Overall, the wind industry globally begins 2017 in good shape, with good prospects for 2017 and beyond.
Although we didn’t reach the 60-GW mark in 2016, largely because China ‘only’ installed 23 GW instead of last year’s phenomenal 30 GW, the industry chalked up 12.6 percent growth in cumulative capacity. In addition, China, Brazil, Germany, Mexico, South Africa and Canada were down a bit on the 2015 market; but these are largely cyclical issues (except in the cases of Germany and South Africa), and we expect to see them all turn around in 2017.
India set a new national record with 3,612 MW of new installations, pushing it into fourth place in terms of annual capacity growth, and cementing it’s fourth place position in cumulative terms, behind China, the U.S. and Germany.
Germany passed the 50-GW mark in 2016 with installations of 5,443 MW, which was nonetheless down a little bit on 2015’s figure — somewhat inflated by late connections of offshore wind projects that were actually ready to go in 2014.
U.S. installations of 8,203 MW were about the same as 2015’s, and despite the political goings-on, seem to be on track for a strong 2017, with 18+ GW either under construction or in advanced stages of development. So far so good — fingers crossed!
Europe’s numbers were surprisingly strong, actually surpassing 2015 for Europe as a whole on the strength of Turkey’s 1,387 MW, the first time that country has broken the 1-GW barrier in a single year. The EU 28 was down by just a few percent, led by Germany, France (1,561 MW) and the Netherlands (887 MW — most of which was offshore).
Brazil once again led markets in Latin America, installing 2,014 MW, despite the country’s political and economic woes. Chile had a record year with installations of 543 MW, and Uruguay installed 365 MW, pushing both countries over the 1-GW mark in terms of cumulative installations. But the big news in Latin America this year was Argentina, which started the year with a new government and a moribund industry, and ended the year with a solid 1.4-GW pipeline and more to come.
Both Africa and the Pacific were quiet, with contributions coming only from the big markets of South Africa and Australia.
So what’s in store for 2017?
We expect China to push back towards 30 GW of installations in anticipation of yet another cut in the feed-in tariff scheduled for the beginning of 2018. The country’s curtailment problem persists, although new HVAC and HVDC transmission lines should help a bit. The main problem is not the lack of transmission, but the lack of willingness of the regional system operators to give wind power the priority dispatch that it is supposed to have under the country’s Renewable Energy Law, and the unwillingness and/or inability of the central government to enforce the law. This problem will persist until and unless there is real electricity market reform, although the national emissions trading system which is being implemented this year will help, at least on the economics.
We expect strong repeat years from the U.S., Germany, and India, and there is hope that the Brazilian economy will start to recover and put some demand back in the market. It appears that the impasse between South African President Zuma and his cronies on the one hand, and the regulator and the industry, is coming to an end. Again, fingers crossed.
Elsewhere in Africa, the 850 MW auctioned in Morocco in 2016 at record low prices will start to be built out, and the Lake Turkana project in Kenya should be finished (finally!) in the first half of this year.
As well as recovery in Brazil, we expect to see many construction starts in Argentina, although by no means all of it will be completed in 2017. Chile’s wind sector is now going strong, the Peruvian market is picking up, and we see first stirrings of a potential new market in Colombia.
After a quiet year or two, the Australian market is picking up again, and both the Philippines and Viet Nam seem poised to develop their substantial market potential.
But the big story that developed in 2016 and promises to begin to bear fruit in 2017, is the cratering of offshore prices. It started with the Dutch tender for Borssele 1 & 2 in June coming in at €72/MWh, well below expectations; followed by a Danish nearshore tender in September at €64/MWh. This was followed in November with the winning bid for the Danish Krieger’s Flak project coming in at an astonishing €49.90/MWh; and then Borssele 3 & 4 in the Netherlands coming in at €54.50/MWh in December.
These prices have certainly gotten everyone’s attention, and we have the bizarre situation in some European countries (at least temporarily) that offshore wind is cheaper than onshore!
The reasons are many: the maturing of the industry, the improvement and maturation of the technology and management thereof, growing investor confidence, and the introduction and deployment of a new generation of 6-8 MW (and now 9 MW with the up-rating of the V-164) machines, with enormous swept area and tremendous output. On the basis of this I think we will finally begin to see the spread of the offshore industry beyond its northern European home to North America, East Asia, India and perhaps elsewhere in the near future.
Combined with record low prices for onshore wind in major markets, I think we will see the industry driven primarily by the economics in the short to medium term, while the policy landscape in general is in a bit of disarray.
By Steve Sawyer
Although we didn’t reach the 60-GW mark in 2016, largely because China ‘only’ installed 23 GW instead of last year’s phenomenal 30 GW, the industry chalked up 12.6 percent growth in cumulative capacity. In addition, China, Brazil, Germany, Mexico, South Africa and Canada were down a bit on the 2015 market; but these are largely cyclical issues (except in the cases of Germany and South Africa), and we expect to see them all turn around in 2017.
India set a new national record with 3,612 MW of new installations, pushing it into fourth place in terms of annual capacity growth, and cementing it’s fourth place position in cumulative terms, behind China, the U.S. and Germany.
Germany passed the 50-GW mark in 2016 with installations of 5,443 MW, which was nonetheless down a little bit on 2015’s figure — somewhat inflated by late connections of offshore wind projects that were actually ready to go in 2014.
U.S. installations of 8,203 MW were about the same as 2015’s, and despite the political goings-on, seem to be on track for a strong 2017, with 18+ GW either under construction or in advanced stages of development. So far so good — fingers crossed!
Europe’s numbers were surprisingly strong, actually surpassing 2015 for Europe as a whole on the strength of Turkey’s 1,387 MW, the first time that country has broken the 1-GW barrier in a single year. The EU 28 was down by just a few percent, led by Germany, France (1,561 MW) and the Netherlands (887 MW — most of which was offshore).
Brazil once again led markets in Latin America, installing 2,014 MW, despite the country’s political and economic woes. Chile had a record year with installations of 543 MW, and Uruguay installed 365 MW, pushing both countries over the 1-GW mark in terms of cumulative installations. But the big news in Latin America this year was Argentina, which started the year with a new government and a moribund industry, and ended the year with a solid 1.4-GW pipeline and more to come.
Both Africa and the Pacific were quiet, with contributions coming only from the big markets of South Africa and Australia.
So what’s in store for 2017?
We expect China to push back towards 30 GW of installations in anticipation of yet another cut in the feed-in tariff scheduled for the beginning of 2018. The country’s curtailment problem persists, although new HVAC and HVDC transmission lines should help a bit. The main problem is not the lack of transmission, but the lack of willingness of the regional system operators to give wind power the priority dispatch that it is supposed to have under the country’s Renewable Energy Law, and the unwillingness and/or inability of the central government to enforce the law. This problem will persist until and unless there is real electricity market reform, although the national emissions trading system which is being implemented this year will help, at least on the economics.
We expect strong repeat years from the U.S., Germany, and India, and there is hope that the Brazilian economy will start to recover and put some demand back in the market. It appears that the impasse between South African President Zuma and his cronies on the one hand, and the regulator and the industry, is coming to an end. Again, fingers crossed.
Elsewhere in Africa, the 850 MW auctioned in Morocco in 2016 at record low prices will start to be built out, and the Lake Turkana project in Kenya should be finished (finally!) in the first half of this year.
As well as recovery in Brazil, we expect to see many construction starts in Argentina, although by no means all of it will be completed in 2017. Chile’s wind sector is now going strong, the Peruvian market is picking up, and we see first stirrings of a potential new market in Colombia.
After a quiet year or two, the Australian market is picking up again, and both the Philippines and Viet Nam seem poised to develop their substantial market potential.
But the big story that developed in 2016 and promises to begin to bear fruit in 2017, is the cratering of offshore prices. It started with the Dutch tender for Borssele 1 & 2 in June coming in at €72/MWh, well below expectations; followed by a Danish nearshore tender in September at €64/MWh. This was followed in November with the winning bid for the Danish Krieger’s Flak project coming in at an astonishing €49.90/MWh; and then Borssele 3 & 4 in the Netherlands coming in at €54.50/MWh in December.
These prices have certainly gotten everyone’s attention, and we have the bizarre situation in some European countries (at least temporarily) that offshore wind is cheaper than onshore!
The reasons are many: the maturing of the industry, the improvement and maturation of the technology and management thereof, growing investor confidence, and the introduction and deployment of a new generation of 6-8 MW (and now 9 MW with the up-rating of the V-164) machines, with enormous swept area and tremendous output. On the basis of this I think we will finally begin to see the spread of the offshore industry beyond its northern European home to North America, East Asia, India and perhaps elsewhere in the near future.
Combined with record low prices for onshore wind in major markets, I think we will see the industry driven primarily by the economics in the short to medium term, while the policy landscape in general is in a bit of disarray.
By Steve Sawyer