for wind -- thought to be about 5000 MW, largely utility-connected projects through the main utility, and self-generation projects for businesses, institutions and municipalities with the excess sold back to the grid. Since wind power is in the embryonic stage in Mexico, large capacity additions are unlikely until after the turn of the century. Two pilot projects totalling 3.5 MW are being installed, of which 1.5 MW is operating. Unresolved issues include the cost of interconnecting with the Comision Federal de Electricidad (CFE), the utility, charges for wheeling power using CFE's lines, and the purchase price of electricity from independent power producers.
UK and Spain highly active
An additional 100-300 MW may be installed in Britain by 2000 in an extremely active wind market with intense competition, says the report. Total installed capacity would thus climb to 250-400 MW, if the government's Non Fossil Fuel Obligation rounds four and five go ahead. Solicitations are expected in 1995 and 1997, but may not occur due to the UK's excess generating capacity. Without NFFO, wind will have to compete with conventional technologies. Typically, Britain's independent producers are awarded contracts at £0.04-0.05/kWh, while gas fired capacity is being aggressively pursued by the Regional Electric Companies. Overall, power demand is growing at a rate of 1-1.5% a year, but no capacity additions will be required until after 2000. If wind is competitive, an active market will exist for the next few years and potentially beyond.
Spain's excellent wind conditions and a recent surge of interest by several utilities may stimulate 150-250 MW of installed capacity by 2000, says the report. The current regulatory climate promotes the development of renewables -- the 1991 National Energy Plan aims for 25% of new capacity additions to be renewables, and there is a freeze on nuclear projects and pressure on utilities to clean up, leading to use of gas turbines, IGCC and renewables. A government incentives package is also being developed that is expected to boost wind. Existing wind projects have received purchase prices ranging from $0.075-0.089/kWh. But environmental concerns may delay some projects, the market is competitive and local companies are favoured. Furthermore, wind may have to compete with natural gas and cogeneration, with gas being provided to new areas of Spain by pipeline in the future.
Tremendous South American resource
In Chile, 100-200 MW may be added by the year 2000. The best opportunities are in the north, where there is little hydro potential. There are other opportunities in both the north and south in remote communities and for mining, where wind is often more cost-effective than extending the grid or using diesel generation. The National Energy Commission is seeking joint ventures for wind and other renewables for an aggressive rural electrification programme. Average end-user rates range from $0.063-0.111/kWh.
Argentina's wind opportunities may be 100-150 MW by the year 2000. The country has tremendous wind resources allowing for some 500,000 MW of wind plant, but they are largely remote. The considerable hydro resource is likely to be exploited before wind, says Arthur D Little. There may, however be near term potential for small projects of less than 10 MW to displace high-cost diesel generation among co-operatives. A larger market will depend upon construction of a 100 kilometre transmission line from Patagonia, an excellent wind site, to key load centres. That could lead to a significant wind market.
Down under looking up
Some 50-100 MW of grid-connected wind power may be built in New Zealand by 2000, which represents 10-20% of the total expected capacity additions. The country has exceptional wind resources that could lead to capacity factors as high as 65%, with resources located close to load centres. But the ongoing privatisation of the country's electric industry may delay new projects. Wind will compete with new generating capacity at rates of about $0.05/kWh. This year's total installed generating capacity is 7300 MW, with an annual growth of about 2%.
Australia's wind market is estimated at 50-75 MW in the next six years, as the market is mostly limited to small, remote applications. Projects to date have been limited to the displacement of diesel generators in North Queensland and Western Australia. Victoria considered developing a 10 MW project at Toora, but it has not been approved. Even so, New South Wales is conducting site surveys. Future markets, in the absence of regulatory incentives, will depend upon the effect of privatisation on electricity rates, which currently vary between states.