Q4/2017 Global Wind Power Market Outlook Update

MAKE’s Q4/2017 Global Wind Power Market Outlook Update presents an analysis of global and regional wind power installation forecasts through 2026.

Innovation and advancements in cost-out measures continue to have a positive impact on the global offshore wind power sector. As traditional global onshore markets are challenged by policy transitions and saturation of developable resources, the offshore sector represents an important area of growth particularly in carbon-intensive markets. Much of the momentum in the offshore sector is concentrated in leading countries of Northern Europe, but as offshore wind costs fall, government appetites for procurement and policy support are increasing globally.

MAKE upgrades its global 10-year outlook in Q4 by less than 1%, with a 5GW+ upgrade in the offshore sector more than off-setting downgrades to the onshore sector in markets such as the US, Australia and the Philippines. The upgrade in the offshore sector, however, will not impact the global outlook until 2020 and beyond, due to the longer development cycle in offshore and a dependence in part on expected technology gains. MAKE downgrades the 2017 to 2019 global outlook by 1.3GW, but the 2020+ global outlook is upgraded by more than 4GW. This results in a 10-year compounded annual global growth rate of 3.8%.

A weakness in offtaker interest in the US results in a 3% net downgrade from 2017 to 2019. Difficulty in securing near-term offtake contracts – both traditional PPAs and hedge deals – has further consolidated capacity expectations in 2019 and 2020, which is already having a negative impact on component suppliers. Congressional negotiations on tax reform and any potential change to the production tax credit provide an unwelcome backdrop to already difficult market conditions.

The results from major auction activity in Latin America in Q4 2017 will help shape the region’s growth profile over the next several years. An A-4 and A-6 auction in Brazil is pivotal due to a lack of PPA-signing activity in the market since 2015. The results from the Chilean and Mexican auctions in November reveal the ongoing threat from solar power. The large share won by solar PV projects in the Chilean auction directly results in a downgrade QoQ in Chile. The upcoming Argentine auction in December will help continue momentum in one of the region’s important emerging markets. Overall, the outlook in Latin America is downgraded by less than 1%, primarily due to the impact of project-level adjustments in Brazil.

A plunge in CfD strike prices for offshore projects in the UK results in a significant upgrade QoQ. The outlook for Belgium also receives an offshore-driven upgrade as cost reduction prompted the government to commit to the Modular Offshore Grid hub and set up a new remuneration level for three projects. Changes borne of cost reduction in the offshore sector contribute to a defining 13% increase in the outlook for offshore wind in Northern Europe. This supports a nearly 3% upgrade in Europe QoQ, with the upgrade in the UK offsetting aggregated adjustments in the region.

Project-level adjustments in Southern Europe have a minimal impact on the outlook although Italy’s recently published National Energy Strategy and 55% renewable energy target by 2030 offers upside to the current outlook. Similarly, the outlook in Eastern Europe is largely unchanged QoQ. Investor interest in Ukraine supports a more than 5% near-term upgrade and a burgeoning pipeline in Estonia and Georgia result in an upgrade post-2020. These gains are balanced out by challenging long-term development conditions in Azerbaijan, Hungary and the Czech Republic that result in a greater than 25% downgrade QoQ for each market.

The 10-year outlooks for both China and India remain consistent QoQ. Curtailment continues to challenge development in China’s Northern region and will certainly impact new capacity in 2017, but there are signs of improvement with curtailment levels beginning to fall. Tempering these gains is a competitive push from solar PV in the Southern region. As grid-connected capacity growth picks up from 2017 there is risk that the new capacity will in turn impact curtailment levels especially with limited power consumption growth in the Northern Region. The adjustment to an auction-based market has slowed development in India, but government initiatives aimed at accelerating recovery may stimulate growth once implemented.

The outlook for the rest of Asia Pacific is relatively flat QoQ. Plans to almost double Taiwan’s offshore target by 2025 put a brighter spotlight on the market’s potential and results in a 128% upgrade QoQ. The boost from Taiwan’s ambitious national offshore target is largely offset by Australia’s decision to not adopt the Clean Energy Target, which creates a void in post-2020 support and hinders recent momentum in the market. The government in the Philippines is considering whether to discontinue the existing FIT allocation scheme, significantly dimming the outlook in this promising market.

Global firm turbine order intake is down 25% YoY in Q3/2017 to nearly 11GW, and down 18% YoY in the first three quarters of 2017. This drop in order intake capacity is influenced heavily by onshore dynamics in China. Competition amongst turbine OEMs in Northern China has intensified amidst a dearth of opportunities, which has limited a willingness to announce orders publicly and resulted in a more than 60% drop QoQ in registered order capacity. Excluding China, global order intake is in line with order capacity registered in 2015 and 2016 and supports MAKE’s near-term market outlook expectations.

The Q4/2017 Global Wind Power Market Outlook Update includes a detailed market forecast update for more than 50 key and emerging markets for wind power from 2017 to 2026. The forecast data includes a split of expected onshore and offshore development as well as an analysis of wind turbine order and wind turbine pricing trends.