Despite A Volatile Market, Wind Energy Blows Strong

It was Wind Energy Day on June 15, and the day while acknowledging the role wind energy is set to play, also serves to highlight the massive strides this key part of the renewable puzzle has made, especially in the past decade.

 

Global Trends

 2023: Big Start, Bigger Finish

The wind sector is back in high gear globally. The first quarter of 2023 witnessed a YoY  increase of 27% , standing at 23.5 GW.

China peaked at a new high in Q1 with orders exceeding 15 GW! Latin America also recorded its highest order intake with over 1 GW. The same holds true for the US, which reflected high order intakes with 1.8 GW. The Inflation Reduction Act has been instrumental in pushing the renewable sector.

As per a study by GWEC, in a first, 2023 is set to see more than 100 GW of new capacity additions in the world.

If trends are anything to go by, it appears that every year, wind capacity installations beat those in the previous year. In 2022, globally, over 77 GW of capacity was added and grid connected  too. 2022 saw a 9% YoY growth rate. :The global wind energy market will pass the one terawatt (TW) threshold for installed capacity by the end of 2023” according to the latest market outlook from Wood Mackenzie. That is just a year behind Solar energy, and is more due to the headstart wind energy had over solar right upto 2018-19. That also explains why wind energy generation still led solar until recently.

The European Resilience 

Europe has been enjoying dominance in the offshore wind sector.

While Europe has obvious advantages in terms of a well established wind energy manufacturing ecosystem and favourable conditions for offshore  and onshore wind, the continent, true to form, has also created a lot of red tape, with upto 80 permits needed for a wind energy installation. That has meant a pipeline of 80 GW of wind energy awaits for permits to fall into place. Despite these challenges, the EU has new revised wind energy target of 420 GW of wind energy by 2030, up from 205 GW.

Looking back at 2022. Europe’s  new wind installations in Europe was 19.1 GW with 16.7 GW onshore and 2.5 GW offshore.

While the challenges remain, Europe has continued to be resilient, having recorded a 4% yOy growth in installations. A large part of the credit can be claimed by Germany, Sweden, and Finland, that built the highest onshore wind capacities. However, half of the offshore installations were claimed in the UK. France also established its first large offshore wind farm: Saint-Brieuc offshore wind farm after the project managed to get relevant permissions.

Despite 2023 already being a notable year, the challenges persist as volatility continues with respect to supply and costs of raw materials. Fluctuations are a deterrent here. Thus, getting large size quantities of raw materials and planning it entails is a challenge.

In some regions, regulations stall projects and capacities. The Japanese government is a great example here since the bidding process was put on a hold here for as many as nine months when businesses complained the bidding regulations lacked clarity.

When compared with other countries, Japan has been slow with installations because of such reasons. Anyhow, Japan wants  to tender up to 45 GW of offshore wind capacity by 2040.

Coming back to the subject of prices of materials for making wind turbines, they have been on a rise, driving up costs. Inflation also adds to the woes as steel, copper, aluminium have seen a dramatic rise over the years, surging by twice or thrice over the pas two to three years, aggravated by the pandemic situation, which worsened the situation, causing supply challenges. The Ukraine crisis has hasn’t been a great news against this backdrop.

While prices and supply challenges continue, the manpower challenges are daunting too. Developers unanimously say there is manpower and machine shortages.

The US is a case in point.  The prices have shot up because of  manpower shortage. EPC contractors are thus treading slowly during bidding .

Another major area that doesn’t look too good is the vessels for installing offshore wind turbines that have limited capacity. Sure, wind turbines have got bigger but only a small number of vessels have been upgraded for transportation and installation. It doesn’t help that construction for a vessel takes a couple of years.

The Challenges Get Bigger, But So Does Turbine Size!

Danish turbine maker Vestas has built  a superstructure that’s 280 meters high with a blade of 236 meters. To think that the Eiffel Tower is 324m!

Vestas describes it as a “monster” “capable of resisting the wind on a rotating surface of more than 43,000 square meters. Each blade measures more than 115 meters, which is equivalent to the total height of many “ordinary” wind turbines.”

When we speak of innovation in renewables, how can China stay behind. In January, The China State Shipbuilding Corporation (CSSC) said it was building the largest and most powerful wind turbine ever, with 18 MWp boasting of a 260-meter (853-ft) diameter on its three-bladed rotor.

Back home in India, The S144 wind turbine generator is one of the largest in India for onshore wind, extendable up to 3.15 MW. It has been introduced by Suzlon, whose 3 MW turbines have been a hit with developers.

India Trends

In 2022, India’s capacity of wind energy scaled an impressive 41.9 GW. Currently, taking recent data into account, it stands at 43198 MW. The additions since 2022, are noteworthy to say the least. As of now, India holds the fourth position when it comes to wind power capacity globally.

Here is a look at the top estimates about India’s wind energy, from where it stands now and what the next few years look like

High Hopes, But Will They Be Met?

India has set some colossal targets for itself. It is looking to auction 8 GW capacity annually  by 2030. A  new bidding process has been put in place towards this. The single-stage-two-envelope closed bid process looks to augment capacity additions.

The government has recently announced a slew of policies to fast-track capacity additions in the wind  sector and accelerate it. Among these policy measures are the repowering of wind power plants that are old. Wind power plants that boast of more height have more height and efficiency hold the potential to lure in INR 40,000 crore of investments, as per a CRISIL study. At the same time, in a more recent announcement, the reverse bidding policy has been scrapped. New renewable energy parks are being set up and land is being made available for wind development.

Delayed, abandoned projects and a few that have not achieved commissioning have been extended a lifeline with extended deadlines.

In another fresh announcement, four policies of “implementation of the bidding plan, ISTS (inter-state transmission system) open access, fixing the missing links in LPS (late payment surcharge) and greater facilitation of offshore wind bids” are under consideration.

Such measures are sure to speed up projects, invite greater investments into the sector and enhance capacities.

The estimates for India look promising too. The Global Wind Energy Council, for instance, says that India can add direct and indirect gross value of about USD 10 billion by adding 19.4 GW of onshore wind capacity by 2026.

Augmenting Offshore Wind

In a move that gives impetus to offshore wind sector and ushers investments herein, a  policy has been introduced to help power generated from all offshore wind farms for  evacuation to offshore  wind pooling stations to the onshore transmission network. This is free of cost until FY 2029–30.

The Government is taking the offshore wind sector seriously and aims to exploit the potential it offers. As per a report, VGF will  be given to projects with a total capacity of 1 GW.  Recently, the MNRE also announced the bidding trajectory for 50 GW and 10 GW of this has to be for offshore wind. A few of these tenders have been released by SECI already, while others are awaited. These include a 1.2 GW tender, the results for which were announced  a few days back. Another was a hybrid tender of 1200 MW. A 2500 MW wind tender by SECI is also in the offing in a few weeks.

The country is striving for 140 GW of wind energy, entailing 30 GW offshore by 2030 and as of now, the number does not look impossible, given that India is said to have a wind turbine manufacturing base with a capacity of 10 GW per annum.

Hot Markets

In 2022-23, Rajasthan was felicitated for achieving the highest wind capacity addition, Gujarat for achieving the highest wind capacity addition through open access and Tamil Nadu for initiating repowering of wind turbines.

A Wind Atlas at 150 meter above ground level has also been launched, prepared by National Institute of Wind Energy (NIWE). The onshore wind potential of the country is now estimated at 1,164 GW at 150 meter above ground level.

In the offshore sector, NIWE says that Gujarat holds potential for 36 GW while Tamil Nadu promises 35 GW since these have a high CUF.

While Tamil Nadu has been the undisputed leader for years, Gujarat overtook it in May 2023. Tamil Nadu will soon host the first offshore tender for a wind farm.

The biggest risks in India remain shifting climate patterns, particularly slowing pace of monsoon winds, if the trends tracked over the past three decades sustain going ahead too.

Future Cost Estimates

As per IEA, next year in 2024, “Electricity generation costs from new utility-scale onshore wind and solar PV plants” will decline, however, still not be comparable to fall under pre Covid-19 values. This holds true for most markets globally.

The study points that even though commodity and freight prices have lowered from the last year peaks, they are still high.

Surging interest rates have dealt a blow to developers’ financing costs. “As a result, global average levelised costs of energy (LCOEs) for onshore wind and solar PV are expected to remain 10-15% above 2020 levels in 2024”, the study adds while concluding, “In 2022, the share of main commodities and costs associated with transportation accounted for an estimated 30-35% of overall CAPEX for utility-scale and wind projects, twice as much as in 2020. Taking the full impact of higher prices on project development costs into account, and the usual annual cost reductions from continued technological innovation, the resulting LCOE increase for 2022 is estimated at 15-20% for these technologies.”

Despite being above Covid-19 levels, solar PV and onshore wind are the cheapest options for new electricity generation in most countries. “Furthermore, power contracts for the end of 2023 and into 2024 in the European Union, the United States, Japan, Australia and India all indicate wholesale electricity prices two to three times above 2020 averages, increasing the economic attractiveness of wind and solar PV.”