Wind Power Responding to Global Economic Forces

A principal driver behind high sustained world oil prices has been increased global consumption: particularly recent growth in oil consumption by China and India. It's a problem that yesterday's US solution, drilling, won't solve for the long term. In a remarkable irony, it is China's planning to develop a diverse portfolio of energy sources that will further lower the capital cost of wind projects, globally. This will allow more economically favorable US wind farm projects to be proposed in the very places that large oil and gas reserves are/were found. What goes around comes around! From the San Jose Mercury News of December 26, 2005, are the underpinnings of this scenario, in an article titled: "Beijing puts emphasis on developing wind power". Key excerpts follow. "China, already a world leader in the widespread use of solar water heaters, is starting to push hard into harnessing wind energy. As air pollution chokes much of the country and soaring crude oil prices bite into state finances, authorities are sharply raising their targets for the use of renewable energy, particularly from wind farms".

"Last month, authorities gave a massive kick-start to wind energy by raising the target for the overall share of renewable energy in the nation's power mix to 15 percent by 2020, up from 10 percent.

A significant chunk of that will come from wind farms. And as Chinese firms move in a big way to produce cheap wind turbines to satisfy domestic demand, they're forcing turbine prices down in other countries".

"With the development of wind turbine technology in China, the price is already falling worldwide. The price has come down about 20 percent," said Deng Yuanchang, deputy director of the Wind Resource Research Center at Sun Yat-sen University in this southern Guangdong province city along the Pearl River Delta".


And to make the scenario driver more convincing, here is a final stat. "[China]. currently has 50 million solar water heaters in use, mostly on rural housetops, claiming more than half the global market for such devices".

Analysis:
A 15% renewable portfolio by 2020 calls for many new projects over a relatively short period: 15 years. As a general rule of thumb, a wind farm project takes about a year to plan and install. In an authoritarian system of government like China has, the planning phase might be shortened. Our point is that the downward capital cost for wind farms, globally, will be a continuing trend, perhaps made steeper by China's resolve. This is assuming that there is sufficient turbine production capacity over the next several years (unlike what is currently being experienced for global solar panel production). We're reminded of Moore's Law on this one. Faster cheaper processors, driven by step change innovations at regular intervals until finally PC's became commodities.

What might be the short term impact in North America of increasingly cheaper turbines? We're thinking about US wind farm projects becoming state campaign issues the mid-term and presidential elections. In that environment, wind farm proposals will feed the "teeter toter" effect that mainstream media thrive on. Expect dueling "experts" on talk shows and local news. Coal vs wind. Nuclear vs wind. Wind replacing mechant natural gas peaking plant output. Wind vs LPG gas port development. Birds and bats versus cheap new electrity sources. And so on.

In our crystal ball, no one outcome seems predetermined. It's going to be a political churn of the scale currently experienced in Britain and Scotland. Get ready 'cause here it comes.

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