Oil Price Rises Increase Attraction of Wind Farms
The wind energy industry is growing rapidly on the back of technological advancements, political will and government subsidies. Utility companies, independent power providers, institutional investors and oil companies are all seeking to capitalize on lucrative support mechanisms to unlock greater commercial and competitive advantages, meet their renewables targets and boost their green credentials.
Strong growth therefore continues on the back of record sustainable energy investments, yet record wind farm development costs and valuations are now driving "dotcom" comparisons as the economics of wind farming projects come under increasing pressure. However, a new series of reports reveals that wind farm projects can still be profitable and competitive under very specific financial, technical, regulatory and legislative conditions.
Concerns about the security of energy supply and climate change, rising demand for power as well as record energy commodity prices are all driving the development of renewable energy generation. While the total power output of these energies remains very small compared with traditional power generation, the growth of global wind energy generation has outpaced that of total global energy generation 10-fold over the past fifteen years. With the majority of new capacity now outside Europe, wind power has become one of the broadest-based renewables technologies with installations in more than 70 countries.
Wind is often considered an unreliable generation technology, yet new research shows that while wind turbine load factors might vary from site to site and country to country, they need not be unpredictable. Turbineload factors are typically very consistent, albeit low. Over the past eight years, European wind turbines have returned consistent load factors of 18-20%. This consistency and predictability have played a large role in underpinning recent record investment levels in wind assets.
Despite recent escalating wind power capital costs, wind is still very competitive against coal and gas. When the cost of carbon is ignored, gas and coal are cheaper than wind. However, in markets where fossil fuels do carry a carbon penalty, wind power beats thermal power generation. Therefore, as primary energy costs soar the attraction of wind power as a generation technology with no fuel price risk has never been greater. In the current context of soaring generation costs and until true demand-pull can be created, it is however worth remembering that the wind industry is increasingly driven by public policy trends and is at the mercy of government programs that drive artificially stimulated demand.
Related Reading: The Renewables Landscape: Wind at The Threshold
Related Reading: Wind Power Market Entry Strategies – Build or Buy?
