Global wind power market will suffer from loss of U.S. tax credit, industry executives say

Source: Special to E&E • Posted: Thursday, April 19, 2012

COPENHAGEN, Denmark — The global wind energy market is heading for a downturn next year as the expiration of the U.S. production tax credit casts a pall on the industry, the Global Wind Energy Council (GWEC) said in a new forecast yesterday.

The wind market will fall 0.4 percent to 45.8 gigawatts next year after growing 13.4 percent to 46 GW this year, according to GWEC. Growth will then rebound to 49.4 GW in 2014, 55.2 GW in 2015 and 59.24 GW in 2016, for cumulative new wind installations of 255 GW for the 2012-16 period.

“Wind technology continues to get better and cheaper, but the industry is plagued by continued slow economic growth and budget crises in the OECD, as well as the continuing credit crunch,” Steve Sawyer, secretary-general of the lobby organization, said at a conference here.

“It will be especially tough for turbine manufacturers, with chronic oversupply adding to existing downward price pressure from general economic conditions, to cut margins dramatically,” Sawyer said.

The biggest uncertainty for the industry is the future of the U.S. production tax credit (PTC) and its impact on the world’s second-largest wind market. There is more than 8 GW of wind power under construction in the United States now, but the trade group expects a substantial drop in 2013 in the U.S. market because PTC renewal is not expected to happen in time, Sawyer said.

Earlier in the conference, Felix Ferlemann, CEO of the wind turbine division of German industrial giant Siemens AG, said his company would adjust operations in the United States if the PTC wasn’t renewed. He didn’t give more details. Earlier this year, Danish turbine maker Vestas said it would lay off as many as 1,600 workers at its American factories if the PTC expired.

The U.S. market will recover slowly over the following years, while Canada is on track to achieve its target of 10 GW by 2015, the trade group said. Mexico is on its way toward 12 GW by 2020. Overall, GWEC expects more than 50 GW to be installed in North America from 2012 to 2016, bringing total installed capacity to more than 100 GW at the end of 2016.

“The PTC has been the driving force in the industry,” said Stephen Miner of the American Wind Energy Association. “We’ve been at the bottom end of political maneuvering this year, but we do believe that we will get the PTC again.”

Growth comes outside traditional markets

Most of the wind industry growth now takes place outside the traditional markets in Europe and North America, Sawyer said. India, Brazil and Mexico are growing strongly, while the Chinese market has stabilized. There are also some bright spots in new markets in Eastern Europe, and Australia and South Africa show potential.

“The majority of the global market remains in Asia, Europe and North America, and that’s not going to change substantially over the next five years,” Sawyer said. While Brazil is well on its way toward becoming a 1 GW annual market, the other markets in Latin America are just not big enough to put up large numbers, the report says.

“We have around 1.6 GW installed now, and we will reach 20 GW in 2020,” said Lauro Fiuza of the Brazilian Wind Energy Association. “Wind is a good complement for the big hydro potential we have in the Amazon. That hydro produces big amounts of energy during the rainy season and almost nothing the rest of the year, so wind is a good counterpoint.”

South Africa will begin to emerge as a regional hub for the industry but, along with Morocco and Egypt, will not figure prominently in the international picture until after 2016, GWEC said.

“Our installed capacity today is just a tiny 10 MW, but assessments show that we could do 20 GW onshore alone,” said Frank Spencer of the South African Wind Energy Association. “We don’t see offshore to be a market in South Africa because of the fantastic onshore wind resources that we have.”

Asia will lead the way

Asia will continue to be the world’s largest market, although with a slower growth rate than over the past five years, the report said. Most of the regional growth over the next five years will be in India, which achieved a 3 GW annual market for the first time in 2011 and will continue to increase and reach 5 GW of new capacity per year by 2015.

China is still struggling with an obsolete grid that slows down connecting new wind capacity, said Liming Qiao from GWEC’s China office. In Japan, the government is pushing offshore wind, with most of the growth expected to take place toward 2016.

“Wind power will have a major role in the government’s energy plan after the Fukushima disaster, but everything takes a long time in Japan,” said Yoshinori Ueda of the Japanese Wind Energy Association, referring to last year’s Fukushima Daiichi nuclear crisis.

“Social acceptance will become a big problem for us if we want to build many wind farms on land. Therefore, offshore wind power development is much more important for Japan.”

South Korea also aims to develop a major offshore wind industry, but how quickly and how much that will be complemented by growth in onshore wind remains to be seen.

“We expect Asia to install 118 GW between now and 2016, far more than any other region, and to surpass Europe as the world leader in cumulative installed capacity in 2013, ending the period with about 200 GW in total,” Sawyer said.

In Europe, Germany’s decision to phase out all nuclear plants by 2020 gives the wind industry a new push. Spain had a disappointing 2011, and 2012 is likely to be even more so, but Romania, Poland, Turkey and Sweden have taken up the slack, GWEC said.

Offshore wind accounted for about 9 percent of the capacity installed in 2011, and that is expected to increase to around 20 percent by 2016. Total installations in Europe from 2012 to 2016 are expected to increase by about 65 GW, bringing combined installed capacity to more than 160 GW.