Demand for new wind power equipment is set to contract in the Europe, Middle East and Africa (EMEA) region in 2013 and 2014, in spite of an expected strong global market recovery in 2014 – the legacy of low economic growth and political weakness across the region, finds a new report from MAKE Consulting.
However, consistent with the region's leading market status, the report estimates that long-term growth of the wind industry in Europe will be over two times gross domestic product (GDP) out until 2020.
Overall, the report says grid-connected wind installations in EMEA will increase by a 4.5% compound annual growth rate (CAGR) from 2012 to 2020. Growth, though, is uneven across the region and is led by northern Europe, offshore and emerging markets. The report says seven of the top 10 global emerging markets are located in the EMEA region, underlining the area's importance in driving growth.
Despite this, the geographical demand structure will change toward markets that warrant investment to achieve market access and thus have higher risk profiles: MAKE says this will present challenges for the European wind power supply chain.
MAKE believes that the European Union (EU) will meet only 93% of its 2020 National Renewable Energy Action Plan (NREAP) targets, with southern European and offshore targets not being met, mostly due to weaker-than-expected electricity demand growth. The EU offshore market is nevertheless still expected to be one of the brightest growth spots.Â
The report says regulatory uncertainty appears to be moderating across EMEA, and regulatory momentum is predominantly positive. However, policy uncertainty in recent months has dampened demand. MAKE adds that improved long-term policy visibility is required within the EU – particularly for offshore to keep momentum. As a result, market contraction in the EMEA region is likely to deepen further in 2014 despite global recovery and continued growth in offshore and emerging markets in the region.
Orders are picking up strongly in markets where MAKE expects growth – northern Europe, offshore and Africa and the Middle East, but it remains weak in southern and eastern Europe. MAKE expects the levelized cost of energy (LCOE) for wind to be at or below grid parity for most onshore markets between 2015 and 2020. This and 2030 renewable targets will form the basis for sustained long-term growth of the wind industry, the report concludes.