International Environment Reporter™ helps you understand environmental laws, regulations, policies and trends in major industrialized and developing nations, as well as in international governmental and nongovernmental organizations.
By Marcus Hoy
Aug. 11 — From Brazil to South Africa, from northern Europe to the American heartland, wind is on the rise.
Already among the world's fastest growing energy sources, wind technology is on the cusp of advances that could multiply a turbine's ability to transform currents of air into electricity, and at a time when global leaders are seeking ways to power the planet without greenhouse gases.
So wind energy should be poised for wider acceptance and tremendous growth. And perhaps it is.
But while a very bright short-term future is easy to see, an unusual convergence of factors makes predicting the industry's post-2020 fortunes more difficult, experts and industry associations tell Bloomberg BNA.
Most wind turbines today generate 1 to 3 megawatts of electricity per hour. The largest of these, the 3 MW turbines, stand 140 to 190 meters (459 to 623 feet) high, with rotor blades 100 to 150 meters (328 to 492 feet) long.
But they could soon be dwarfed. Danish company Vestas and Germany's Siemens are both developing 8 MW turbines, and Vestas has applied for permission from the Danish government to test a 10 MW turbine. According to Vestas, a single 8 MW turbine could generate enough electricity to power 7,500 homes.
And a 10 MW turbine would stand up to 250 meters (820 feet) high and with 200-meter-long (656-foot-long) rotor blades.
These new turbines will significantly cut the price per unit of produced electricity. But upfront costs—including money needed to build, transport and install these turbines—will be significantly higher, said industry professionals based in Helsinki, Copenhagen and Brussels.
Many of the new turbines will be located far offshore, where wind speed is generally stronger. But turbines need to be connected to land by cable, so the cost of building (or buying) and installing a next-generation turbine could be prohibitive.
Analysts told Bloomberg BNA that the significant cost of bringing further-at-sea turbines online is high on the list of challenges facing the industry.
Uncertainties related to energy prices and technical construction challenges will add to the investment risk, analysts agreed.
Other factors include the unpredictability of the climate and the potential for a new global economic downturn.
Although he expected wind to retain its status as what he called the world's fastest-growing power technology, Jacopo Moccia, head of political affairs at the Brussels-based European Wind Energy Association (EWEA), told Bloomberg BNA that major cost concerns exist, especially in the offshore sector.
A slight slump in installations was expected in 2016 and 2017, he said, but the industry's short-term future was helped by more stable policy conditions in Europe and the fact that many nations have well-defined 2020 climate goals. However, he added that significant cost savings and new funding streams would be needed in the longer term to meet the cost of installing new technology post-2020.
“For the industry to make a significant impact beyond 2020 we need to reduce costs dramatically,” Moccia said “Costs have been decreasing, but we have started going further offshore, which has added to them. Plus, we have gone through a period of policy instability with people not really knowing where grid connections are going, projects being canceled, and uncertainty about feed-in tariffs. These things haven't helped to give investors the confidence they need.”
Offshore wind industry has the potential to deliver the greatest benefits, with lack of space constraints and higher wind speeds, he said.
But that growth could come to a virtual standstill if “all the wrong conditions are met at the same time,” he warned.
“The construction risk is still quite big for obvious reasons,” Moccia said. “What we have identified is that there are more than enough players out there willing to put up the cash for offshore wind. These include traditional banks and utility companies but also pension funds, infrastructure funds, and companies such as Lego and Google.
“The cash is there, but the question is, under what conditions and at what risk? Who is willing to take the construction risk, and who is willing to take the operational risk, which is of course lower but still significant?
“When you look at an infrastructure industry which is regulated and has large, upfront capital requirements, any whiff of instability will either reduce investors' appetites or send the costs of capital up. If you are an industry based on upfront capital expenditure and the cost of capital goes up, that has a significant impact,” Moccia said.
Innovation is booming. “We have seen the average size of turbines increase quite dramatically over the past few years, and we will soon start to see 7 megawatt turbines, 8 megawatt turbines, and by 2020 we will see a 10 megawatt turbine in the water,” said Moccia, who said the result will be lower cost per unit of power produced.
“The problem is that now we need to work on our logistics to be able to transport and erect these very big turbines,” he said. ”We don't yet have dedicated vessels, but they are being built quickly. Obviously it's easier to ship out 10 turbines at a time than one at a time. But you need a vessel that can do that and you need a port that can actually dock these large turbines and put them on such a large vessel. This is where the challenge is now, we really have to move the supply chain and have a supply chain only focused on offshore wind. Before, we were using boats and ports used by other offshore industries, their vessels, cranes, and their port infrastructure. That's over now. We need wind energy ports. We have a few, we have Bremerhaven [Germany], Ostend [Belgium], some in the U.K. are now being fitted out and these ultimately will drive down costs.”
Moccia said, “The caveat is this: All this technology is there, it will all become cheaper, and it will all become off-the-shelf, if we have a vision on the volume.
“No one is going to make these investments unless they know over the next 20 years, not over the next five years, that the market will be able to absorb at least so many turbines, so many boats, so many ports. That's the stumbling block at the moment because we have a reasonably good vision into the early '20s but we don't really have much certainty with regards to what will happen after that. EU policy is so fundamental here, that will be the investment signal.”
Growth in Europe's wind power industry could have an indirect but positive effect in the United States, he added, where a number of innovative projects are underway in both the onshore and offshore sectors, including plans for a grid of undersea cables to serve a new offshore wind farm off the coast of Massachusetts.
“The U.S. is the most exciting market for the moment,” he said. “Things are happening there very quickly now, there are a lot of projects being authorized, and they are looking towards European expertise, so the opportunities for European companies are huge. We are the ones with a proven track record and it will help us if we are doing things in terms of volume.”
Steve Sawyer, general secretary of the Global Wind Energy Council, told Bloomberg BNA that the production tax credit [PTC] system in the U.S. meant that the nation's wind power could potentially be priced competitively.
The PTC, which provided federal incentives for building renewable energy facilities, expired at the end of 2013, but projects that began before 2014 can still be eligible.
Sawyer said the “on-again, off-again” nature of the PTC was not conducive to stability and investment in long-term cost-reductions and new technology.
He pointed to EPA regulations proposed by the Obama administration June 2 that lay out new emissions standards for U.S. power plants, and a 2013 proposal from former Senate Finance Committee Chairman Max Baucus (D-Mont.) to make energy tax incentives more predictable and sector-neutral, as two measures that could potentially “do a great deal to increase wind power's position” in the U.S.
While the use of wind power is increasing globally, Sawyer told Bloomberg BNA, its application varies widely across nations and continents.
Currently, wind power's global market share stands at around of 2.9 percent, although accurate figures are hard to come by due to a lack of available data.
While China's total national wind power capacity is highest in the world, he said, the U.S. still produces more electricity from wind, due to “better wind conditions, better grid management and better wind farm management.” China currently derives just over 2 percent of its electricity from wind, compared with 3 percent in the U.S. and 8 percent in the EU.
In 2013, wind supplied about 33 percent of Denmark's electricity and 21 percent of Spain's electricity needs, he said. In the U.S., Iowa derived 27 percent of its electricity from wind in 2013, while in South Dakota the figure was 25 percent. A total of nine U.S. states currently obtain more than 10 percent of their electricity from wind, Sawyer said.
“Wind is really taking off in Brazil, Mexico and South Africa,” he said. “Those will be the major growth markets for the next few years, followed by Turkey, Egypt and Morocco. Australia also has a solid wind sector, but policy uncertainty in that country puts future growth at risk. Onshore wind is lagging behind in both Japan and Korea, but both of these countries have lots of activity offshore and big plans for that sector.”
Sawyer called wind power “already the cheapest way to add new generation capacity to the grid in Brazil, Mexico, New Zealand, Turkey, South Africa, South Australia, parts of the United States and, I daresay, in parts of China,” he said. “This list increases year by year. We have an increasing imperative for energy security, diversification of energy supply, price stability and job creation all of which favor renewables in general and wind power in particular. This is a nearly universal trend.”
In the offshore sector, Sawyer said, cost reductions were anticipated in areas such as standardization and scale, rather than in the cost of turbines themselves. The costs could also be mitigated by a number of technological innovations, he said, including:
Whether or not retroactive refits of existing turbines make economic sense, he said, should be evaluated on a case-by-case basis. “Such a decision would depend on whether or not the expenditure on that machine at that location will result in enough of an increase in performance to warrant the expense,” he said.
Heidi Malmberg, an attorney at the Finnish legal firm Castren & Snellman, told Bloomberg BNA that the switch to larger turbines will enable producers to concentrate their efforts on fewer sites and potentially reduce maintenance costs and expenses related to the sale of energy. Furthermore, she said, direct drive technology that dispenses with the need for gears and related maintenance costs was becoming more viable in Finland and elsewhere.
While Finland's land-based wind energy industry is well established, she said, its offshore industry is still in a stage of early development, with no commercially viable offshore parks with deep water or floating turbines.
Coastal projects located offshore have faced more local opposition than projects located inland, she said, and developers have found it easier, faster and cheaper to develop onshore sites in scarcely populated areas. “The ice conditions in the Baltic and the Gulf of Finland are proving to be a challenge, particularly regarding pack-ice conditions,” she said.
Malmberg, who focuses her practice on wind energy, said that Finnish feed-in-tariff legislation holds that turbines admitted to the system must be new and cannot consist of modified or previously used parts. However, she added that blade maintenance and service technology had already prolonged the life cycle or upped the production capacity of several Finnish turbines.
“Outside normal maintenance we do not foresee that any extensive modification works will be carried out on existing turbines, and it is likely that some of them will be replaced by larger turbines once they have come to the end of their life cycle,” she said.
With excellent offshore conditions, a wind-friendly business sector and sympathetic governments, Denmark already derives around 30 percent of its electricity from wind power and this figure could reach to 50 percent by 2020. However, Danish Wind Industry Association CEO Jan Hyllerberg told Bloomberg BNA that bringing down costs remained a challenge in Denmark. “All chains must be streamlined further,” he said.
”With regular maintenance, wind turbines can function for 20 to 25 years,” he said. “Some turbines can be retrofitted with new control panels and blades to extend their lifetime or improve their performance, and some turbines will in due time be replaced.”
An example is the Danish KlimFjordholme project where 22 turbines with a combined capacity of 70.4 megawatts will replace 35 wind turbines aged 18 years with a capacity of 21 megawatts. The old turbines will be retrofitted and sold to be used for another 20 years in other markets.”
In many nations, he said, the political needed to turn energy policy toward renewables was still lacking.
“For the time being, wind power and all other types of renewables have entered in a forced marriage with fossil energy,” said Hyllerberg. “Big investments and more innovations are needed to replace fossil energy with renewables.”
“Without doubt, tax and tariff systems can be improved to accommodate more renewables,” he said. “Wind power is already fully competitive with fossil fuels in more than two dozen countries today. This figure will only increase as it becomes more competitive. “
To contact the reporter on this story: Marcus Hoy in Copenhagen at firstname.lastname@example.org
To contact the editor responsible for this story: Greg Henderson at email@example.com
More on the European Wind Energy Association is available at www.ewea.org.
The Global Wind Energy Council website is www.gwec.net.
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