Navigant Research Blog

For the First Time, Solar Surpasses Wind

— June 20, 2017

2016 was a record year for solar with 76.6 GW installed—50% year-over-year growth from the 51.2 GW installed the year before. This brings solar to over 300 GW installed globally, just after exceeding the 200 GW mark in 2015, according to SolarPower Europe. This is great news for the broader renewables industries and for anyone concerned about climate change. However, it may raise some concerns within the wind energy industry, which for many years has vastly exceeded the installation rates of solar.

Since wind installed 54.3 GW (cumulative wind capacity stands at 484 GW), 2016 marks a turning point: the first time solar has exceeded wind energy’s annual installation rates. Solar only recently has been considered a serious competitor to wind, as solar PV module prices have fallen and installation rates have skyrocketed. This has led some notable developers (such as US-based Pattern Energy and Tri Global) to diversify from wind into solar, and turbine manufacturers Gamesa (now Siemens Gamesa Renewable Energy [SGRE]) and Suzlon to diversify into solar. SGRE landed a deal to build 130 GW of solar projects in India using inverters manufactured by Gamesa from factory capacity previously intended only for wind turbine power converters. Pattern is involved in a number of solar projects, including its first solar foray with 120 MW in Chile.

Wind continues to attack costs. It has decreased its cost of energy by 66% over the past 7 years (while solar decreased 85%), and its higher capacity factor of around 40% versus solar means wind will continue to maintain an edge in total megawatt-hours produced with the same nameplate capacity as solar. However, there are some key detractions to wind power that can’t easily be overcome. Two major impediments stand out: resource constraints and aesthetic impact.

Resource Constraints

Wind power is increasingly cost competitive in areas where there are good wind resources. In the United States, for example, the clear majority of wind capacity is installed in the vast central interior corridor spanning through Texas, Kansas, Oklahoma, Colorado, Iowa, Nebraska, Iowa, Minnesota, and the Dakotas. The consistent, low turbulence wind makes new wind plants cheaper than fossil fuel generation in those parts of the country.

While some of those states boast significant populations, the majority of the US population is located along the coasts where much less wind power is being developed because the resources are not as good (except for offshore—an entirely different topic). Solar doesn’t have the same challenge, as areas with strong solar resources are more likely to be colocated with population centers.

The Aesthetic Challenge

Wind turbines have increased their efficiency by evolving taller towers and longer blades. While this results in fewer turbines needed at a given project, it still results in a major visual change to the horizon. There are many people around the world that do not welcome such obstructions. Solar is arguably less visually obtrusive, as it takes up space on roofs in the residential setting or large fields in commercial settings.

Wind development has largely plateaued and global installations above 50 GW are expected annually for the next 10 years. Whether solar will begin to consistently eclipse those figures as it maximizes its core strengths is the big question.

Best of Both Worlds?

Regardless, one factor that will help the two technologies remain (to some degree) complementary instead of direct competitors is the different and complementary resource profiles. In most parts of the world, sunny months tend to be less windy and windy months tend to be less sunny. Analysis by the Fraunhofer Institute of Germany’s grid shows greater value and system stability with both wind and solar operating versus only one of the two technologies operating.

 

Will 2015 Be Global Wind Power’s High Water Mark?

— June 9, 2017

Will 2015 be the high water mark for annual global wind installations? Navigant Research compiled its data for 2016 in its annual World Wind Energy Market Update report, and an enormous amount of wind turbine capacity was installed—over 54.3 GW. But this was a 14% annual decrease from the over 63.1 GW installed the year before. The downturn is largely the result of China dropping from 30.2 GW installed in 2015 to 23.3 MW in 2016 due to changing incentive rates in that market. Unless there are further incentive changes that foster another huge annual rush in China, the 63.1 GW installed in 2015 is likely to be the high water mark within Navigant Research’s forecast out to 2026.

The reality is that the global wind energy industry is a huge market that is no longer subject to the high annual growth rates it experienced in its infancy. Rather, it is a mature market seeing steady installations across most country markets and regions. In 2016, stable installation rates occurred in most countries outside of China—from the long established European countries to new markets in Latin America, Asia Pacific, Africa, and elsewhere.

Maturation Evident

Europe installed nearly 14 GW of wind power capacity in 2016, almost the same amount as the year before. This represents 25.7% of global capacity installed in 2016. Europe also had the distinction (for the first time) of having more wind energy installed than coal plant capacity. North, South, and Central America combined installed 12.4 GW in 2016, representing 22.9% of the global market in 2016. This is down from over 14.5 GW of capacity the year before. The downturn was partly due to less capacity added during 2016 in Canada and Brazil.

The United States led all countries besides China in 2016, and the US market is in the middle of wind plant construction boom. A long-term extension of incentives ramping down through 2020 provides much sought after policy stability. It also supports continued capacity expansion that is expected to peak, with over 10 GW of annual wind projected to be brought online in 2020. While there were some concerns at the start of the new presidential administration, having a Republican back in office is not expected to alter this wind build cycle since it is based on a tax credit phaseout deal coded into law prior to 2017.

Wind power capacity continues to surge in Mexico as its policies and energy demand show the foundation for steady growth while energy deregulation secures a windy future. Chile and Uruguay saw strong installation rates to bolster capacity in Latin America.

The combined markets of South and East Asia represented 49.7% of global wind power capacity in 2016, down from 52.6% in 2015. China’s market strength again propelled global growth, with 23.3 GW, followed by India with 3.2 GW. India is experiencing steady and substantial year-over-year growth in installations and should prove to be a stable large market going forward, driven by new policy changes and insatiable energy demand from an enormous population.

Momentum Offshore

Offshore wind continued its successful build cycle of 2.2 GW in 2016, bringing the total cumulative capacity of offshore wind to 13.5 GW. The majority of capacity came from Europe, as expected, led by the Netherlands and Germany. China ramped up its offshore wind capacity in 2016 as well, with multiple turbine vendors installing capacity and pushing the country’s cumulative offshore wind online to over 1 GW.

Looking forward, wind installations in 2017 are projected by Navigant Research to increase slightly by 1.7% to around 55.3 GW. Annual installations are expected to average around 51.9 GW between 2017 and 2021. This is a downward revision from 54.2 GW from the 2016 World Wind Energy Market Update report due to lower installation levels expected in China and Germany.

 

Corporate Renewable Energy Goals Stimulate Solar, Wind Demand, and Business Models

— May 4, 2017

Large retailers, data centers, manufacturers, and even government facilities are among the growing number of entities shifting away from the standard electricity model where utilities decide the generation source and technology for consumers. As the costs of wind and solar energy continue to decline, owners of these energy-intensive buildings are taking advantage to meet their renewable energy goals. The combination of these two factors has led to the manifestation of corporate procurement as a major driver in the deployment of renewable energy, forcing utilities to continuously adapt to meet a wide range of consumer needs.

Leading companies such as Microsoft and Google paved the way early on for renewable energy procurement, but more and more companies are joining in. Notably, the online retail giant Amazon is building (and has built) wind and solar farms in North Carolina, Texas, Virginia, Ohio, and Indiana as part of its goal to achieve 100% renewable energy usage. Worldwide, nearly 20 GW of corporate renewable energy procurement contracts have been signed to date, with 240 Fortune 500 companies now having set renewable energy goals.

Achieving Renewable Energy Goals

Making things more interesting are the growing number of methods companies use to meet their formidable renewable energy targets:

  • Physical power purchase agreements (PPAs) were the preferred method for many years; a third-party developer would install, own, and operate a solar PV system (often onsite) and sell that energy to a company at a fixed price.
  • Financial or virtual PPAs are becoming more common. A utility or independent renewable developer sells power from wind or solar into the wholesale energy market at an agreed upon price via a third party (in this case, the companies looking to fulfill renewable energy targets). The company gets credit for bringing renewable energy to the grid and can count this toward its goals without directly sourcing its energy from renewables. Amazon’s 80 MW solar farm in Virginia operates under this structure through a deal with Dominion Energy.
  • Utility tariffs or green tariffs are agreements between a company and utility to purchase renewable energy from a specific facility in the utility’s service territory instead of negotiating a PPA directly with the developer. Google and Duke Energy announced a partnership under this arrangement.
  • Exiting the utility entirely is another method, though it is uncommon. Companies that are able to exit can separate from the utility entirely and purchase energy from private providers. MGM Resorts International and Wynn Resorts recently announced their plans to part ways with the local utility, NV Energy.

Favorable Future for Aggressive Movers

Looking ahead, it’s still to be determined if any one procurement method will emerge as the preferred path to meeting renewable energy goals, and it is unclear how utilities will respond. The demand doesn’t seem to be waning: Google, a leader in procured renewable energy, announced a plan to be 100% renewable powered on a real-time basis. To meet these bold targets, companies will need to continue to be creative in coming up with arrangements that work for both sides. Competitors are becoming more aggressive in this expanding space, and the evolution of this nuanced renewable energy application will be one to watch for the foreseeable future.

 

Renewed Interest in Older Forms of Energy Storage

— November 17, 2015

After recently receiving support from Governor Steve Bullock, a planned pumped hydro storage (PHS) project in Montana has moved one step closer to reality. While the Gordon Butte project still faces many hurdles on the road to development, it is being embraced by many in Montana as a way to help take advantage of the state’s abundant renewable energy resources. Located in remote Meagher County, the facility would add a 400 MW resource capable of storing excess wind energy to be released at times of high demand. Montana-based Absaroka Energy is developing the project, working to secure financing and permits, as well as an interconnection and partnership agreement with a regional utility.

This project is part of a trend of renewed interest in PHS and other forms of electro-mechanical energy storage. According to Navigant Research’s Energy Storage Tracker 1Q15 report, there are 42 PHS projects in various stages of development around the world, including 13 located in the United States. As the penetration of renewable energy increases globally, energy storage solutions of all types are emerging as efficient ways to manage fluctuating supply and demand. While advanced batteries are an ideal choice for managing the grid’s stability over short time periods, the economics of very long duration (6+ hour) energy storage often do not line up given the high upfront cost and limited lifetime of battery technologies. Thus, many grid operators are looking at alternative storage technologies to help align the output of renewable energy with times of peak demand.

Generation and Demand

A common issue with renewable energy is the mismatch between when energy is generated and when demand is highest; this is a particularly acute problem in remote areas or physical islands that are unable to import or export energy whenever it is needed. In Montana and other areas, wind power is generally most productive at night (when there is minimal demand for energy) and is generally unavailable during peak demand hours when energy is needed most. The aim of Gordon Butte and other planned PHS projects is to allow this abundant wind energy to be shifted from when it is produced to times of peak demand, often in the evening, helping to ease utility concerns around balancing wind’s variable output. An economical means of storing large amounts of wind energy could allow Montana to fully capitalize on its immense natural resources, potentially allowing the state to export power to surrounding areas and greatly reducing the amount it spends on importing fossil fuels.

Despite the attractive economics and potential positive impacts PHS facilities can have, development of such large and complex infrastructure projects can be challenging, costly, and time-consuming. In addition to concerns regarding impacts on water resources and local wildlife, issues surround land-use and permitting have derailed past projects. These projects will face increasing competition from rapidly advancing battery technologies that are improving the economics of long-duration storage with more flexibility and less complex development processes.

 

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