Are hybrid projects the future of wind energy?

Wind is undergoing a profound transformation. The industry has gone mainstream, which is good, but it also means developers and investors have to find new ways to preserve its growth and their profits.

Ilaria Valtimora
April 5, 2019
Are hybrid projects the future of wind energy?

Wind is undergoing a profound transformation. The industry has gone mainstream, which is good, but it also means developers and investors have to find new ways to preserve its growth and their profits.

This is one of the main findings of the Global Wind Energy Council’s Global Wind Report that launched at the WindEurope 2019 conference in Bilbao last Wednesday.

The report shows that 51.3GW of wind farms were installed last year, taking total installed wind capacity globally to 591GW. GWEC has forecast that over 300GW of wind farms are to be built by 2023. This means wind companies need have to install over 50GW each year.

The question that investors in wind must now grapple with is how to keep this momentum while maintaining profitability. This will be a major challenge when faced with issues such as price cannibalisation, growing use of competitive auctions, and competition from solar. The industry’s main goal so far has been to reduce the levelised cost of energy across the supply chain – but, now that wind has established these credentials, the focus must change.

GWEC argues that the industry’s focus should now be to show the value wind can provide to the energy system, and that this will be vital if the industry is to keep this sustained level of growth. This includes focusing on how wind can help match energy supply and demand.

This is where hybrid schemes come in. It was clear from the discussions at WindEurope that developers, manufacturers and investors are putting a lot of focus on how best to match the different profiles of wind, solar and storage technologies to develop profitable projects.

Hybrid solutions integrating wind farms with other technologies could be a key driver to unlock wind’s value, potentially by supporting the growth of microgrids and decentralised energy system. They can be managed as virtual power plants, meaning that projects would be built in different locations but still managed as a single solution.

Finally, financial solutions that exclude physical delivery of electricity, such as virtual power purchase agreements or revenue swaps, are also a useful tool to increase the value of wind.

However, what has also emerged from discussions at WindEurope is that, despite all of the talk of pairing wind with other technologies, we are currently nowhere near to knowing how best to deliver these projects and make money. In storage, there is still a technology arms race in which plenty of firms are looking to overhaul the early promise of lithium-ion batteries. And the ‘best’ solutions will vary hugely depending by site, country and market.

Wind companies have already been exploring these options. For example, CWP Renewables is developing a 370MW wind, solar and storage battery project in Australia; and Statkraft unveiled plans last month to add 2GW of virtual power plants to its UK portfolio by end of this year and 12GW in Germany. Vestas, Siemens Gamesa and General Electric are all looking at solutions to complement wind turbines to diversify their portfolios.

These are just a few examples, but they show a trend that wind companies are looking to secure benefits in terms of cost-efficiency, profitability and increased stability of supply.

For wind investors, this means they will need to closely follow these technological shifts and identify how best the hybrids can be financed. We also expect to see strategic partnerships and acquisitions coming up, with wind developers and manufacturers expanding their reach. And politicians will need to look at how they support investment in these nascent systems.

Over the past decade, the wind industry has successfully delivered dramatic reductions in the LCOE of wind energy. A new challenge lies ahead.

Wind is undergoing a profound transformation. The industry has gone mainstream, which is good, but it also means developers and investors have to find new ways to preserve its growth and their profits.

This is one of the main findings of the Global Wind Energy Council’s Global Wind Report that launched at the WindEurope 2019 conference in Bilbao last Wednesday.

The report shows that 51.3GW of wind farms were installed last year, taking total installed wind capacity globally to 591GW. GWEC has forecast that over 300GW of wind farms are to be built by 2023. This means wind companies need have to install over 50GW each year.

The question that investors in wind must now grapple with is how to keep this momentum while maintaining profitability. This will be a major challenge when faced with issues such as price cannibalisation, growing use of competitive auctions, and competition from solar. The industry’s main goal so far has been to reduce the levelised cost of energy across the supply chain – but, now that wind has established these credentials, the focus must change.

GWEC argues that the industry’s focus should now be to show the value wind can provide to the energy system, and that this will be vital if the industry is to keep this sustained level of growth. This includes focusing on how wind can help match energy supply and demand.

This is where hybrid schemes come in. It was clear from the discussions at WindEurope that developers, manufacturers and investors are putting a lot of focus on how best to match the different profiles of wind, solar and storage technologies to develop profitable projects.

Hybrid solutions integrating wind farms with other technologies could be a key driver to unlock wind’s value, potentially by supporting the growth of microgrids and decentralised energy system. They can be managed as virtual power plants, meaning that projects would be built in different locations but still managed as a single solution.

Finally, financial solutions that exclude physical delivery of electricity, such as virtual power purchase agreements or revenue swaps, are also a useful tool to increase the value of wind.

However, what has also emerged from discussions at WindEurope is that, despite all of the talk of pairing wind with other technologies, we are currently nowhere near to knowing how best to deliver these projects and make money. In storage, there is still a technology arms race in which plenty of firms are looking to overhaul the early promise of lithium-ion batteries. And the ‘best’ solutions will vary hugely depending by site, country and market.

Wind companies have already been exploring these options. For example, CWP Renewables is developing a 370MW wind, solar and storage battery project in Australia; and Statkraft unveiled plans last month to add 2GW of virtual power plants to its UK portfolio by end of this year and 12GW in Germany. Vestas, Siemens Gamesa and General Electric are all looking at solutions to complement wind turbines to diversify their portfolios.

These are just a few examples, but they show a trend that wind companies are looking to secure benefits in terms of cost-efficiency, profitability and increased stability of supply.

For wind investors, this means they will need to closely follow these technological shifts and identify how best the hybrids can be financed. We also expect to see strategic partnerships and acquisitions coming up, with wind developers and manufacturers expanding their reach. And politicians will need to look at how they support investment in these nascent systems.

Over the past decade, the wind industry has successfully delivered dramatic reductions in the LCOE of wind energy. A new challenge lies ahead.

Wind is undergoing a profound transformation. The industry has gone mainstream, which is good, but it also means developers and investors have to find new ways to preserve its growth and their profits.

This is one of the main findings of the Global Wind Energy Council’s Global Wind Report that launched at the WindEurope 2019 conference in Bilbao last Wednesday.

The report shows that 51.3GW of wind farms were installed last year, taking total installed wind capacity globally to 591GW. GWEC has forecast that over 300GW of wind farms are to be built by 2023. This means wind companies need have to install over 50GW each year.

The question that investors in wind must now grapple with is how to keep this momentum while maintaining profitability. This will be a major challenge when faced with issues such as price cannibalisation, growing use of competitive auctions, and competition from solar. The industry’s main goal so far has been to reduce the levelised cost of energy across the supply chain – but, now that wind has established these credentials, the focus must change.

GWEC argues that the industry’s focus should now be to show the value wind can provide to the energy system, and that this will be vital if the industry is to keep this sustained level of growth. This includes focusing on how wind can help match energy supply and demand.

This is where hybrid schemes come in. It was clear from the discussions at WindEurope that developers, manufacturers and investors are putting a lot of focus on how best to match the different profiles of wind, solar and storage technologies to develop profitable projects.

Hybrid solutions integrating wind farms with other technologies could be a key driver to unlock wind’s value, potentially by supporting the growth of microgrids and decentralised energy system. They can be managed as virtual power plants, meaning that projects would be built in different locations but still managed as a single solution.

Finally, financial solutions that exclude physical delivery of electricity, such as virtual power purchase agreements or revenue swaps, are also a useful tool to increase the value of wind.

However, what has also emerged from discussions at WindEurope is that, despite all of the talk of pairing wind with other technologies, we are currently nowhere near to knowing how best to deliver these projects and make money. In storage, there is still a technology arms race in which plenty of firms are looking to overhaul the early promise of lithium-ion batteries. And the ‘best’ solutions will vary hugely depending by site, country and market.

Wind companies have already been exploring these options. For example, CWP Renewables is developing a 370MW wind, solar and storage battery project in Australia; and Statkraft unveiled plans last month to add 2GW of virtual power plants to its UK portfolio by end of this year and 12GW in Germany. Vestas, Siemens Gamesa and General Electric are all looking at solutions to complement wind turbines to diversify their portfolios.

These are just a few examples, but they show a trend that wind companies are looking to secure benefits in terms of cost-efficiency, profitability and increased stability of supply.

For wind investors, this means they will need to closely follow these technological shifts and identify how best the hybrids can be financed. We also expect to see strategic partnerships and acquisitions coming up, with wind developers and manufacturers expanding their reach. And politicians will need to look at how they support investment in these nascent systems.

Over the past decade, the wind industry has successfully delivered dramatic reductions in the LCOE of wind energy. A new challenge lies ahead.

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