According to a report BloombergNEF, wind energy industry is recovering from recession in 2022. Global capacity growth includes offshore and onshore wind power installations, which saw a 15 percent drop last year. Among the new wind installations, the most drastic reduction in production was in offshore ones — by 46% compared to 2021.
Until last year, the winds were favorable for the industry. Over the past few decades, turbines have become much cheaper. Governments are aiming to bring more renewable energy into the grid. It is expected, that in a few years, renewable sources of electricity such as wind and solar will dominate the global growth of the energy sector.
However, after two years of record growth, the wind industry took a hit in 2022 due to supply chain constraints and regulatory uncertainty. Last year, developers installed 86 gigawatts of wind turbines worldwide, compared to about 100 gigawatts in 2020 and 2021.
Past increases in the cost of shipping and key materials, including steel and resin, have made projects more expensive to complete. Many industry players were tied to old contracts that did not take these obstacles into account. This put wind turbine manufacturers in a difficult position as they had to stick to pre-agreed prices in the face of much higher costs. These problems spilled over to developers, some of whom even tried to renegotiate utility contracts due to rising costs.
Pricing pressures have started to ease, but the sector has also had to worry about the loss of tax breaks that have been a huge boon for the industry, especially in China and the US. These two countries are the largest markets for wind energy.
At the end of 2021, China stopped state subsidies for offshore projects. This caused a boom-and-bust cycle as developers tried to cash in on the subsidies in 2021 before slowing down in 2022. In the US, a key tax break for wind energy projects was set to expire in 2022, but The Inflation Reduction Act, signed into law last August, extended the term of these credits.
The Biden administration also ramped up efforts to develop offshore wind energy on more shorelines along the US coast by announcing auctions to lease several wind farms. The Netherlands, Germany and Great Britain also have major projects in the works, as do new markets such as Taiwan and France.
Despite this, a shortage of ships capable of installing giant turbines at sea is looming. Outside of China, there are still huge delays when it comes to getting permits for projects and connecting them to the grid. Fishing communities protest against such projects, worried about how wind farms will affect their culture and environment.
Currently, wind energy is less than 7% of global electricity production.