TODAY’S STUDY: THREE TIMES THE WIND IN THE WORLD BY 2020 “The Global Wind Energy Outlook 2012

Wind Energy and Climate Change

Public concern and political pressure to tackle the climate problem had its most recent peak at the UN climate negotiations in Copenhagen in December of 2009. The profound disappointment at the failure of governments to come to grips with the issue resulted in climate change being placed on the back burner for a few years, both politically, and in the press. But the press (and the public) are waking up.

New research from NASA’s Goddard Institute for Space Studies1 demonstrates that recent extreme weather events, particularly the scorching summers in the US and Russia and the drought which has severely impacted this year’s US corn crop are a direct consequence of climate change. This year’s Climate Vulnerability Monitor2 cites 400,000 deaths annually already attributable to climate change, with economic costs already reaching 1.2 trillion USD, or roughly 1.6% of global GDP; and this is, of course, set to rise dramatically. The record retreat of the Arctic sea ice this past summer season is a grim reminder that climate change is about physics, not politics; even though the ability of humanity to deal with the problem is ultimately determined by politics, at least for now. A time will come in the not too distant future when the issue is out of hands of the politicians and in the hands of the emergency services.

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But the politics don’t look very good at the moment. At the UN climate negotiations in Cancun in 2010, governments agreed that their overall objective was to keep global mean temperature rise below two degrees C above the pre-industrial average, with more than 100 countries arguing that it should be even lower. In order to achieve that target, what all models agree is that at a minimum, global emissions need to peak and begin to decline well before the end of this decade. Despite that, a year later at the negotiations in Durban, in what was widely hailed as a ‘breakthrough’, governments agreed to begin negotiations on a new agreement which would only be completed in 2015 and which would not come into effect until 2020. This means that the new work stream agreed in Durban “to raise collective ambition” will be critical to achieving that first and most important target if we are to avoid the worst ravages of climate change. We do not have time for eight more years of international negotiations before we get started in earnest.

Unfortunately, there is significant evidence that we are going backwards. Despite repeated warnings about the damage to both the climate and the economy from subsidies to fossil fuels, they continue to rise, by as much as 50% over just the past two years, according to the IEA, whose Chief Economist Fatih Birol has been one of the least likely but most vocal critics of the ‘inconvenient truth’ about achieving agreed climate targets, while governments are spending their money taking us exactly in the opposite direction. The 21st century equivalent of the old Bulletin of Atomic Scientists doomsday clock, The Climate Action Tracker3, puts us on track at the moment to see about 3.3° C of warming by the end of the century on the basis of existing commitments. There is currently a ‘gap’ of 10 billion tonnes of CO2 per year4 between current confirmed national emission reduction targets and where we need to be by 2020; and even if the pledges made in Copenhagen and confirmed in Cancun are met in full, we’re still looking at a gap of 6 billion tonnes per year; and global emissions continue to rise.

There are those who now say that 2° C is ‘out of reach’ and that we’re ‘too late’, and while that may or may not be politically the case, it is certain that we have the technology and the finance to make the shift very quickly should the political leadership appear. We now that this can be achieved with current technologies, in the power sector and elsewhere; and if the political direction was clear, we could probably achieve a great deal more.

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What role can wind energy play in ‘bridging the gap’5?

So where does wind energy fit into this equation?

Unfortunately, there is no silver bullet, and no single answer to the climate problem. It cuts across the entirety of the ways in which 21st century civilization produces and consumes energy, the way it practices agriculture and forestry, the chemicals we make and release into the biosphere, and how we treat our waste. Nonetheless, wind energy has a crucial role to play.

The power sector is responsible for more than 40% of all carbon dioxide emissions from burning fossil fuels, and about 25% of our total greenhouse gas emissions. If we are going to make significant emission reductions in the near to medium term, then we have to look at the power sector. In the period out to 2020, we don’t have too many options.

The first of these is energy efficiency. As shown in study after study for the last four decades and more, there are innumerable cost-effective ways to save energy with existing technologies. Why don’t we do it? Well, the 600 billion USD or more in subsidies to the fossil industry might be one reason, and the lack of an effective price on carbon is another.

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The second is fuel switching from coal to gas - a significant amount of which is happening at the moment in the US and elsewhere, although the development of the cheap shale gas in the US has a climate downside in terms of the increased methane emissions associated with its production – but that problem can be mitigated, if there was the will (and the requirement) to do so.

The third, of course, is renewable energy, and in the time frame out to 2020 and for a good while beyond that, the largest contributor will be wind energy. Wind power will reduce emissions by about 400 million tonnes in 2012. How much can it be by 2020?

Up until two years ago, the industry was on track to meet the GWEO Advanced scenario, on a trajectory to surpass 1,000 GW installed by 2020, and saving 1.6 billion tonnes of CO2 per year; along the lines set out in the original Wind Force 106 publication from 1999.

Since the end of 2009, however, we’ve fallen back towards the Moderate scenario track. Coincidence? Maybe, but the same forces that have put the climate change agenda on the back burner for the past couple of years – recession in most of the OECD, the lack of EU ambition to ‘fix’ its emission trading system, fickle policy in the US and elsewhere – have contributed to slower growth in the wind energy sector – a flat market in 2010, modest growth in 2011 and again this year; and a very uncertain 2013 market. On the Moderate scenario track out to 2020 we would still see a cumulative capacity of more than 750 GW, and annual CO2 savings on the order of 1 billion tonnes/annum. Not insignificant, and better than the old IEA reference scenario upon which the ‘gap analysis’ is based, but not sufficient for wind energy to play its full part in combating the climate crisis.

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So what do we need to start growing rapidly again, to make up our own half-a-gigatonne gap?

• An end to the partisan bickering over energy policy in the US which creates the destructive boom-bust cycles in that critical market;

• Resolution of grid, certification, transparency and quality issues in China;

• Flushing the free allocations out of the European Emissions Trading System;

• A re-vitalization of the carbon markets – the Kyoto Protocol’s Clean Development Mechanism has more than 100 GW of wind energy projects in the pipeline, but in the absence of a new demand for the credits, reflecting increased emissions reduction ambition from governments,the price for the credits are so low as to be almost immaterial;

• The political courage on the part of at least some governments to tackle the subsidies issue in the conventional energy sector;

• Perhaps most importantly, stable, bankable policy in as many national energy markets as possible.

Any one of the above would contribute significantly to reestablishing rapid growth in the wind energy sector. We can only hope that the resurgence of public concern about climate change and the accompanying political pressure will generate the kind of political leadership necessary to get us back on track towards a sustainable energy future, with wind power making its full contribution towards to protecting the climate system for ourselves and for future generations.

The Global Wind Energy Outlook explores the future of the wind energy industry out to 2020, 2030 and up to 2050, with a range of three scenarios: The New Policies scenario from the International Energy Agency (IEA) and two scenarios developed especially for this publication, the GWEO Moderate scenario and GWEO Advanced scenario.

The latter two scenarios have evolved over the years as collaboration between the Global Wind Energy Council (GWEC), Greenpeace International, and the German Aerospace Centre (Deutsches Zentrum fur Luft- und Raumfahrt – DLR). These projections on the future of wind energy development have contributed to an on-going series of larger studies on global sustainable energy pathways up to 2050 conducted by DLR and Greenpeace in collaboration with a number of industry associations, including GWEC and the European Renewable Energy Council (EREC).1

The current volatility and seismic shifts underway in the global economy, and the uncertainty over international climate policy, makes looking into the future of the wind industry even more hazardous than usual. Here we present three scenarios for each of the IEA-defined regions as well as global totals, looking towards 2020 and then to 2030 – with longer term projections out to 2050 in the annex table. A brief description of the underlying assumptions and purpose of each scenario is outlined below.

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IEA New Policies scenario

Previously, we have used the IEA World Energy Outlook’s ‘Reference scenario’ as the baseline in this exercise. That scenario is basically an assumption of the status quo, and while it still exists within the World Energy Outlook (WEO) framework (as the ‘Current Policies’ scenario), it is no longer the central scenario. The ‘’New Policies’ scenario is based on an assessment of current directions and intentions both national and international energy and climate policy, even though they may not yet have been incorporated into formal decisions or enacted into law. Examples of this would include the emissions reduction targets adopted in Cancun in 2010, the various commitments to renewable energy and efficiency at national and regional levels, and commitments by governments in such fora as the G-8/G-20 and the Clean Energy Ministerial. The New Policies scenario has taken its place at the center of the WEO analysis, although the difference between that and the old Reference scenario when it comes to wind power is marginal. The IEA scenarios go out to 2035 and were extrapolated out to 2050 for comparison purposes by DLR.

GWEO Moderate scenario

The GWEO ‘Moderate’ scenario has many of the same characteristics as the IEA New Policies scenario, taking into account all policy measures to support renewable energy either already enacted in the planning stages around the world, and at the same time assuming that the commitments for emissions reductions agreed by governments at Cancun will be implemented, although on the modest side. At the same time it takes into account existing and planned national and regional targets for the uptake of renewable energy in general and wind energy in particular, and assumes that they are in fact met.

Through the five year period out to 2016, the Moderate scenario is very close to our annual five year market forecast, based on industry orders and planning as well as intelligence from our global network about new and emerging markets. After 2016 it is difficult to make a precise forecast given the current set of global uncertainties.

GWEO Advanced scenario

The most ambitious scenario, the ‘Advanced’ scenario explores the extent to which the wind industry could grow in a best case ‘wind energy vision’, but still well within the capacity of the industry as it exists today and is likely to grow in the future. It assumes an unambiguous commitment to renewable energy in line with industry recommendations, the political will to commit to appropriate policies and the stamina to stick with them.

It also assumes that governments enact clear and effective policies on carbon emission reductions in line with the now universally agreed objective of keeping global mean temperature rise below 2°C above pre-industrial temperatures. Wind power is an absolutely critical technology to meeting the first objective in the battle to stay below 2°C – which is getting global emissions to peak and begin to decline before the end of this decade.

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Global scenario Results

While the IEA New Policies scenario shows a flat and then slightly decreasing market for wind power for the next two decades, the GWEO scenarios paint a picture of two different futures:

The Moderate scenario is more likely in a world which carries on more or less the way it has been, with wind power continuing to gain ground but still struggling against heavily subsidized incumbent energy sources, and with the patchwork of carbon emission reduction measures that exist at present, with a low price on carbon emissions, where one exists at all.

The Advanced scenario shows the potential of wind power to produce 20% or more of global electricity supply in a world where there is strong political commitment and international cooperation to meeting already agreed climate change goals, enhancing energy security, dramatically reducing fresh water consumption and creating millions of new jobs around the world. Which future will we choose?

Capacity Growth

Assumptions on growth rates

Growth rates in the GWEO scenarios are based on a combination of historical trends, current and planned policies, new and emerging markets for wind power, and assumptions on the direction of overall climate and energy policy. While double-digit growth rates as assumed in both the Moderate and Advanced scenarios out to 2020 may seem high for a manufacturing industry, actual wind industry cumulative growth rates have averaged about 28% for the past fifteen years. Interestingly, annual market growth rates over the period are also about 28%, although the interannual variability is much higher due to the vicissitudes of the marketplace and the state of the global economy. The cumulative market growth figures are a more useful way to look at the industry over the longer term.

In the Advanced scenario, cumulative growth rates start off well below the historical average at 21%, recover slightly in the middle of this decade and then taper off to 13% by the end of the decade, dropping to 6% by 2030. The Moderate scenario starts with about 19% growth in 2012, tapering off gradually to 11% by 2020 and then also to 6% by 2030, while the IEA New Policies scenario starts at 16% in 2012, sinking to 6% by 2020 and then to 4% by 2030.

It should be borne in mind that cumulative market growth figures will inevitably drop over time in almost any scenario as the size of the cumulative market grows; although even small percentage increases a decade out from now will mean a large actual increase in the quantity of wind power deployed.

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Scenario results

The IEA New Policies scenario projects that annual wind energy markets will stay essentially flat out to 2015, and then shrink to about 10% below the 2011 market for the second half of this decade. It then projects a gradual decrease in the annual market to 2030 and remains flat for the rest of the period. On the basis of this, cumulative installed capacity would still reach 587 GW by 2020, and 918 GW by 2030. Ironically, the 2020 number of 587 GW is almost exactly the same as the IEA Reference scenario predicted for 2030 two years ago.

The GWEO Moderate scenario follows the lines of our short term market projections out through 2016, with annual market size topping 70 GW by 2020 for a total cumulative installed capacity of 759 GW by that date. We have taken into account what looks like a very difficult year in 2013, which contributes to a slightly more conservative projection for 2020 than we made two years ago, even though the market has outperformed the moderate scenario over the past two years. Under this scenario, growth would continue throughout the 2020s, with annual market size approaching 100 GW per year and a total installed capacity of about 1,600 GW by 2030.

The GWEO Advanced scenario maintains ambitious growth rates throughout this decade, assuming that current market difficulties are overcome in the near future. With annual market size topping 130 GW by the end of the decade, it assumes that manufacturing capacity continues to increase while market demand increases to fill it. Total installed capacity reaches 1,150 GW by 2020 and more than 2,500 GW by 2030, reflecting a full commitment to decarbonising the global electricity supply which we need to do sooner rather than later.

Production and Share of Electricity Supply

Assumptions on turbine capacity

The rated output, rotor diameter and average height of wind turbines have steadily increased over the years. While the average size of turbines varies substantially by country and region, the average turbine installed in 2011 was 1.76 MW, against an average of 1.21 MW for all currently operating turbines worldwide. This trend is expected to continue as larger and larger machines are developed for the offshore industry, and larger and more efficient turbines are developed to extract the most energy from new sites as well as for repowering old sites, many of whose turbines are nearing their design lifetimes of 20 years. The need for substantial and increased repowering has been built into the GWEO scenarios.

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Assumptions on Capacity Factors

The ‘capacity factor’ of a wind turbine or a wind farm refers to the percentage of the nameplate capacity that a turbine will deliver in terms of electricity generation over the course of a year. This is primarily governed by the wind resources in the particular location, but is also affected by the efficiency of the turbine, its suitability for the particular location, the reliability of the turbine and how well the wind project is managed. For example, a 1 MW turbine operating at a 25% capacity factor will deliver 2,190 M Wh of electricity during the course of one year.

Capacity factors vary widely from region to region, and are generally increasing with rapid new developments in very windy locations in Brazil, Mexico, offshore and elsewhere. However, there is also an increased emphasis on developing new turbines for new locations with lesser wind resources but which may be closer to load centers. Therefore, we have left the average global capacity factor at 28% for the period out to 2030, increasing to 30% after that date. The reality is that it will probably be greater than that, but given the wide variations within the IEA regions we have used for the GWEO scenarios, we have used the same global averages across the regional analyses as well.

Projections for Electricity Demand Development

While it is useful to calculate the actual electricity production from the global installations of wind power, it is also helpful to put it in the context of global electricity demand, and to thereby determine what percentage of that growing demand for power wind energy can supply. Each of the three scenarios in this study is set against two different projections for the future growth of electricity demand: the IEA (Reference) demand projection, and the ‘Energy Efficiency’ demand projection.

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IEA demand projection

As a baseline we have used the IEA’s electricity demand projection from the New Policies scenario from the 2011 World Energy Outlook, including its assumptions on population and GDP growth, extrapolated out to 2050 by DLR. Again, this assumes some measures to curb emissions growth and create a more sustainable energy future, but does not foresee major shifts.

With these assumptions, the scenario looks for electricity demand to grow from over 18,000 TWh last year to more than 24,000 TWh by 2020, and to just over 30,000 TWh by 2030; basically double what it was in 2005.

Energy Efficiency Demand projection

We also measure our progress against an Energy Efficiency demand projection, originally developed for the Energy [R]evolution scenario by the ECOFYS consultancy, which has now been updated by researchers at the University of Utrecht3, updating the energy efficiency scenario used in previous editions of this publication. The study includes the implementation of best practice existing technologies and a certain share of new efficiency technologies, while using the same assumptions for population and GDP growth over the period as the IEA, and assuming no structural economic changes beyond those in the IEA scenario. The uptake of e-mobility after 2020 is also included in the study. It does not foresee lifestyle changes or loss in comfort levels, nor does it foresee ‘stranded’ assets, i.e., the early retirement of inefficient installations in favour of more efficient ones.

This ‘Energy Efficiency’ demand projection, then, only taps some of the potential for energy savings and increased efficiency which are available to us now, and which will likely be available in the near future. However, it is an indicator of what can be done at very low or no cost if we are to be serious about achieving our climate and energy security objectives.

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Scenario results

In the IEA New Policies scenario, wind power contributes 1439 TWh of electricity to the global energy mix in 2020, 3 times the 480 TWh produced by wind power in 2011. Measured against the two different demand scenarios, this would count for 6.0 to 6.4% of total global electricity demand, approximately the share that wind power contributed to the European power mix in 2011. By 2030, this number rises to just over 2,400 TWh, accounting for between 8 and 9% of global demand – a respectable number, but far less than wind power’s potential contribution.

The GWEO Moderate scenario envisages a substantially larger contribution from wind, which would generate over 1,866 TWh in 2020, rising to almost 4,300 TWh in 2030. This would mean that wind power would meet between 7.7% and 8.3% of global electrical demand in 2020, and between 14.1% and 15.8% in 2030; quite a substantial contribution, but probably not in line with what would be required to meet agreed climate protection goals.

The GWEO Advanced scenario shows that wind power could generate just over 2,800 TWh of electricity by 2020, meeting between 11.7% and 12.6% of global electricity demand, in line with the industry’s long term objectives and consistent with the idea of having global emissions peak before 2020. These numbers continue to rise steeply in the subsequent decade, with wind power contributing more than 6,600 TWh in 2030, meeting between 22.1% and 24.8% of total electricity demand.

Investment

The capital cost of turbines has been decreasing, precipitously in some markets, over the past several years, both in adjusted and in absolute terms. Of late, this has been largely the result of market forces, but at the same time, continuous design refinements and experience with mass producing an increasing number of the same or similar turbines have decreased the cost of the technology itself. The other major factor, commodity prices, has contributed to the decrease in prices, although the industry is susceptible to price spikes, particularly for steel and copper. There are also significant regional variations, as both competition and other underlying market factors affect the final costs, and there will be interannual variations beyond the scope of these scenarios as a result of market forces, commodity prices and the rate of inflation.

Regardless, the growth of the wind power industry is attracting increased investment over the past few years, reaching €50.7 billion in new wind power equipment in 2011.

The development of turbine costs in the GWEO scenarios assumes gradually decreasing costs in absolute terms, reflecting the projected growth of the industry. In the IEA New Policies scenarios the costs remain roughly static over the period out to 2030.

Capital costs per kilowatt of installed capacity were considered to have averaged €1,250 in 2011. For the New Policies scenario they don’t change significantly over the scenario period, ending up at €1,267/kw in 2030. In the Moderate scenario prices drop to about €1,200/kw in 2020 and to €1,168/kw by 2030; and in the Advanced scenario, with rapid scale up, costs drop more rapidly, down to €1,147 by 2020 and to €1,137 by 2030.

Annual investments in wind power equipment in 2011 were just over €50 billion. In the Reference scenario, this decreases to €45 billion per year by 2020, and to €42.5 billion in 2030. In the Moderate scenario, annual investment increases to nearly €90 billion by 2020 and to nearly €115 billion per year by 2030. Finally, in the Advanced scenario, annual investments rise to 154 €billion by 2020, and then to €170 billion by 2030. These figures are indeed large, but they should be seen in the context of total power sector investments, which will according to the IEA, need to be well over €500 billion annually for the period in question.

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Employment

As governments struggle with high unemployment rates in many parts of the world, both the current reality and future potential for employment in the wind industry become increasingly significant. The industry creates a substantial number of skilled, semi-skilled and unskilled jobs, and this has taken on an increasing political as well as economic importance of late. The macro-economic effects of the development of the wind power sector as well as the renewable energy sector as a whole is increasingly a factor in political decision making about our future energy choices.

A number of national and regional assessments of employment in the wind industry have been carried out around the world in recent years, although there is no comprehensive authoritative ‘ground-up’ assessment. The assumption we have made and continue to make, which is verified by such studies as do exist, is that for every new megawatt of capacity installed in a country in a given year, 14 person/years of employment is created through manufacturing, component supply, wind farm development, construction, transportation, etc. While there is regional variation, this seems to work as a global average. As production processes are optimised, we project that this level will decrease to 13 person/years of employment per new megawatt installed by 2020, and to 12 person/years of employment by 2030.

In addition, 0.33 person/years of employment are judged to be needed for operations and maintenance work at existing wind farms.

Under these assumptions, and on the basis of existing studies, the industry currently employs about 650,000 people, as of the end of 2011. Under the IEA New Policies scenario, this number would stay roughly the same throughout the current decade, and rise to just over 700,000 jobs by 2030.

In the GWEO Moderate scenario, a very different picture emerges, with employment levels rising to over 875,000 by 2015, 1.2 million by 2020, and to more than 1.7 million by 2030.

In the GWEO Advanced scenario, employment would need to more than double by 2015, ending the decade with more than 2.1 million jobs, which would rise to 2.6 million in 2030.

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Carbon Dioxide Savings

Wind power has many environmental benefits, including the elimination of local air pollution and nearly zero water consumption. However, the greatest benefit is wind power’s contribution to reduction of carbon dioxide emissions from the power sector, which is the single largest anthropogenic contributor to the global climate change problem.

Modern wind energy technology has an extremely good energy balance. All of the CO2 emissions related to the manufacturing, installation, servicing and decommissioning of a turbine are generally ‘paid back’ after the first 3 to 9 months of operation. For the rest of its 20 year design lifetime, the turbine operates without producing any of the harmful greenhouse gases which are already disrupting life on earth. The benefit obtained from wind power in relation to CO2 emissions depends entirely on what sort of power plant it displaces. If it displaces hydro or nuclear power, the benefit is small; but if it replaces coal or gas, then the benefit is enormous. Emissions from fossil fuel plants range from around 500g CO2/kWh up to 1200g CO2/kWh or more for the dirtiest fuels. On the basis of the current electricity distribution, we have calculated that 600g CO2/kWh is a good average number to characterize the savings generated by wind power, although the regional variations will be significant. While the majority of the existing plant is in regions which may be slightly lower than that number, the majority of new installations, particularly in Asia, are in regions which are much higher.

Annual reductions in CO2 from existing wind power plant was about 350 million tonnes in 2011. Under the IEA New Policies scenario, this is expected to rise to 863 million tonnes annually by 2020 and up to 1447 tonnes per year by 2030. The GWEO Moderate scenario implies savings of over 1.1 billion tonnes of CO2/annum by 2020 and more than 2.5 billion tonnes by 2030; while the GWEO Advanced scenario would result in savings of nearly 1.7 billion tonnes of CO2 per year by 2020, and just over 4 billion tonnes/annum by 2030.

In cumulative terms, the IEA New Policies scenario has wind power saving nearly 6.1 billion tonnes by 2020, and 17.5 tonnes by 2030. The GWEO Moderate scenario results in nearly 7 billion tonnes in cumulative savings by 2020, and just over 25 billion tonnes of CO2 savings in 2030. The GWEO Advanced scenario yields CO2 savings of 9.25 billion tonnes per year in 2020, and 37.5 billion tonnes by 2030.

These are significant reductions in all cases, but the critical issue here is not just the total volume of reductions, but the speed at which these savings are achieved, as these are long lived gases, and the imperative is for early CO2 emissions reductions to achieve the greatest benefit for the atmosphere. Wind power’s scalability and its speed of deployment makes it an ideal technology to bring about the early emissions reductions which are required if we are to keep the window open for keeping global mean temperature rise to 2°C or less above pre-industrial levels.

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