Dramatic changes in wind energy industry over last two years

As EWEA CEO Christian Kjaer prepares to step down and hand-over to Thomas Becker on 1 April, he gives his thoughts on how the industry has changed over the past two years to Gail Rajgor, Managing Editor of Renewable Energy Focus…

Market over-capacity and the financial crisis

A dramatic shift has taken place for the fortunes of the global wind industry, when comparing it today with how it was just a few years ago, said Kjaer. If we take the last two years, we’ve gone from a seller’s market, if you look at wind turbines, to a buyer’s market, Kjaer told Rajgor.

It’s very clear that globally there is an immense amount of over-capacity. We invested in production capacity in anticipation that the market would continue to grow dramatically globally, but it hasn’t. That means we’ve had a very dramatic change in the whole supply/demand balance in the sector, he said, and the change has happened very quickly.

The result is that the cost of wind energy has come down, but at the same time the sector is facing challenges, aggravated by the financial crisis, which has meant banks are more reluctant to lend, he said.

Wind power is cost-competitive

But the fundamentals of the technology continue to be very strong, Kjaer countered. We have arrived at a point where onshore wind has proven itself to be very cost-competitive, and has the biggest advantage in that it can scale up very rapidly and reduce investor exposure to carbon and fuel prices. This is the long term fundamental that makes me absolutely certain this technology has a bright future ahead of it, he commented.

Critical short-term challenges

In the short to medium term there are some critical challenges – the cost and availability of capital, and the fact that we’re not building infrastructure fast enough, he outlined.

If we want to make the best of wind power technology, we need to get to grips with infrastructure – it’s not being built fast enough, and it’s not co-ordinated well enough.

We will see a lot of bumps on the road in the short-term, but the medium to long-term prospects, certainly for onshore wind, are very good, because fundamentally the technology is very affordable, it’s extremely competitive, and you don’t have to worry about fuel prices 20 years from now, he said.

Competing with fossil fuels

When it comes to subsidies, Kjaer held up the example of New Zealand – a country which has passed legislation stipulating the end of all energy subsidies to the energy sector – not the renewable energy sector, the whole energy sector.

In the EU today, 80% of energy subsidies are still paid to nuclear energy and fossil fuels, he notes.

If we had a level playing field in which we removed all these subsidies, you would need much less subsidies to introduce newer, smarter and cleaner renewable energy technologies, and, as the most competitive of the new renewables, wind energy most likely would not need any subsidies.

These are just some of the highlights from the full interview which appeared on Renewable Energy Focus. Click here for part I, and here for part II which explores Kjaer’s thinking on local content requirements, and the future of the sector.