Global Wind Energy 
Market Report

With the end of the millennium world wind energy markets have turned in another record-breaking performance. Preliminary estimates indicate that during 1999 more than 3,600MW of new wind energy generating capacity were installed worldwide, bringing total installed capacity to the 13,400MW range. This total represents an increase of more than 36% over the 1998 total installed capacity of 9,751MW, and the largest worldwide addition to capacity in a single year.

With this dramatic growth rate, wind energy seems to retain its position as the fastest growing energy technology in the world. Already, from 1995 to 1998, a total of 4,893MW of additional worldwide capacity was installed, representing a worldwide average growth rate of 27.75%. Wind energy capacity installations worldwide have surged from under 2,000 MW in 1990 to the present level of approximately 13,400 MW at the end of 1999, representing more than a six and a half –fold increase during that time period.

These numbers support the claim of the European Wind Energy Association and other organizations that wind energy can produce 10% of worldwide energy supply by the year 2020 with the appropriate policies, even if electricity consumption increases substantially. In fact, some countries are already reaching relatively high wind-penetration levels on their electric grid. Denmark, for example, is dependent upon wind power for approximately 10% of its electric generation. At the regional level, there are examples such as Germany’s Schleswig-Holstein, where wind provides about 15% of the power, and Spain’s Navarra, which gets about 23% of its power from this wind. In contrast, in Germany as a whole wind still provides less than 2% of the country's electricity; in the United States, despite a substantial increase in 1999, wind power still provides less than 1% of its total electricity.

The three top 1999 markets added an estimated 2,582MW of new capacity and account for almost 64% of the total capacity additions for the year. These three countries also contain some 60% of worldwide installed wind energy capacity at the end of 1999. They are:

• Germany, which once again wins the top prize with the addition 
  of over 1,200MW for the year;
• the United States, which wins second place for installing new turbines 
  with a total generating capacity of 905MW, including 173MW from repowered projects in California and 732MW in new capacity; and
• Spain, which obtains the bronze medal through an estimated 
  650MW of new capacity this year.

Table 1

Note: * Values for U.S., UK, China, India and Netherlands are confirmed and final. Year-end, confirmed estimates are made for Germany, Spain and Denmark. Italy and Sweden are unconfirmed estimates. Additions only include projects that have been installed and are operating in the calendar year. The year end total figure for the U.S. is net of retired projects.

The leading countries fueling wind energy's growth throughout the decade have been in the northern hemisphere, in particular in Europe, where issues regarding the environment, fuel security and electricity-generating diversity are a priority. Of the 10 countries with the highest installed capacity at the end of 1999, only the United States, India and China lie outside Europe.

The fuel for European growth continues to be policy incentives that have facilitated the birth and development of the wind energy industry in the region. A combination of high energy prices, renewable energy subsidies that may include investment and other fiscal incentives, and mandated purchases that may include price support systems, are some of the most important parameters that encourage wind energy development in the EU. The heightened sensitivity that Europeans have for the environment is a determining factor in setting such policies within the EU. Another important factor, although it is less frequently mentioned, is fuel security. Developing an indigenous resource helps diminish the dependence on imported energy sources, which is of strategic importance to many countries in the region.

Germany overtook the United States in 1997 as the country with the highest installed wind capacity in the world. The right mixture of incentives such as the Renewable Energy Feed In Tariff (REFIT), which guarantees that renewable energy producers are paid up to 90% of the current domestic electricity price; and low interest loans in several regions, have made this the most ebullient market in the world.

These incentives are beginning to be challenged. The strong development in the windy North of the country brought the regional utilities to question the cost of the REFIT. A proposed provision of the REFIT limits the buying-in obligation for grid operators to five percent of the kWh sold through their supply grid per calendar year, although that has been strongly resisted by the wind industry and their allies. Moreover, with the liberalization of the power market, electricity prices are being cut, reducing payments for wind since wind energy payments are made as a percentage of the average sales price of energy to the final user. This year wind energy is being paid around $US 8.8 cents per kWh while next year it will be lowered to around $US 8.5 cents per kWh.

The German wind lobby enjoys strong political support, however. This is not only because of wind energy's environmental benefits, but also because of the 18,000 jobs that the industry provides. The wind energy manufacturing sector alone employs more than 2,500 people, and approximately 500 of those jobs were created in the first half of 1999. In addition to serving as a direct source of employment, the industry provides several thousand more jobs in supplier companies, planning offices, consultancies and research.

Land constraints, lower average wind speeds in future projects, as well as lower energy prices are likely to impact the economics of future projects. This trend is offset, however, by the use of larger, more efficient turbines, with the average size per turbine installed increasing from 630kW in 1997 to megawatt size systems in 1999. Larger and more powerful turbines allow operators to lower generation costs. The increase in capacity factor (the ratio of the average power produced by a wind turbine to its rated power) from 20% to 25% also reflects improved efficiency and siting of projects. In addition, the future development of offshore windfarms will open up new frontiers in wind energy development. Despite its challenges, the next millennium looks promising for Germany, and bigger and better turbines will keep this market on its feet.

Denmark is a juxtaposition of extremes with a land area that is small like David, but with a wind industry that is a world-class Goliath. The Danish wind turbine manufacturing industry exports over 75% of its production overseas. At home, some 1733 MW of installed wind generating capacity provide over 10% of the country's electricity.

A unique set of policies that encourage ownership and siting of single or small clusters of turbines promotes the private ownership of equipment, representing 80% of the wind turbine market, compared to 20% owned by utilities. This type of structure is helped by the very strong public support for wind energy development within the country.

Long term policy decisions favoring wind energy have also facilitated the strong development of the Danish wind energy industry. For example, the Danes' goal of providing 10% of electricity generation from wind was achieved in 1999, five years earlier than originally projected. The new goal is to supply 50% of electric generation from wind by 2030, in part through a massive new offshore wind initiative.

Denmark is a leader in the implementation of a national Green Credits program, which should begin January 1, 2000. The Danes are liberalizing their wind energy market and transforming the fixed-price system to a Renewable Portfolio Standard (RPS), where 20% of the country’s electric consumption will have to come from renewable sources by 2003. At present between 12% to 14% of consumption is provided by renewables. Consumers will have the option of choosing between various suppliers to provide the additional renewables.

The mechanism that will be used are green certificates, which will be issued to renewable energy generators proportionate to their energy production and traded in the marketplace. The value of these certificates will fluctuate with supply and demand. The goal of this process is to let the market forces act upon the development of the renewable energy industry and support the most efficient technologies that will offer the lowest cost green certificates.

Not all aspects of this process have been finalized, but what is known at this point is that wind energy prices will reflect two components: a fixed price of DKK 0.33/kWh and a renewable certificate, which can be sold at a market price within a range between DKK 0.10/kWh to DKK 0.27/kWh. Many questions remain to be answered regarding this complex, and relatively swift, change of policy. The creation of a market using green certificates will eventually need modern financial tools such as options and futures markets that will benefit the long-term financing of renewables.

Spain is a wind energy dynamo. Strong incentives for wind developers, coupled with regional incentives to spur local investment and willingness from banks to finance projects, has caused an industry that barely existed in 1994 (with only 72 MW of installed capacity) to reach 822MW of installed capacity by the end of 1998. IDAE, the organization in charge of renewable energy development in Spain, estimates that capacity will have increased by another 650MW in 1999, bringing total generating capacity to over 1,472MW. Spain in 1998 had an impressive 81% increase in wind energy capacity, and 1999 should reach an annual increase of 80%, awarding it the record in annual growth rate for the second year in a row.

A temporary slowdown in this spectacular rate of growth is expected to occur because the regional governments in Castilla and Leon, where a very high number of projects were proposed, have developed additional requirements regarding siting.

In Spain many of the incentives are coupled to the local manufacturing of equipment, which has created a rush from international wind turbine manufacturers to set up joint ventures with local industrial consortiums. Companies like Vestas, from Denmark, set up manufacturing plants early on and have taken advantage of rapid growth, and now we see these joint venture companies starting to bid for projects in Latin America and the Caribbean.

Strong political support, on both a regional and central government level, will continue to promote rapid wind energy development in Spain. Wind development is heavily concentrated in the provinces of Galicia, Navarra and Aragon, where provincial governments are particularly eager to promote wind development. In Navarra, which have already achieved more than 20% wind energy penetration, the local government's policy decision to reach 100% renewables generation will promote continued growth of the wind energy industry.

At the national level, a system similar to the German REFIT, introduced in 1994 and reformulated in 1998, ensures a payment equivalent to 80-90% of the retail rate, which equals almost 8 US cents/kWh, to wind energy producers. The level of price support for wind energy will be revised periodically.

Spain has a significant wind energy potential, and the land available to develop it. The country should be able to support hundreds of MW per year in new development for many years to come.

The United Kingdom tells a somewhat different story. Some of the lowest cost, most competitive wind energy projects to date have come from the British Non-Fossil Fuel Obligation (NFFO) competitive bidding process. In 1999, however, the UK added a paltry 18.1MW, which brought total installed wind energy capacity up to 352MW. A large portion of the wind energy projects awarded funding through NFFO have run into problems obtaining the permits to construct in different regions, causing delays in the construction of these windfarms. The slowdown has worried the government, which will largely depend on wind energy to reach its commitments to lower greenhouse gas emissions. Parliament has set up a Planning Inspectorate to investigate those projects that have run into problems, and try to resolve the pending issues that affect them.

The future of wind in the UK looks unclear. An estimated 50 MW in additional projects are scheduled to come online next year. Much of the potential in the UK hinges on development of large-scale offshore windfarms, and it is still unclear how quickly the country will move toward constructing such projects.

In the United States, the "wind rush" of 1999 produced the wind industry's best year ever. In 1999 some 732 MW of new wind energy generating capacity and an additional 173 MW of repowering projects (in which new turbines replace less efficient "first generation" turbines) were installed, bringing U.S. total generating capacity to approximately 2,400 MW. See U.S. Project Development Information.

This new growth represents an increase of 40.8% over the previous year. At the end of 1997 there were about 1,600MW of wind capacity installed in the country; during 1998 an additional 193MW were built and started operating; and in 1999 the record-breaking 732MW in new projects started to generate electricity. The addition of 925MW of new generating capacity between June 1998 and the end of 1999 was more than twice as large as the amount added in 1985, the U.S. previous largest year (442 MW).

The expiration of the wind energy production tax credit (PTC) in June 1999 was an important catalyst to this unprecedented growth, as developers raced to complete projects before the expiration deadline. Fortunately for the US market, the PTC has been extended for an additional 2½ years. The extension will be effective retroactively from the date of its expiration through December 31, 20001. Wind energy producers will therefore continue to receive inflation-adjusted $1.5cents/kwh tax credit for utility scale projects. This tax credit will spur continued strong growth in the US market.

Driving forces behind this growth also included progressive state policies, especially in Minnesota and Iowa, and the movement toward customer choice markets in electricity markets in a growing number of states. Competition has pushed a growing number of utilities toward offering a "green product" to their customers, and wind energy’s relatively low cost has led to over 80 utilities offering a wind energy based product to their customers. An estimated 165 MW were installed in 1998-99 in response to this emerging market.

The rebirth of the US wind industry is one of the energy success stories of the decade. After struggling for most of the 90’s, it has come of age at the very end of the millennium. One reason for the limited activity in the mid-90s was the uncertainty caused by deregulation of the electric sector, which caused many utilities to re-evaluate their priorities, and freeze any new investments in new capacity. In the meantime, wind technology has continued to mature, gradually convincing the electric industry that it is ready for broad deployment.

The US is also a leading manufacturer of small wind turbines. AWEA considers machines under 100kW in nameplate capacity to be part of this select group. This segment of the industry has also seen strong growth, and the US is considered a world leader in sales volume for this segment. Four very active U.S. manufacturers are estimated to cover a 30% market share worldwide. Preliminary estimates indicate that the U.S. has 15MW in nameplate capacity of small wind turbines, and that the industry averages a half domestic, half international sales mix. The last two years have seen a growth rate approaching 30% per year, and growth in 1999 should exceed 35%.

AWEA expects increased domestic opportunities for small turbine manufacturers. Some of this year’s market has been driven by Y2K concerns, but another factor has been a growing number of states providing project cost-sharing for small scale renewables as part of the transition into more competitive electricity markets.

India was one of the fastest growing wind energy markets in the mid 90’s, but several changes including underperformance of projects (often due to poor siting), transmission problems, political and economic instability, have all affected investments in new projects. Extensive use of investment tax credits has led to unsustainable revenue losses for the government. A resulting modification of the credits has been a factor in slowing rapid growth down to a trickle. In 1999 India added an additional 62MW of wind energy bringing their total wind generating capacity to 1,077MW.

During the 1990s electricity consumption more than doubled in India, and despite huge expenditures in the power industry, the country still has a 12% electricity deficit and 20% peak power shortage. Due to these conditions, and the continued fast rate of growth in consumption, India continues to be considered a key market for wind developers. In order to re-ignite the installation of significant amounts of wind energy, several factors are required. Perhaps most significantly, a production tax credit is viewed as a preferable alternative to an investment tax credit.

China is the sleeping giant of wind energy, with a total of 224MW of wind energy capacity at the end of 1998, and an additional 76MW installed in 1999.

Growth of wind energy in China has been very slow, if one takes into consideration their immense energy needs, their vast wind energy potential and the urgency of the country's air pollution problems. For the most part China has demanded, and obtained, bilateral donor support for projects. Because of this, projects tend to remain small. It will require entirely commercial development to reach the level of growth that the country needs. Both large and small-scale turbine manufacturers have set up joint ventures to prepare for rapid growth in the future, and it is expected that strong wind energy development will take place early in the next decade.

Costa Rica has encouraged the development of renewable energy and has stated the desire to be self-sufficient in the generation of electricity. However, the government and the national utility, ICE, have set a maximum wind energy penetration of 66MW that will be reached when the country builds the 20MW windfarm to be awarded in early 2000. This limit has been set because wind energy already sometimes provides 10% or more of the electricity on the nation's grid, usually at night when winds are favorable and demand is relatively low, and there is concern that the grid cannot safely support more. There is continued interest in developing wind energy projects in the country, but any further additions will only be possible with a change in the current limit. With the continuous improvement of wind energy technology, which should remove this technical limiting factor, AWEA expects to see wind development continue at some time in the future in this Central American country.

After breaking the 10,000 MW threshold in the spring of 1999, and witnessing an increase of over 37% in wind capacity over the past year, the global wind industry enters the new millennium riding a bull market. For the first time, we are seeing one of the emerging renewable energy generating options—wind power--in a position to compete head to head with the generation technologies of the last century.

As befits a growing, high-tech industry, the wind industry has taken to heart the term multinational, with a variety of players engaged in pushing forward projects worldwide. Enron Wind Corporation acquired German turbine manufacturer Tacke; NEG Micon of Denmark has built manufacturing facilities in the U.S., Vestas of Denmark has built factories in Spain and India and many manufacturers have developed joint ventures in various countries around the world. This globalization trend is likely to continue.

Because of the financing needs of the industry, which reached over $3.5 billion this year, financial institutions are beginning to view the wind industry as a promising investment opportunity. Traditionally European and Japanese financial institutions have been wind energy's principal financiers, but now we are starting to see broadened interest on the part of the financial community in the fast growth rate and financing needs of the industry.

As is the case with many other rapidly-growing industries, the global wind energy panorama can change swiftly and countries with limited growth in one year become coveted wind markets the next. As more countries are added to the wind energy roster, uneven development focusing on a half-dozen key markets will be replaced by more balanced growth. During the next couple of years, large-scale projects are expected to be developed in Egypt, Nicaragua, Costa Rica, Brazil, Turkey, Philippines, and several other countries, totaling thousands of MW of new installed capacity, and expanding the number of countries using their wind resources.

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© 1999 by the American Wind Energy Association.
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