TODAY’S STUDY: World Wind Now
Global Wind Report 2018
April 2019 (Global Wind Energy Council)
2018 was a good year for the global wind industry with 51.3 GW of new wind energy installed, a slight decrease of 4.0 per cent compared to 2017, but a strong year, nonetheless. Since 2014, annual installations have topped 50 GW each year, despite ups and downs in some markets.
Market status and outlook
The 51.3 GW of new installations brings total cumulative installations up to 591 GW. In the onshore market, 46.8 GW was installed, a decrease of 4.3 per cent compared to 2017. China and USA remained the largest onshore markets with 21.2 GW and 7.6 GW new capacity respectively. The European onshore market installed 9 GW, a 32 per cent decrease compared to 2017. Growing developing markets in Africa, the Middle East, Latin America and South-East Asia installed a combined 4.8 GW during 2018 (nearly 10 per cent of all new installations), up from eight per cent in 2017 when these markets installed 3.8 GW…
Current and future market drivers…Increased focus on value…Corporate sourcing driving growth…Shifting business models…
Market Status 2018
2018 was a solid year with 51.3 GW installed – a decrease of 4.0 per cent compared to last year, and with total installed capacity of 591 GW (a growth of nine per cent compared to 2017). New installations in the onshore wind market reached 46.8 GW, and the global offshore market installed 4.5 GW, bringing the share in the global market to now eight per cent.
The onshore market
The Chinese onshore market installed 21.2 GW in 2018 and has been the leading market since 2008. China with 206 GW total installations at the end of 2018 is the first market to surpass 200 GW of total installed capacity – reaching its target of 200 GW two years early (based on the FiveYear-Plan 2016-2020). As part of the ongoing reform of the energy market, the Chinese government announced the introduction of auctions in 2018. These auctions focus on competitive pricing, technology and low curtailment risks, while volume is still determined through the central planning process. GWEC expects further progress on market mechanisms for the integration of renewables and wind energy and moving away from direct subsidies. The full implementation of the Renewable Portfolio Standards (RPS) with quotas for grid companies, local utilities, large corporates and others is one element of the market mechanisms and providing opportunities for wind energy.
The second largest market in 2018 was the US with 7.6 GW of new onshore installations and total onshore installations of 96 GW. Until 2020/ 21, the Production Tax Credit (PTC) will remain the main driver for new installations. Future demand will be linked to RPS and the increasing competitiveness of onshore wind energy. New business models and new financial models are being developed in the US market and will, most likely, further drive volume for new installations.
In addition to China and USA, the top five wind markets in 2018 are completed by Germany (2.4 GW), India (2.2 GW) and Brazil (1.9 GW).
Excluding the two largest markets, China and USA, market-based mechanisms, such as auctions, tenders, and Green Certificates, were the main drivers behind new installations in 2018: For the onshore market, 16 GW of new installations or 35 per cent of new installations originate from marketbased mechanisms. This level can be expected in the future, as 15 GW of onshore wind capacity was auctioned during 2018. The dramatic decreases of bid levels and equipment prices, as seen in 2016 and 2017, have slowed down in 2018, and bid levels will continue to stabilise in 2019. Continuing efforts to increase efficiency and lower cost means that the wind industry will be able to respond to changing market conditions in the future.
With China expecting to implement auctions during 2019, the share of installations originating from market-based mechanisms will rise after 2020, when the first auction-based volume will be installed in China.
Without doubt, auctions and tenders are an important element for capacity allocation. However, how governments select the support and allocation mechanisms for renewables and wind energy depends on market conditions and the design of the energy market (e.g. integration, pricing mechanism, etc.).
The offshore market – China installed 1.8 GW in 2018, taking the lead for the first time, followed by the United Kingdom (1.3 GW). Globally, the share of offshore installations continues to increase and reached eight per cent for new installations and four per cent of the total installations in 2018…
China and USA increased new installations, Europe and India saw decreases
The mature and leading markets in China and North America continued to grow in 2018. Positive developments came from Mexico growing by 500 MW compared to 2017 and reaching 0.9 GW of new installations. Africa/Middle East also grew to 0.9 GW with Egypt and Kenya as leading markets (380 MW and 310 MW of new installations respectively). The decrease in the European onshore market is attributed to lower volumes in Germany and the United Kingdom. In India, new installations slowed compared to 2017 (4 GW in 2017) as execution challenges need to be solved.
Markets to watch 38 Asia – Vietnam - Thailand - Philippines - Indonesia 39 Latin America – Argentina, Colombia, Peru
Market Outlook 2019 to 2023
Global wind energy market to grow on average by 2.7 per cent each year
The market outlook for the global wind industry is positive. Over the next five years, GWEC Market Intelligence expects that over 300 GW of new capacity will be added. That is more than 55 GW of new installations each year until 2023.
Near-term, governmental support (auction/ tender programmes and renewable targets) are still a main driver for installations. The opportunities for wind energy to operate on a commercial basis are increasing though as wind is proving its cost-competitiveness and bilateral agreements (e.g., in the form of corporate PPAs) will grow.
It is difficult to predict the installations driven by commercial opportunities rather than government support. However, several markets like USA, Mexico, Brazil and others already get considerable volumes through these drivers.
The investment climate for wind energy and renewable energy has stayed positive during 2018, and despite, certain outlooks on the global economy, the activity level in the wind market will remain high.
Many markets are reassessing their energy demand and their market design. Wind energy as a flexible and easily-scalable capacity will be part of the solutions for the reassessment. The pressure decreasing prices pushed the wind energy industry over the past years to accelerate technical developments and efficiency improvements. For the near-term, the price pressure will not be as severe, but will continue to exist as a key element to mature the wind industry
Developing markets and offshore to take larger share in global market
The offshore market will become a truly global market over the next five years. Capacity will grow, especially in Asia. The first largescale offshore installations installations are expected in North America towards 2022 or 2023. Currently, eight per cent of the new installations are offshore, by 2023, this share is expected to increase to 22 per cent by 2023.
Africa/ Middle East
Steady volume is expected from Africa/Middle East based on the expectation that African governments stay true to their ambitions for wind and renewable energy – and project execution progresses. For South Africa, the largest market in Africa so far, the next auction/ procurement round is expected in H1 2019 and will re-install confidence in the market.
Asia excl. China
India will drive the volume of new installations with the execution of the scheduled auctions. In SouthEast Asia, unless governments stop prioritizing coal, wind energy will remain at a moderate level – despite better economics.
Australia and New Zealand challenge wind energy to drive down cost and, at the same time, to provide opportunities for new and advanced business models like hybrid and co-located models.
As a mature market, the European onshore market is expected to remain stable as governments execute their auctions and tenders. For 2019, installations increase as auctioned volume in Spain will be installed and a large project pipeline in Sweden will be executed.
In Latin America, governments’ commitment to large-scale auction is driving the volume. Maintaining the commitment is crucial for positive development in Latin America. For the next two years, the PTC will drive the US market, good economics and state-level RPS will ensure future market activity.
Installations for the next two years are linked to the already existing pipeline of approved projects by the NEA. Installations as of 2021/22 will be linked to the newly introduced auctions. Currently, it is expected that the market will remain at the level of 20 GW new installations per year…