Solar energy has become the biggest threat to the dominance of offshore wind in the battle of decarbonization. However, the tools available to the wind sector to combat this challenge are declining, according to Wood Mackenzie.
The marathon that the sector has lived in the last decade will continue in 2020 and the following years, although the limitations in the technological innovation of the land turbines are glimpsed on the horizon.
While new cost reductions could occur within the industry, the fruit has already been squeezed to a large extent and the additional reductions will be marginal and will depend on the extended value chain as the turbines reach maturity.
What are the most important trends to observe in the global terrestrial wind market in 2020 and beyond? Dan Shreve, director of Wind Research at Wood Mackenzie, sees three key themes:
- A final round of consolidation
- Transmission investment is key to changing the growth trajectory of the market
- Repowering begins to encounter recycling problems
Shreve said: “In a way, the wind market is starting to resemble the market for combined natural gas cycles.“ The final wave of consolidation is already upon us in the ranks of the wind turbine manufacturers. Senvion has doubled, Suzlon is under fire from investors in India and Enercon is reeling after the collapse of the German land market.
Siemens acquired Gamesa in 2017, while Vestas joined Mitsubishi Heavy in 2013. It is likely that the Nordex group will come back into play once the US market returns to the ground in 2023, which will add additional tension to the OEM of western turbines that are blocked by a booming Chinese market.
According to Woodmac’s report, if regional giants fall prey to global corporations, it is feasible that 98% of the western wind market will fall under the control of three companies. A similar dynamic is likely to occur within the Chinese wind energy market, especially given the segment of highly concentrated asset owners within the country.
The death of industry pioneers is bittersweet, although it is probably a necessity to produce the next round of cost reductions for global wind energy.
If maturity and stability have reached the offshore wind market, what could dramatically change the growth trajectory in the next decade?
Innovative technological advances generally fall within the offshore wind sector compared to the land industry. The key evolutionary changes in the design of the turbine tower, shovel materials and controls will cause greater reductions in the level costs (LCOE) of offshore wind, however, none can be considered a real game-changer.
“Previously we have outlined the main barriers to decarbonization of the US power grid, in particular, the lack of investment in mass transmission to support the expansion of wind energy. The first level of wind resources is critical to reach the low energy prices demanded by the market. These tend to be more localized than solar resources and located in more remote locations” Shreve added.
Coordination and cooperation between network operators, power companies and public service commissions currently lacks large-scale transmission projects.
According to Wood Mackenzie, the implementation of projects of national and pan-regional super-networks, managed by a single government entity, could dramatically accelerate the deployment of transmission assets that are critical to achieving decarbonization objectives.
Establishing and empowering such an entity can also accelerate market redesign efforts aimed at expanding the penetration of renewable energies, guaranteeing the resistance of the network and establishing the appropriate remuneration schemes to instil investor confidence.
“The radical regulatory changes necessary to achieve this level of harmonization will require notable decisions from a political point of view. If successful, the widespread deployment of the HVDC transmission will allow substantial expansion of wind power on land,” said Shreve.
The inability of the land wind market to develop a recycling solution for older wind turbines is creating a new challenge for 2020 and beyond.
The small size of the first-generation wind turbines and the general lack of repowering volume to date has limited the visibility of this problem.
However, the recent success of the US 80/20 repowering program has facilitated the replacement of more than 10 GW of small turbines. As a result, there are thousands of + 35m fiberglass shovels that are being sent to the landfill, a major concern since these materials are not biodegradable and take up huge amounts of space.
“The increased use of carbon fibre in the structural parts of these blades will add another problem to the recycling efforts in the future,” Shreve added.