Welcome back! It's an A Word About Wind tradition that in our first edition of the new year we give ten predictions about what we expect to happen in the wind industry in the next 12 months – and we will check back when the year ends. If you didn't see our look back at our 2017 predictions then here it is.
Here are our ten predictions for 2018…
1) Europe seeks to regain initiative: Europe has been slipping behind North America and Asia in recent years terms of annual wind installations, and in 2018 we expect the European Union to seek to regain the initiative. The EU is committed to gaining 27% of energy from renewables by 2030, but corporates and others have been pushing for 35%. We expect this lobbying to result in more supportive policies for wind and solar. And even if 35% looks a step too far, we see a chance they could settle at 30%.
2) US faces tougher year: President Trump’s first year was calm for wind, but his second will be less so. Republicans have not cut the vital production tax credit in their tax reforms, while changes to BEAT look more benign than they were. Even so, we expect more policies with negative consequences for wind, both intended and unintended; and more scrutiny of what happens after 2020.
3) Auctions weigh on manufacturers: Competitive tenders are helping to drive down the cost of wind globally, but they are taking their toll on manufacturers. For example, Vestas shares are trading 40% lower than in summer as a result of increased competition. In 2018, we expect job pain as manufacturers restructure and look hard at R&D budgets. Efficiency will also drive takeover activity.
4) Contracts for Difference get sexy: Competitive tenders will re-shape the way that owners and operators do business as well. With fewer government feed-in tariffs, we expect to see more wind firms clamouring for Contracts for Difference. These would help firms stabilise their revenues and give governments more certainty on energy prices. Hedging projects will rise up the agenda.
5) Germany and India face tender fallout: Germany and India may be very different countries, but both faced problems with competitive tenders in 2017 – and, in both, we see firms warning that tenders are killing wind. Germany is set to modify its auctions after political gridlock subsides, while India is set to plough on with new auctions. Firms in both will find there are no easy fixes.
6) Onshore support for Scotland and Wales: The falling cost of offshore wind in the UK’s CfD auction in September put onshore wind back on UK government's agenda too. We expect the UK to make more progress on plans to support construction of large wind farms in Scotland and Wales ahead of a CfD auction in 2019, but extending this to England will prove a step too far.
7) PPAs pick up in Europe: Businesses in the US have made the running when it comes to signing power purchase agreements with wind farm owners in the last few years, but in 2018 we expect to see more globally. In Europe, we see good potential for PPAs in places including Scandinavia, the UK and the Republic of Ireland; and Australia’s wind PPA market should stay strong.
8) Frothy pricing continues: One key talking point at Financing Wind 2017 last November was the high prices being paid for wind assets, and we expect this to continue in 2018. Interest rates will not yet reach levels that draw investors away from wind. The great unknown is whether we will see a global crash that forces banks to restrict liquidity: Italy’s banking crisis could be the spark, and the
level of debt in China is also a threat to global stability.
9) Developer consolidation: Consolidation is not just for turbine makers. We see plenty of utilities looking to grow market share, and we expect many to do so by buying smaller developers and their project pipelines. We also expect financial institutions to get in on the action, with investors from Canada and the US looking especially keen on developers in established markets.
10) Battery storage breakthroughs: Batteries have grabbed the industry’s imagination this year, and we expect more firms to make inroads in storage in the next 12 months. Elon Musk’s Tesla shook things up with a 100MW facility in South Australia last year; and we have also seen Vattenfall install a 22MW battery at its 228MW Pen y Cymoedd. These will become more common in 2018.
And that's it for the predictions. No doubt some of these will give us a few sleepless nights in the next 12 months!
That just leaves us to wish our members a prosperous year, and we will check back at the end of 2018 to see what we got correct.
Four Republican congressmen have called for a halt to US offshore wind projects because of unsubstantiated claims blaming the industry for whale deaths. But this obvious misinformation can still be a threat for the growth of the industry.