Wind passes the tipping point

“Wind is not a hobby any more, it’s a serious business” says Herbert Peels of GE. The evidence backs him up, as Janet Wood reports.

Back in June, speakers at the British Wind Power Association’s annual meeting speculated that the industry was reaching the “tipping point”: soon it would be holding its own within the power industry. Just five months later, that shift was in evidence at the European Wind Energy Association’s (EWEA’s) meeting in London: Patricia Hewitt, UK Minister for Trade and Industry, insisted “we mean business” on wind power and the exhibition hall saw major energy industry players competing for investment dollars.

What changed between June and November? Perhaps most significant in the long term was Russia’s decision to ratify the Kyoto Protocol. European utilities were already preparing to deal with a carbon-constrained future: “The Kyoto protocol and meeting those obligations is one of the top five worries” of European utilities, noted Jayesh Parmar, VP for utilities market restructuring at consultant Capgemini, which canvasses European utilities’ views on deregulation in its annual Global Utilities Survey, and examines market statistics in its Observatory.

What is more, it is clear US utilities are also taking post-Kyoto constraints very seriously. As our story on page 13 reveals, most anticipate limits on carbon emissions within the next decade.

The Bush administration may be sceptical about the role of renewables, but many states are setting capacity targets
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The scepticism of the Bush administration notwithstanding, this broad acceptance of the post-Kyoto situation is reflected in the US on a state level. Some 18 states have set renewables targets ” by no means all of them at the Democratic end of the political spectrum. And although moves to introduce a Federal ‘portfolio standard’ requiring a proportion of renewables failed, there was broad support for extending the production tax credit that subsidises wind power production. Apart from its credentials for the green lobby, the opportunity to build expertise and manufacturing capability in a growing sector, and wind’s role in reducing foreign energy dependence, gave it credibility across the political spectrum. That means that even if the US never officially signs up for Kyoto, the US wind industry could still remain the largest in the world.

What else has changed? Investment decisions on conventional generation are far from clear cut at present. “Price signals are not good enough,” said Parmar, echoing similar comments from other industry sources. Capgemini’s annual survey reveals that electricity markets are developing from competition based on price to react more like other commodity markets, so “forces of supply and demand are beginning to establish prices” and respond to recent changes in oil and gas fuel prices and constraints in fuel supply. But there is concern that the market has not developed far enough to secure investment in capacity in the long term. “It has moved on from central planning and the decision-making process has been left to market and the players,” Parmar explained. “The levels of price and liquidity are good for six to twelve months, but signals are weaker moving onward from there. And there is still a concern that regulators are too keen to interfere and that increases the perceived risk.”

For wind, it may be that the investment climate is at least as certain as for conventional capacity. The proof is in EWEA’s exhibition hall, where the power industry’s major manufacturers have grabbed turbine companies to secure a share of the market.

GE Wind Energy moved in early. Herbert Peels, general manager for Europe, points out that wind is one sector where power companies can make long term assumptions on income. The UK’s Renewables Obligation regime, for example, allows companies to plan out to 2015.

Peels said the presence of big players like GE helped overcome resistance in the conventional power market. What is more, a company like GE already understood its customers concerns on headline issues like grid compatibility. “It makes the whole discussion much easier,” he said. “When we focus on grid compatibility we have systems that comply with the grid code and we can take a system approach to optimise power quality.”

The company’s Andreas Wagner agreed: “There are still myths,” he said, “and you find people have in mind an old turbine that, for example, can’t fulfil grid requirements. But GE has lots of competencies in this area and there has been lots of development. In some aspects of operation modern wind turbines have better characteristics than some gas turbines”

At this stage of development there is work to be done and opportunities for fast moving companies to make their mark. “We see it as the company’s task to bring down costs,” Peel explained. “New materials we expect in five to ten years, and new control systems in three to five years.” Larger turbines will also be on the way.

“Ten or twenty years ago this was a playground for idealists,” said Wagner, “but GE’s entry is confirmation that wind is becoming mainstream and it’s a reaffirmation that it is serious business. In the next two years it will grow to a $10 billion market.” The wind industry is a player in the world power game at last.

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