Market Forecast for 2014-2018
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GWEC expects the market diversification trend which has emerged over the past several years and intensified during 2013 to continue to do so over the next several years. New markets outside the OECD continue to appear, and some of them will begin to make a significant difference to overall market figures. Inside the OECD, as wind power approaches double digit penetration levels in an increasing number of markets, and as demand growth either stalls or goes backwards, incumbents feel increasingly threatened. The fight for market share and policy support in these markets is becoming more and more intense. As a result, most of the growth in the coming years will be in markets outside the OECD.
The competition with incumbent fossil generation will continue until and unless there is a global price on carbon, a prospect which few look for any time soon. However, regional and national carbon markets are starting to show some promise, although it will take some time to see if they begin to have a systemic effect on the market. The shine is starting to come off of the notion of the ‘Golden Age of Gas’, much touted in recent years, as the environmental and climate impacts of the fracking revolution in the US begin to emerge, and as artificially low prices begin to rise. That, combined with political unrest in the hydrocarbon-rich parts of the world, has given wind and other renewables a competitive boost in terms of price.
Today, in the absence of a concerted effort to combat climate change, it is wind’s cost competitiveness that is its greatest advantage in the market place. In Brazil, South Africa, Turkey, Mexico and elsewhere, wind is competing directly and successfully with heavily subsidized incumbents – so successfully in fact that in an auction last August in Brazil, wind power was excluded to ‘give the other energy sources a chance’. Wind is coming in about 30% cheaper than the notorious giant World Bank financed coal-fired power plants in South Africa, and we have heard tell of PPAs being signed for wind power in the US as low as US$ 20/MWh; which of course translates into about US$ 42 with the PTC, but still extremely competitive.
But in the absence of global climate policy, national and regional policy are still the main drivers for wind energy deployment. The boom and bust cycle in the US is driven by on-again, off-again policy; China’s support for wind as a major pillar of its energy strategy supports the continued growth in that market; and in the EU, the debate over 2030 climate and energy policy dominates the perspective for wind going forward, both on and offshore. But it is safe to say that market growth over the next five years will be concentrated in Asia, Latin America, and Africa – that’s where the ‘easy’ growth from rapid increase in demand and strong economic growth will come from.
The 2013 market saw China back on top, installing about five times as much wind power as Germany in the number two spot. The 2012 market leader, the US, dropped back to sixth place, behind Canada (which had a record year), and just ahead of Brazil. Despite a lackluster year, India moved into fourth place, right behind the UK, which had a good year both on and offshore.
When we did our projections for the 2013-2017 market one year ago, we underestimated the drop in the US market by about 3 GW; but because of the nature of the PTC re-authorisation and the strong pipeline of new projects, we look to make up that 3 GW in 2014. All in all, 2014 looks to be a record year, with annual market growth of about 33%, to bring the annual market to about 47 GW, with strong installations in North America and Asia, and the Brazilian market really beginning to come into its own. Brazil, Mexico and South Africa will figure increasingly strongly in the annual market figures in the years to come. After 2014, we expect the market to return to a more ‘normal’ annual market growth of 6-10% out to 2018. Cumulative growth will rise to nearly 15% in 2014, but average 12-14% from 2015 to 2018. Total installations should nearly double from today’s numbers by the end of the period, going from just over 300 GW today to just about 600 GW by the end of 2018.
This puts us more or less on track with the ‘moderate’ scenario in our last Global Wind Energy Outlook published in 2012. In order to put the industry back on the track of the strong growth numbers from the last decade, we will either need to see a global price on carbon or unexpectedly strong economic and demand growth, or both; and neither of them seem likely from the vantage point of March 2014, at least within the five year period out to 2018.