The wind energy industry averted disaster by securing a one-year extension of the production tax credit (PTC) and is likely to benefit from the ‘begin construction’ language contained in the latest iteration of the incentive. But as the threat of the boom-and-bust cycle looms, what can the industry expect in the years ahead?
Some companies – including GE, the world's largest wind turbine manufacturer in terms of megawatts installed in 2012 – have expressed concerns about where the wind power market is headed for the remainder of 2013, as the PTC's eleventh-hour extension came too late for many firms to resurrect their development plans for this year.
A new report released by MAKE Consulting corroborates those expectations. Order flow at the end of 2012 for announced conditional and firm orders was down by 13%, which leads to expectations for a weaker 2013, MAKE says, noting that pricing has stabilized in all regions.
The firm predicts that wind power installations will drop by about 7% this year compared to last year.
However, MAKE also forecasts that the industry will continue to experience modest growth for the remainder of the decade. Growth in the Asia Pacific, Latin America, Northern Europe, the Middle East and Africa will offset some of the declines in North America, Southern Europe and Eastern Europe, which are experiencing some degree of regulatory upheaval and/or policy uncertainty.
Despite volatility this year, the compound annual growth rate (CAGR) of global wind energy installations is likely to average about 4.6% until 2020, as wind energy is expected to become one of the most competitive power generation technologies after 2015, the MAKE report says.
In fact, 2014 is likely to be another record year, with installations expected to increase by 17% year over year. Continued growth in the Asia Pacific, Latin America, Middle East/Africa and offshore markets – plus a strong year in North America ahead of expected regulatory expirations at the end of 2014 – will offset a slight decline in European installations, spurred mostly by weakness in Southern European markets, MAKE says.
An uptick in planned installations for 2014 is expected to lead orders to recover sharply this year, the report notes. A focus on restoring original equipment manufacturer profitability may give turbine pricing a positive bias, but the outlook for prices through 2015 will be somewhat mixed.
Prices for turbines larger than 2.5 MW are likely to increase, MAKE says. However, prices for turbines in the sub-2.5 MW category may remain under pressure.
Global growth in the wind power market is likely to flatten off until 2016, before accelerating again in 2017. MAKE expects a CAGR of 5.3% between 2017 and 2020, as the levelized cost of wind energy is anticipated to drop below grid parity.