Market Forecast for 2018-2022
840GW by 2022
Click graph for a close-up image.
The aftermath of the global financial crisis in the previous decade resulted in average global markets of about 40 GW/annum for the period from 2009 to 2013. Breaking through the 50 GW barrier for the first time in 2014, the industry set a record of more than 60 GW due to anomalously high installations in China in 2015. In 2016 the market returned to the ‘new normal’ of just over 54 GW, and 2017 was in the same general range, which is also what we expect for 2018, before the industry embarks on another growth spurt in the run up to a number of 2020 targets.
Several countries set new record high installations last year, as did the offshore sector, which installed more than 4 GW in a single year for the first time. While offshore still represented only about 8% of the global market, and still only represents about 3.5% of global installed capacity, those numbers will increase substantially in the coming five years. It should also be noted that those offshore MW will generate significantly more electricity than their onshore counterparts.
Germany, the UK, France, Belgium and Ireland all set new records, as did India, breaking the 4 GW barrier for the first time. China, still very much the global leader, dropped below 20 GW for the first time since 2013.
We expect the annual market to remain at roughly 2017’s level for 2018 due to anticipated decreases in Germany, the UK and India. This will be balanced by increases in North America, the Middle East and Africa and Latin America. The annual market will return to growth in 2019 and 2020, breaching the 60 GW barrier once again and continue to grow, albeit at a slower pace, in the beginning of the new decade. We expect to see total cumulative installations reach 840 GW by the end of 2022.
Major trends in 2017:
Prices continue to drop
“How much lower can it go?” is the question we are often asked. While we don’t have a definitive answer, it is clear that the downward trend will continue for both wind and solar in the coming years, although at a slower pace than we’ve seen over the past five years or so. In late 2017 we saw tender prices in Canada (Alberta) go well below €0.025/kWh mark, and in Mexico below €0.015/kWh. While these are outliers at present, they are also harbingers of things to come in more and more markets, where wind (and increasingly solar) are far and away the cheapest way to add new generation capacity to the grid.
Late in 2017 the Dutch government announced its first ‘subsidy free’ offshore tender, which was in fact concluded earlier this year. The winner of the 700 MW Hollandse Kust project will build the project by 2022 and will receive nothing more than the wholesale price of electricity. This follows on from the first ‘zero bids’ for more than 1 GW of offshore wind in Germany last year, although these projects will not be built out until about 2024. In both cases, the costs of building the transmission connections will be borne by the government. These developments have created a dramatic increase in the appetite for offshore outside its home base in Europe (and China) in places as diverse as the United States, Taiwan, Korea, Japan, India, Australia and now even Brazil.
A Market in Transformation
What we are seeing across the globe is a transformation of markets for wind power away from the support schemes that gave birth to the industry, with wind taking its place as a purely commercial technology, increasingly operating without subsidies or support mechanisms. Competing, one might add, with incumbents which are heavily subsidized to the tune of hundreds of billions (low estimate) to trillions of dollars per year, depending on what is included. But that is a discussion for another time.
The point is that the phrase ‘renewables are too expensive’ can now disappear forever. Whatever ideologues might have to say about it, the marketplace has spoken and we are in the process of adjustment to a direct market-driven competition for the future of the energy system. Policy will also play a role, and it should play a stronger role if we are to avoid the worst ravages of climate change; regardless, we are in a time when it makes extraordinary sense to invest in renewables, and it makes little sense to invest in anything else.
This transformation is taking its toll on the annual market size. ‘Policy gaps’ between the new and old systems mean that some markets were on something of a bumpy ride in 2016 and 2017 and that will continue for another year or two (longer in a few markets, including the world’s largest, in China) until the kinks are worked out of the new systems.
Alongside the cratering prices for wind, solar and other technologies, other aspects of the transformation are proceeding apace. The dramatic uptake in EVs is one of them. Although it is as of yet limited to just a few markets, the rate of increase is beyond the wildest projections of just a couple of years ago. Likewise, the precipitous drop in the price of battery storage is another game-changer. One result of that is what has been talked about for many years, but which is only now appearing in reality: wind/solar hybrid plants with battery storage. We have examples under construction in Australia and India, and we will see much more in the coming years, with the combination enabling power delivery 24/7 for most of the year.
What does all this mean for wind markets in 2018-2022? Well, from where we sit at the end of March 2018, it will mean a more or less flat market for 2018, a return to rapid growth in 2019 and 2020, and tapering off a bit after that, following the rush to install prior to the various deadlines coming up in key markets in 2020. Will there be unforeseen surprises? Probably. Will Russia and Saudi Arabia finally begin to reach their potential and provide rapidly growing major new markets for the industry? Perhaps. What about the Vietnam, the Philippines and the rest of the Southeast Asia? The only thing that we can say for certain is that the increase in the rate of change in energy markets will continue to accelerate in the coming years.