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2023

Global Onshore Wind Market Report

Key Regional Markets

Canada

Onshore Wind Capacity

15.3 GW

GDP (Current Prices) USD (2022)
2,139.84bn
GDP Growth Forecast (constant prices) (2023-2027)

1.76%

Currency
Canadian Dollar
Country Credit Rating (S&P)
AAA
Renewable Energy capacity (2022)
106.9GW
Onshore Wind Share in Renewables (2022)
14%
Renewable Energy Target
Canada aims to decarbonise the electricity grid by 2050 and reach 90% of electricity generation from renewable and non- emitting resources by 2030

Canada stands as a prominent leader in renewable energy, boasting a cumulative renewable capacity exceeding 106.8GW, with approximately 80% of its electricity generation sourced from renewable and non- emitting methods, including nuclear energy. Among these sources, hydropower has historically held a predominant position, closely followed by onshore wind, with solar power making smaller contributions.

In Canada’s ambitious pursuit of carbon neutrality by 2050, onshore wind power plays a pivotal role. It is regarded as a cost-effective technology, enjoying favourable market conditions and strong support from provincial authorities, notably in regions like Alberta. Presently, there is a high demand for onshore wind energy among corporate entities, facilitated through Power Purchase Agreements (PPAs). Moreover, the growing popularity of wind plus storage projects is set to further bolster the onshore wind pipeline, promising a robust expansion in the sector. GDP (Current Prices) USD (2022) GDP Growth Forecast (constant prices) (2023-2027) Currency Country Credit Rating (S&P) 2,139.84bn 1.76% Canadian Dollar AAA 106.9GW 14% Canada aims to decarbonise the electricity grid by 2050 and reach 90% of electricity generation from renewable and non- emitting resources by 2030

Pros

  • Investment tax credits (ITCs) of up to 30% for renewable energy technologies and 15% refundable ITC to clean energy investments made by non-taxable entities

  • Robust funding programs, including CAD3 billion for developing smart grids and upgradation of grid transmission network
  • Significant traction of corporate PPAs for wind plus storage projects

Cons

  • Delay in environmental approvals affecting project cost, hurting potential developers

  • Inadequate transmission infrastructure to connect renewable power plants to major cities

Renewable Energy Mix

Source: IRENA Renewable Capacity Statistics July 2023

Canada boasts one of the world’s cleanest electricity mixes, with renewables constituting approximately 70% of the generation mix as of 2022. This impressive share is primarily driven by hydropower, which is the dominant contributor, alongside onshore wind, and solar energy. Onshore wind power, in particular, has emerged as a significant player, marking a doubling of its contribution from 7% in 2012 to 14% in 2022. Notably, offshore wind energy has yet to make its presence felt in the Canadian energy landscape.

The rise of onshore wind can be attributed to proactive government initiatives and the positive market approach of regions like Alberta, where a substantial portion of wind farms is located. Despite this growth, the sector faces challenges stemming from regulatory hurdles that hinder its full potential.

Installed Capacity: Status and Trend

Trend in Installed Onshore Wind Capacity

Source: Preqin Global Report 2023: Private Equity

Private equity fundraising faces a challenging outlook over the short term.

Devalued public equities and fixed investments are already reducing overall portfolio value, thereby pushing private equity allocations closer to, or sometimes over, target levels, better known as the denominator effect.

As such, following a 34% jump in global private equity fundraising to $562bn in 2021, 2022F was anticipated to decline 21.5%, followed by a 2.7% decline in 2023F.

Modest growth in private equity fundraising is expected in the medium term, owing to a “higher for longer” interest rate environment as a result of persistent. inflation

Forecast increases in private equity fundraising in 2026F and 2027F are largely driven by North America, which is predicted to make up 70% of total funds raised by 2027F, up from 60% in 2021.

Demand Drivers

The growth of Canada’s onshore wind industry can be attributed to the strategic initiatives and policy support put in place by the Canadian government. Key efforts include the ambitious goal of decarbonizing the electricity grid by 2035 and collaborative efforts between federal, provincial, and local authorities to achieve a national carbon-neutral economy. To attract investor interest, the government introduced an Investment Tax Credit (ITC) system in Budget 2023. This system offers substantial incentives, providing up to 30% tax credits for renewable technologies such as wind, solar PV, and energy storage systems. The tax credit, starting at 30% in March 2023, is set to decline to 15% in 2024 and will conclude in 2034. Additionally, the budget outlines a 15% refundable ITC on investment capital costs made by non-taxable entities, including indigenous communities, municipally owned utilities, and Crown corporations, with an estimated value of $25.7 billion.

In alignment with the goal of increasing renewable energy penetration by 2030, the government is investing CAD 3 billion over 13 years in smart grid programs, upgrading transmission networks, supporting indigenous clean energy projects, and initiating offshore wind projects starting from 2023-24. Plans for a cross-Canada grid transmission are also in progress to enhance security and affordability. Provincial governments are actively implementing grid management policies, with initiatives such as Alberta’s Electricity Grid Displacement Factor (EGDF) introduced in March 2022. This policy incentivizes wind energy developers to renew and support their EGDF for the entire 8-year offset credit period, encouraging sustained investment in renewable energy.

Another significant initiative outlined in Budget 2023 is the carbon contract for difference (CCfD), designed to facilitate investment in a flourishing clean economy. This comprehensive CCfD strategy, complementing the existing CfD provided by the Canada Growth Fund, aims to enhance the predictability of carbon pricing, and stabilize revenues for renewable energy projects. This initiative creates a favourable market environment for both developers and investors, ensuring a stable and lucrative landscape for the renewable energy sector in Canada.

Market Opportunity

The growth of Canada’s onshore wind industry can be attributed to the strategic initiatives and policy support put in place by the Canadian government. Key efforts include the ambitious goal of decarbonizing the electricity grid by 2035 and collaborative efforts between federal, provincial, and local authorities to achieve a national carbon-neutral economy. To attract investor interest, the government introduced an Investment Tax Credit (ITC) system in Budget 2023. This system offers substantial incentives, providing up to 30% tax credits for renewable technologies such as wind, solar PV, and energy storage systems. The tax credit, starting at 30% in March 2023, is set to decline to 15% in 2024 and will conclude in 2034. Additionally, the budget outlines a 15% refundable ITC on investment capital costs made by non-taxable entities, including indigenous communities, municipally owned utilities, and Crown corporations, with an estimated value of $25.7 billion.

In alignment with the goal of increasing renewable energy penetration by 2030, the government is investing CAD 3 billion over 13 years in smart grid programs, upgrading transmission networks, supporting indigenous clean energy projects, and initiating offshore wind projects starting from 2023-24. Plans for a cross-Canada grid transmission are also in progress to enhance security and affordability. Provincial governments are actively implementing grid management policies, with initiatives such as Alberta’s Electricity Grid Displacement Factor (EGDF) introduced in March 2022. This policy incentivizes wind energy developers to renew and support their EGDF for the entire 8-year offset credit period, encouraging sustained investment in renewable energy.

Another significant initiative outlined in Budget 2023 is the carbon contract for difference (CCfD), designed to facilitate investment in a flourishing clean economy. This comprehensive CCfD strategy, complementing the existing CfD provided by the Canada Growth Fund, aims to enhance the predictability of carbon pricing, and stabilize revenues for renewable energy projects. This initiative creates a favourable market environment for both developers and investors, ensuring a stable and lucrative landscape for the renewable energy sector in Canada.

Outlook

Source: BNEF Global Wind Market Outlook

Canada’s onshore wind industry faces notable challenges in the pursuit of its 2050 decarbonization goals. Projections by BNEF suggest a slow growth trajectory, with an average annual capacity addition of 712MW between 2024-2030, showing a declining trend in capacity additions year-on-year. This sluggish progress is primarily attributed to a weak project pipeline, hampered by cumbersome environmental approval processes that lead to delays in project commencement. Stringent ecological assessments, as exemplified in Nova Scotia, have caused significant setbacks, impacting project costs and discouraging potential developers and investors.

Furthermore, the onshore wind sector is impeded by inadequate grid and transmission infrastructure, limiting its expansion potential. However, Canadian authorities are taking steps to address these challenges. Budget 2023 focuses on strengthening grid management and initiating a cross-Canada electricity grid, aiming for increased sustainability, energy security, and affordability. Additionally, the sector’s growth prospects are bolstered by the rise of hybrid projects, including wind plus storage and wind plus solar and storage initiatives, gaining momentum in the market.

The future dynamics of Canada’s onshore wind industry hinge on several factors: streamlined project construction facilitated by policy support, a substantial increase in battery storage capacity, the proliferation of hybrid projects, and a rise in clean power offtake through PPAs. These developments, coupled with enhanced grid infrastructure, hold the key to unlocking the full potential of Canada’s onshore wind market and accelerating its contribution to the nation’s decarbonization efforts.

Key Regional Markets
Global Onshore Wind Report
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