After several years of steady decline in onshore wind turbine prices globally, projects which are expected to be completed in 2021-2022 are set to drive some modest price increases into the global market.
The global market has seen a weighted average 6.41% per year reduction in prices over the past five-year period, but IntelStor’s Wind Turbine Price Index indicates the weighted average wind turbine price will increase 1.7% in 2020 to USD 1.11 million (EUR 1m) per MW and another 3.15% in 2021 to USD 1.15 million/MW. There is potential for another increase of 10% leading towards 2022, but many projects scheduled for completion that year have yet to be confirmed and reach their final investment decision (FID).
These increases are a result of a combination of factors including some commodity cost increases, tariffs on some major components such as permanent magnets as well as wind turbine towers, and a perceived reduction in the number of wind turbine suppliers as Senvion’s likely market exit looms.
Globally, the cost of towers is seeing an increase weighed down by import tariffs in the US from several Asian countries. Additionally, permanent magnet costs have increased recently thanks to China withholding some supply to western markets as part of the ongoing trade dispute with the US.
The Americas region will see some of the lowest prices globally, bottoming out at just over USD 550,000/MW in Brazil for a few projects. Contrary to popular belief, the Asia Pacific region will see prices ranging mainly from USD 1 million/MW to USD 1.68 million/MW with a few outliers. Africa and the Middle Eastern region will see some reductions from years past with the bulk of their projects coming in at USD 1.0 million/MW to USD 1.25 million/MW. Europe will remain soft compared to the rest of the world with most onshore wind farm project sites at between USD 750,000/MW up to USD 1.1 million/MW.
Companies who have a lower overall turbine price and more margin flexibility relative to their bill of materials cost are able to build projects further away from load centers where wind resource may be better. The extra cost is absorbed in the transmission and distribution system to evacuate the power to the load centers.
New transmission capacity is being installed in 77 active wind energy markets around the world within the next five years, which should make project CapEx costs and the corresponding turbine prices gain more bang for their bucks. Additional power evacuation capacity provides price stability by ensuring there is sufficient interconnection available for projects. This means more of the project CapEx allocation can go to turbine price as well as OpEx costs.
Nevertheless, some wind turbine OEMs are still using a lower turbine price as leverage in their commercial negotiations to obtain more favorable rates on their long-term service contracts.
Philip Totaro is the Founder & CEO of IntelStor, a market research and strategic advisory company focused on renewable energy. He has over 11 years of experience in the power generation industry, having previously worked for General Electric as well as Clipper Windpower. His company has helped cultivate over 600 inventions and file over 350 patents. Their strategic market analysis has led to the funding justification of over USD 600 million in R&D investment, and they have advised on over USD 1.8 billion in M&A transactions.