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Global Onshore Wind Market Report


The global onshore wind market is entering a phase of recovery, marked by accelerated project approvals and strategic revisions in OEMs pricing strategies. While the energy crisis of 2022 underscored the imperative of energy transition, European countries have led the way by revitalizing permitting processes. Despite this positive momentum, the industry grapples with challenges related to development costs. The recovery trajectory is also influenced by the dynamics of long-term power purchase contracts and the imperative for new projects to offer higher prices, ensuring sustainable offtake and capacity expansion.

This section reviews some of the major factors shaping the onshore wind power’s business outlook.

Capacity Addition

The surge in onshore wind power capacities is propelled by strategic policy initiatives aimed at ushering in a transition to renewable energy sources. The energy crisis of 2022 acted as a catalyst, intensifying efforts among policymakers and investors to accelerate this shift. With growing recognition of the severe impacts of climate change, renewable energy investments, particularly in wind and solar power, have gained paramount importance. Among these, onshore wind energy has emerged as a frontrunner due to its effectiveness and cost-efficiency, drawing substantial attention from policymakers worldwide.

One notable instance of policy-driven impetus is the UK government’s step at expediting the approval process in cases of onshore wind farms involving public consent. This move was pivotal, aligning with the nation’s ambitious goal of achieving a net-zero power sector by 2035. Simultaneously, European countries expedited procedural approvals, resulting in a remarkable 60% increase in German onshore wind capacity during the first half of 2023. Additionally, the United States witnessed significant growth dynamics shaped by the Inflation Reduction Act (IRA). This legislation incentivized the use of domestically sourced components in onshore wind projects, potentially lowering project costs and bolstering the sector’s competitiveness.

The Global Wind Energy Council’s projections provide an optimistic outlook. The council anticipates an average annual capacity addition of 100GW globally, as highlighted in Figure 5 1. This estimation relies on substantial growth in key markets, with China slated to add 300GW between 2023 and 2027, followed closely by Europe with an estimated addition of about 100GW. The promising prospects extend to the entire wind energy sector, encompassing both onshore and offshore installations. Favorable policy frameworks and conducive business conditions could pave the way for the addition of approximately 1TW of new capacity by 2030.

China’s wind energy market stands out as a dominant force, expected to contribute nearly 60% of the global onshore wind capacity addition by the end of 2023. This remarkable surge in Chinese wind power projects results from catching up with initiatives delayed by the disruptions caused by the COVID-19 pandemic. Despite these encouraging developments in 2023, concerns loom on the horizon. Challenges such as high capital costs, soaring material expenses, and procedural delays pose potential threats to future capacity buildouts. The International Energy Agency (IEA) has cautioned about a possible 5% decline in onshore wind capacity post-2023, underscoring the need for proactive policy interventions and sustained support to ensure the industry’s vitality.

In conclusion, while the onshore wind industry experiences robust growth driven by strategic policy reforms and expanding capacities, addressing the challenges ahead is crucial. To sustain this momentum, policymakers, investors, and industry stakeholders must collaboratively navigate these challenges, fostering an environment of innovation, efficiency, and resilience within the global onshore wind sector.

Costs Impacting Pipeline

The onshore wind industry faces a complex landscape shaped by rising costs, impacting the financial health of Original Equipment Manufacturers (OEMs) and, consequently, the viability of projects. Between 2020 and 2022, a sharp spike in costs, driven by various factors, significantly impacted OEMs’ financial positions, leading to impaired returns for key players. While there is hope for relief in terms of commodity prices, the horizon reveals impending price revisions for wind turbines and related equipment.

A glaring example of this cost surge is evident in Vestas’ onshore wind turbine pricing. In Q4 2022, the company’s average contracted price soared to €1.15 million/MW, a stark contrast to the €710,000/MW charged in 2000 for comparable periods. This surge, echoing a general 40% increase in onshore wind turbine prices outside China since the pre-pandemic era, illustrates the sector’s financial strain.

However, the challenges faced by OEMs extend beyond material inputs and capital concerns. Operational and Maintenance (O&M) issues related to new wind turbine configurations pose significant hurdles. Siemens, a leading OEM, projected a staggering $1.75 billion cost for addressing wear and tear complaints in its flagship turbines. Additionally, the company anticipated a $5 billion loss in 2023 due to repair and replacement costs. Vestas shared a similar outlook, with order backlog and contractual O&M servicing agreements affecting financial performance, despite improvements in supply chain and pricing strategies.

The stress on profitability and price revisions by OEMs casts a shadow on project viability. Typically, developers finalize fixed contracts for turbines at the project’s initiation stage. However, the challenges faced by OEMs could jeopardize these contracts, leading to uncertainties in project pipelines. This concern was exemplified in Germany, where the government proposed allowing onshore wind developers (5GW worth) to abandon contracts due to cost-related unviability, enabling them to re-enter subsequent auctions offering higher prices. Although the plan faced industry criticism and was not implemented, it highlighted the dynamics at play in the onshore wind business.

The critical nexus between costs and Power Purchase Agreement (PPA) prices further exacerbates challenges. Studies by S&P Global Commodity Insights project a rise in the break-in levels for a typical 10-year PPA in German onshore wind power projects starting in 2025. This rise, extending beyond wholesale power prices and capture rates, is expected to persist for at least the next two years, reflecting the rigid inflationary pressure on new projects under development.

In navigating these challenges, stakeholders must engage in collaborative efforts to strike a balance between profitability, affordability, and sustainability. Proactive policy interventions, innovative solutions, and streamlined regulatory frameworks are essential to ensuring the resilience of the onshore wind industry amid evolving cost dynamics.

Equipment Manufacturing and Supply

The rapid expansion of onshore wind capacity has intensified the spotlight on the industry’s supply chain, amidst evolving policies and shifting market dynamics. Despite challenges, the onshore wind turbine market remains optimistic due to proactive efforts by government bodies to bolster project pipelines. However, the industry’s resilience hinges on ensuring the timely, sufficient, and cost-effective availability of equipment, a critical concern for developers, regulators, and investors.

China continues to play a central role, serving as the global hub for wind turbine manufacturing and supplying crucial components. In the post-pandemic landscape, developers have sought diversification, exploring alternative sourcing options in countries like India in the Asia-Pacific region and MENA countries. This diversification strategy aims to enhance supply chain resilience and mitigate dependence on a single region.

However, challenges arise when considering major policy initiatives such as the Inflation Reduction Act and Made in Europe policies. Both initiatives, while aiming to bolster domestic industries, create dependencies on imports due to the lack of immediate domestic capacities. Disruptions in free trade flow triggered by these localization policy incentives can lead to supply bottlenecks, complicating the industry’s growth trajectory.

Trade barriers, especially between China and the US/Europe, exacerbate challenges, directly influencing costs. Competitive subsidies from European and US policies further complicate the situation, conflicting with the principles of free trade. While the overarching goal is to achieve supply security through indigenous investments, the current framework risks sub-optimization due to these conflicting policies.

Navigating these challenges requires a delicate balance between regional policy objectives and global supply chain dynamics. Collaboration between nations, open dialogue, and a focus on fair trade practices are essential. Sustainable solutions must prioritize both supply chain security and adherence to free trade fundamentals. Only through strategic coordination and shared objectives can the onshore wind industry establish a robust, resilient supply chain, ensuring sustainable growth in the face of evolving global policies and market demands.

Figure 5 2 – Reginal breakup of wind turbine manufacturing (GWEC, 2023)(1) Others refers to Asia Pacific excluding China and India (2) China’s share includes the capacity of western turbine OEMs (3) Manufacturing capacity refers to turbine nacelle assembly capability and does not represent actual production