Wind Power

Global onshore growth, European offshore bet

 

Wind has been used for millennia to power windmills and to pump water. As sunlight heats the Earth and its atmosphere, temperature gradients form, moving air from cold regions to warm regions. The result: wind—an abundant source of clean energy.

Today, wind is mainly used to generate electricity via turbines. With the global outlook for the energy industry focused on environmental impact, the technical potential for wind as a source of power exceeds today’s global electricity production, although the quality of resources varies by location.

Onshore Wind-Power Capacity has Grown at a Robust Rate Over the Last Decade

Since 2006, global wind-power capacity has increased by an average of 20 percent a year, reaching 540 gigawatts (GW) at the end of 2017. This growth has been driven primarily by onshore technology, which accounts for about 97 percent of capacity (see figure 1). Since 2014, annual onshore wind capacity addition has been exceeding 50 GW per year. In 2017, the offshore wind market reached a record with 3.8 GW of new capacity added. Since 2008, offshore wind has been growing faster than onshore albeit on a much smaller base, reaching only 19 GW of globally installed capacity with 3.8 GW added in 2017—a record for offshore wind. However, in 2017, 648 megawatts (MW) of capacity was decommissioned worldwide.

FIGURE 1: The world's wind-power capacity has been rapidly expanding

China is the world’s largest market for wind power, accounting for 37 percent of total wind capacity additions in 2017 and the principal driver of market growth (see figure 2). The country accounted for almost 35 percent of installed capacity at the end of 2016 and 38 percent of the global capacity additions in 2017.

FIGURE 2: China has outpaced the United States and Europe in wind capacity market growth

The United States was the second largest country for capacity additions, continuing to develop its wind capacity with 7 GW of capacity additions in 2017. Nevertheless, annual added capacities are still lower than in 2015 and 2016 when approximately 10 GW and 9 GW of wind capacity were added respectively.

Europe has long been the world leader in terms of installed capacity, accounting for about 33 percent and adding 32 percent of global capacity at the end of 2017. The European market is led by Germany—the world’s third-largest country after China and the United States, for capacity additions in 2017 with 6.6 GW—and to a lesser extent by the United Kingdom and France, with 4.3 and 1.7 GW capacity additions in 2017 respectively. European countries accounted for 85 percent of the global offshore installed capacity in 2017 with the United Kingdom and Germany having 67 percent of the total global capacity.

Wind Capacity is Expected to Keep Growing at Strong Rates

Wind power is expected to continue to grow, with cumulative capacity increasing to more than 841 GW by 2022. Offshore wind is expected to see particularly strong growth at 18 percent, which is more than double onshore wind’s growth rate of 8 percent.

FIGURE 3: Onshore and offshore wind power capacity is expected to grow

Onshore wind is a proven, mature technology with an extensive global supply chain. Onshore wind turbines are getting bigger with taller hub heights and larger rotor diameters. In 2017, cumulative grid-connected wind capacity reached 540 GW (521 GW onshore wind and 19 GW offshore wind), and wind power accounted for 4 percent of global electricity generation. Over the next five years, onshore wind capacity is expected to grow by 295 GW to reach almost 750 GW by 2022, according to the International Energy Agency’s Renewables 2017 report. China leads this growth, followed by the United States, Europe, and India. As a result, onshore wind electricity generation would increase by 80 percent globally between 2017 and 2022—exceeding 1,500 terawatt hours (TWh) per year by 2021 and reaching almost 1,650 TWh by 2022.

When it comes to offshore projects, turbines take advantage of better wind resources than land-based sites. Therefore, new offshore turbines are able to achieve significantly more full-load hours, ranging from 40 to 55 percent depending on resource availability. Offshore wind is also expected to grow rapidly. In 2017, global offshore wind generation reached an estimated 55 TWh, 12 percent higher than in 2016. By 2022, the cumulative global offshore wind capacity is expected to reach 41 GW, up from 19 GW in 2017. Deployment will be led by the European Union and China. Enhanced policies and faster deployment of projects in the pipeline could result in an additional 7 GW. In 2021, global wind offshore generation is expected to pass 100 TWh per year and continue to grow at a steady pace.

The Design of Offshore and Onshore Wind Turbines is Diverging

Wind turbines used onshore and offshore have very similar technical aspects. In fact, offshore wind turbines are essentially scaled up, marinized versions of land turbines or turbines installed in shallow waters. However, looking ahead, the technologies used in onshore and offshore wind systems are likely to diverge.

In the offshore segment, companies are racing to develop larger turbines (see figure 4). Much of R&D is focused on increasing wind power capacity, reducing costs, and solving network integration difficulties. Much of R&D efforts are focused on alleviating relatively high infrastructure costs of offshore wind, such as building foundations and lowering the number of units per kilowatt (kW) of installed capacity, which improves access and facilitates maintenance. The market is now dominated by 1.5 to 3 MW turbines. Offshore economics require larger turbines to limit the proportionally higher costs of infrastructure and lower the number of units per kW of installed capacity to facilitate access and maintenance.

FIGURE 4: An array of companies are developing larger wind turbines

Meanwhile, when it comes to onshore turbines, size is leveling off because of road-access constraints and public acceptance of noise and visual disturbances. In addition, in some cases, larger turbines and taller towers increase the investment cost to an extent that is not balanced by higher capacity and therefore does not reduce the levelized cost of electricity (LCOE).

The need to ensure that wind power meets network requirements has also resulted in a significant effort to create innovative transmission systems and develop power-control systems. Coupling wind and battery storage can provide efficient solutions to address power network requirements (although wind lags solar when it comes to storage). Advancements in wind resource assessment and forecast are crucial to identify the most suitable locations and develop appropriate solutions to ease integration.

With Zero Fuel Costs, Wind Energy is a Capital-Driven Industry

As with most other renewables, upfront investments account for the bulk of the full cost of wind power, although operation and maintenance costs are more significant in offshore projects (see figure 5). Operation and maintenance typically account for 20 to 25 percent of the price of electricity. (This can be higher for offshore projects.) Financing costs are therefore fundamental to the economic viability of a wind project.

FIGURE 5: With zero fuel costs, wind energy is a capital-driven industry

For onshore projects, turbines make up most of the capital costs, accounting for up to 67 percent of total installed costs. The main components are the rotor blades, the tower, and the gearbox, which make up about two-thirds of the overall capital costs. Investment costs are much lower than for offshore projects, ranging from $1,300 to $2,800 per kW and from $2,400 to $5,900 per kW respectively. This gap can be explained by offshore wind’s relative lack of maturity as well as the marine environment’s need for expensive foundations and costly grid connections. Onshore investments are expected to see a moderate decrease in the future, while offshore should benefit from a larger decline in investment costs per unit of power. However, these reductions remain sensitive to commodity prices and supply chain bottlenecks. If wind conditions are favorable, onshore projects can be competitive with fossil fuel generation sources. During 2016 and 2017, the regional weighted average LCOE for onshore wind was $55 to $92 per MWh compared with $145 to $240 per MWh for offshore in the same period.

FIGURE 6: The cost of onshore wind power is compatible with fossil fuels

Support from the Public and Private Sectors is Essential

Many countries have national wind energy targets, policies, and regulatory support mechanisms to encourage and subsidize wind energy development. Multiple subsidy-free offshore contracts have been awarded in Germany and Netherlands with plans to offer more such tenders in the future. However, the viability of subsidy-free projects might not be uniform across the markets and could face technological challenges.

Aiming for an Environmentally—and Consumer Friendly—Option

Although wind power is one of the lowest greenhouse gas-emitting energy technologies, CO2 abatement is highly system specific, and its overall impact depends on the penetration level and on the power system’s ability to compensate for wind’s intermittency without relying on carbon-intensive peaker power plants.

Pushback from consumers presents another obstacle. In recent years, several key markets, including the United States, Australia, and Europe, have seen an increase in consumer opposition to wind projects—both in planning and operational stages.

 

Request the full FactBook presentation here.

Permission is granted to reproduce and distribute copies of this work for personal or nonprofit educational purposes. Any copy or extract must refer to the copyright of A.T. Kearney Energy Transition Institute.

Explore other links with further details about wind power.

Discover more about A.T. Kearney’s expertise and insights in energy: Oil & Gas and Utilities

Request the Full FactBook

Title: Wind Power
Size: 3.82MB PDF

 

 

  • Follow A.T. Kearney for more
    energy news and insights:
  • For Social Media News from
    the Energy Transition Institute:
  • #etinews