The European wind power market is expected to register a CAGR of approximately 6.11% during the forecast period. Factors, such as the declining cost of wind power generation, growing sensitivity toward environmental issues, and support from various governments around the world, through financial incentives is expected to increase the demand for wind power during the forecast period. On the flipside, substitution from solar energy and gas-fired power plants is expected to continue to restrain the market. The solar energy industry achieved cost reduction at a significantly higher rate than the wind energy sector.
- The global offshore wind power sector is dominated by European countries, especially by the United Kingdom and Germany. In 2018, Europe’s new offshore wind farm investments totaled EUR 10.3 billion, representing almost 24% of the total new power investments and a 37% increase from the 2017 levels. The United Kingdom financed USD 5.9 billion of wind investments in total, representing 22% of total financing activity for the construction of new onshore and offshore wind farms. With 4.2 GW of new offshore wind projects reaching FID, Europe witnessed the second-highest capacity financed in 2018, after 2016.
- In Europe, Germany had the highest installed capacity in 2019 and is further expected to be the largest market during the forecast period bolstered by constant growth in onshore wind power additions and upcoming offshore wind power projects.
Key Market Trends
Offshore Segment to Witness Significant Growth in the Market
- The global offshore market remained stable in 2018 with 4.49 GW of new additions, almost the same as in 2017. The total cumulative offshore installations reached 23.36 GW, representing a 23.74% increase in cumulative offshore wind installed capacity over the previous year.
- Europe’s total installed offshore wind capacity reached 18.498 GW at the end of 2018. Including sites with partial grid connection, there are now 105 offshore wind farms in 11 European countries and 4,543 grid-connected wind turbines. In 2019, the new offshore installation across Europe increased to 3.6 GW, taking the cumulative installed capacity to 22 GW. Additionally, the average rating of the turbine was 7.2 MW. The offshore wind turbine market is dominated by the United Kingdom, Germany, and China. The United Kingdom represented approximately 34.4% of the total offshore installed capacity in 2018.
- In 2018, Europe’s new offshore wind farm investments totaled EUR 10.3 billion, representing almost 24% of the total new power investments and a 37% increase from the 2017 levels. The United Kingdom financed USD 5.9 billion of wind investments in total, representing 22% of total financing activity for the construction of new onshore and offshore wind farms.
- With 4.2 GW of new offshore wind projects reaching FID, Europe witnessed the second-highest capacity financed in 2018, after 2016.
- Some of the major drivers for the growth of the offshore wind industry in Europe are major developments in technology, which led to a drop in the production cost of offshore wind farms, making them comparable to the onshore wind farms, in some cases, in terms of economic performance. Hence, the offshore wind power market is expected to be on the positive side during the forecast period.
- However, China, which registered a maximum installed offshore capacity during 2018, is expected to have slow growth in 2020 amid coronavirus outbreak. The virus outbreak is likely to severely affect the growth of the offshore wind segment across the world, even Europe.
Germany to Dominate the Market
- As of 2019, Germany has Europe’s largest wind power installed capacity of over 61.50 GW. The country is also considered among the top three markets in the onshore wind power industry. In 2019, Germany added up to 2,189 MW of new wind power, with 1,078 MW onshore installation and 1,111 MW offshore installation.
- As of 2019, the cumulative number of wind turbines installed in the country reached 29,456, with 325 new wind turbines of an average power rating of 3.3 MW installed in the country. In 2018, the country successfully connected its largest wind farm, Borkum Riffgrund II (465 MW).
- In 2019, the country accounted for 30.6% of new offshore wind installations in Europe. The country also expected to install over 700 MW of offshore wind capacity, annually, during 2019-2030. The growth in the offshore segment is driven by technological advancements, which resulted in the reduction of the production cost of offshore wind farms, making them comparable to the onshore wind farms, in some cases, in terms of economic performance. Hence, the offshore wind power market in the country is expected to be on the positive side during the forecast period.
- Moreover, the country has set a target to achieve 65% of the power generation from renewable energy and plans to shut down nuclear power plants by 2022 and phase-out coal power by 2038. The expected growth in the offshore wind industry is insufficient for achieving this target. Adding to this, the slowdown in the onshore wind industry has become a significant concern for meeting the renewable energy target.
- In 2019, the German Economy Ministry held a summit to address a dramatic slowdown in the wind energy sector that is endangering the country’s climate goals. The key problems are the effect of policy mistakes and growing public resistance. Further, legal actions against German wind energy projects multiplied in recent years, leading to a dramatic decline in the number of new onshore wind farms.
- During the first nine months of 2019, developers installed 150 new wind turbines across the country with a cumulative capacity of 514 MW – over 80% below the average build rate in the past five years. One of the major reasons for a significant decline in the new installations is the lack of land availability.
- Overall, a full-fledged recovery of the wind sector is unlikely to be witnessed in the short-term scenario. Furthermore, by introducing a market-based tendering model for new capacity, the government forced the industry to cut costs and face stronger competition. Out of the 1,350 MW offered by the government in the first half of 2019, only 746 MW materialized due to a lack of participation in the public auction rounds. Hence, the German wind power market, once a blooming and dominating region, is likely to remain a stagnant market during the forecast period.
Some of the key players are Acciona Energia SA, Orsted AS, EDF SA, General Electric Company, Vestas Wind Systems AS, E.ON SE, and Siemens Gamesa Renewable Energy.
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