Wind power has evolved from its position as an emerging fuel source 20 years ago to become a commercial generating technology in more than 80 countries.

Technological developments paved the way for more effective, reliable equipment and machinery, making wind one of the fastest-growing energy sources in the global market. The exponential growth of the wind energy market is fuelled by depleting fossil fuel reserves, the declining cost of wind energy generation, and growing financial support for environmental initiatives from governments across the world.

The global wind power market witnessed significant growth from 2006 to 2016. Global installed wind power capacity increased from 74.6GW in 2006 to 496.7GW in 2016, at a compound annual growth rate (CAGR) of 20.9%. There was a total addition of 57.6GW in 2016 alone and global capacity is expected to reach 1,024.1GW by 2025.

China, US lead global wind power market

China, the largest wind power market in the world, had a total installed capacity of 170GW in 2016. China overtook the US as the number one wind power market in terms of new annual installations in 2010, adding 19GW of wind capacity that year. Supportive government policies, including an attractive concessional programme, and the availability of low-cost financing from government banks, are the main reasons for the success of the Chinese wind power market. It is expected that China will continue to promote wind power in order to reduce its carbon footprint and increase rural electrification.

The US was the second-largest wind power market in 2016 by cumulative installed capacity base and annual capacity addition. It was the largest until 2009, but was surpassed by China in 2010 after a 43% decline in its annual installations. The effect of the economic slowdown and uncertainties due to lack of long-term policies supporting the wind sector are responsible for this decline. The US recorded annual wind power installations of 8.2GW, and reached a cumulative installed capacity of 82.8GW by the end of 2016.

The key growth drivers in the US market are federal tax credits, loan guarantees, federal grants, state-level renewable portfolio standards, and state-level feed-in tariff (FiT) programmes, as well as other state and federal support initiatives.

Germany, the third-largest wind power market globally, and the largest market in Europe, had a total installed capacity of 50.3GW at the end of 2016. The country has a well-structured support system for the promotion of wind power and offers separate incentives for onshore, onshore repowered and offshore wind projects. Germany is promoting wind power on a large scale, with more than 15GW expected to be added between 2015 and 2020.

Emerging markets

Major wind power markets like the US, Germany, Spain and the UK are expected to experience a slowdown during the 2017–25 forecast period. Emerging markets from Asia-Pacific, and South and Central America such as Thailand, Argentina, South Africa, the Philippines, Ukraine, Brazil, Republic of Korea and Mexico are among the nascent wind markets that are set to expand rapidly in the forecast period.

The global wind power market has grown from a cumulative installed capacity of 74.6GW in 2006 to 496.7GW by the end of 2016. The market grew at a CAGR of 20.9% during 2006–16. The global wind power installed capacity is expected to grow at a CAGR of 8.0% during 2017–25 and reach a cumulative installed capacity of 1,024.1GW by 2025.

The Asia-Pacific region is the largest market in terms of cumulative installed wind power capacity, with 216.4GW in 2016, and is expected to reach 445.6GW in 2025. Europe and North America contributed significant capacities too, with 163.7GW and 98.2GW respectively in 2016. South and Central America, and the Middle East and Africa had fewer capacities, but are expected to grow in the coming period.

China is currently home to more than a third of the world’s wind power capacity. The country had exceptionally good capacity additions during 2009–11, and also in 2014 and 2015. Being the largest manufacturing centre for turbines and components, and abundant in high-windspeed sites, China has become a world leader in terms of installed capacity.

The US and Germany have had large capacities since the early 2000s, and have excelled in terms of wind power technology and achieving better efficiencies. It was only in 2009 and 2010 that China overtook Germany and the US, respectively, in terms of installed capacity.

Global wind power generation

The increased number of installations has augmented wind power generation globally, which increased from 136.8TW/h in 2006 to 977.2TW/h by 2016. Offshore generation accounted for 43.0TWh of total wind generation in 2016. Global wind power generation is expected to grow during 2017–25 to reach 1,996.1TWh in 2025, with 90.9% of generation expected to be accounted for by onshore wind farms and the remainder from offshore wind plants.

Global power demand has increased considerably from 2010. It is estimated that it will increase from 21.584 million GW/h in 2017 to 26.690 million GW/h by 2025 − meeting this demand will require an increase in the pace of the capacity additions. The planned capacity additions would suitably need to fulfil peak demand requirements, meet emission control and provide the affordable power. This drives the need of generating power from all possible sources including wind. Cumulative global wind power installations totalled 496.7GW in 2016, and by 2025 the wind power capacity installations are expected to reach 1,024.1GW.

The wind power market, like other renewable sources, is also primarily driven by government support policies and regulations. Across all regions, governments have introduced, or are in the process of formulating, policies to promote renewable energy development.

These support policies are the main force behind market growth. For example, in North America the wind market is driven by federal tax credits and state-level renewable portfolio standards protocols. Production tax credits have traditionally played a vital role in boosting wind power capacity in the country, helping make it the second-largest wind power market in the world. Different countries set renewable energy targets to secure a stable energy supply, promote economic efficiency and enhance environmental compatibility.

Growth drivers and costs

Financial incentives such as FiTs, tax credits, rebates and accelerated depreciation have been the main methods by which governments drive the growth of wind capacity installations in most major markets. FiT schemes have been deployed in most countries to increase grid-connected wind installations.

Better FiT rates in the UK and Germany have resulted in increased wind installations. Tax credits and Global energy demand is rising quickly, especially in developing countries. In order to meet this demand, it has become necessary to explore renewable energy sources, as conventional sources are becoming expensive due to depleting supplies. Wind energy provides an excellent and abundant source of power generation and does not involve continuous fuel purchase. It is emerging as one of the most promising solutions for ensuring reliable and affordable energy supply in the long term.

This rising energy demand across the globe will result in increased levels of CO2 emissions, posing a serious threat to the global environment. The growth of wind power is therefore even more desirable as it is a clean and emission-free power generation technology. Many countries are keen to promote the generation and use of wind power in order to reduce carbon emissions and achieve the Kyoto Protocol targets.

The cost of wind power installations and maintenance has declined in recent years. Offshore turbines, with a capacity of more than 6MW, are being developed and manufactured, which means the amount of electricity generation per turbine will increase. The investment needed for wind power is therefore much lower than for most fossil-fuel systems. Wind power does not require considerable further investments following the initial investment, other than for maintenance. Wind resources are freely available and offshore wind is consistent. The development of new technology turbines is expected to further reduce the costs of operating and maintaining wind turbines.

Upgrading old electricity infrastructure and constructing new infrastructure to meet future transmission and distribution (T&D) demands will be a major challenge for wind power development. The existing grid infrastructure is deemed insufficient and there is also an urgent need for modifications to be made to the existing grid and its regulations to accommodate specific wind power characteristics. The development of new grid infrastructure requires massive investment in terms of financial resources and time, which could reduce the market’s medium-term growth.

Various countries have taken measures to upgrade grid infrastructure, but this could take a long time to reach the same pace of development as power generation from renewable sources. In addition, wind farms are usually developed in remote areas that are sparsely populated and do not have adequate transmission lines to connect this capacity to the grid properly. This has led to idle capacity in many countries such as the US, China and India.

Environmental impact

In many countries, wind power has not been accepted completely, and some residents in areas with proposed wind farm installation plans have displayed heavy resistance. Wind farm installations are said to cause environmental, economic and health problems, including sleep disturbances, headaches and irritation. It is feared that offshore wind farms could also have an undesirable impact on marine life and bird migration. The developmental stages of offshore wind farms that may cause the most disruption to the surrounding environment are construction and decommissioning. The operating stage can also cause disruption as the foundation of a turbine can act as an artificial reef and attract fish towards the new food supply. This, in turn, attracts birds that can collide with the turbines and towers. The noise pollution and illumination of turbine towers can also cause navigational disorientation for migrating birds.

Administration procedures delay the project executions, which impact the stakeholders of the value chain. These delays lead to longer gaps in return on investments, which lead to further drops in investments. Administrative issues must be minimised for the correct and punctual execution of projects.