Market Forecast for 2017-2021
800GW by 2021
Click graph for a close-up image.
After setting a new record in 2014, passing 50GW for the first time; and then again in 2015 passing 60 GW for the first time, the wind industry in 2016 had a year of consolidation in 2016. China ‘only’ installed 23 GW, and cyclical or policy related slowdowns in key markets such as Brazil, Mexico, South Africa and Canada meant that the industry was not able to set another record in 2016, but still installed 54.6 GW during the course of the year. A number of countries set records last year, most notably India, with its all-time high total of 3.6 GW. At the end of 2016, total global installed capacity was 486,790 MW.
We expect the annual market to return to growth in 2017: with another policy-induced rush to install will drive market growth in China, although it is unlikely to reach the 30 GW record set in 2015; stable markets in Europe and North America; continued growth in India; a general pickup in Africa and Latin America; and some new markets putting up numbers for the first time.
Major trends in 2016:
Cratering of offshore prices:
While the offshore industry was expecting prices to gradually decrease towards the target of €100/MWh by 2020 that it had set itself, everyone was surprised at how quickly it has actually happened. Starting in July with the Dutch tender for the 700 MW Borssele 1&2 projects at €72.7/MWh (USD 78.5), the action then moved to Denmark with their nearshore tender which came in in September at €64/MWh (USD 69.1), followed in November by the Kriegers Flak project at €49.9/MWh (USD 53.9), and returning to the Netherlands in December with the Borssele 3&4 project for another 700 MW at €54.5/MWh (USD 58.9). A spectacular drop in price, by any measure, which has certainly defined a range for ‘the new normal’ in mature northern European offshore wind markets at well below €100/MWh.
Now, it should be noted that these projects are exclusive of transmission costs, which would add another €6-12 Euro/MWh, and that they are not in either very deep water or very far offshore. Regardless, it seems that the industry has exceeded its 2020 targets by a significant margin, and four years ahead of time. We have the remarkable situation where all of a sudden offshore is competitive with onshore wind, and the repercussions have been felt across the world, setting the stage for a round of large investments in offshore not only in Europe, but also in Asia and North America.
Corporate buyers playing a larger role in the market:
While direct purchasing of the output of wind farms by corporations has been a significant factor in a number of markets for the past decade, most notably in Mexico, during the past couple of years it has become a major factor in the US market, and there are signs that it is spreading to Europe as well. While it seems that 2016 was a bit slower than the record year in 2015, it’s another aspect of the major upheaval underway in the power sector.
Competition with solar:
While most major indices of LCOE still have wind come in significantly cheaper than solar PV, the competition in emerging markets such as Mexico and Chile is fierce indeed, and even in such a windy place as Argentina, solar PV prices are catching up to wind quite quickly.
From a global point of view, of course, this is a very good thing: that in an increasing number of markets around the world, the cheapest way to add new capacity to the grid is wind power…except where it is solar PV. But this will be of little consolation to the project developer who loses out to solar PV in an auction in a new market.
In most cases, of course, the technologies are quite complimentary, with solar providing the majority of its power on a relatively predictable curve during the middle of the day, whereas often wind is at its peak in the evenings or at night. However, every circumstance is different, and system needs and design, as well as the market arrangements to support them will be increasingly determinant factors for technology selection as we move from electricity markets dominated by fossils to those dominated by wind and solar.
The other major event, of course was the outcome of the US election in November. However, so far so good and it seems that the new Treasury Secretary as well as the new Energy Secretary are looking to keep the current arrangements in place. We (and everyone else) will be watching closely.
There have been rumblings in the two remaining sleeping giants – Russia and Saudi Arabia – but we’ve heard these before, and we’ll keep a close eye but have no concrete expectations at this point.
Finally, good news from Argentina. Twelve months ago there was nothing but hopes founded on the election promises of a new government. Now we have a solid 1.4 GW pipeline of wind projects, with more to come as Argentina rolls out the second year of its RenovAR programme with another auction later this year.
So what does this mean for the short term? From where we sit here at the end of March 2017, it looks like solid if unspectacular growth in 2017, a slight downturn in 2018, then moderate growth through the rest of the decade and the beginnings of another growth spurt at that time. We don’t expect the spectacular swings that led us to dramatically underestimate (in 2015) or overestimate (in 2016) the market; but we can only make our projections on the basis of what we know now…and there’s a lot we don’t know! To quote a phrase variously attributed to such diverse characters as Niels Bohr and Yogi Berra, “It’s hard to make predictions, especially about the future!”
Top ten global new installed capacity
Top ten global cumulative capacity