Last year was an unusual one for the wind industry. For the first time since 2009 — and perhaps for the last time — the majority of the global market was inside the OECD.
The extraordinary boom year in the US, coupled with an unexpectedly strong showing in Europe and the smallest Chinese market since 2009, are a set of circumstances unlikely to be repeated.
Asia was still the largest market, and is likely to remain so indefinitely. A year or two of consolidation of the Chinese market will see it emerge stronger than ever, and even in this “down” year, wind surpassed nuclear to become China’s third-biggest source of electricity. The New Energy Administration estimates that the country will add 18GW again in 2013, but will it grow by much more than that?
Both of India’s major support schemes (Accelerated Depreciation and the Generation-Based Incentive, or GBI) were allowed to lapse at the end of the 2011-12 fiscal year, and the market was down in 2012; but the GBI will return this year, and will set the industry back on a growth path in the medium term.
The US has had its boom, with the bust to follow this year, and something of a recovery in 2014. But after that, who knows? Congressional volatility makes any prognostication difficult.
Europe will no doubt have a tough 2013, although the 20/20/20 framework is likely to add stability to the picture for the next seven years.
So where are the new growth markets?
There’s a surprisingly strong pipeline of projects in Pakistan. Thailand is moving ahead, despite its relatively modest winds, and the Philippines seems ready to tap its excellent resources. The Vietnamese market will grow, although it’s going to be slow and difficult.
Japan will come along, but not until electricity market reform is completed towards the end of this decade. South Korea has ambitious offshore plans, although without a substantial domestic industry, it is likely to be quite slow at first, despite the large companies involved.
The real potential lies in Mongolia: landlocked between two huge countries, and completely reliant on energy imports from Russia. But it also has 35% GDP growth, due to the world’s largest mining operations being established in the Gobi Desert, where there are no roads, no power and no water. Mongolia has wind and solar resources measured in the terawatts, and many investors have a keen eye on that potential to power those mines as well as the region more broadly.
Sub-Saharan Africa’s first major commercial wind farm came on line last year, in Ethiopia. More projects are under construction there, with plans for about 7GW by 2030. The South African market is finally under way, with more than 600MW of projects under construction or nearly so, and a pipeline of 9GW until 2030.
Kenya also has ambitious plans, although they have been somewhat delayed, and discussions are under way about linking all of East Africa and further afield to supply power for economic development as well as increased electricity access for the region’s people.
North African markets seem to be starting to move again after the Arab Spring. Morocco has enormous potential, and Egypt still has plans for 7GW on the Red Sea coast, once it gets its constitutional house in order.
In Latin America, the main market is Brazil, with excellent wind and a plan for at least 16GW by 2021. Mexico is the other large market in the region, although it remains unclear what the new government is going to do. Argentina has become a no-go zone for most investors after the nationalisation of Spanish oil company Repsol’s assets last year.
There are many other smaller markets in the region. Uruguay shows the most promise at the moment, but Chile, Peru, Venezuela, Costa Rica, Honduras, Panama and Nicaragua all have the beginnings of an industry, and could in combination account for significant installations in the medium term.
The most exciting development in the Middle East is in Saudi Arabia, where plans to combat the effects of rapidly growing domestic energy consumption include developing more than 50GW of renewable energy over the next decade or so, with 10-15GW from wind. The other country with strong potential is Iran, although development there is hampered by its political and economic isolation.
And last, but not least, as I learned in 25 years of climate negotiations: ignore the Russians at your peril. Yes, the country is a mass of corruption and other hazards for foreign investors. But wind may well turn out to be Russia’s most valuable energy resource in the long term, and they will recognise that... eventually.
Steve Sawyer is secretary-general of the Global Wind Energy Council
This piece was published as part of the Thought Leaders series. Recharge’s Thought Leaders’ Club brings together leading thinkers and participants from the renewable energy sector to examine the key challenges facing our industry.