Navigant Research Blog

First Dedicated Vessel for the US Offshore Wind Industry

— August 1, 2017

The US offshore wind market has been caught in the classic “the chicken or the egg” conundrum for years. The lack of purpose-built offshore wind installation jack-up vessels in the United States—necessary for the deployment of wind turbines in marine environments—has added uncertainty, complexity, and financial risk to the nascent offshore wind market in the country. It is also a key factor contributing to the slower-than-expected growth of offshore wind in the United States.

Multiple Issues

I wouldn’t attribute all the blame for the United States lagging behind Europe with offshore wind to this issue. European countries and China have been willing to provide generous regulatory and financial support for offshore wind, along with policies that are set up with a long-term framework. By contrast, the US market’s primary incentive mechanisms, the Production Tax Credit and Investment Tax Credit (PTC/ITC), have been enacted in short-term on and sometimes off again schedules for more than a decade.

Onshore wind developers with projects in advanced development can go from a turbine order to commissioned project in less than 8 months. The offshore wind industry, however, takes substantially longer for project development, turbine procurement, and project construction. Large wind projects in Europe typically require 2 years for construction. Prior to construction, the development and investment phases usually take at least 3-5 years.

That reality is the main reason offshore wind has been slower to take off than expected, but following at a close second is the lack of US-based jack-up vessels. These vessels have not been built in the United States because the offshore wind market demand has not been there to justify their pricey construction. Then why not simply bring a vessel or two from Europe?

The Jones Act

An antiquated maritime law from the 1930s called the Jones Act plays a major role in this issue. The law makes it illegal for vessels that are not built in the United States and crewed by American staff (a US flagged vessel) to deliver goods and conduct work from port to port. It is largely considered a protectionist measure to protect the US shipbuilding industry. One offshore project was commissioned last year, Deepwater Wind’s 30 MW Block Island wind farm off the Rhode Island coast. The Jones Act forced additional cost and complexity because the developers had to contract a jack-up vessel from Europe due to the lack of US vessels. Yet, the vessel could not touch US shores, where normally it would pick up the wind turbines, towers, and blades. Instead, Deepwater had to use smaller US flagged barges that towed wind turbine equipment out to the site, where it was transferred to the European jack-up vessel, thus increasing the cost, complexity, and risks of the project.

A Step Forward

One small but important step has arrived to mitigate the Jones Act problem. Two Texas-based companies active in the oil & gas industry, Zentech Inc. and Renewables Resources International (RRI), recently announced they would be the first to build an offshore wind construction jack-up vessel. The vessel will be a four-legged, self-propelled dynamically-positioned level 2 (DP2) jack-up vessel based on a US-built barge. Zentech plans to install four truss legs with spud cans, a proven oil & gas design, integrated in a newly built hull. It will be able to install in each port-to-site voyage three 6 MW-9 MW range wind turbines. Commissioning is expected in 4Q 2018.

The US offshore wind industry still faces challenges, but this recent announcement is a positive step toward minimizing the Jones Act as one of the industry’s impediments.

 

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.

 

2016 Reshuffles the Top 10 Global Wind Turbine Manufacturers

— June 8, 2017

Navigant Research’s annual World Wind Energy Market Update ranking of the top 10 wind turbine vendors is closely observed every year. This benchmarking goes back 22 years—before other similar analyses existed and when commercial wind turbines had 50 meter rotors and a top nameplate size of around 750 kW. Today in 2017, there are rotor diameters pushing beyond 140 meters for some onshore turbines and 164 meters for offshore turbines. Nameplate capacities for onshore are mostly between 2 MW and 4 MW and 9 MW for offshore, and 10 MW capacities are just around the commercial corner.

In 2016, a total of 54.3 GW was installed globally, a 14.0% annual decrease. This annual downturn is largely the result of China dropping from 30.2 GW installed in 2015 to 23.3 GW in 2016 due to changing incentive rates in that market. The new wind capacity added in 2016 brings new cumulative wind capacity up to 486.8 GW globally, a 12.1% annual increase.

The downturn in China from an unbelievable amount of capacity installed in 2015 to a merely astonishing level installed in 2016 resulted in a shake-up of the top 10 ranking, as a few Chinese vendors dropped in capacity and rank against their peers. Merger and acquisition (M&A) activity also effected the ranking, with GE now including Alstom wind activity and Nordex including Acciona activity.

The Top 10 in 2016

The actual megawatts and market share numbers installed in 2016 are available in the full report, but the following summary describes the year 2016 annual top 10 ranking:

  • Vestas regained its longtime No. 1 status globally for annual wind installations with double-digit growth rates. It even achieved higher capacity additions in the United States over GE Energy, which has normally held a perennial lead.
  • GE Energy saw its strongest year to date and moved from 3rd place in 2015 capacity in last year’s Navigant Research World Wind Energy Market Update report to 2nd place for 2016 capacity. Its acquisition of Alstom’s wind turbine division helped, but it was largely momentum with GE Energy’s wind portfolio that drove its move upwards.
  • Goldwind fell in 2016 to 3rd place from its briefly held No. 1 position in 2015, when it rode the cresting wave of the record Chinese market.
  • Gamesa took 4th place in 2016, underlining why it was a target for M&A with Siemens’ wind division, a mega-merger that was made official in April 2017. Despite no Spanish home market, Gamesa saw continued success in a variety of global growth markets, propelling it from 8th place globally in 2014 and 5th in 2015 to 4th in 2016.
  • Enercon had a strong 2016, moving up the ranks to 5th place in 2016, thanks to a strong domestic German market, a reputable direct drive turbine portfolio, and well-diversified sales internationally.
  • Siemens again fell two positions in the 2016 top rankings to 6th place from 4th in 2015—and from 2nd in 2014, when it nearly took the top slot from Vestas. In 2016, a commanding lead in its offshore wind division could not offset lower installation rates in its onshore segment.
  • Nordex broke into the top 10 category, taking 7th place globally. This jump in 2016 was due largely to its acquisition of Acciona in 2015, which rapidly shifted Acciona’s international success to the Nordex Group.
  • The final three top 10 companies in order were all Chinese: Envision, Ming Yang, and United Power. All three saw lower installation totals in 2016 than in 2015 as the Chinese market cooled. Envision moved up the rankings within the large group of Chinese turbine OEMs.

Top 10 Wind Turbine Suppliers Market Share, World Markets: 2016

(Source: Navigant Research)

 

Blog Articles

Most Recent

By Date

Tags

Clean Transportation, Digital Utility Strategies, Electric Vehicles, Energy Technologies, Policy & Regulation, Renewable Energy, Smart Energy Practice, Smart Energy Program, Transportation Efficiencies, Utility Transformations

By Author


{"userID":"","pageName":"Jesse Broehl","path":"\/author\/jbroehl","date":"8\/16\/2017"}