Steady as she goes By Alasdair Cameron

RENEWABLE ENERGY WORLD, July-August 2005, Volume 8, Number 4 Steady as she goes By Alasdair Cameron BTM's world market update Total wind capacity grew by around 20% in 2004, despite a temporary slump in the US. Global wind is becoming more resilient and international, says BTM, with some new markets taking a lead. Alasdair Cameron reports. Each spring, BTM unveils its predictions for the future of the wind industry and gives us a round up of its past. The latest World Market Update reveals that 2004 was a good year for wind power, with 8154 MW of new capacity installed. This brings the total global capacity to nearly 48,000 MW and represents an increase of 20%.The growth rate of global installation, however, was down slightly on 2003, falling by 2.3%. This is likely to be a temporary blip and is accounted for by the 2004 stagnation in the US market. Over the last five years, though, average growth has equalled 15.8%, and this looks set to remain stable for the foreseeable future. While these figures look positive for the industry as a whole there are some interesting developments at a national level. Some of the traditionally strong players are facing saturation, and some surprising new markets are emerging both on and offshore. WHO INSTALLED WHAT? Europe maintained its position as the leader in wind power. It accounted for 73% of the total capacity installed in 2004. For the first time, Asia was the second-placed continent with 13.2%, overtaking the Americas, which fell to fourth place with just 6.3%. The OECD Asia-Pacific also overtook the Americas and accounted for 7% of new capacity installed. Elsewhere, Africa accounted for 0.3% of global installation with 23 MW and the rest of the world just 0.4% (Tables 1 and 2). ------------------------------------------------------------------- 2 MW windturbines in India SUZLON For the first time, Asia was the second-placed continent

-------------------------------------------------------- Blades for a new wind farm in Portugal REPOWER Within Europe, Spain overtook Germany as the leading market in 2004, installing 2064 MW compared with the former leader s 2054 MW. Both Italy and Portugal made impressive gains, moving up to third and fourth places (fifth and sixth globally) with 357 MW and 274 MW respectively. The UK was in fifth position (seventh globally) with 253 MW installed. Denmark dropped away, installing only 7 MW of new power as its market reached saturation point. Wind power already accounts for around 20% of that country s electricity. Germany too is facing saturation, with many of its best onshore sites already occupied. Local opposition to wind farms is also on the increase, and growth there is expected to slacken next year before the German offshore boom picks up in 2007. The UK made steady gains, installing the year s only offshore windfarm in 2004, at Scroby Sands. In South and East Asia, India maintained its position as the lead country and became the third largest market in the world, with 875 MW of new generating capacity installed. China made more modest but significant gains, installing 198 MW. The rest of that region saw little gain and contributed just 3.9 MW. The Americas declined in 2004, installing only 516 MW, compared with 1818 MW in 2003. The main reason for this was the US government s failure to extend the Production Tax Credit (PTC) into 2004. Of this new capacity the US installed 75%, followed by Canada, with 24%. Throughout the rest of North and South America, just 4 MW was installed. In the OECD-Pacific region, Japan maintained its dominance (230 MW of new installations), followed by Australia (182 MW) and New Zealand (112 MW). South Korea showed growth as it raised its installation to 47 MW, an increase of nearly 500% on 2003, as the government gears up to become a player in the wind energy technology market. Growth in the rest of the world was weak. Egypt accounted for the only new installation in Africa, and the Middle East and Central Asia added a tiny 29.2 MW of capacity, of which nearly all was in Iran. TABLE 1. Top 10 markets in 2004 (annual installed MW) Country 2003 2004 Share (%) Spain 1377 2064 25.3 Germany 2674 2054 25.2 India 423 875 10.7 US 1687 389 4.8 Italy 116 357 4.4 Portugal 107 274 3.4 UK 195 253 3.1 Japan 275 230 2.8 Netherlands 233 199 2.4 China 98 198 2.4 Total 7185 6893 Fraction of world total (%) 86.1 84.5 Source: BTM Consult ApS

TABLE 2. Top 10 markets by end of 2004 (cumulative MW) Country 2003 2004 Share (%) Germany 14,612 16,649 34.7 Spain 6420 8263 17.2 US 6361 6750 14.1 Denmark 3076 3083 6.4 India 2125 3000 6.3 Italy 922 1261 2.6 Netherlands 938 1081 2.3 Japan 761 991 2.1 UK 759 889 1.9 China 571 769 1.6 Total 36,545 42,735 Fraction of world total (%) 90.7 89.2 Source: BTM Consult ApS WHO BUILT THE TURBINES? There was little change among the top 10 manufacturers of turbine equipment, who between them accounted for 96.4% of all turbines installed in 2004.Vestas maintained its number one spot (34.1%), benefiting from its merger with NEG Micon, last year s number five. Spain s Gamesa moved into number two after strong sales in Europe and North America (18.1%). Germany s Enercon remained in third place (15.8%). Altogether these top three companies increased their dominance in the global market, accounting for nearly 68% of new installations, a sharp increase on the 55% of 2003. GE Energy was the fourth largest manufacturer, dropping from second place, having lost share thanks to the troubles in the American wind industry in 2004.They were followed by Denmark-based Siemens (the company is listed as Danish following its takeover of Bonus late in 2004) and Suzlon of India (Figure 1).

WHO DEVELOPED THE FARMS? BTM identifies three broad categories of wind developers: independents, such as RES or Zilkha; utilities, such as Scottish Power or E-ON; and wind producers, such as Shell Wind Energy or EHN. WORLD S FIRST CDM WIND FARM TO BE IN CHINA A Chinese wind farm is expected to become the first in the world to be registered as a Clean Development Mechanism (CDM) project. The 25.8 MW Huitengxile wind farm in Inner Mongolia will also be the first CDM project to be registered in China. The CDM enables industrialized countries to meet the greenhouse gas emission targets agreed under the Kyoto Protocol by buying certified emission reductions from developing countries. Since the Kyoto Pr otocol s coming into force in February 2005, emission reductions have become an increasingly valuable commodity in world markets. The Inner Mongolia Long Yuan Wind Power Development Company owns Huitengxile and will receive 2.5 million (US$3 million) over the next 10 years from SenterNovem, which is buying the certified emission reductions on behalf of the Dutch Government. The CDM revenue will cover about 8% of the project development costs. Huitengxile consists of 22 wind turbines producing 25.8 MW. Tw elve of these have a capacity of 900 kw each and the remaining 10 have a capacity of 1500 kw each. Despite good wind resources in Inner Mongolia, wind projects can only compete with the large coal-fired power stations used in Northern China by obtaining additional income via the CDM. Consolidation is the key word among developers. Examples abound, including the acquisition of SeaWest by AES and of EnXco by SIIF/EdF. The report suggests that this is because these new, larger companies are in a better position to deal with the new large-scale manufacturers of turbines and other components than traditional small developers. In addition, developers are increasingly demanding that the turbine manufacturers invest in projects and help to co-manage and operate them. Following this pattern, some former utilities are integrating backwards by using their experience of running wind farms to design new installations and generation systems. This ties in with the saturation of dispersed markets such as Germany (where many farms are owned by cooperatives and small players) and the rise of offshore wind, to which the large developers are much more suited. TECHNOLOGY ISSUES How to make the machines bigger is still the number one technological issue in the turbine industry, with the current philosophy being that the larger the turbine, the greater its cost effectiveness. The average size of turbines installed increased by only around 3% to 1.248 MW in 2004. The three-blade, three-stage gearbox design remained the most popular. Progress is being made in the production of single-gear generators, although German company Enercon is the only one which manufactures them commercially. Turbines rated at 5 MW remained the largest available, but so far only three prototype units have been installed worldwide. The report expects that these will play an important role in future offshore production. REPOWERING As markets begin to mature and saturate over the coming years, repowering will become an increasingly important market, says BTM. A large number of the firstgeneration wind turbines, which were installed 15 20 years ago in pioneering countries such as Denmark and Germany, are reaching the end of their useful lives. Many are small, being in the 50 100 kw range, the most popular size at the time of their installation. Replacing these with new multi-megawatt units could lead to fewer turbines and a large increase in total capacity. Repowering has several advantages which make it easier than new development. Firstly, a firstgeneration site is likely to have good wind resource, as that would have been the original reason it was chosen. Secondly, planning and consent are already in place, along with survey and mapping work. Thirdly, the local

community has lived with the turbines for some time and may be less likely to object to new systems being installed than people in new areas. On the other hand, planning matters remain complex and grid infrastructure may not be sufficient to cope with large machines. The first repowering programme, launched in Denmark in 2001, provided an economic incentive for developers to upgrade wind turbines by providing a feed-in tariff on top of that already given to wind. From 2001 2003, 1480 old turbines with an average size of 82 kw were replaced with 272 turbines with an average size of 1.2 MW. The result was an increase in capacity of 210 MW with 1208 fewer turbines. A second round of repowering is due to start in Denmark in 2005. In Germany the first phase is likely to be the replacement of 150 300 kw turbines with 1.5 2 MW machines. -------------------------------------------------------------------- Wind farm at Kuocangshan, China ZHU LI Only three prototype 5 MW units have been installed worldwide THE NEXT FIVE YEARS Onwards and upwards seems to sum up BTM s predictions until 2009, with an average growth of 16.6% per year expected. The growth will be spread unevenly, with increases of 26% expected for 2005. These predictions have increased significantly from those made the previous year thanks to high growth in certain Asian markets and an optimistic outlook on the situation in the US. Overall, Europe will maintain its place at the helm of wind power development. It will account for 63% of global capacity (and 58% of global growth) by 2009. In addition, India and China will see a rapid increase in their contributions, along with the US, which is expected to pick up towards the end of the prediction period. By the end of 2009, total installed global wind power capacity is expected to be over 117 TW. The offshore boom The long-awaited surge in offshore projects seems to be moving further into the distance, observes BTM. Despite a great many projects in development, the timeframe for implementation has been pushed back by two years. There are several reasons for this, including the lengthy process needed to get building consent, environmental concerns and questions over electrical infrastructure. In addition, some offshore projects are waiting for turbines with proven outputs of 5 MW or more, technology which is only just becoming available. Only four companies Prokon Nord, REpower, Vestas and Enercon are developing turbines in this range. Despite these delays, several projects are due to begin construction from 2005 to 2007, including Klasarden and Utgrunden II in Sweden, and Kentish Flats and Barrow in the UK. It is unclear whether building will start on the German projects at Butendiek and Borkum West in 2006 or later. Spain The real drivers behind the Spanish market have been the regional authorities, a trend that is expected to continue. It is predicted that in the next five years Spain will remain a dominant market in Europe, along with Germany.

Germany The Renewable Energy Law passed in August 2004 withdraws payment for wind turbines located in sites that produce less than 65% of the wind energy reference production for their location. This is designed to encourage building on windier sites, and, along with saturation, will discourage onshore development, says BTM. Offshore activity will begin to pick up in 2008 2009, two years later than expected. Within two or three years, however, repowering is expected to constitute a major part of the German market, as mentioned above. Denmark Despite reaching saturation, Denmark has launched a new repowering project to increase capacity by 400 MW over the next few years. Other proposals include joint implementation programmes with the new countries of the EU and former Soviet Baltic states. India -------------------------------------------------------------- Construction of a wind farm in India SUZLON In 2005 India is expected to overtake Denmark in terms of cumulative capacity. The government s target of 7000 MW by 2012 seems sure to be reached by 2009. It has set an overall target of electricity from renewables of 12% by 2012. US The PTC was eventually extended in September 2004 for at least one more year and may possibly be extended up until 2007.With this policy in place, growth can be expected at around 2000 MW per year while the PTC lasts. In the long term, says BTM, a federal renewable portfolio standard may be needed to ensure growth, although transmission issues from remote areas are also a problem which could hamper development. The US offshore sector is due to take off in 2006 or 2007, assuming the right political conditions are in place. UK The UK has the greatest wind resource in Europe and is expected to become one of the largest markets in the world over the next few years. The introduction of the Planning Policy Statement is expected to speed up the development of offshore wind farms. Another two or three are expected to be completed in 2005 2006. The second round of offshore leasing resulted in 15 projects totalling 7000 MW being granted permission for construction from 2006 onwards. In addition, around 1000 MW of projects are still awaiting construction from round 1. Canada With its huge expanses of uninhabited land and its vast plains, Canada has some of the best wind resources in the world. Government targets aim to produce 10,000 MW by 2010, but BTM finds this ambitious and suggests a more realistic figure of 2000 MW will be achieved. Once again, transmission from remote wind farms to centres of population could be a problem.

Ireland Estimates for the next five years are around 1000 MW, a quarter of which will be installed offshore. New projects are planned for Dublin Bay, and the second phase of the Arklow Banks project is under development. Meanwhile, onshore development is being restrained by poor grid infrastructure. Other markets Another country to watch out for is Norway, whose low official target of 1000 MW by 2010 belies its huge wind resources and offshore expertise. Indeed, plans are afoot here for single developments that would generate over 1000 MW. PREDICTIONS TO 2014 ------------------------------------------------------------- Scroby Sands in the UK was the only offshore project to be built in 2004 POWERGEN The report predicts that in the long term, wind power will not be as reliant on local politics as it is today, thanks to improved efficiency and economics. The ratification of the Kyoto Protocol on 16 February 2005 is likely to lead to increased global interest in wind power, which will help to ensure this happens. Assuming that supply keeps pace with demand, annual installation could reach 29,000 MW per year by 2014, with a cumulative global capacity of 235,000 MW (Figure 2). This could rise further as countries commit to new, more ambitious renewables programmes as Kyoto becomes obsolete. The most ambitious plans to date are those of the European Wind Energy Agency, which, along with Greenpeace, launched its WindForce 12 plan. This demonstrates how up to 12% of the world s electricity could be generated from wind by 2020. Were this to be realized, it would require the installation of 1.2 TW of capacity and provide an enormous boost to the industry. ----------------------------------------------------------------------------------------------- Alasdair Cameron is on the editorial team of Renewable Energy World. e-mail: rew@jxj.com International Wind Energy Development World Market Update 2004 was published in March 2005 and is available from BTM Consult ApS, Ringkøbing, Denmark Fax: + 45 97 32 55 93 e-mail: btm@btm.dk website: www.btm.dk