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Global Wind Energy Insight: Work Harder, Be Smarter in 2018

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2017 has been yet another tumultuous year. Cratering prices for wind and solar. The South African stand-off at the OK corral continues. The Indian market drops through the floor as procurement schemes change. On the bright side, wind and solar are hailed by all and sundry as the inevitable technology leaders going forward. And back in Washington…

…the U.S. House and Senate conferees have come up with a tax ‘reform’ bill which at first sight seems to have fixed most of what was wrong with the House and Senate versions, at least from the RE perspective; although they’ve managed to throw the U.S. market into chaos for a couple of months in the process — NOT the way we would have chosen to close out the year. It appears we have dodged a bullet (or only been slightly grazed); but the lawyers and pundits are now saying that the new base erosion and anti-abuse tax (BEAT) could still be highly problematic for the sector. This story will continue to unfold through the New Year and beyond.

Meanwhile. Much of the rest of the world is getting on with saving the climate, or trying to…or at least putting on a good show.

On December 12, 2017, two years after the historic Paris Climate Change Agreement was adopted, heads of state, governments, civil society and the private sector gathered in Paris for President Macron’s ‘One Planet Summit’, designed to launch new initiatives to ramp up financial flows to developing nations as they implement their climate action plans under the Paris Agreement, and to contribute generally to the transformation of the economy required to meet the decarbonization targets in the Agreement.

The achievements of the summit are listed here. Most of them strike me as either vague or just repackaging of existing finance flows from governments, but three of them stand out: both because of their significance and ambition and because of the need to stick a little caveat in each one in case somebody ever checks up on them.

a) The World Bank’s commitment to stop the upstream financing of oil and gas after 2019 (with the usual caveats about poor countries who really need it). One wonders what they’re going to get up to for the next two years;

b) French AXA insurance group pledged to quadruple its ‘green’ investments from €3 billion to €12 billion, and to increase its divestiture from coal from €500 million to €2.4 billion, along with a complicated set of criteria. Why don’t they just get out of coal altogether?

c) Dutch ING Bank will divest itself of all of its coal investments by 2025. Or rather, their exposure will be “close to zero.”

California Gov. Jerry Brown pledged to host another such summit next autumn in the run up to COP 24 in Poland; and a summit to raise ambition will be convened by the UN Secretary General in 2019. All this high-level hoopla is great PR. I just hope someone’s counting the tons of carbon that we are (or aren’t) reducing…

Back in the ‘real’ world, the new wind market in Argentina goes from strength to strength, with recent auction results bringing the pipeline of renewable energy projects up to 5 GW, barely two years after the new government took office. Both the U.S. and Europe are having strong years, and offshore will set another record for installations in 2017, both in Europe and globally.

But the main story in 2017 has been the plummeting prices bid in recent auctions in India, Germany, Mexico and many other countries, reaching levels which were unthinkable even a year or two ago, for both onshore and offshore. We end 2017 with yet another set of record-breaking auction prices, this time in the Canadian province of Alberta, the center of the Canadian oil industry, and home to the infamous tar sands, where a competitive procurement process for approximately 600 MW of capacity resulted in a weighted average price of C$37 per MWh — the lowest price for wind energy generation in Canada to date.

Alberta is phasing out coal-fired electricity generation by 2030 and plans to procure 5,000 MW of new renewable energy to help fill the resulting electricity supply gap.

The lowest price I’ve seen is in the recent Mexican auction, where a couple of wind projects came in at around $US17/MWh. Is anyone making any money at these prices?

The consequences for our industry is a major preoccupation of ours, and will be for years to come.

The upside of that, of course, is that renewables have emerged as the cheapest way to install new generation in most markets, and has even reached the ‘tipping point’ where new-build wind (and solar) are increasingly cheaper than existing fossil generation in a growing number of markets. The energy revolution is well underway!

…and the rate of change just continues to accelerate. According to the Economist, 2018 will be a year in which electric cars become cheaper than their fossil-fuelled alternatives to own and operate, putting some welcome new demand in OECD grids. Just two years ago this would have been a laughable proposition. We now have an electric semi-truck, commercial electric ferries and an electric cargo barge. More and more companies are staking their future on a renewable energy future, powered primarily by cheap wind and solar. We all have at least a vague idea of what ‘blockchain’ is and how it could change power markets beyond all recognition. Therein lies our hope…the fear, of course, is that we won’t do it fast enough. We have to both work harder and be smarter in 2018.

Lead image credit: Global Wind Energy Council

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