Destination Europe: Dawn of the ‘Offshore Wind’ Era Sivapriya Ramakrishnan, Senior Research Analyst Business and Financial Services November 4 th 2010 Frost & Sullivan’s Growth Consulting can assist with your growth strategies
Focus Points The European Wind Energy Market Market Overview Market Development Impact of Recession Wind Capacity Factor Offshore Wind Installations and Forecasts Cost Competiveness Funding Patterns of Wind Energy Projects Investment Scorecards
European Wind Energy Market Overview Global leader in cumulative wind installations. However, lagging in growth and new capacity additions Wind Energy Market: Wind Resource Potential (Europe), 2009 Maximum Potential Source: Industry Sources and Frost & Sullivan. The United Kingdom has the highest wind speeds and maximum offshore potential. Wind Energy Market: Key Figures (Europe), 2009-2015 Note: All figures are rounded; the base year is 2009. Source: Frost & Sullivan Spain has one of the largest markets in Europe due to its feed-in tariffs and legislative environment Parameters 2009 2015 Total installed capacity 74,767 MW ~170,000 MW Market growth rate (y-o-y) 15.5% 12.8% Market stage Slow Growth Slow Growth New capacity (previous year) 10,055 MW 24,400 MW Incremental capacity leader Spain Offshore – The United Kingdom
European Wind Energy Market Overview (Contd…) Europe moves towards slow growth as other emerging regions overshadow its slow growth rates Emerging Markets (Asia Pacific) Time Markets characterised by exponential growth rates. Projects funded by domestic utilities and government. Wind Energy Development Growth Markets (United States) Slow Growth Markets (Europe) Total Installed Capacity: 41 GW Several independent power producers and geographic expansion. Focus on onshore and tapping offshore potential. Total Installed Capacity: 35 GW Several domestic and foreign utilities present. Onshore matures as offshore takes priority. Repowering emerges. Total Installed Capacity: 74 GW Wind Energy Market: Market Development (World), 2009 Note: All figures are rounded; the base year is 2009. Source: Frost & Sullivan Low High
Impact of Recession Europe’s growth was sluggish compared to the other regions such as North America and Asia Pacific. Although funds continued to flow, growth was not significant on a relative basis Wind Energy Market: Total Installed Capacity Share (World), 2008-09 Note: All figures are rounded; the base year is 2009. Source: Frost & Sullivan Increase over previous year’s share Decrease over previous year’s share No change Despite the recession, wind farms received €13 billion in investments of which 12 per cent was dedicated to offshore wind development. Inflow of Funds Continued The United States government allocated $1.05 billion in 2009 to promote wind energy of which 84 per cent of has been distributed among predominantly the European companies. Foreign Funds From accounting for more than 70 per cent of the wind turbine demand in 2005, Europe accounted for only 27 per cent of new turbine additions in 2009. This is due to competition from their Chinese counterparts and the slump in European market demand. European Wind Turbine Manufacturers Relegated Behind North America Europe Asia Pacific Rest-of-world Region 2008 2009 2008 2009 2008 2009 2008 2009 Share of Installations 22.3% 22.2% 53.7% 48.2% 21.4% 26.1% 2.6% 3.5% Year on year growth NA
Wind Capacity Factor The United Kingdom has the highest capacity factor in Europe. Increasing average capacity factor in Europe promises new installation additions in the upcoming years. Note: All figures are rounded; the base year is 2009. Source: Frost & Sullivan Wind Energy Market: Total Wind Installations and Average Capacity Factor (Europe), 2000-2009 Highest due to increase in offshore projects Note: All figures are rounded; the base year is 2009. Source: Frost & Sullivan With a growing offshore base, the average capacity factor is likely to reach 33 per cent by 2030. Wind Energy Market: Average Capacity Factor (Europe), 2009, 2015 and 2020 Note: All figures are rounded; the base year is 2009. Source: Frost & Sullivan and European Wind Energy Association (EWEA) Country Capacity Factor in 2008(%) Italy 15.7 France 18.8 The United Kingdom 30.9 Germany 20.9 Spain 21.7 Denmark 24.5 Capacity Factor 2009 2015 2020 Average Installed Capacity Factor 24.3% 26.5% 28.9% Average Onshore Capacity Factor 23.9% 25.2% 26.0% Average Offshore Capacity Factor 41.3% 41.6% 42.3%
European Wind Energy Market – Installed Capacity Europe is the only region to have sizeable capacity in offshore wind Wind Energy Market: Total Onshore and Offshore Capacity (Europe), 2009 Note: All figures are rounded; the base year is 2009. Source: Frost & Sullivan and EWEA Wind Energy Market: Cumulative Offshore Installations (Europe), 2000-2009 Note: All figures are rounded; the base year is 2009. Source: Frost & Sullivan and EWEA Slow growth Steep growth 8 year CAGR for Onshore Wind – 19.5% 8 year CAGR for Offshore Wind – 44.5% Offshore wind has a capacity factor, which is twice that of onshore wind. Since 2007, Europe has heavily concentrated in increasing offshore projects. The large coastline and regulatory environment have been supporting the growth of offshore wind. The United Kingdom has the maximum number of offshore installations on a global level Onshore Wind Installed Capacity 71.6 GW Offshore Wind Installed Capacity 1.9 GW
European Wind Energy Market –Offshore Wind Forecasts As offshore wind takes off and more projects come online, it is expected to drive growth in installed capacity Wind Energy Market: Total Offshore Installed Capacity Forecasts (Europe), 2010-2016 Note: All figures are rounded; the base year is 2009. Source: Frost & Sullivan Assumptions ( Scenario 1 – Offshore wind does not expand as expected and delay in consents in the United Kingdom largely affect the market. Frost & Sullivan Scenario – Offshore wind grows phenomenally in 2010, however, the market is unable to sustain growth through the forecast period. Scenario 2 – Although offshore wind has a flying start in 2010-11, growth does not spread to other areas as expected, which leads to a drop in the subsequent years.
Cost Competitiveness and Funding Patterns of Wind Energy The wind energy developers in Europe comprises primarily several leading utilities such as Enel, EDF and others. Wind Energy Market: Utility Investment Composition (Europe), 2009 Note: All figures are rounded; the base year is 2009. Source: Frost & Sullivan Increasing share of overseas investments Wind Energy Market: Investment Costs (Europe), 2000-2020 After a lull, the wind energy market picks up generating demand for turbines. Moreover, supply chain bottlenecks were high, which increased total cost. Note: All figures are rounded; the base year is 2009. Source: Industry Sources and Frost & Sullivan The investment costs of onshore and offshore wind are expected to decline gradually as economies of scale and technological advancements pave the way. After 2012, the gap between onshore wind costs and offshore wind costs is likely to reduce. Declining Investment Costs Wind project development is largely dominated by the major utilities of Europe which have generously invested in other European countries as well such as Germany, Italy, Spain and others.
European Wind Energy Scorecard (Wind Project Development) Most of the investment potential for onshore wind lies in Spain and for offshore wind in Denmark and the United Kingdom . 2016 2009 Germany Spain Denmark The United Kingdom Italy France Wind Energy Market: Investment Potential in Development (Europe), 2009 and 2016 Country High Low Source: Frost & Sullivan The potential is ranked based on the existing market status and the planned capacity in pipeline. The regulatory environment is also taken into consideration. Onshore Wind Investment Potential Offshore Wind Investment Potential Onshore Wind Investment Potential Offshore Wind Investment Potential
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