Worldwide Wind Energy Development 2007

by Paul Gipe

January 16, 2007

Overview

Currently, there are more than 90,000 wind turbines operating worldwide, representing more than 70,000 MW of installed generating capacity. This fleet of wind turbines, some now more than two decades old, generates in excess of 100 Terawatt-hours (TWh) of electricity per year. In 2006 alone, more than 15,000 MW were installed.

Wind energy contributes less than 1% to total world electricity supply today. However, wind energy at an exponential rate, from 20% to 40% per year and BTM Consult estimates that by 2012 wind energy will contribute 2% of world supply. The implications of this estimate are the staggering number of new turbines that will be added to networks by then.

Europe, where the penetration of wind energy is highest, continues to account for two-thirds of total worldwide wind development. Most wind turbines are manufactured in Europe and nearly all wind turbine designs are of European origin. Germany continues to outdistance all other markets, including that of the United States. In mid-decade Germany lead the world in total installed wind capacity, accounting for 30% percent of the total market. In 2006, fifteen years after the market took off in 1991, Germans installed nearly 2,200 MW

Some countries, such as Denmark, Germany, and Spain, incorporate high penetrations of wind energy in their electrical networks. In northern Europe specific regions are net exporters of wind-generated electricity. Germany expects to produce 20% of its electricity in 2020 with wind energy.

Major World Markets

Germany and Spain are the world's two top markets in the average wind turbine capacity installed per year during the past five years. The United States is the world's third leading market despite its robust showing in 2005 and 2006. During 2006 the United States installed more wind generating capacity than any other country, but still less than industry peak reached in 2002 by Germany of nearly 3,250 MW. India is the world's fourth largest market and, like its European competitors, has begun exporting wind turbines to other countries. China's wind industry grew rapidly in 2006 and is expected to continue its growth as China rapidly industrializes.

Multi-MW Class Emerges

Manufacturers of commercial-scale wind turbines continue to reach for the stars as machines grow ever larger. Megawatt-class turbines dominated much of the world market during the first half of the decade.

The growing offshore market demands even larger machines. Several manufacturers have now installed large fleets of multimegawatt turbines both on land and at see. These include GE Wind's 1.5 MW design, Vestas' V80, a 1.8-MW turbine and Siemens 2.3 MW.

Even larger turbines are now just entering the market, including GE Wind's 104-meter diameter, 3.6 MW-turbine, Vestas' V120 4.5-MW turbine, and Enercon's monstrous 4.5 MW-turbine with a 114-meter rotor. RePower has introduced its 5M, a 126-meter, 5 MW machine, Siemens' 107-meter, 3.6 MW design, and the new entrant Multibrid unveiled its 116-meter, 5 MW turbine.

These giant machines were designed for the offshore market. There is little evidence that their size is justified on land. Some industry analysts have noted that there may continue to be markets for sub-MW class turbines and turbines in the 1-2 MW range for onshore markets such as in Europe and North America. Machines in this size range are easier to install because their components are smaller, requiring narrower roads and smaller cranes.

Growth Quickens in New Markets

As the wind industry has grown alongside the size of its wind turbines, it has become apparent to energy analysts that wind energy can play a larger role in the energy mix more quickly than once thought possible. This is due in part to greater experience with the technology, but also simply because the turbines have become so much bigger. Thus wind energy can play a larger role in new markets, for example in parts of North America where there hasn't been a lot of wind development, more quickly than in older markets like that of Denmark or California.

For example, it took Denmark 16 years to pass the 2,000 MW threshold, whereas Germany, which came later, only took 7 years to reach the same milestone. Spain, which came later yet, accomplished the same goal in 5 years. Once it reached 2,000 MW Germany doubled its capacity every 2-2.5 years. As Texas demonstrates, markets today can top 2,000 MW in three years or less.

Offshore

Offshore wind is now considered fully commercial. Nearly 300 MW of wind turbines were installed offshore in 2002. Most of that was in Denmark, but there were some 20 MW installed off the Dutch and the Swedish coasts. The 160-MW Horns Rev project off Denmark's west coast port of Esbjerg became the world's largest offshore wind plant when it came on line. Horns Rev alone is expected to produce 2% of Danish electricity. The Rødsand project (158 MW) is the second largest offshore wind plant and it is also off the coast of Denmark.

There is also a 23-MW wind project off the Danish island of Samsø comprised of ten turbines. Two of the ten turbines are cooperatively owned by the islanders.

Altogether, offshore installations accounted for 3% of the world market in 2002. Offshore wind development is expected to expand rapidly off the coast of Europe. There are no operating offshore projects in North America.

Manufacturers

Danish manufacturer Vestas continues to dominate worldwide sales, followed by Enercon, the dominant player in the German market, followed by GE Wind and Spanish manufacturer Gamesa.

German manufacturers Siemens (Bonus), RePower, and Nordex, Indian manufacturer Suzlon, Spanish manufacturer Ecotecnia are also major wind turbine producers.

There remain a number of smaller manufacturers who serve niche markets. Central Germany's Fuhrländer is one example and Mitsubishi, the giant Japanese conglomerate, another.

Project Size Grows

Wind projects have continually grown larger. Today, it's not uncommon for U.S. developers to boast of 100 to 250 MW projects. For example, Florida Power and Light built a 204 MW project in eastern New Mexico and Horizon Wind Energy completed a 250 MW in New York State.

Nevertheless, big projects are not necessarily the norm elsewhere. German project size decreased in 2005, according to the German trade magazine Neue Energie. In the recent past German projects would contain 30 to 40 turbines, or about 25 to 50 MW. The trend now is toward projects with fewer turbines, from three to six each or 5 to 15 MW. The reason is not clear, but as there are fewer and fewer sites and the turbines are becoming bigger, there is pressure to fit smaller projects on smaller sites. Projects elsewhere in Europe are also smaller than the massive or "mega" wind projects in North America.

Form of Wind Development

There are three forms of wind development worldwide: large or "mega" wind projects of commercial-scale wind turbines, small wind turbines installed at farms and homes, and small projects or clusters of commercial-scale wind turbines. North Americans are familiar mostly with large projects and small household-size wind turbines. However, in northern Europe there are few household-size wind turbines, and few large wind farms. Most projects in northern Europe, especially on land in Denmark and Germany, are small projects of commercial-scale turbines. In Denmark, a wind farm is any project greater than three wind turbines.

The form of development used in Denmark and Germany is in part a response to settlement patters and in part due to ownership structure. Denmark and Germany are densely populated and land parcels are small. It is also equally important that in both Denmark and Germany there was a strong citizen movement in support of renewable energy and this led to the development of numerous share cooperatives and the installation of single turbines and turbine clusters by farmers. This was made possible by a public policy, electricity Feed Laws, that made investment in wind turbines possible.

Farmers, for example, accounted for 2/5 of installed wind capacity in Germany (~8,000 MW) and nearly 2/3 of capacity in Denmark (~2,000 MW). Share cooperatives represented 10% of all wind capacity in Germany (~2,000 MW) and ¼ that in Denmark (~800 MW). Such a staggering amount of community wind development surprises North Americans who have not visited Germany or Denmark recently. The phenomena of community-owned wind development has now crossed the border into France with the 30 MW Le Haut des Ailes project in Lorraine.

Participation in German share cooperatives reflects the communal nature of the investors. In north Germany, farmers and those who work for a salary represent ¾ of the investors in a citizen-owned wind project (Bürgerbeteiligung). In a corporate structure, nearly 1/3 of the investment in a wind project is provided equity investors or entrepreneurs.

Landowner Participation and Royalties

Landowners can participate in wind development in two ways: by leasing their land to a wind developer, or by owning the wind development themselves. In North America, the traditional approach has been for a landowner to lease their land to a wind developer and for doing so the landowner is paid a royalty. However, as seen in Germany, Denmark, and the Netherlands, owning the wind turbines has been a popular choice for landowners. Though wind projects are costly, landowners in northern Europe have had no difficulty finding the financing necessary to develop their own property. Nevertheless, many landowners in North America will lease their land to others who will then develop the wind project even if that project is owned cooperatively.

Total payments for a land lease are a function of the royalty rate, the amount of wind energy produced on the property (the number of turbines and the wind resource), and the price paid for the electricity. Royalty rates vary from a low of 1.5% in Germany to 10% in France. Typical values for the first 10 years of operation are 3-8% in Germany and 3-6% in the United States.

German landowners receive substantially more in land lease payments than their North American counterparts because the royalty rates are typically higher than in North America, and because German wind turbine owners are paid more for their electricity than in North America (except for in the province of Ontario).

Royalty rates also typically vary from one decade to the next. In one Texas project, for example, the royalty rate varies from 4% in the first decade to 8% in the third decade.

Growing Influence of Large Companies

Commercial-scale wind development now includes both small companies and major electric utilities. The names of wind farm developers now reads like a "Who's Who" of the big names in the utility industry not only in Canada, but worldwide.

In Canada companies such as TransAlta, SunCor, EpCor, and others are now operating wind plants. South of the border major national and international firms have become dominant from Florida Power & Light and American Electric Power to French giant Electricite de France (EdF), Scottish Power, Nuon (Dutch), Enel (Italian) to name a few. Petroleum giants Shell and BP have also made "a play" for wind energy in North America.

There are also numerous independent wind developers in North America as well.

Feed Laws Dominate Major Markets

Electricity Feed Laws are the world's most successful policy mechanism for stimulating the rapid development of renewable energy. More than half of the wind generating capacity installed worldwide have been installed under Feed Laws. Feed Laws are also the most egalitarian method for determining where, when, and how much renewable generating capacity will be installed by opening the electricity market up to players of all sizes, from homeowners to farmers, from cooperatives to First Nations and commercial developers. All can participate in the renewable energy market on an equal footing. It is Germany's Feed Law that has permitted German farmers and cooperatives to participate fully in the booming wind industry.

Feed Laws are also known as Minimum Price Systems, Renewable Energy Feed-in Tariffs (ReFITS), and Advanced Renewable Tariffs. In Ontario, the feed-in policy there has been incorrectly called Standard Offer Contracts. Feed Laws, and especially Advanced Renewable Tariffs, differentiate the price, or tariff, paid for renewably-generated electricity by technology. Thus, the price paid for solar energy and wind energy differ from each other and are not standardized.

Electricity Feed Laws permit the interconnection of renewable sources of electricity with the electric-utility network and at the same time specify how much the renewable generator is paid for their electricity. In the United States, feed laws have been described as PURPA (the Public Utilities Regulatory Policy Act) on steroids because the price is specified. (In 1978, PURPA permitted interconnection of renewable energy generators with the grid but didn't specify the price, only the means for calculating the price.)

Feed Laws are widely used in Europe. Currently 16 countries in the European Union use some form of Feed Law. Advanced Renewable Tariffs (ARTs) are the modern version of Feed Laws and are most notably used in Germany, France, and Spain.

ARTs differ from the simpler feed laws in several important ways. Though tariffs are differentiated by technology in all Feed Laws, tariffs within ARTs are also differentiated by project size or, in the case of wind energy, by the productivity of the resource. Tariffs for new projects are also subject to periodic review to determine if the program is sufficiently robust. For example, programs are reviewed every two years in France and every three years in Germany.

Feed Laws have resulted in more wind generating capacity and have created more dynamic industries than competing policy mechanisms, such as Renewable Portfolio Standards (RPS), a from of Quota model. More dynamic industries have created more jobs in countries with Feed Laws than those with Quota-RPS.

In the case of wind energy, tariffs vary by resource intensity or location in Germany and France. In both countries, the tariffs for wind energy vary by the productivity of the wind turbine. This is a surrogate for wind resource intensity (power density). The objective is twofold: to lessen development pressure on the windiest sites by enabling development in other, less windy, sites; and to provide siting flexibility. Both programs have been successful in spreading or distributing development across the landscape of each country. While development still favors the windiest regions, development is not solely concentrated in the windiest regions. More than 60% of German wind development now takes place in the less windy interior than along the windier North Sea coast.

Germany and France each use a different mechanism for determining site productivity. However, both use a trial period after which the productivity and the subsequent tariff are determined. Until mid 2006, both countries used a five-year test period. Beginning in 2007, France extended its trial period from five to ten years. During this period, all wind turbines are paid the same tariff.

In Germany, all new wind turbines on land are paid about $0.12 CAD/kWh (offshore turbines receive a higher price) during the first five years of operation. After five years, the average productivity is calculated and this value determines the tariff that will be paid during the remaining 15 years under the contract. Thus, the maximum tariff is fixed to provide a targeted profitability at the targeted sites, but the final tariff paid for more productive sites declines on a sliding scale as a function of productivity. Turbines at the windiest sites receive the base payment of about $0.08 CAD/kWh for the remainder of the contract.

The process is similar in France. All new wind turbines on land are paid about $0.13 CAD/kWh for the first ten years. Then the productivity of the site is determined and the new tariff is determined. At the windiest sites in France, payment will fall to $0.04 CAD/kWh for the remaining five years of the 15-year contract.

Performance

Wind turbine performance is a function of the wind resource, the turbine, and the maintenance of the turbine. All else equal, wind turbines will generate more electricity at windy sites than at less windy sites. Because the energy of the wind is a cubic function of wind speed, small differences in wind speed from one site to the next have a big effect on the energy available. (Doubling the wind speed increases the energy in the wind eight times.) Nevertheless, there are physical limits to how much energy any wind turbine will capture and convert to electricity.

Wind turbine performance is best measured by annual specific yield in kWh of generation per square meter of rotor swept area (kWh/m2/yr). While the practice in the North American electric utility industry is to use "capacity factor" as a measure of performance, this is a very misleading indicator for wind energy. Manufacturers of wind turbines vary the size of their generators relative to the area swept by the rotor for different wind regimes. For example, wind turbines for windy areas use a large generator for a relatively small rotor.

Operating wind turbines at the windiest sites in the world generate no more than 1,400 to 1,600 kWh m2/yr on average. Individual turbines have produced as much as 1,800 kWh m2 in one year, but this is rare.

Wind turbines at good sites in North America should generate from 750 to 1,200 kWh m2/yr. There are many operating wind turbines in North America and elsewhere at less windy sites that deliver 500 kWh m2/yr or less.

Operations & Maintenance Cost

Operations and maintenance (O&M) costs are often reported in cents per kWh or as a percentage of the initial cost per year. Costs presented in cents per kWh naturally favors turbines sited in windy areas where the cost of operations and maintenance can be spread over more kilowatt-hours than turbines at less windy sites. Since wind turbines are installed in widely varying regions, costs as percentage of the initial installed cost are more frequently used for planning purposes. Actual European O&M costs are much higher than estimated costs for projects not-yet built in North America.

O&M costs are not constant over time. In early years costs are low. In later years costs are expected to rise as major components are replaced or rebuilt. Studies in Denmark found costs in the first ten years averaged 1-3% of initial costs per year, while in the second decade costs rose to 4-7% of initial cost. German researchers have found similar results. Deutsche WindGuard found that during the first decade O&M costs averaged 4% of equipment costs (about 70% of total installed costs), and as much as 6.8% of equipment costs in the second ten years. These values are substantially higher than those mentioned in North America's trade press.

Installed Costs

The installed cost of wind energy has fallen steadily since the early 1980s. Rapid development from 2004-2006 caused widespread shortages of wind turbines, forcing prices up for the first time in nearly two decades. Installed costs in 2006 averaged $1,800-$2,000 CAD per installed kilowatt of capacity in the Canadian market. Because costs in $/kW installed are often misleading, industry analysts use costs relative to the area swept by the wind turbine rotor. Costs in Canada in 2006 averaged $650-675 CAD/m2.

Supply Penetration

Wind energy supplies about 20% of total annual Danish electrical consumption. During the windy season, Danish wind turbines provide a surprising amount of Danish generation. At 8 pm on January 12, 2007, Danish wind turbines produced 58% of total Danish consumption or 2,725 MW of a 4,735 MW load. Danish wind turbines were producing nearly 90% of their 3,100 MW of installed capacity. During this period, Danish wind turbines were producing nearly as much as the country's central station plants.

The German trade magazine New Energy reported (2/2006) that on 16 February, 2006 during the peak of consumption in Spain at 9:25 pm, Spanish wind turbines delivered 20% of total national generation. This was during a period of low hydroelectric production because of a prolonged drought. At the time there were 10,200 MW of wind generation on line-and most significantly-they were producing 7,000 MW or some 70% of their nameplate capacity.

The Spanish trade association, APPA (Asociacion de Pequenos Productores Autogeneradores) reported that on numerous occasions throughout 2006 Spain's wind generation exceeded 25% of the supply and on 8 December reached a high of 31%.

Industry analysts calculate that wind energy can contribute up to 20-25% of system's annual electrical generation with little additional cost for grid regulation or voltage support. Some studies have calculated that wind energy could contribute up to 50% of supply with modest investment in the grid infrastructure.

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