10 Sep, 2021
Emerging from pandemic with record growth, global wind industry eyes accelerator
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A worker on a Siemens Gamesa wind turbine in Egypt. Developing markets in Africa and the Middle East saw 8.2 GW of new wind capacity installed in 2020. |
In a world otherwise battered by economic challenges, the global wind industry produced its best-ever year in 2020 and hopes for a further boost as countries recover from the pandemic, the Global Wind Energy Council said in a Sept. 9 report.
The organization's "Global Wind Report 2021" said 93 GW of new installations last year brought the world's total wind power capacity, both onshore and offshore, to 743 GW.
This growth came despite COVID-19 challenges affecting supply chains and construction, as well as the postponement or cancellation of crucial renewable energy auctions, especially in the first half of the year. The sector bounced back in the second half, drawing record levels of investment.
However, the Global Wind Energy Council, or GWEC, said the annual installation rate needs to rapidly ramp up to about 180 GW per year across both onshore and offshore if the world is to meet its climate neutrality targets and limit global warming.
"To reach the [2050 net-zero emissions] target, we are far behind schedule. We have to work closely with politicians, streamline the pipelines, permitting et cetera," Feng Zhao, head of market intelligence and strategy at GWEC, said Sept. 10 during a webinar to accompany the report. "We need to get a lot of turbines built to reach the target."
Some 86.9 GW of onshore wind capacity was brought online in 2020, up 59% on 2019 additions. Onshore growth was strongest in China and the U.S., as developers rushed to commission projects in time to be eligible for incentives. Developing markets in Africa and the Middle East reported 8.2 GW of new onshore wind installations, similar to 2019 levels.
The global offshore wind market, meanwhile, saw 6.1 GW of new capacity in 2020, marking its second-best year of all time. At 3 GW, China added the most offshore capacity, followed by Europe, in particular the Netherlands, Belgium, the U.K., Germany and Portugal, GWEC said.
Government support programs indicate that installations will continue at pace, the organization said. Auctions in the second half of 2020 awarded nearly 30 GW of new wind power capacity, a slight increase year over year. The market's growth in the first half of 2021 has been slower, however, with installations at a lower level than in the same period in the previous three years.
Auction competition, off-take challenges
The wind industry continues to argue for an improved policy backdrop, including around site availability and permitting. "You cannot have valleys and then a boost," Marc Becker, offshore wind CEO at Siemens Gamesa Renewable Energy SA, said on the GWEC webinar. Germany, where wind deployment has slowed, is "an unfortunate example," Becker said.
Costs continued to fall in 2020, which GWEC attributed to technology innovation and economies of scale, with both onshore and offshore projects now being delivered or awarded on a subsidy-free basis. An offshore wind auction in Germany yielded unsubsidized bids Sept. 9, tracing similar developments seen in the Netherlands.
"The zero-bids now realized in Germany have shown how independent we are from subsidy support. But we are not independent from policy support," Becker said.
The role of corporations in energy purchasing and financing was diminished by the pandemic, with unpredictable energy prices and a challenging economic backdrop in a variety of sectors dampening appetite for wind power purchase agreements, or PPAs.
Some 6.5 GW of wind power was signed through PPAs during the year, according to BloombergNEF, down almost 30% year over year. This contrasts with a global increase in power-buying activity across the board, with solar deals on the rise.
At the same time, the wind industry stands to benefit from a raft of national and international pandemic recovery programs, such as the European Green Deal.
"The current crisis offers a unique window of opportunity to put the world on a sustainable trajectory and meet our international climate goals, but we must act now — or miss the opportunity," Zhao said in the report.
Wind could also benefit from increased policy focus on the rollout of green hydrogen, made from renewable power using electrolysis. GWEC argued that falling production costs from wind will help bend down the cost curve of the molecule throughout this decade.
"This moment is reminiscent of the renewable energy revolution of the 2000s, which exceeded expectations in terms of cost and growth," GWEC said in the report.
European utilities dominate offshore
GWEC expects more than 70 GW of new offshore wind capacity to be added globally by 2025. In Europe, new capacity targets will boost offshore installations further, analysts at S&P Global Ratings said in a Sept. 8 report. To achieve net-zero emissions by 2050, Europe may need to install 400 GW of additional offshore wind, much of which needs to come from floating wind to access resources in deeper waters, the analysts said.
European utilities including Ørsted A/S, RWE AG, Vattenfall AB, Iberdrola SA, EnBW Energie Baden-Württemberg AG and Electricité de France SA will remain global leaders, outside China, for the next five years, with an existing market share of over 45% and a pipeline of 29 GW until 2025, Ratings said.
Meanwhile, heightened competition in auctions is weakening returns "at a time when execution risks are surfacing, notably due to the harsh conditions in the open seas and as [cost pressures] continue to be felt across the supply chain," the analysts said.
Much of this increased competition is coming from oil majors, which are entering the sector in a bid to green their energy portfolios. Earlier this year, the U.K.'s auction round for seabed leases yielded record-high bids, with companies including BP PLC paying hundreds of millions for the right to develop projects in Europe's largest offshore wind market.
Yet, Ratings analysts said a lack of a defined development pipeline at this stage will prove to be a hurdle for oil and gas companies to boost their market share. Offshore wind investments will represent a relatively small portion of the oil and gas major investments for the next five years, with much of the focus set to lie on floating wind, where these players have operational expertise already.
"Ultimately, footholds by oil and gas companies will increase competition in this field, but we believe it won't come at any cost — such as a loss of pricing discipline," the analysts said.