Wind power outlook bleak for U.S., Europe

The outlook remains bumpy for the wind-power industry after regulatory turmoil along with flattening demand in China hampered growth in key markets last year, according to a report from the Global Wind Energy Council released Tuesday at the European Wind Energy Association’s annual event in Copenhagen.

Potentially sluggish demand after presidential elections in the U.S. and Europe’s debt troubles are further expected to weigh on the industry’s growth potential in coming years, while new markets in South America and Canada likely will make up for lost momentum.

The sector grew 6% in 2011, with the majority of new wind turbines being installed outside traditional wind farm markets like Europe and the U.S. Before the financial crisis undercut funding and triggered cuts in governmental subsidies, the sector as a whole saw growth rates of 34% and 45% in 2008 and 2009 respectively.

“Asia continues to drive global growth, but the European market is stable for now. Latin America is the thing to watch,” said Steve Sawyer, secretary general at GWEC.

China was still the biggest market for new wind power farms with 43% of the total capacity installed in the country. That was down, however, from a 50% share last year.

“We have reached a flattening phase in China after doubling our capacity each year. The government has changed focus from quantity to quality,” said Liming Qiao, China director at GWEC. “Another challenge for the Chinese wind energy industry is the grid. It has always been discussed as the most serious challenge, but the lack of connection is being improved.”

The U.S. market, which plays an important role for companies like Siemens Wind Power, a division of Siemens AG DE:SIE +0.24% , and Vestas Wind Systems AS DK:VWS -3.96% , added 33% more capacity in 2011 than in 2010, but industry players are certain dark clouds looms over the American wind energy industry.

A federal production tax credit for new wind farms expires at the end of the year with little chance for an extension before the November presidential election. Without a tax credit extension, a substantial drop in demand for new turbines installations is widely expected, industry officials said.

In Europe, capacity installed in 2011 was marginally higher than 2010. With tighter national government budgets leaving less room for wind energy subsidies, growth in the sector will stabilize over the coming years in Europe, the projections showed.

But where the U.S. and European markets leave demand quiet for a while, Canada and Brazil will partly make up for lost installation and interest. The Latin American market is expected to almost fourfold from 2011 to 2016 and Brazil will contribute about three quarters to that, the global growth report said. Canada is expected to almost double its installed capacity by 2015.