Wind Energy Update Review

Wind Energy Update 2010 Review: Peaks and troughs for the international wind energy sector

2010 in review: Peaks and troughs for the international wind energy sector

Short on orders, long on ambition, 2010 has been a challenging year for the global wind energy sector.

By Rikki Stancich

Contrary to expectations, a long-awaited 2010 upturn has failed to materialize. 2010 has consequently seen the rate of installed capacity in the US take a dive, while a restriction of financing options available to companies in the wind sector persists.

This year Vestas, the world's leading turbine manufacturer, posted first and second-quarter losses and cut its 2010 earnings outlook as customers delayed orders. In October, Vestas announced that  European market growth in 2011 would "not live up to Vestas’ expectations", prompting the company to consider closing down of a number of factories, primarily in Denmark, where its says costs are highest.

Spanish turbine maker, Gamesa, and Belgium-based gearbox supplier Hansen Transmissions recently said anticipated recovery in the wind energy sector had proved elusive, and cut their 2011 sales and revenue forecasts respectively.

Elsewhere, Vestas and Gamesa were both forced to seek government support as the Spanish wind sector staggered in the wake of the economic crisis. “In Spain our production capacity is going to fall,” Gamesa chairman and CEO Jorge Calvet recently told analysts.

That is not to say that Gamesa is about to turn its back on its home market. The company recently announced that it will be leading on the Azimut offshore wind turbine project, which will result in the development of a 15-MW offshore wind turbine using 100% Spanish technology.

GE’s drop in group revenues (posted in October) was partially atributed to a 32 percent dive in turbine sales, and a 15 percent fall in sales for the third quarter. GE's Chief Financial Officer Keith Sherin recently told analysts during a conference call that the wind market has “collapsed” in the U.S. 

According to a spokesperson for the American Wind Energy Association, the “massive drop in new megawatts” is due to a lack of a long-term national policy, low power demand and low power prices. 

“This shows the need for a long-term national policy that helps … deal with the boom and busts. We need a national renewable electricity standard that gives us parity with other energy sources and gives investors a sign that the U.S. is committed to renewable energy,” said the spokesperson.

Governments rally behind wind sector

The wind sector is tenacious and with increasing levels of government support the world over, looks set to emerge from 2010 battered, but not beaten.

In May, Cape Wind, a 420MW wind farm in Horseshoe Shoal - the US’ first ever offshore wind farm - emerged from a decade of permitting when the project was finally approved by Secretary of the Interior, Ken Salazar. Only last week, the Massachusetts Department of Public Utilities (DPU) approved terms of a 15-year power purchase agreement between utility National Grid and Cape Wind Associates under which the grid will buy Cape Wind’s energy, capacity and renewable energy credits.

To ensure that future developers will not face the same costly permitting process endured by Cape Wind's developers, the Bureau of Ocean Energy Management (BOEMRE) launched a process in November it calls ‘Smart from the Start’ designed to expedite permitting on up to 6GW of proposed offshore wind projects, and to address issues such as running export cables through state and federal waters.

Within the scheme, BOEMRE is to work closely with 11 Atlantic states and stakeholders to identify potential offshore wind sites by the end of February 2011 to carry out site and environmental impact assessments with a view to issuing renewable energy leases later in 2011.

The announcement coincides with a recent FERC Notice of Proposed Rulemaking (NOPR) on integration of renewable resources into the grid. FERC’s proposed rule will allow for more frequently scheduling and will enable improved forecasting  - two measures that will “facilitate in accommodating variable resources like offshore wind into the grid without constructing added transmission”, says ocean energy analyst Carolyn Elephant.

But the US needs to ramp up its permitting processes and lift its sights if it wishes to keep pace with its European and Asian counterparts. Despite NREL having recently identified 212.98 GW of Atlantic coast offshore wind potential in shallow waters, the US’ offshore wind ambition to develop 10 GW of offshore wind by 2020 and 54 GW by 2030 is trifling compared to Europe’s and China’s targets. The European Union and the European Wind Energy Association have set a target of 40 GW of offshore wind by 2020 and 150 GW by 2030. China has established a target of 30 GW of offshore wind by 2020. 

Public support lures investment

Across the Atlantic, the UK has bent to the task of achieving its 33GW 2020 target for offshore wind. Scotland and England recently pledged a combined £130 million for the upgrade of ports and port facilities in advance of its Round 3 build out.

This display of public commitment prompted major energy players GE, Siemens, Mitsubishi Heavy Industries Ltd. and Gamesa to reiterate their intentions to invest over £400 million ($629 million) in the U.K.'s offshore wind sector. Spanish power utility Iberdrola also announced its decision to invest €4.8 billion in renewable energy projects in the United Kingdom over the next two years.

The final week of November saw Mitsubishi Power Systems Europe (MPSE) acquire Edinburgh University offshoot Artemis Intelligent Power (AIP) to support its research and development work. MPSE also confirmed it that it will invest up to £100 million in a Scottish offshore wind research and development centre.

The UK has doubled its efforts to check the spiraling cost of offshore wind. A UKERC report published in October noted that in the last five years costs in the offshore wind sector have escalated dramatically, with capital costs doubling from approximately £1.5m/MW to over £3.0m/MW in 2009. The report noted that, as of June 2010, capital and energy costs peaked at approximately £3.0m/MW, or £150/MWh. Through funding, new test facilities and initiatives to flush out the most innovative ideas to address the costly challenge of deepwater, far shore wind, the UK hopes to curb these costs.

Offshore wind picks up

Even in the face of high costs, the offshore wind sector has continued to gain traction. The Crown Estate gave the nod on extensions to offshore wind farm sites around the coast of England. It announced an additional 2 GW of capacity from the Round 1 and 2 project extensions to RWE npower renewables and Scottish & Southern Energy for the Galloper wind farm; Vattenfall Wind Power the extension of Kentish Flats; and to Dong Wind UK, rights for the extension of  the Burbo Bank and Walney wind farms.

The month of April saw the commissioning of E.ON’s 180MW Robin Rigg offshore wind farm, and of Alpha Ventus, the first German offshore wind farm, constructed by a consortium of EWE, E.ON and Vattenfall Europe.

In June, Danish energy company Dong Energy opened its UK offshore wind farm, Gunfleet Sands, in the Thames Estuary off the Essex coast. Meanwhile, Vattenfall inaugurated the world’s largest offshore wind farm, Thanet (300MW) just off the coast of Kent, while simultaneously carrying out construction on its 150MW Ormonde wind farm in the Irish Sea. Construction also began on Stat Oil Hydro’s 315MW Sheringham Shoal wind farm off the UK’s Norfolk coast.

Beyond the UK’s borders, Spanish utility Iberdrola Renovables secured the rights to build a 400 MW offshore wind project, Ventotec Ost 2, in the Baltic Sea, scheduled to come online in 2014. Off the coast of Denmark, E.ON’s 207MW offshore wind farm, Rødsand II,  came online in October.

Germany’s first commercial offshore wind farm project, ENbW’s 48MW Baltic 1, came online in September this year and construction began on the 400MW BARD Offshore 1, another wind farm comprising 80 five megawatt turbines, 100 km off Germany’s North Sea coast. More than 30 wind parks have already received formal approval from the German government, which plans to develop 10 GW of offshore wind in the North Sea and Baltic Sea by 2020 and 25 GW by 2030.

2010 also saw the first major wind farm to be constructed outside of Europe. The 102-megawatt Donghai Bridge Wind Farm, off the East coast of China in the East China Sea came online in July this year.

Tapping new markets

Wind turbine manufacturers have been crossing new borders to reach new markets. GE made its debut in Brazil, supplying two wind projects back in February. GE and REpower Systems signed their first contracts in Turkey, while Suzlon Wind Energy, formed a joint venture with wind farm operator Volkswind Bulgaria to accelerate the company’s growth into the Bulgarian wind energy market.

In June, wind turbine manufacturer, Vestas, introduced its V112-3.0 MW turbine in China, while Gamesa set up its fifth manufacturing plant in China in the city of Da’an in the province of Jilin (northwest China), one of the country’s leading wind energy regions. Gamesa announced its plans to triple China investments by 2012, on the back of a doubled sales forecast. In October, GE set-up a joint venture with Harbin Electric Machinery Company (HEC), a subsidiary of China’s Harbin Power Equipment, to manufacture and supply wind turbines to its customers in China.

The wind energy sector has felt the squeeze in 2010, and it remains to be seen as to whether 2011 will prove to be any kinder, particularly where securing funding and investment for offshore projects is concerned. Survey results released by KPMG last week indicate that wind developers, banks and other players do not expect the financing environment to improve in the short term.

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