With 10MW turbines on the horizon, stable policy conditions, improved investment conditions and a dependable infrastructure, wind is about to enter its fastest ever growth period. We examine the mitigating factors and explore what is set to be a golden period for wind.
Let’s kick this feature off with a look at the figures. The most recent statistics available for any country on the planet happens to be the UK, which is fairly typical of a maturing market that has nevertheless had its fair share of setbacks along the way.
Renewable energy technologies contributed nearly one fifth of the UK’s power mix in the first quarter of the year, as a result of high winds, rainfall, and a surge in new construction in the solar farm industry.
According to government figures, UK renewables saw a record quarter, producing 18.1 TWh, an increase of 43% on the same period in 2013.
Amid the wettest winter on record, wind – in particular – saw a surge in output. Onshore wind generation grew 62%, offshore wind output increased by more than half (while hydropower increased by 78%) reaching a record quarterly level of 2.2TWh, the data showed.
By the end of quarter one, the UK had installed 20.8GW of renewable energy technologies, up by 15% from the same time last year.
The figures will be welcomed by many of us, who will be already celebrating after the wind industry broke its summer performance record as a result of high winds, outstripping generation from coal in the process.
The data comes in the same week as Germany also confirmed that it enjoyed record output from renewables in the first half of this year, with renewable energy meeting 28% of power demand as generation from fossil fuels fell.
This growth, while phenomenal and welcome in equal measure, is set to continue. GWEC expects the market diversification trend which has emerged over the past several years 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 the GWEC did its projections for the 2013-2017 market one year ago, it 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 the 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.
Technological drivers
Meanwhile, the technology we employed is becoming ever-more efficient and effective. GE recently released an announcement regarding new wind turbine technology that can boost wind turbine technology by up to 5%, which equals a whopping 20% or so more profit per wind turbine.
PowerUp is the new “Industrial Internet” technology that makes this considerable output improvement possible. It is a customized software-enabled platform available for all of GE’s wind turbine models.
This announcement was actually one of 14 new industrial internet predictivity technologies launched by GE today, following up on the first 10 that it launched last year. As one commentator claimed back in 2011, “GE wants to sell you everything.” In terms of revenue, GE is the 25th-largest company in the world. In the energy industry, it is involved in the use of nearly every type of energy resource, and some of the predictivity technologies announced today were for oil, some were for natural gas, and some were for wind power. Beyond energy, the technologies are for aviation, healthcare, and more. In the end, the goal for all of them is better efficiency and better economics.
As noted above, the new wind turbine predictive technology can boost output by up to 5% (initially). That is for GE’s 1.5-77 turbine. 5% may not sound huge to you, but that’s actually a very considerable increase, especially when you consider how many of these turbines are out there. GE writes:
“To put things in perspective, today our customers have more than 9,000 GE 1.5-77 turbines running in the United States. Even a 1 percent energy output increase on this installed base would generate more than 420,000 megawatt hours of additional energy each year, which would provide the equivalent power used by 33,000 average U.S. homes.” That’s just 1%! 5% would mean enough power for an additional 165,000 average homes, simply thanks to the output boost provided by this Industrial Internet technology.
Meanwhile, it’s not just the software that is improving. The SeaTitan 10MW wind turbine designed by American energy technologies company AMSC is currently the biggest wind turbine in the world. The direct-drive turbine, with 190m rotor diameter, has a rated power capacity of 10MW and hub height of 125m. The turbine design incorporates a high temperature superconductor (HTS) generator with a speed of 10rpm making it much smaller and lighter than a conventional wind turbine generator.
AMSC started developing the turbine in 2010 and completed the design in 2012. The generator for the wind turbine has been tested by the US Navy in harsh offshore conditions. AMSC is currently negotiating with potential partners to build and commercialise the SeaTitan 10MW wind turbines.
The ST10 offshore wind turbine designed and developed by the Norwegian technology company Sway, is the world’s second biggest wind turbine. It has a power output of 10MW, is equipped with a rotor of 164m diameter, has a 2rpm nominal speed and blades 67m in length. The turbine was developed between 2005 and 2012 with an investment of Ä20m ($27.4m), and is suitable for both fixed and floating foundations.
The turbine features a direct drive permanent magnet ring-style generator with ironless stator core. The blades are mounted on an “A-frame” blade support structure to which the outer rim of the generator rotor is connected. Sway Turbine is looking for potential partners to commercialise the ST10 turbine technology. (Besides AMSC and SWAY, Mitsubishi and Sinovel are also reportedly developing 10MW wind turbines, the details of these turbine designs have not however been revealed.)
French energy company Areva’s 8MW wind turbine, launched in November 2013, is the world’s third biggest wind turbine by rated capacity. The three blade offshore turbine, featuring 180m diameter rotor and a medium-speed hybrid gearbox, produces up to 8MW of power in an average wind speed of 12m/s.
The turbine design is based on Areva’s M5000 series wind turbines installed at the Global Tech I and Borkum West II offshore wind farms in Germany. Areva has been developing the 8MW turbines for the UK’s offshore market as well as the second round tender for the 1GW offshore wind farm developments in France. The turbine’s prototype is scheduled to be installed in 2015, while commercial production is expected to begin in 2018.
Booming investment
The finance that is being poured into wind is on the rise, also. A Ä3bn deal for what is planned to be one of the world’s biggest offshore wind farms has boosted Europe’s renewable energy market after more than a year of sagging investment.
The Gemini wind farm off the shore of the northern Netherlands province of Groningen is “the largest renewable energy asset finance deal anywhere in the world in 2014 so far,” said Angus McCrone of Bloomberg New Energy Finance, which monitors global renewable energy transactions.
“The fact that Ä2.8bn in equity and debt has been raised for the Gemini project will be a morale booster for the European renewables sector after a 44 per cent fall in new investment in 2013.”
Siemens has received a contract worth more than Ä1.5bn in the deal. It will supply 150 turbines for the wind farm and has a 15-year service and maintenance deal that it said was its largest energy service contract.
The project has a budget of almost Ä3bn and is notable because it has not been financed directly by one of the big European utilities, such as Denmark’s Dong and Germany’s Eon, that have developed schemes in the UK, the world’s largest offshore wind market.
Instead, 70 per cent of the Dutch project’s budget comes from bank financing. Siemens, which has an equity investment in the scheme, said this meant it was largest ever project-financed offshore wind farm.
“It sends a signal how the appetite for offshore wind assets can be aligned across a wide range of investor groups,” the company said in a statement. Siemens Financial Services has a 20 per cent stake in the project while Northland Power Inc is the biggest shareholder with a 60 per cent holding.
A joint venture of 48 Dutch municipalities and six water regulatory authorities has a 10 per cent stake as does Van Oord, a Dutch dredging and marine engineering company (as featured elsewhere in the magazine).
With an planned generating capacity of 600 megawatts, the Gemini farm will supply electricity to 1.5m people in the Netherlands. “With the project we are entering one of the most important emerging offshore wind markets in Europe,” said Markus Tacke, CEO of the wind power division of Siemens Energy.
The project was steered by Green Giraffe Energy Bankers, a European-based specialised financial advisory group that focuses on renewable energy.
The Netherlands is aiming to secure about 14 per cent of its energy from renewable sources by 2020 and currently has 2.7 gigawatts of wind power generating capacity, of which 2.45GW is harvested from onshore wind farms. It hopes to have 4.45GW of offshore capacity in operation by 2023.
Government influence
Meanwhile, the U.K. government’s Green Investment Bank (Gib) has announced plans to raise £1bn to encourage new investors to put money into offshore windfarms.
Unveiling its first set of annual results, the bank said it was looking for long-term investors for a fund managed by a subsidiary that would buy equity stakes in windfarms already in operation. Investors are likely to be pension and sovereign wealth funds looking for long-term, stable returns. The fund is a new development for Gib because it raises private money up front for investment in a particular industry instead of investing project by project.
Vince Cable, the Business Secretary, launched the bank in 2012 to invest in wind, biomass and other green schemes that would otherwise lack funding because they are considered too risky or take too long to repay private investment. In the year to the end of March, the Edinburgh-based bank pledged £668m to 18 projects, more than double the number it backed in its first five months. Its pre-tax loss for the first full year of operation was £5.75m but it expects to make a profit for the government as investments start to pay off.
Shaun Kingsbury, the bank’s Chief Executive, said: “We want to do more to maximise our green impact. We plan to extend our reach into new markets like community-scale renewables. And we plan to raise new capital for the first time through the creation of a new £1bn fund for operating offshore wind assets.”
Kingsbury recently said the bank could make a far bigger contribution to the UK’s green infrastructure needs if the government allowed it to borrow. It has brought in private-sector money alongside its own funds, but by tapping the capital markets it could raise up to £60bn, Kingsbury said.
The world is taking great strides towards a low-carbon economy. Looking back over the last twelve months and comparing our achievements to those of previous years helps us to take the temperature of our sector, and to demonstrate to others what is happening in wind energy on and offshore. It’s clear that wind is going places and that the market is now – finally – mature. It’s up to us to ensure that it remains in rude health for a long time to come.
