Analysts: Wind Power Investments to Reach $101 Billion by 2020 as Component Costs Drop

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Written by Richard Finlayson, Senior International Editor for Industrial Info Resources (Sugar Land, Texas)--Renewable energy sources have seen exponential growth since the turn of the century, and wind power is the leading example. Installed global wind power capacity is set to grow from about 365 gigawatts (GW) in 2014 to 651 GW in 2020, according to research by energy and healthcare market analyst firm Globaldata (New York).

Driven by demand growth, global investment in wind power projects will increase from $70 billion in 2013 to $101 billion by the end of 2020, according to Globaldata.

Wind turbine manufacturers produced about 11% of wind turbine gearboxes, 48% of rotor blades and 43% of generators in-house in 2013. "Depending on wind power component supplies, turbine manufacturers make strategic decisions over whether or not to produce the equipment in-house," said Prasad Tanikelia, a Globaldata senior power analyst. He added that some manufacturers prefer to develop components within their business structure to avoid issues with quality control and design confidentiality.

The growth in the global wind power market is forcing turbine manufacturers to seek multiple component suppliers to ensure smooth production, leading to a number of agreements being drawn up between turbine manufacturers and their suppliers. The analyst sees component costs decreasing as a result of reduced raw material prices. A low growth rate is predicted for the wind turbine components market through 2020, despite investment in wind power increasing significantly by the end of 2020.

Another report at the end of 2014 by Navigant Research (NYSE:NCI) (Chicago, Illinois) said: "Oversupply is allowing wind turbine manufacturers to more easily adjust what components they produce in-house, what is outsourced, and when a blend of both is advantageous for cost, technological or geographic reasons. Although many manufacturing facilities are running at less than full capacity, product innovation, lean manufacturing and outsourcing are resulting in a highly competitive wind industry ready for the challenges of today's and tomorrow's wind markets."

In the past two years, more flexible sourcing strategies across the wind power supply chain have resulted in cost reductions, enabling greater geographic market access, while reducing risk and ensuring profitability for wind turbine vendors and their partners in the component value chain.

According to a report by Navigant, while demand in 2014 is projected to be less than 47,000 MW, annual turbine manufacturing capacity is likely to exceed 71,000 MW.

Capping all this intense growth activity in the wind power sector is the claim by the International Renewable Energy Agency (IRENA) (Abu Dhabi, United Arab Emirates) that the cost of generating power from renewable sources has reached parity, or dropped below the cost of fossil fuel-fed power for many technologies.

IRENA's "Renewable Power Generation Power Costs in 2014" report says that biomass, hydropower, geothermal and onshore wind are all competitive, or cheaper, than coal-, oil- and gas -fired power stations, even without financial support (subsidies) and despite falling oil prices.

Renewables are competitive, even when integrating high shares of variable renewable into the electricity, IRENA says.

The "variable" factor remains as a vulnerability to over-claiming for renewables, as traditional base-load power is required as a match for energy security when the wind does not blow, the sun does not shine and the dams dry out. But, the intense activity in energy storage and battery technology development, could see that vulnerability dramatically reduced by 2025.

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, three offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.