Market Forecast for 2015-2019
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GWEC sees continued dominance by Asia, and having surpassed Europe in terms of cumulative installed capacity at the end of 2014, it will continue to lead markets with 40-45% of the annual global total going forward. Of the other big markets, Europe will continue its steady march towards its 2020 targets, and North America, as always, is the most difficult to predict. After a strong 2015 and 2016 in the US and Canada it’s a crap shoot as to what will happen next, on the one hand due to the vagaries of the US Congress, and ‘north of the border’ to a lack of policy clarity in key provincial markets after the end of next year.
Latin America’s numbers will increasingly make a difference to global totals, with Brazil leading the charge, but with Chile, Uruguay, Peru, Central American markets and others providing a boost. For Africa, it’s going to be a contest between Egypt and South Africa for dominance of that market, but there are many other countries that will contribute numbers to the totals going forward. The Pacific will have to wait for the end of the Abbot government in Australia to start growing again.
Given the expiration of the current FIT arrangements in China at the end of 2015, we can expect similar numbers as in 2014. After that, while the market may contract a bit, it’s not unreasonable to assume that China alone will install on the order of an additional 100 GW by the end of 2019, exceeding the country’s 200 GW target for 2020 by a healthy margin, and a year ahead of time.
Due to the new government’s initiatives on renewables, the Indian wind industry has a de facto target of 5 GW/annum for the rest of the decade and into the next. We don’t expect it to reach that in 2015, but it will move in that direction and get close by the end of the five year period. Elsewhere in Asia, we’re seeing the basis for strong growth in Pakistan and the Philippines, and Taiwan and Thailand continue to surprise. Japan will start to grow again in 2015, but the slow pace of electricity market reform and the hesitation to unbundle the existing utilities means that it will be slow to realise it’s potential; and the slow pace of onshore development in Korea means that we won’t see much from that market until the offshore market starts to get built out towards the end of the decade. Overall, however, we’re expecting an additional 140 GW to be installed in the region between now and the end of 2019, a doubling of the existing installed capacity.
Germany’s spectacular performance is likely to be matched in 2015, or nearly so; and will remain strong throughout the period due to the offshore segment developing in earnest and significant repowering on land. The UK’s market could stall, but it is hoped that a positive outcome of the next election will see some stability and positive support for the sector going forward. Sweden and France performed well in 2014, and we would expect that to continue. Both Turkey and Poland continue to bring strong numbers to the table, and Turkey in particularly is to become a major market.
The offshore segment seems to be in a much healthier place than it was at this time last year, with more realistic targets and a stronger financial base, as well as a greater diversity of suppliers of the ‘next generation’ of >5MW machines which will be rolled out in earnest over the next few years. On the whole, we expect Europe to continue its march towards its 2020 targets, installing about 70 GW over the next five years.
The US is always the hardest market to call, and as the dominant market in this region, projections for North America are difficult. With a strong pipeline of projects under construction under the existing incentive arrangements, 2015 and 2016 are likely to be good years. But what happens after that? Despite the fact that close to 80% of existing wind power installations are in Republican congressional districts, it remains the case that energy (and climate) are ideologically charged political issues in Washington, and it’s difficult to see how the current Administration and Congress can work together to come up with much in the short term to fill the looming policy gap.
North of the border in Canada, there is a similar lack of policy clarity after 2016, but the more diverse nature of the market there, dependent on provincial government policies rather than what emanates from Ottawa, means that we could still see support for the sector after 2016, but it’s far from certain. Mexico’s existing legislation sets another de facto target of at least 2 GW/annum going forward, but sorting out the details of the energy reform means that Mexico will have to play ‘catch-up’ to reach these goals, with large market figures projected for 2017 and 2018. Overall, we expect to see about 44 GW installed in the region as a whole in the next five years.
On the basis of existing contracts, the Brazilian wind sector is expected to install another 12-13 GW over the next 5 years, and with four auctions planned during 2015, that number could rise substantially. Wind will likely surpass gas in terms of installed capacity by the end of 2017, and assume its place as the ‘No. 2’ power source in the country. This is all the more important given the recent droughts and associated unreliability of the hydro which is and will continue to be the backbone of the country’s electricity system. Notwithstanding the current economic slump and political unrest, the Brazilian wind market looks solid for the foreseeable future.
Elsewhere in the region, Chile’s wind market finally took off in 2014, and although it is unlikely to rival Brazil, will evolve into a modest but steady market. Uruguay continues to surprise, and it looks as though the Peruvian market is starting to move also. Panama will soon add to the small but cumulatively significant numbers put up in Central America, and there is some potential in Colombia which may start to emerge at the end of the period. Argentina remains the largest untapped resource, but until there is a change of government, we’re not going to see much from that market, even though it has some of the world’s best wind resources.
Overall, we expect to see about 25 GW installed in the region over the next five years, largely led by Brazil, but with other markets making significant contributions to the total as time goes by.
Africa and the Middle East
The African market reached nearly 1,000 MW of annual installed capacity for the first time in 2014, and we expect that it will pass the 1 GW with room to spare in 2015, and not look back. Driven initially primarily by South Africa and Egypt, we see Morocco, Ethiopia, Kenya, Tanzania and Ghana as emerging markets to pay attention to. In the Middle East, there are new projects coming soon in Jordan, and if the current negotiations succeed, we could see the emergence of the next ‘big’ market in Iran towards the end of the decade.
South Africa’s emergence in 2014 is the ‘take-off’ after an extremely long countdown. Despite the political instability in the country, the electricity situation is dire, and they need the power. Wind is today the cheapest way to add new capacity to the grid in the country, and the market could expand far beyond the existing pipeline of 3-4 GW that is in the works.
The project to tie together the existing electrical markets in Eastern and Southern Africa continues to enjoy strong political support, and there is some construction underway. Strong interconnections will facilitate east African states development of their enormous renewable energy sources – not only wind, but hydro, geothermal and of course solar, creating clean power for economic growth, energy security, and increased access to energy for the roughly 500 million Africans who currently do without. We project total installations of a bit more than 13 GW in the region through 2019.
Australia is the main market in this region, and was the only contributor to the region’s total in 2014. While the current government is trying to kill the renewables industry, we don’t think it will succeed, or at least not completely, and the climate and energy logic, as well as Australia’s tremendous wind (and solar) resources mean that this is going to be a strong market again, but it’s not easy to say when. As for the rest of the region, the situation has not improved in New Zealand, and although there are some projects in the pipeline in the Pacific Islands, they will take some time to mature. We expect only about 4 GW to be added in this region over the next five years.
So this is what we think the markets will do over the next five years. Asia will continue to dominate, followed by a steady Europe, and a volatile North America. Latin America surges ahead, and so does Africa, a few years behind.
It’s always a challenge to look seriously into the future, and we will of course revisit the issue in twelve months’ time to see how accurate we were, and to make adjustments in the face of whatever new reality faces us then.