The coming years will mark a crucial transition period for the global wind industry. Later this year, wind energy will reach the historic milestone of 1 TW of installed capacity. It has taken us around 40 years to get here.
However, the next TW will take less than a decade. The energy and climate policies now being pursued by the world’s largest economies in both the ‘West’ and the ‘Global South’ point to a whole new level of ambition and support for wind energy and renewables.
These policies are likely to take us to 2 TW of installed wind energy by the end of 2030. They are the consequence of growing urgency in the fight against dangerous global heating; prolonged high fossil fuel prices and the impact of fossil fuel dependence on security; and the success of our industry in scaling up and establishing wind as one of the most cost-competitive and reliable power sources in the world.
While the industry pushed through the new level of 100 GW of annual installations in 2021, the last few years have not been without their challenges. Many of the manufacturers at the heart of the industry have seen mounting financial losses caused by ‘race to the bottom’ pricing, as a result of misguided government policies around procurement and offtake arrangements, exacerbated by higher inflation and logistics costs. Meanwhile, wind projects have been delayed or stalled by inadequate and inefficient permitting and licensing rules, from Denmark to India to Japan and beyond.
This has created the bizarre paradox of energy markets rewarding fossil fuel companies with record profits, while renewable energy companies have struggled to break even. As this report shows, while companies have regrouped to adapt to the new inflationary pressures, the market has stalled, and the industry installed only 77.6 GW in 2022.
All this has come at a time when policymakers are racing to address the energy and climate crises by dramatically increasing their targets for wind energy across the world.
The situation, however, is about to change and 2023 will mark the start of a decisive turnaround. Governments of all the major industrialised nations have enacted policies that will result in a significant acceleration of deployment.
In the US, the Inflation Reduction Act has completely changed the rule book for both onshore and offshore wind, while in the EU, policymakers are racing to introduce new rules and regulations to enable the huge increase in deployment that the REPowerEU plan foresees. In China, unstoppable momentum behind the energy transition continues, and the end of COVID-19 restrictions will see the return of faster economic growth. Large emerging market economies such as Vietnam and the Philippines are enacting new plans for wind, the sleeping wind power giant of India seems set to pick up the pace, and Brazil will continue to establish itself as a wind energy powerhouse.
By 2024, GWEC expects onshore wind to pass the 100 GW annual installations mark, while offshore wind will install more than 25 GW in a single year for the first time in 2025, and installations will accelerate rapidly after that.
Market conditions will change, as countries and regions will have to compete for badly needed investment in their wind sectors: who gets the investment will depend on who has the most attractive market conditions and the most efficient regulators. For power equipment – and this includes key commodities such as copper and rare earth elements (REEs), power transmission equipment, wind turbines and offshore installation vessels – market dynamics are likely to change from buyers’ to sellers’ markets as supply chains struggle to keep up with demand.
According to the data in this Global Wind Report 2023, spare capacity in the wind energy manufacturing industry is likely to disappear by 2026. For some inputs and in some regions, the squeeze will be felt before then. Both Europe and the US are facing the risk of supply chain shortfalls, and these could be worsened by policies aimed at reshoring manufacturing away from China and protecting local industry and jobs.
As this report shows, while creating more diversity and resilience in the supply chain is an important and necessary objective, decision makers will have to design policy very carefully to make sure that it allows the fair exchange of essential inputs for the energy transition, fosters innovation and keeps costs from rising unnecessarily.
In order to ensure that the wind industry is able to meet the expectations of policymakers and society at large, it is essential that we start investing in new capacity and plant, and in training and skills, right now. Otherwise, we run the risk that we will not be able to deliver our promises, policymakers will turn to other, less efficient alternatives, and society will fail in its climate goals.
This may sound counterintuitive in an environment where companies have found it difficult to keep their businesses viable, but it is a challenge we cannot ignore. Thankfully, the sector’s leaders can see the opportunity ahead, and companies are already investing – despite the highly unfavourable conditions of the last few years – in new manufacturing facilities, from South Korea to the US to Poland.
Much more is needed, and fast. The wind industry will need to forge new partnerships with governments, cities, communities, investors and customers in order to enable the next era of growth.
Working together, we can put into place the right policies, which will allow trillions of dollars in investments to flow and the creation of millions of jobs.
As a starting point, we need to leave the hesitancy of the past behind and adopt a new mindset in our industry. The wind industry is no longer the hobby sector of forty years ago. Our technology is resilient and mature, and is poised to play a unique role in the energy transition. Now, in order to deliver on the promises we have made, we need a confident wind industry that is capable of moving boldly ahead.
Full Report: GWEC 2023 Report.