For nearly 50 years, the commercial application of wind grew quietly with the help of government support. Over the last few years, it has become an industry that is ready to stand on its own.
From a standing start when the first U.S. wind farm was connected to the electricity grid, wind power generation has increased to represent 6% of global electricity capacity in 2020. At the same time, coal declined from 40% to 34%, two trends that are likely to continue. Dry Fork Station near Gillette, WY, which opened in 2011, may turn out to be the last coal power plant built in the U.S. By contrast, global wind generating capacity is expected to grow 8% annually between now and 2025.
Government support in the form of subsidies nudged developers to see economic opportunity when they otherwise would not initiate the first steps. The result was a slow march down in cost per kilowatt-hour which, combined with a growing number of renewable power mandates, forced electricity suppliers and their regulators to find ways to meet those directives. Manufacturer research and development, combined with practical experience with innovative technologies, increased efficiencies and led to a further reduction in the costs associated with wind power. To the point that wind is becoming more cost-competitive than new-built coal or gas plants today; the Netherlands and Germany now have zero-subsidy wind power projects.
The market for wind power remains fragmented. As recently as 2018, 37 manufacturers delivered wind turbines to the global power market, with 10 of these firms claiming 85% market share. Participants come mostly from Europe, the U.S., and China. Many are parts of larger organizations, while others solely focus on wind power. As fragmented markets grow, competitors acquire and merge to better position themselves to capture an increasing share of a growing pie. We expect this will happen in wind power too.
While land-based developments have been most common so far, offshore wind developments represent the fastest-growing corner of wind power. In the case of the U.S., technical estimates suggest offshore capacity that could be developed is twice the amount of electricity the nation currently uses. The first U.S. commercial offshore wind farm went into production in 2016 off the coast of Rhode Island, another was recently completed this year off the coast of Virginia, and more are in development. Offshore turbines in certain parts of the world require different engineering. Turbines are generally designed to withstand gusts of 150 miles per hour, but some locations that are hurricane prone must handle gusts up to 225 miles per hour. Bigger is better here too, with some offshore rotor diameters reaching 185 yards, or nearly two football fields, compared to 140 yards for land-based turbines.
Despite having installed merely 1% of potential capacity, North America is viewed as the most mature and competitive wind generating market. The greater opportunities for wind development are believed to lie outside the U.S. In particular, Southeast Asia and Africa are expected to be the fastest-growing regions over the next five years. China already has the most installed wind capacity of any nation. Since becoming the biggest consumer of energy in 2010, China has aggressively invested in renewable energy and has ambitious plans to do more.
Governmental policy and customer demand are moving inexorably towards greater use of alternative energy; wind power is at the center. For example, the state of Hawaii set a goal to achieve 100% clean energy by 2045. Financial markets are giving more attention to the industry and will reward those who capture the most value.
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