Volume 2 wind energy 2 20 – wind power industry and markets

Volume 2 wind energy 2 20 – wind power industry and markets Volume 2 wind energy 2 20 – wind power industry and markets Volume 2 wind energy 2 20 – wind power industry and markets Volume 2 wind energy 2 20 – wind power industry and markets Volume 2 wind energy 2 20 – wind power industry and markets Volume 2 wind energy 2 20 – wind power industry and markets

PE Morthorst, Technical University of Denmark, Roskilde, Denmark

© 2012 Elsevier Ltd

2.20.1 Global Market Development

Within the last 15–20 years, wind power has on a global scale developed incredibly fast In 1990, total installed capacity of wind power in the world amounted to approximately 2 GW – by the end of 2009, this capacity has increased to 158 GW equaling an annual growth rate of almost 25% Although, on a global scale wind power accounts for only approximately 2% of total electricity supply, this small fraction is increasing rapidly

As shown in Figure 1, wind power has experienced a fairly steady but continued rapid capacity development (left part) The right part of Figure 1 shows the capacity development in the early years, from 1983 to 1995, and already from the late 1980s a strong development is taking place

The growth in installed global wind power capacity is shown in Figure 2 Except for 1 year, 2004, the annual absolute growth has increased for every year For quite an impressive time period, the annual percentage growth rates have exceeded 30% In 2008, the growth equaled almost 29%, and in 2009, it was 31%, despite a financial crisis

On a global scale, the three main regions regarding wind power development are Europe, North America, and Asia, comprising approximately 97.2% of total installed capacity The rest of the world only has smaller amounts of wind power installed, that is, Latin America has 0.8% of world capacity, the Pacific has 1.4%, and finally, Africa and Middle East has 0.5%

For a long period, Europe was dominating the wind power scene At the beginning of the century, Germany and Spain were unrivaled in wind power expansion, but in recent years countries outside Europe have moved fast This applies especially for the United States and China, where the latter in just a few years ranks third in terms of installed wind power capacity

This becomes clear from Figure 3, where wind power installed in Asia in 2009 amounted to 14.6 GW, significantly above North America with 10.9 GW and Europe with 10.5 GW installed wind power capacity Thus, the European share has decreased strongly from 67% of total world installed capacity in 2003 to 28% in 2009 However, with regard to cumulative installed capacity, Europe is still in the lead with a little more than 48% of total installed wind turbine capacity, while approximately 24% was installed in North America and approximately 25% in Asia [1]

Figure 4 shows the top 10 countries’ distribution of the global installed wind power capacity by end 2009 Four countries, the United States, Germany, China, and Spain, are dominant covering approximately two-thirds of the cumulative installed capacity worldwide Following these four, we find a large group of countries with smaller contributions, although some of them are developing quite fast

Observe that all top 10 countries are from the above-mentioned three major regions (the most important countries will

be treated in more detail in the following sections) The other regions of the world – Latin America, the Pacific, and Africa and Middle East – have not yet entered the ‘take off’ stage In Latin America, Brazil, Mexico, and Chile have done well within the last couple of years, while other countries only contribute irregularly In Africa, mainly the North African countries like Egypt and Morocco are in a steady growth Finally, in the Pacific region, both Australia and New Zealand have experienced growth in 2009 (400 and 170 MW installed capacity, respectively); however, the development in recent years has not been stable

Comprehensive Renewable Energy, Volume 2 doi:10.1016/B978-0-08-087872-0.00223-7 657

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Figure 2 Growth in global annual installed wind power capacity (Left) Absolute annual growth (Right) Percentage annual growth Source: GWEC (2010) http://www.ewea.org [1]

Figure 3 Annual installed wind power capacity in the three main regions: Europe, North America, and Asia Source: GWEC (2010)

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Figure 4 Top 10 countries’ distribution of global installed capacity Source: GWEC (2010) http://www.ewea.org [1]

2.20.2 Trends in the Development of Wind Turbines

In general, three major trends have dominated the development of grid-connected wind turbines in recent years:

1 The turbines have grown larger and taller – thus the average size of turbines sold at the market place has increased substantially

2 The efficiency of the turbines’ production has increased steadily

3 In general, the investment costs per kilowatt have decreased, although recent years have shown a discrepancy from this trend

Figure 5 shows the development of the average size of wind turbines sold each year for a number of the most important wind power countries As illustrated in Figure 5, the annual average size has increased significantly within the last 10–15 years, from approximately 200 kW in 1990 to more than 2 MW in the United Kingdom and Denmark in 2008, with Germany, Spain, and the United States lagging only a little behind But as shown, there is quite a difference between some of the countries In India and China, the average installed size in 2008 was approximately 1 MW, significantly below the level of the United Kingdom and Denmark of 2256 and 2277 kW, respectively The unstable picture for Denmark in recent years mainly reflects a fairly small number

of new turbines being installed and in some years being dominated by offshore installations

In 2008, turbines of the megawatt-class (i.e., above 1 MW) had a market share of more than 95%, leaving less than 5% for the smaller machines Within the MW-segment turbines with capacities of 2.5 MW and up are getting increasingly important, even for on-land sitings These large turbines had a share of 6% of the market in 2008, compared to only 0.3% at the end of 2003 The wind regime at the chosen site, the hub height of the turbines, and the efficiency of production mainly determine power production from the turbines Thus, increasing the height of the turbines has by itself yielded a higher power production Similarly, the methods for measuring and evaluating the wind speed at a given site have improved substantially in recent years and thus improved the siting of new turbines In spite of this, the fast development of wind power capacity in countries such as Germany and Denmark implies that most of the good wind sites by now are taken and, therefore, new on-land turbine capacity has to be erected at sites with a marginally lower average wind speed To this though should be added that the replacement of older and smaller turbines with new ones is getting increasingly important, especially in countries that have taken part in the wind power development for a long time as is the case for Germany and Denmark

Figure 5 Development of the average wind turbine size sold in different countries Source: BTM consult ApS – A part of NAVIGANT (2009) World Market Update 2008, March [3]

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Figure 6 The development of investment costs exemplified by the case of Denmark for the time period from 1989 to 2009 Right axis: Investment costs divided by swept rotor area (€ m−2 in constant 2009 €) Left axis: Wind turbine costs and other costs per kW rated power (€ kW−1 in constant 2009 €) The development of electricity production efficiency owing to better equipment design measured as annual energy production per swept rotor area (kWh m−2) at a specific reference site has correspondingly improved significantly over recent years Taking into account all the three mentioned issues of improved equipment efficiency, improved turbine siting, and higher hub height, the overall efficiency has increased by more than 2% annually over the last 15 years

Figure 6 shows how investment costs have developed over the years, exemplified by the case of Denmark for the time period from 1987 to 2009 The data reflect turbines installed in the particular year shown (all costs are converted to 2009 prices) and all costs at the right axis are calculated per swept rotor area, while those at the left axis are calculated per kilowatt of rated capacity The number of square meters the rotor of the turbine is covering – swept rotor area – is a good proxy for the turbines’ power production and therefore this measure is a relevant index for the development in costs per kWh As shown in the figure, there has been a substantial decline in costs per unit swept rotor area in the considered period except from 2006 to 2009 Thus, from the late 1990s until 2004, the overall investments per unit swept rotor area have declined by more than 2% per annum during the period analyzed, corresponding to a total reduction in cost of almost 30% over these 15 years But this trend was broken in 2006 where total investment costs rose by approximately 20% compared to 2004, mainly induced by a strong increase in demand for wind turbines combined with severe supply constraints [4]

Looking at the cost per rated capacity (per kW), the same decline is found in the period 1989 to 2004 with the 1000 kW machine

in 2001 as the exception The reason has to be found in the dimensioning of this specific turbine With higher hub heights and larger rotor diameters, the turbine is equipped with a relatively smaller generator although it produces more electricity This is particularly important to be aware of when analyzing turbines constructed to be used in low and medium wind areas, where the rotor diameter

is dimensioned to be considerably larger compared to the rated capacity As shown in Figure 6, the cost per kW installed also rose by 20% in 2006 compared to 2004, while the cost almost remained constant from 2006 to 2009 At the beginning of 2010, it seems that the cost has declined slightly compared to 2009; however, at present this cannot be documented by sampled data [5] Also, the share of other costs as a percentage of total costs has in general decreased In 1989, almost 29% of total investment costs were related to costs other than the turbine itself By 1997, this share had declined to approximately 20% The trend toward lower auxiliary costs continues for the last vintage of turbines shown (2000 kW), where other costs amount to approximately 18% of total costs But from 2004 to 2006, other costs rose almost in parallel with the cost of the turbine itself and have stayed at this level in 2009

2.20.3 Main Drivers behind the Wind Power Development

The reasons for the global success of wind power are many fold Seen from a governmental viewpoint, some of the benefits are as follows [6]:

• Improved security of energy supply

• Enhanced competitive edge in the renewable energies technology industries

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• Mitigation of greenhouse gas emissions by power sector

• Mitigation of regional and local pollutant emissions

• Improved economic and social prospects especially for rural and isolated areas

Thus, as part of their energy policy, a number of countries have established long-term targets for renewables, and thus implicitly for wind power as part of the renewable portfolio As an example, European Union (EU) has set the mandatory target for renewable energy sources that by 2020 20% of final energy demand in EU has to be supplied by renewable technologies as hydro power, wind power, solar, and biomass This EU renewable target has to be implemented mainly by national initiatives (the European Trading System for CO2 allowances will be part of the regulatory framework) and is distributed on member states as shown in Figure 7 The mandates for the share of renewable sources by 2020 vary significantly for the individual member states from an increase of 13% to a total of 30% for Denmark to an increase of only 6.9% to a total of 13% for the Czech Republic

However, only at sites with relatively high wind speeds, wind turbines are at present economically competitive to conventional power production on purely economic grounds Figure 8 shows the costs of wind power production in

Figure 8 The production costs of wind power compared to conventional power plants

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comparison with costs of conventional power plants based on coal or natural gas The analysis is performed on fuel prices from the international markets and a crude oil price of 59 $ bbl−1 in 2010 (constant terms) is assumed The price of natural gas is assumed to follow the crude oil price The price of CO2 is assumed to be 15 € t−1 as observed by 2010 and basically covers the cost of fuels, operation and maintenance, and leveling of investment costs It is based on cost from IEA [7] and assumptions from OECD/IEA [8]) As shown, the costs of power production based on coal or natural gas are significantly lower than the costs of wind power production independent of site

Thus, to attract investors wind power is dependent on economic support from national support schemes based on feed-in tariffs, green certificates (alternative to the renewable portfolio standard (RPS) in the United States or ROCs in the United Kingdom) or investment subsidies Most countries apply support schemes especially designed for their own and specific purposes In EU, feed-in tariffs have been highly effective in the deployment of wind power in Germany, Spain, and Denmark According to the EU Commission [4], the most effective scheme in general is the feed-in tariff that has the lowest risk as perceived by investors In the United States, the production tax credit (PTC) and the Renewable Portfolio Standard (RPS) have proved to be efficient in the deployment of wind power Nevertheless, the effectiveness of the support system depends heavily on the specific design of the scheme Thus, other schemes might prove to be effective in particular cases, for example, tendering in the development of offshore wind farms

2.20.4 Market Development in Europe

Right from the start of the wind power revival, European countries have done well, and by the end of 2009, total installed capacity amounted to 76 GW During the 1990s there was a strong growth in Europe peaking with annual growth rates of cumulative capacity of 40–50% at the late 1990s (see Figure 9) However, although the absolute growth persistently is kept

at a high level, the annual growth rates have declined severely, leveling off at a little more than 15% of annual growth in cumulative capacity

This development is mainly the consequence of European policies Thus, at present the development is dominated by a few countries, especially Germany and Spain; however, quite a number of new countries are entering the wind power scene This applies especially for Italy, France, and the United Kingdom, which all are experiencing rapid expansions

Quite a number of different instruments are presently used in the Member States in supporting the development of renewable energy sources Quota obligations with tradable green certificates, feed-in tariffs, tender procedures, and tax measures are the most discussed schemes, dominating the national support systems at the moment At present, most support schemes are based on a national entity and trade across the borders explicitly of green power is limited

In the following the development of wind power in the most important European countries will be described

2.20.4.1 Germany

By the end of 2009 wind power in Germany covered approximately 9% of the country’s power consumption and accounted for approximately 34% of total installed wind power capacity in Europe making Germany the number one country in this area However, the dominance of Germany is weakening The German share of new annual installed capacity in Europe has gradually fallen from 48% in 1999 to 18% in 2009 The development of annual installed capacity in Germany is shown in Figure 10 Together with Denmark, Germany was one of the first movers on the development of wind power in Europe Already at the end of the 1980s, a rapid development was initiated in Germany, especially in the Northern part of the country with good wind conditions, driven by favorable feed-in tariffs for wind produced power As shown in Figure 10, in the early 1990s Germany had

Figure 9 Development of wind power capacity in Europe (Left) Total cumulative capacity (Right) Annual growth rates of cumulative capacity Source: GWEC (2010) http://www.ewea.org [1]; BTM consult ApS – A part of NAVIGANT (2010) World Market Update 2009, March [2]

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Figure 10 Development of wind power capacity in Germany (Left) Annual installed capacity (Right) Annual growth rates of cumulative capacity Source: GWEC (2010) http://www.ewea.org [1]; BTM consult ApS – A part of NAVIGANT (2010) World Market Update 2009, March [2]

some years with very strong growth in cumulative capacity, 70–90% increase per year, followed by a stable time period with cumulative capacity growth rates of approximately 40% per year

For many years, Germany has very successfully continued a policy of favorable feed-in tariffs, gradually decreasing the tariffs as wind power technology has economically matured However, although tariffs are still at a high level in Germany, growth rates of cumulative capacity have gradually declined For the last 5–6 years, the annual installed capacity has stagnated at approximately

1500–1700 MW, resulting in a growth rate of cumulative capacity below 10% per year A major reason for this is that new available sites for on-land turbines are becoming scarcer Thus, by now Germany is increasingly looking into the possibilities of offshore wind power development (see Section 2.20.7)

2.20.4.2 Spain

In Spain, wind power covers approximately 15% of the country’s electricity consumption Spain is the number two country in Europe accounting for a share of approximately 26% of total cumulative wind power capacity by 2009 But as for Germany also, the pace in the Spanish development is declining In 1999, approximately 28% of the new capacity in Europe was installed in Spain; by

2009, this share has fallen to approximately 23% However, Spain is still the country in Europe with the largest installation of new capacity amounting to almost 2500 MW in 2009 (see Figure 11)

The main driver in Spain has been a favorable feed-in tariff combined with a multitude of good wind sites in a large part of the country Historically, problems of getting access to the electricity grid and slow administrative procedures have been a limitation to development in Spain However, in recent years this seems to have improved [2] Some uncertainty around the future level of the feed-in tariff has implied a more unstable development of wind power in Spain than seen in Germany and this uncertainty seems to persist for the future

Figure 11 Development of wind power capacity in Spain (Left) Annual installed capacity (Right) Annual growth rates of cumulative capacity Source: GWEC (2010) http://www.ewea.org [1]; BTM consult ApS – A part of NAVIGANT (2010) World Market Update 2009, March [2]

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There is quite a distance from the dominating two wind power countries in Europe, Germany, and Spain, to the next level of countries While Germany and Spain accounts for 34% and 25% of total installed capacity in Europe, respectively, the following countries account for less than 6% each However, a group of rapid moving countries consists of Italy, France, the United Kingdom, and Portugal The countries’ share of total installed wind power capacity in Europe by the end of 2009 is shown in Figure 12 The growth in cumulative wind power capacity in selected European countries is shown in Figure 13 As shown, quite a difference exists between fast growing countries and slow growing ones

Italy is experiencing a strong growth for the time being, increasing cumulative capacity by 37% in 2008 and 30% in 2009 The country now has installed 4.8 GW and ranges as number three country in Europe in terms of cumulative wind power capacity The development in Italy is driven by a well-working green certificate system, and especially in the Southern part of the country, a large number of good windy sites exist At the end of 2009, a little more than 2% of power consumption in Italy was covered by wind power [2]

A strong development of wind power is also going on in France In 2008, cumulative capacity increased by 39% and by 32% in 2009 The development in France is driven by the country’s commitment to the EU renewable targets where wind power is expected to contribute significantly A fairly high feed-in tariff is implemented in France, which of course is the major reason for the success

The United Kingdom has taken the lead in offshore development of wind power Forty-three percent of total installed offshore capacity was established in the UK waters by the end of 2009 However, on-land installations are still dominating in the UK and

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Figure 12 Share of total installed wind power capacity in Europe, 2009 Source: GWEC (2010) http://www.ewea.org [1]

Figure 13 Growth in cumulative wind power capacity in Europe in 2009 (excluding Germany and Spain)

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more than 80% of total installed capacity is land turbines Also in the United Kingdom, the growth of cumulative capacity is strong amounting to 35% in 2008 and 36% in 2009 The EU target for renewables is driving the Government’s actions and commits the UK to cover 15% of final energy consumption with renewable energy production by 2020; by now the contribution

is approx 4% A system of Renewable Obligation Certificates (ROCs) is being utilized in the UK to promote renewable energy technologies [2]

In Portugal the EU renewable target is an important driver as well The target for Portugal is a 32% coverage of final energy consumption by 2020, starting with approx 21% by 2005 The national target is 5 GW by 2010 and at present this target seems not

to be fulfilled Growth rates are still high in Portugal reaching 33% in 2008 and 24% in 2009 in cumulative capacity

Denmark back in the 1980s and 1990s was the frontrunner in the development of wind power But the Danish development was stalled after year 2000, mainly because the fixed feed-in tariff was replaced with a feed-in premium at a lower level In recent years the premium has been increased so on-land installations of wind turbines are slowly starting again Denmark is worldwide number two in establishing offshore, holding 31% of total offshore installations only by-passed by the United Kingdom

Among other established countries Sweden is developing pretty fast Newcomers such as Poland and Turkey have large potentials for siting wind turbines and by now seem to be growing fast, although they still have small amounts of wind power installed

2.20.5 Development of Wind Power in North America

The North American region consists of the United States and Canada, where the United States is clearly dominating covering approximately 91% of total installed wind power capacity By the end of 2009, approximately 3.3 GW was installed in Canada, where the growth of cumulative capacity in 2008 was 28% and in 2009 an astonishing 40% In the following, the United States will

be treated in more detail

2.20.5.1 United States

A little more than 35 GW of wind power in total was installed in the United States by the end of 2009, which makes it the largest wind power country in the world, followed by Germany and China Approximately 22% of the world’s wind power capacity was established in the United States by the end of 2009 A veritable boom has appeared in the United States in recent years; the growth in cumulative wind power capacity was in 2008 at astonishing 50% followed by a growth in 2009 of 39% The development of annual installed capacity in the United States is shown in Figure 14

As Denmark, the United States was one of the early movers within the development of new wind power Already in the early 1980s, the United States had a strong development of wind power especially driven by a tax rebate scheme But the tax scheme was abandoned in the mid-1980s and thereby the installation of wind power was halted (see Figure 14)

In general, the US policy is a combination of federal and State initiatives Federal energy policies are complemented by State policies, where the State policies are often found to be designed in a variety of different ways One of the important federal policies is the PTC The PTC has had a significant influence on the development of wind power At the same time, it has been subject to a stop­ and-go policy, the decisions on PTC delaying the deployment of wind power and creating a significant uncertainty for the industry The importance of the stop-and-go policy for wind power is clearly illustrated in Figure 14, most of the discontinuities caused by delayed PTC decisons [9]

Texas is the leading state in terms of wind power capacity, followed by Indiana and Iowa In 2009, these three states accounted for 41% of new installed capacity in the United States [2] At the state level, the use of a renewable portfolio standard (RPS) scheme

is one of the more popular policy instruments

Figure 14 Development of wind power capacity in the United States (Left) Annual installed capacity (Right) Annual growth rates of cumulative capacity Source: GWEC (2010) http://www.ewea.org [1]; BTM consult ApS – A part of NAVIGANT (2010) World Market Update 2009, March [2]

2.20.6 Wind Power Development in Asia

The Asian region is dominated by China and India, where China holds a share of Asian cumulative installed capacity of 65%, while India has a share of 28% Japan has at present a share of 5% and is developing slowly Finally, countries like Taiwan and South Korea have less than 1% of the Asian installed wind power capacity

Today, India holds an installed capacity of 10.9 GW and is developing at a stable rate In 2008, the growth rate of cumulative capacity was 23%, and in 2009, it was 13% In the following, the Chinese development will be described in more detail

2.20.6.1 China

China is clearly a newcomer to the wind power field, but nevertheless a newcomer that moves incredibly fast By the end of 2009, China had in total installed 25.1 GW of wind power, making China the third ranking country in the world in terms of cumulative installed capacity, very close to Germany with a total capacity of 25.8 GW but still a way to go to reach the US level of installed capacity of 35.1 GW The development of annual installed capacity in China is shown in Figure 15

With regard to China, fast means really fast; both in 2008 and 2009, the total installed capacity was more than doubled compared to the previous year Thus, the Chinese share of world installed wind power capacity went from 2% in 2005 to almost 16% by the end of 2009 By 2009, 35% of the world’s new established capacity was located in China compared to only 5% in 2005 Combining this with the recent development in the United States, this clearly indicates that the European dominance is broken, that new trends are pointing to a fast development in Chinese and US markets

The wind power development in China actually started back in the mid-1990s For almost 10 years the development was fairly slow, the installed capacity being below 100 MW per year But in 2005, the Renewable Energy Law was approved and this signaled the take-off for wind power in China Thus, in 2005 the growth rate in cumulative capacity reached 65% and since then China has more than doubled cumulative capacity each year In 2009 approximately 13 GW of new capacity was installed, making China the world’s number one in terms of annual wind power installations

The Chinese development is regulated by long-term plans and targets The Renewable Energy Law in 2005 was an important achievement and since then a number of new laws was put in place, regarding feed-in tariffs and access to the grid In 2008, the Renewable Energy development plan for the 11th 5-year period was approved, stating targets for wind power development in China The target for 2010 of 10 GW was already fulfilled in 2008, and during 2009, the Chinese Government launched a new long-term target of 100 GW by 2020 If the pace of wind turbine installation is kept at the present level in China, this target will be fulfilled in due time before 2020 [2, 10]

2.20.7 Offshore Wind Power Development

In a number of countries, offshore turbines are playing an increasingly important role in the development of wind power, particularly in the north-western part of Europe Partly this can be explained by on-land sitings being limited in number and that the utilization of these sites to a certain extent is exposed to opposition from the local population This is seen in relation to an unexpected high level of energy production from offshore turbines compared to on-land sitings (based on the experiences gained until now) and has paved the way for huge interest in offshore development

As for onshore turbines, the wind regime, where the offshore turbines are sited determining the production of power, is the single most important factor for the cost per generated unit of power In general, the wind regime offshore is characterized by high

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