Gone with the Wind? The Financial Crisis and Wind Energy

Undoubtedly, the Global financial crisis is impacting formerly high growth energy sectors.  The wind energy sector has witnessed dramatic growth over the past 10 years.   Our researchers explored some of the ways the wind industry has been impacted by the financial crisis.

The Financial Impact of the Recession on Wind Energy

• Wind Energy projects’ increased cost of debt
• Though this increase in the cost of debt is often offset by a decrease in central bank’s rates
• Big projects can raise money
• Predicted lower levels of economic activity
• Few industries will benefit from climate change
• Lending volumes and revenues shrinkage

Indeed the wind energy industry is subject to the whims of the financial crisis.  It is interesting to note the longterm advantages in wind energy and power generation. Wind energy in power generation holds several longterm advantages that other methods of power generation do not.

Advantages in Wind Energy

• No fluctuations in global commodity prices
• No geopolitical issues
• No fuel costs
• No water usage, oil usage, no waste, no emissions, fuel costs, no emissions
• Cost competitive

Yet Wind Energy faces very important challenges that impact its integration into the energy grid and a nation’s energy mix

Wind Energy’s Long-term Challenges

• Integration into the grid
• Dependency on tax incentives
• Landscape and aesthetics.  Landowners typically do not like aesthetics.
• Capacity.  A typical power plant has about 500 MW and some power plans have 1 GW (Gigawatt) capacity.  Wind energy projects are typically a fraction of this capacity (e.g. 80 MW)

A brief overview of the Wind Energy Market 

The top 3 largest markets are US China and Spain.  In Europe, wind energy composes 40% of energy.  In Denmark, wind energy comprises 20% of energy production.  Germany and Spain see 10% and 7% of their energy coming from wind energy, respectively.  Roughly $50 billion was invested in 2007 in Wind Energy projects.  Further, some experts believe that wind energy can meet the year 2000’s total global demand, seven times over.  There has been a roughly 27% average annual increase from 2000 to 2007.  Yet, wind energy only comprises 1% of global production.

Key Market Leaders

• GE Energy
• Vestas
• Siemens AG
• Gamesa Corporacion Tecnologica
• Mitsubishi Heavy Industries
• Suzlon Energy Limited
• Clipper Windpower
• Nordex