Market Forecast for 2013-2017
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GWEC expects the wind industry to continue to diversify geographically, with significant new activity in Latin America, Africa and Asia outside of China and India; but it is still the ups and downs of the major markets which are the main determinants of global market growth. Continued uncertainty over the short term development of the global economy with all its regional and national variations, and its effect on electricity demand growth are major variables to contend with when looking at the wind industry’s development over the next five years, and although we continue to watch closely the development of national and regional carbon markets, given the state of the global climate negotiations, climate policy and carbon markets are unlikely to have a significant effect on global development in the next five years.
As ever, policy at the national level is the most significant factor driving the market. The Production Tax Credit (PTC) in the United States was extended on 1 January 2013 for one year, with the critical proviso that it will cover projects which have broken ground during 2013, not only those which are connected to the grid. But what happens after 2014? While it seems clear that the current wave of policy uncertainty sweeping through many European markets is going to have an effect on 2013, and perhaps 2014, what next? What about the post 2020 target discussion in Europe? How long will China’s consolidation phase last before the market returns to significant growth? Will India’s ‘policy gap’ be rectified in a timely enough fashion to bolster the 2014 market?
These are some of the many questions that need to be considered when looking at the industry’s near term future. In addition, one has to expect the downward pressure on turbine prices because of sluggish markets and manufacturing overcapacity to continue. How long before we return to a reasonable balance between supply and demand, and at what cost to the manufacturing supply chain?
The 2012 market saw the US return to the top of the league table. Installing an incredible 8.4 GW in the fourth quarter in anticipation of the expiration of the PTC, the US installed 13,124 MW, eking out China, which at 12,960 MW had its lowest level of installations since 2008. Combined with an exceptionally strong year in Europe, the market was much more reasonably balanced between the three major regions (Asia, North America and Europe) than at any point in the last several years, and while Asia was still the leading region, it did not enjoy the dominance that characterized the 2010 and 2011 markets.
Looking back at last year’s annual market update, we were pretty close with our 2012 forecast, missing our projection by just over 1 GW. But for 2013, we are now looking at a much more significant drop in the market than we foresaw a year ago, primarily as a result of a major drop in US installations, a slower than expected recovery of the Chinese and Indian markets, and a bit of a slowdown in Europe. We forecast that annual installations for 2013 will drop by more than 11% to just under 40 GW; and then recover sharply in 2014 to slightly exceed the 2012 market and average just over 11% annual market growth from 2014-2017. The average annual market growth rate for the entire 2013-2017 period will be almost 7%, ending up with an annual market in 2017 of 61 GW.
In cumulative terms, this means an average growth rate over the period of about 13.7%, well below the decadal average, although the larger numbers involved mean that maintaining growth rates in excess of 20% is challenging without some sort of global policy imperative to drive the market. We project that by the end of 2017 we will see total cumulative installed capacity passing 500 GW to end up at about 536 GW. This puts us right on track with the Moderate Scenario from last year’s long term projections in the Global Wind Energy Outlook 2012, and leaves us to ponder what is required to get us back on the Advanced Scenario track.