Successful Policy Transitions and LCoE Gains Key for Wind Industry’s Future
The global wind power industry added 52.4GW of capacity in 2016 and 627GW could be added from 2017 to 2026, as MAKE expects a compounded annual growth rate (CAGR) of 3% for the period. However, the global outlook is heavily dependant on policy transitions and LCoE.
Last year represented the second highest year of annual grid-connected capacity trailing only the peak year in 2015. Looking ahead, near-term demand is strong, as several key markets globally front-load development ahead of policy changes, which supports annual increases in growth through 2020. Annual growth levels out to some degree following this surge before peaking again from 2024 to 2026, according to MAKE’s latest report.
A critical transition period for the global industry continues in 2017, as policy regimes in several markets globally shift to auction-based mechanisms, and the global industry awaits clarity on firm commitments motivated through compliance with the Paris Agreement. Moreover, a lack of firm, long-term policy direction in key markets has caused focus to intensify on economic build opportunities, the realisation of which depends on industry-wide LCoE gains.
The increasing importance of cost reduction guides technology development and innovation, impacting the entire wind value chain through consolidation and industrialisation.
As onshore growth proliferates in emerging markets, mature markets will rely increasingly on growth in the offshore sector and the re-powering of existing assets to meet renewable energy targets.
When it comes to offshore wind, in Northern Europe, new offshore capacity will account for 34% of growth while re-powering represents 16% of growth in the sub-region. In the near-term, however, developers in Germany and the UK are exploiting expiring incentives and connecting the last of eligible onshore projects, which will culminate in a peak in 2017 in Northern Europe.
Maturing know-how in China’s offshore sector, particularly in Jiangsu province, boosts the near-term outlook for the country.
However, offshore development in several land-constrained markets will largely characterise market activity in Asia. South Korea will connect its first utility-scale offshore project to the grid in 2017, which is critical to establishing a track record and momentum as offshore is expected to account for 30% of the market’s growth over 10 years.
Offshore development in Taiwan and Japan has not progressed as smoothly, as delays due in part to difficult site conditions, impact project economics and impede a faster pace of development, according to the report.