Wind Power Tackles Challenging Global Conditions
By Jenny Bieksha, Bishop & Associates Inc.

2010 was another challenging year for many industries, and for the first time, wind power was not an exception. This was largely attributed to lower fossil fuel prices, the financial unsettlement in Europe, lower levels of wind turbine orders, policy uncertainty in the U.S., and a credit shortage since the onset of the financial crisis.

Global wind power installations increased by 35.8 gigawatts (GW) in 2010, according to figures released by the Global Wind Energy Council (GWEC), bringing total installed wind energy capacity up to 194.4 GW, a 22.5% increase from 2009. However, the annual 2010 wind power market was down for the first time in 20 years, shrinking by 7% from 38.6 GW in 2009.

For the first time, more than half of all new wind power in 2010 was added outside of the traditional markets in Europe and North America. Ongoing growth in China drove the shift, which installed 16.5 GW in 2010, and now claims global leadership with 42.3 GW of wind power. Other developing countries also expanded their wind capacity in 2010, including India (2.1 GW), Brazil (326 MW), Mexico (316 MW), and North Africa, with 213 MW installed in Egypt, Morocco, and Tunisia. Expansion of wind power beyond the traditional markets is a trend that the industry anticipates developing further in the future.

China sees wind power as an important contributor to achieving its stated goals of reducing carbon intensity, aiming for a 40% reduction by 2020. The Chinese government will remain one of the main drivers in the coming years, with annual wind power additions expected to be over 20 GW by 2014. China’s growth is reinforced by an aggressive policy supporting the diversification of the electricity supply and a rapidly increasing domestic industrial base.

In Europe, new installed capacity of 9.9 GW in 2010 was 7.5% down from 2009. This is in spite of a 51% growth of the offshore market in the U.K., Denmark, and Belgium, and new developments in Eastern Europe, mainly in Romania, Bulgaria, and Poland. Fiscal constraints in Europe will restrict growth in new wind energy installations from 14% in 2010 to 1% this year.

The U.S. wind industry installed 5 GW of new wind capacity in 2010 (half of 2009’s record pace of 10 GW), and entered 2011 with more than 5 GW under construction. Total U.S. wind capacity now stands at 40.1 GW. The U.S. fell to third place in wind installations, behind China and the European Union, both of which have implemented long-term policies to provide a stable environment for wind power to operate.

Brought about by a lack of federal direction, the U.S. market is in the midst of a slowdown, creating an unstable business environment. Without an energy policy, utilities are less eager to enter into power purchase agreements. The one-year extension by Congress of the Section 1603 Investment Tax Credit for renewable energy is expected to spur more project start-ups to meet the new construction deadline for the tax credit now expiring at the end of 2011.

2011 Wind Power Challenges and Trends

• During the wind power boom of the past five years, there was a substantial increase of small manufacturers and a subsequent fragmentation of the market. In these leaner times, buyers in Europe and America are placing orders mainly with the larger firms, since they seem more likely to survive the turmoil. Mergers and takeovers will be seen over the next year.

• Cheap natural gas, the lack of electricity-transmission lines, and the lingering credit crunch have combined to take the shine off large-scale renewable-energy projects. T. Boone Pickens, the oilman and clean-energy booster, shelved the majority of his massive $2 billion wind-power project in Texas, and is now pushing to increase the use of natural gas for transportation. Cheaper natural gas hurts wind farms, because cheaper gas makes gas-fired power plants a more attractive option for electricity generation.

• Europe is relentlessly pursuing the growth of offshore wind power. Offshore wind installations increased 51% in 2010. The U.K. is the world leader in offshore wind installations, with a total installed offshore wind capacity of 1.3 GW. Gamesa, General Electric, and Siemens, among the world’s biggest wind power companies, are planning to invest more than $475 million in the U.K. through 2014. Assuming financial conditions remain favorable, analysts for the wind industry forecast that up to 40 GW could be installed in the North Sea region by 2020.

• The process of developing major transmission and distribution (T&D) projects for renewable electricity generation has proven problematic. The main problem is that developers need transmission lines to build wind farms, but investors will not build transmission lines unless they are confident that these lines will carry electricity. In California, Southern California Edison completed and inaugurated a new 1,500-megawatt capacity line that will deliver wind-generated power to Los Angeles. In doing so, it kicked off a new building boom in the Tehachapi Mountains, one of the state’s windiest regions.

• International competition has intensified. China now has at least two of the world’s top 10 manufacturing companies (Sinovel and Goldwind). It is installing both new domestic transmission and new domestic wind capacity at awe-inspiring rates.

• The 2.5-megawatt turbine became the industry standard in 2010. The 1.5-megawatt turbines continue to sell, but more developers are opting for the 2.5-megawatt turbine, especially in China. In Europe, where more manufacturers are turning their attention to the stronger winds offshore, turbines in the 3-megawatt class, from companies like ENERCON and Siemens, are selling. GE, Goldwind, and others are pioneering four-plus megawatt machines.

• Wind manufacturers predict that direct drive transmissions, with fewer moving parts and a lower maintenance profile, will soon find a solid niche in the market; some have even speculated about a complete transition away from standard gearboxes. There are three stages of gears in a gear-driven system. Each stage has multiple bearings and a structure to house all of these gears. A direct drive system eliminates all the gears, so there is one moving part—the rotor. The direct drive turbine could completely change turbine maintenance issues for the better. The direct drive will also make wind turbines safer. With a direct drive, because of the use of permanent magnets instead of copper coils, there will be more space to work in the nacelle. Finally, the direct drive will make wind power’s move to offshore production less costly.

There are signs that 2011 will be a better year. Orders increased in the second half of 2010 and the financing environment has improved, with private banks, financial institutions, utilities, and pension funds backing the sector. Over the next five years, global wind power capacity has the potential to triple to nearly 450 GW. According to the wind-energy consulting firm BTM, the sector’s market value will grow from $75 billion in 2010 to $124 billion in 2014. For that reason, analysts and manufacturers generally remain encouraged by optimistic industry forecasts.

Jenny Bieksha will provide an update of the solar market, “Solar Power Growth Exceeds Expectations,” in the April 5th issue of Connector Supplier.

Jenny Bieksha Director, Renewable Energy, Medical, and Test, Measurement, and Instrumentation, Bishop & Associates Inc. Jenny Bieksha joined Bishop & Associates in 2008 as its market segment director for the renewable energy, and the test, measurement, and instrumentation markets. She is currently a management consultant specializing in strategic business planning, with an emphasis on the development of program, market, and product plans. Bieksha has more than 20 years of experience in the electronics industry, with a background in market management, business development, channel sales, product management, and operations for ITT Corporation, Delphi Connection Systems, and Hughes Aircraft Company. Bieksha has a bachelor of science degree in marketing from the University of Wyoming, and has since received her certificate as a project management professional.