Wind development has recently stalled but is expected to rebound driven by policies for energy independence and decarbonization, in combination of a realization of projects delayed by COVID. After a year of lackluster growth, the global onshore wind power market is headed for a sharp rebound in capacity addition. Most of the upcoming growth, by end-2023 or mid-2024, will be from projects stalled so far in permitting delays. The renewed momentum can be credited to the policy attention on the matter. The energy crisis reinforced the case for energy transition, and onshore wind has an instrumental role. The ambitious renewable energy and decarbonization targets add to the urgency in adding capacities. Such goals impose different levels of demand across countries and regions. The pressure to decarbonize the power sector is almost equally critical for countries globally.
Wind energy capacity is growing at different rates across countries and regions. Cornering 40% of the globally installed 836GW in 2022, the Chinese market maintained the momentum. In the five years ending 2022, installed capacity China registered a CAGR of 17%. For the same period, the North American and European region capacities had CAGRs at 10% and 7% respectively. Notably the top countries in installed onshore wind power capacity lag in penetration of wind power in total grid supply. For instance, the country with the highest wind energy penetration in grid is Denmark (55%) and not China which has the highest installed capacity base.
While penetration takes time, cost competitiveness continues to hold strong. Newly built onshore wind farms are competitive to the coal and gas-fueled capacities across many developed and emerging market economies. This is despite the pressure on costs from material inputs and development challenges. Regulations stipulating grid parity- based pricing for wind power plants, such as those in China, are indicative of the progressive shift in cost balance of the power mix. Many other markets are adopting technology- neutral auctions partly for the same reason, so that the mature technologies like onshore wind are weighed against all other competitive options of power procurement.
There is, however, a cost pressure for the onshore wind industry. Besides a macroeconomic environment of high commodity prices (such as steel) and rising interest rates, the wind turbines selling prices went for an upward revision across all major manufacturers. Most of the projects thus face a higher capital cost. Even if for the short-term, the impact is on the project pipeline and capacity commissioning schedule. The cost challenges manifested through various market developments such as under-subscribed auctions, higher risk premiums and even select ad hoc (later cancelled) policy plans of re-auctioning at better prices. A rising market orientation in procurement would mean commensurate price adjustments in the power purchase contracts. It thus helps that a rising number of market-linked procurement of renewable energy is led by the direct corporate power purchase contracts.