Looming Wind Energy Policy Induced Demand Peak Set For 2018, Says MAKE
Near-term growth in the wind energy sector is being driven by a winding down of policy incentives, and heading towards a 2018 policy induced demand peak.
These are the conclusions made by renewable energy intelligence firm, MAKE Consulting, in its recently published Q1/2016 Global Wind Power Market Outlook Update. Specifically, the current trend of global wind energy growth is likely to reach a tipping point in 2018, as national markets adjust to either a lower level of incentives, a transition to new support mechanisms, or a lack of policy support altogether.
This is exemplified by the rush at the end of 2015 in China to maximize the benefits from the expiring Feed-in Tariff policy, which saw the country report wind installations in 2015 of 32.9 GW (or 32.5 GW, depending on who is reporting).
The expectation of a policy induced demand peak in 2018 hinges on the looming question of successor policies, and whether or not the wind energy sector will receive policy support moving forward — especially due to the “uncertainty surrounding the depth and scale of post-2020 renewable energy commitments” made by individual nations.
“Optimism flourishes under expectations of the creation of national-level commitments under the Paris Agreement,” MAKE Consulting explained in the press release attached to the publication of its Update.
“Moreover, a burgeoning non-state, consumer-driven market supported by commercial and industrial commitments seemingly works both in parallel and independently of national-level policies. However, the question of wind power integration, storage, and further LCOE improvements linger and potentially limit growth potential as governments wrestle with the cost of compliance.”
Looking forward, therefore, MAKE Consulting predicts global connected wind power capacity to decline by 17% in 2016, though this is due primarily to what MAKE describes as “a return to relative normalcy in China” which will reset in 2016, dropping 35% year-over-year. Global growth excluding China is flat, according to preliminary data from 2015.
MAKE forecasts global growth to spike in 2018, before growing gradually from a lower 2017 level toward 2025.
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To be sure, there will be some effect. Large construction projects are affected by finance. But with the inexorable fall of turbine prices and rise in output and capacity factor, turbines would likely be installed anyway. And what of predictions of much faster global temperature rise, 1.5C sooner?
I am afraid that normally reasonable predictions are not adequate anymore. A few years ago, there was no reason to believe China’s growth would slow or coal expansion aggressively slowed. Yet look at where we are now. If China’s pollution abatement so are not met, look for them to extend incentives or reinstate them. Pressure is still high regardless of today’s policy decisions. Globally, people are well aware and pressuring governments. I see no long term cessation in that, but rather an increasing avalanche of pressure.
Even just tracking the discussion among renewables supporters on cleantechnica the consensus on achievable policy has moved forward quickly in only a few short years. The previously unthinkable is now mainstream.
That’s right. It’s remarkable how much sentiment has changed.
Spain didn’t even install one single wind turbine last year:
http://www.bloomberg.com/news/articles/2016-01-26/spain-installed-no-wind-power-for-first-time-since-80s-in-2015
I hope that Spain’s policies won’t be copied by other governments.
But unfortunately, most people don’t care about energy policies. Most people don’t even bother to reduce their electricity bill, even if they would just need to unplug a few devices which consume a lot on standby or wear a pullover in the winter.
You bet. Policy,policy,policy. But politicians are moved by voter sentiment. Takes time. Even Australia, Spain, and Italy can’t hold out forever. We are witnessing country after country whipsawed by the clash between corporate/government and public interests.
No doubt, the public wants a painless transition.
Iberdrola, the big fossil/hydro/wind utility that is widely blamed in Spain for leading the charge against solar, has recently teamed up with a developer of commercial self-consumption plants. This suggests to me that the economics of solar in sunny Spain are now so favourable that grid defection (solar plus batteries) is now or soon will be attractive to many businesses like supermarkets that need to run daytime a/c. So Iberdrola is basically changing sides again.
Is it really the cost of wind incentives that is driving policy hesitation and U-turns? In Spain and Germany, it’s clearly not the direct cost of renewable incentives but the looming disaster of lossmaking coal and non-peaker gas plants. These are doomed anyway (coal first), and there is no good economic reason to delay the phaseout.
Are policy makers really in control? In many countries, wind beats fossil (not to mention nuclear) handily without incentives, In the USA, a lot of wind is being built for direct sale to large customers like Google, outside any incentive framework. Expect this to happen more and more in the UK and Germany, with negative or lukewarm policies for onshore wind. Let’s hope MAKE are wrong.
I can imagine this will happen in the UK soon enough, although will probably be limited to Scotland and Wales initially due to very difficult planning regime in England. Many “zero subsidy” projects are already being planned in the UK (at both the large scale and small scale) and the number of such projects will only increase with time.
In the UK, 2016 and 2017 is likely to witness the peak. Beyond this there are a few CFD supported projects and then by the end of the decade the zero subsidy projects will start to come through.
Continue policy support until a minimum of 10% world power production.
While tax policies may end in some places by 2018, they will not end everywhere. Also with wind now one of the cheapest sources of energy right now.
So I don’t see how demand will drop. At this point demand will still increase due to the lower cost of wind power. The rate of increase may slow a little for a short time, but demand will continue to grow long term. We are very close to a point (if we haven’t already passed it) where government policies are only a small driver in the market.