Wind Energy in the 21st Century

Renewable energy from the sun, wind and sea has long been touted as the ultimate solution to the world’s energy and environmental problems, offering the potential of virtually unlimited cheap and pollution-free energy. Initial interest in renewable energy, spurred by the oil crises of the 1970s and fears of resource depletion and political insecurity, resulted in frenetic research and development activity, impressive technological advances and bold energy policy experiments. Yet, as the 1980s passed into the 1990s, fears of energy crises faded into the past and fossil fuel prices dropped to their lowest levels ever, while renewable energy technologies remained expensive in spite of the advances made. Renewables looked like they might forever remain ‘the energy of tomorrow’.

How much of the world’s electricity needs could actually be met using wind energy? This is a question of fundamental importance. Detractors of wind energy, and of renewable energy in general, often assert that modern renewable energy will never contribute more than a few per cent of world energy demand and is therefore not worthy of serious consideration. Is such scepticism justified?

This chapter provides an introduction to wind turbine technology, a discussion of technological development and grid interaction issues, and an overview of the wind turbine industry. We begin with a brief introduction to the history of wind power use, followed by an introduction to the physical principles of extracting energy from the wind.

As described in Chapter 3, wind power is used in a number of different applications, including both grid-connected and stand-alone electricity production, as well as water pumping. This chapter analyses the economics of wind energy primarily in relation to grid-connected turbines, which account for the vast bulk of the market value of installed turbines.¹

The previous chapter described the changing economics of wind energy and the rapid improvement in wind energy’s economic viability during the last decade. In spite of this, however, wind energy projects often continue to face obstacles obtaining finance for actual construction. This chapter therefore examines issues of finance by first outlining the differences between economic and financial viability and then describing some of the most important considerations when financing wind projects, such as cost of capital, capital structure, risk, debt-service coverage ratio, and others. The chapter then goes on to describe special considerations for financing projects in developing countries. Lastly, the chapter examines the increasingly competitive nature of power markets and how the advent of competition may affect the outlook for wind power development.

Electricity generation is one of the world’s most significant sources of air pollution. In the USA, for example, electricity generation accounted for 79 per cent of SO₂ emissions and 64 per cent of NO₂ emissions in 1998 (USEPA, 1998) and 35 per cent of CO₂ emissions in 1994 (USEIA, 1996). In addition, different electricity generation technologies can have a wide range of other environmental impacts including water pollution, radiation, flooding, visual intrusion and so on.

Great strides have been made over the last two decades in improving the technology, reliability, cost-effectiveness and overall understanding of wind energy. However, in spite of these improvements, significant barriers remain which must be overcome before wind energy can achieve substantial adoption within the general electricity market. These barriers have been discussed in previous chapters, but some of the most important are reiterated below:

Installed wind power capacity has been increasing at an average rate of over 25 per cent per year between 1992 and 1997, making wind energy the world’s fastest growing energy sector. This growth rate shows few signs of slowing down. On the contrary, installed wind capacity has grown by well over 30 per cent per year between 1998 and 2000, surpassing 10 000 MW in 1998 and 18 000 MW in 2000. Installed capacity is expected to continue growing on the order of 20 per cent per year until 2007, with total worldwide wind capacity expected to approach 50 000 MW by then (BTM Consult, 1998a). This anticipated growth rate is of a similar order to that achieved by nuclear power between 1968 and 1977, during which time installed nuclear capacity increased from 9200 MW (similar to installed wind capacity in late 1998) to 99 000 MW, an annual rate of increase of 30 per cent (Worldwatch, 1999).