Navigant Research Blog

Policy Headwinds for the Wind Industry

Jesse Broehl — April 4, 2014

Weatherman_webFor the first time in 8 years, the global wind industry installed less wind capacity in an annual cycle than the year before.  A total of 36.1 GW was brought online in 2013, representing a full 20% drop from the 44.9 GW installed the year before, according to the latest figures from Navigant Research’s World Market Update – International Wind Energy Development Forecast 2014-2018.  Policy fluctuations and uncertainty are key factors for the drop and continue to frustrate those in the wind industry.  The countries where policy put the brakes on wind power development globally in 2013 or is dampening its future outlook include:

United States: The biggest dent to global wind growth came from one of the sector’s largest markets, the United States, where new installations fell 92% from a record 13.1 GW in 2012 to just under 1.1 GW in 2013.  This was the result of a dysfunctional federal government, which delayed renewing the wind industry’s key tax incentives.  Strong growth is expected this year and the next, but the broader boom and bust policy cycle is likely to continue in coming years.

Spain: For the beleaguered Spanish wind market, 2013 was the first full year in which installation data clearly reflected the downturn caused by the near total removal of incentives for wind energy.  With just 175 MW of new capacity added in 2013, Spain’s wind industry recorded its lowest growth rate in 16 years. The sector’s collapse is the result of the national government’s decision to withdraw virtually all subsidies for renewable energy projects. The latest electricity market reforms scrap production incentive payments for all new wind plants and attempt to reduce revenue for wind plants already operating.

Italy: Newly installed wind capacity in Italy was down 65% from 1,272 MW in 2012 to just 450 MW in 2013. The decline in new installations was widely expected, with Italy switching policy from a system of tradable green certificates to a structure based on competitive bidding for a capped volume of fixed-price 20-year contracts. The contract prices are significantly lower than prices for wind under the certificate program. The change in market structure set off a rush among developers to connect wind projects to the grid before January 1, 2013 and the drop-off for the full year 2013.

Canada: Wind plant construction hit a record 1,599 MW in Canada last year, but medium- and longer-term forecasts are lower due to policy changes at the provincial level.  Ontario scrapped its feed-in tariff (FIT) program of premium fixed power purchase prices for wind power after the World Trade Organization found the local content rules to be in violation of international law.

Australia: 2013 was a strong year for wind plant construction in Australia, with 655 MW connected, but the future of Australia’s wind power industry is in serious doubt following the late 2013 election that resulted in a conservative coalition government that is openly hostile to wind power.  The new government is planning a number of policy reversals in 2014 that will dilute or collapse price support for wind power generation and strengthen the fossil fuel industry.

European Union: The EU is making progress toward meeting its 2020 climate and energy target, but the view beyond has grown less positive for renewables.  The European Commission proposed a new framework for a climate and energy policy for the 2020-2030 timeframe that includes a proposed renewable energy target of 27% by 2030, lower than the previously discussed 30%.  In addition, under the proposal, the target would not be formally translated into national, binding, country-level commitments, as it is currently structured through 2020 for all EU member states.

For further details on policy headwinds, how they contributed to changing market shares of the top wind turbine OEMs globally and within country specific markets, and a range of other current topics, check out the recently released World Market Update – International Wind Energy Development Forecast 2014-2018.

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