Global Wind Power

Installations &
Financing Outlook
Vietnam Wind Power Conference, 2019

Ashish Sethia

@BloombergNEF @asethia

June 11, 2019

BloombergNEF
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new materials utilities & manufacturing

1 June 11, 2019

Amara’s Law & Hype Cycles
“We tend to overestimate the effect of a technology in the short run and
underestimate the effect in the long run”, Roy Amara

Source: The Institute of Future, Gartner

2 June 11, 2019

Technology led transitions of
the past
Selected technologies’ penetration of U.S. households

Source: Michael Felton, NY tImes, https://www.census.gov/history/pdf/sipp-data-appliances.pdf

3 June 11, 2019

How far are we in the energy
transition?
Current penetration of selected technologies in power generation, U.S.

Natural gas
power (35%)

Renewable
power (18%)
Rooftop
solar (~2%)

Source: BloombergNEF

4 June 11, 2019

Wind and solar are at terawatt
scale, storage is accelerating
Global wind and solar installations Global stationary energy storage installations
Cumulative GW Cumulative GW
1,200 10
Small- 9
1,000 scale PV
8 EMEA
800 Utility- 7
scale PV 6 AMER
600
5
400
Offshore
4
wind APAC
3
200
Onshore 2
- wind 1
0
2010 2011 2012 2013 2014 2015 2016 2017 2018
Source: Bloomberg NEF.

5 June 11, 2019

Tipping point 1: new
renewables vs new fossils
China U.S.
LCOE ($/MWh, real 2017) LCOE ($/MWh, real 2017)
100 80
Utility-scale PV
CCGT 70
80 60 Coal
Utility-scale PV
50 CCGT
60 Coal
40
40 30
20
20
Onshore wind 10 Onshore wind
0 0
2018 2025 2030 2035 2040 2045 2050 2018 2025 2030 2035 2040 2045 2050

Source: BloombergNEF Note: PV capacity factors in China: 12%-18% Source: BloombergNEF Note: the PV LCOE is for a tracking PV system.
in 2018, onshore wind 23%-32%. Coal and gas plants LCOEs include PV tracking capacity factors in the US: 14%-30% in 2018 and onshore
a carbon price. wind: 29%-49% in 2018

6 June 11, 2019

Tipping point 2: new
renewables vs existing fossils
U.S. India
LCOE vs running costs ($/MWh, 2017 real) LCOE vs running costs ($/MWh, 2017 real)
80 60 Onshore wind
70 Onshore wind
50
60 CCGT
40
50 Coal Utility-scale PV
40 30
CCGT
30
20
20
Coal
Utility-scale PV 10
10
0 0
2018 2025 2030 2035 2040 2045 2050 2018 2025 2030 2035 2040 2045 2050

Source: BloombergNEF Note: the PV LCOE is for a tracking PV system.

PV tracking capacity factors in the US: 14%-30% in 2018 and onshore Source: BloombergNEF. Note: PV capacity factors in India: 18%-20%
wind: 29%-49% in 2018 in 2018, onshore wind 25%-35%.

7 June 11, 2019

79% of new power generating
capacity will be renewable
Total installed capacity, 2017 (GW) Total installed capacity, 2050 (GW)

Utility-scale Flexible
PV, 4% capacity Coal Gas
Onshore 5% Peaker
wind Small- 9% 9% Gas
Coal
8% scale PV 6%
30%
12% Nuclear
2%
Hydro 6,596GW 16,977GW
Hydro
17%
Utility- 9%
Nuclear Gas scale PV Onshore
5% Oil Peaker 19% 28% Offshore wind
5% wind 15%
Gas
4% 2%

Half a decade for the next wind and solar TW

Source: BloombergNEF

8 June 11, 2019

Asia needs ~1/2 of global
power generation investment
Global investment in power generation by Asia Pacific investment in power generation by
region, 2018-2050 region, 2018-2050

Cumulative investment ($tn, 2017 real) Cumulative investment ($tn, 2017 real)
APAC $5.6 China $2.7

Europe $1.9 India $1.6

Southeast Asia $0.5

AMER $1.9
Japan $0.3
META $1.6
South Korea $0.2
ROW $0.5 Australia $0.1

Coal Gas Oil Nuclear Hydro Wind Solar Other

Source: BloombergNEF

9 June 11, 2019

Global onshore wind forecast
Gigawatts
160
Historic
140

120

100

80

60

40

20

0
2010 2015 2020 2025 2030 2035 2040
Commissioning year
Source: Bloomberg NEF. Notes: Data for 2008-22 from 3Q 2018 Global Wind Market Outlook; 2023-40 data from New Energy Outlook 2018.

10 June 11, 2019

Global onshore wind forecast
Gigawatts
160
Short
Historic
term
140

120

100
189
80 GW

60

40

20

0
2010 2015 2020 2025 2030 2035 2040
Commissioning year
Source: Bloomberg NEF. Notes: Data for 2008-22 from 3Q 2018 Global Wind Market Outlook; 2023-40 data from New Energy Outlook 2018.

11 June 11, 2019

Global onshore wind forecast
Gigawatts
160
Short Medium
Historic
term term
140

120

100
189 330
80 GW GW
60

40

20

0
2010 2015 2020 2025 2030 2035 2040
Commissioning year
Source: Bloomberg NEF. Notes: Data for 2008-22 from 3Q 2018 Global Wind Market Outlook; 2023-40 data from New Energy Outlook 2018.

12 June 11, 2019

Global onshore wind forecast
Gigawatts
180
Short Medium
Historic Long term
160 term term

140

120

100 189 330 ≈1,800

GW GW GW
80

60

40

20

0
2010 2015 2020 2025 2030 2035 2040
Commissioning year
Source: Bloomberg NEF. Notes: Data for 2008-22 from 3Q 2018 Global Wind Market Outlook; 2023-40 data from New Energy Outlook 2018.

13 June 11, 2019

Wind project revenue drivers
Gigawatts
180
Short Medium
Historic Long term
160 term term

140

120
Subsidies Hybrid Subsidy-free?
100
Feed-in-tariffs Auctions Economic build
80

60

40

20

0
2010 2015 2020 2025 2030 2035 2040
Commissioning year
Source: Bloomberg NEF. Notes: Data for 2008-22 from 3Q 2018 Global Wind Market Outlook; 2023-40 data from New Energy Outlook 2018.

14 June 11, 2019

Corporate PPAs create new routes
to market
Annual volume (GW) Cumulative volume (GW)
15 13.4 60
12 2.0 48
2.3
9 36
6.2
6 4.6 4.2 24
2.2 9.1
3 0.3 1.0 12
0.3 0.1 0.3 3.9 0.8
0 1.5 3.4 2.4 0
2009 10 11 12 13 14 15 16 17 18 19
YTD
AMER EMEA APAC Cumulative
Source: BloombergNEF . Note: Chart is for offsite PPAs only. APAC capacity is estimated. Figures are subject to change and may be updated as more
information is made available.

15 June 11, 2019

All project inputs have combined
to drag down prices…

Cost of
Capex O&M MWh
finance
≈

Source: BloombergNEF

16 June 11, 2019

Competitive auctions have
resulted in cost drops
$2017/MWh
80

70
Vietnam FiT
8th capacity
60 VI
auction I&V
1st auction IV
50
II Brazil
25th energy auction III
40 Vietnam FiT
3rd auction 26th energy auction
Germany
30
India SECI
I
20 27th energy auction 28th energy auction Mexico
II III IV V
10

0
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Source: BloombergNEF Note: Data shows levelized average winning date by commissioning date. Bids have been levelized to account for
indexation, exchange rate, tariff duration and expected merchant tail.

17 June 11, 2019

Wind turbine prices have declined
Global turbine price index by delivery date, 2H 2018
$m/MW
2.0 1.83
1.8 1.72
1.6 1.45
1.58
1.4 1.50 1.48 1.29 1.22
1.2 1.16 1.20 1.12 1.07
1.24 1.23 1.17 1.02
1.0 1.10 1.13 1.03 0.89 0.78
0.8 0.89
0.82 0.79
0.6
0.4
0.2
0.0
1H 2H 1H 2H 1H 2H 1H 2H 1H 2H 1H 2H 1H 2H 1H 2H 1H 2H 1H 2H 1H 2H 1H 2H
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Source: BloombergNEF

18 June 11, 2019

O&M prices are falling too
Full-service initial O&M contract pricing
Thousand $/MW/yr
60

50.6 51.1 50.0

50
45.0
39.1
40
35.4

30 28.8
26.4
21.3 20.5
20 18.1

10

0
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Source: BloombergNEF Note: Pricing for full-service initial agreements only. This includes routine and unscheduled maintenance, minor and major
component parts and labor.

19 June 11, 2019

Onshore wind capacity factors
are rising 1% point year-on-year
Historic and forecast onshore wind gross capacity factors
Capacity Factor (%)
70%
299MW
60%
Operational projects
50% Global forecast
75MW
40%

30%
weighted
20% average

10%

0%
1980 1990 2000 2010 2020 2030 2040
Source: BloombergNEF
Year
20 June 11, 2019
Investor interest in renewables in
APAC holding steady
Clean energy investment in APAC (ex-China)
$ billion
68.8 69.4
65.8 66.4 65.4
59.1 Marine
Low carbon services & support
48.2 46.6
Geothermal

36.2 Biofuels
Small Hydro
25.8 27.1 25.8 Biomass & Waste
20.3
16.5 Energy smart technologies
14.3
Solar
Wind
9.6 12.8 11.9 11.6
5.8 4.9 8.4 7.6 7.7 8.2 7.4
3.2 3.4 3.6 4.1
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Source: BloombergNEF Note: Includes small-scale distributed solar capacity

21 June 11, 2019

Cheap debt is helping
Swap rates for select tenors and countries

Source: Bloomberg Note: Reflective of fixed-for-floating swap rates.

22 June 11, 2019

Green bond issuance growing
$ billion
Health care
200
182.1 Consumer staples
180 173.6
160 Technology

140 Materials
120 Consumer discretionary
103.1
100 Industrial
80 U.S. municipal
60 51.7 Energy
40 37.3
Utilities
20 14.7
4.2 Government
0
2012 2013 2014 2015 2016 2017 2018 Financial

Source: BloombergNEF Green Bonds Tool

23 June 11, 2019

Clean energy IPOs still too far
and few
$bn
20
18
16
14
12
10 EMEA
8 APAC
6 AMER
4
2
0
'04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18

Source: BloombergNEF Note: includes renewable energy and energy efficiency

24 June 11, 2019

But clean energy M&A rising
steadily
$bn
180
160
140
120
100 APAC
80
EMEA
60
AMER
40
20
0
'04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18

Source: BloombergNEF Note: includes renewable energy and energy efficiency

25 June 11, 2019

LCOEs in leading markets at
$40-50/MWh
2H 2018 onshore wind LCOE
Indonesia
South Korea 60.0
Kenya
Vietnam
Poland 50.0
Estonia
Panama 40.0
France
Italy
Uruguay 30.0
Denmark
Peru 20.0
Spain
Mexico
Canada 10.0
India
Brazil 0.0
0
$0/MWh 20 40 60 80 100 120 140 160 180 200
Range 1H 2018 (mid) Mid
Source: BloombergNEF. Note: LCOE for a project starting construction in 2H 2018.

26 June 11, 2019

Risks remain even in high-
deployment markets
Perception of risk in Indian renewables projects
Financiers Risks IPPs
Financiers that ranked IPPs that ranked the
the parameter among the parameter among the
top two risks top two risks
Curtailment - grid or offtake
71% 86%

Regulatory risks
43% 71%

Payment delays
57% 14%

Resource estimation errors

14% 0%

Land acquisition risks

14% 29%

Forex risks
0% 0%

Plant downtime
0% 0%

Source: BloombergNEF Note: Survey done in 2018.

27 June 11, 2019

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28 June 11, 2019

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Appendix

30 June 11, 2019

50% wind and solar generation
by 2050 Historical world power NEO2018 power generation
generation mix mix
100% Other
90% Hydro Solar
80%
Nuclear 48% solar and wind
70% Wind
60% Oil
50% Gas
40% 64% renewables
30%
20% Coal
29% fossil fuels
10%
0%
1970 1980 1990 2000 2010 2020 2030 2040 2050
Source: BloombergNEF

31 June 11, 2019

Global onshore wind installation
forecast – set to hit new heights
Medium-term global onshore wind forecast

Annual installation (GW)

63.1 62.7 RoW
58.8 57.2
52.6 52.2 MEA
45.3 47.9 47.4 45.2 6.0 4.4
39.8 10.1 11.9 Latin America
4.8 10.8
35.2 9.0 6.6
15.0
32.2 7.0 7.9 4.3 5.9 5.7
7.4 8.3 5.7 North America
5.7 6.2
29.0 22.0 21.7 India
20.7 16.8 22.5 19.5
17.0 18.0 13.9 15.0 19.3 19.1
China
9.5 11.6 10.8 10.6 11.1 12.4 12.8 13.9 11.6 13.0 9.4
8.9 8.4
Europe
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Source: BloombergNEF. Note: We treat as commissioned installed but not grid-connected capacity for China and grid-connected capacity for all other
markets. Some historical installation data have been revised.

32 June 11, 2019

Vietnam forecast
Vietnam installation forecast
Annual installation (MW)
500
458
450
400
350
300 Estimate
300 280
250 Announced
250
Permitted
200
138 Financing secured
150
89 Commissioned
100
50 30 30 39
15 24
-
-
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

Source: BloombergNEF

33 June 11, 2019

Getting the admin process
right is key (and hard!)
$2017/MWh
100 CfD Round 1
90 2014 auction Round 1
80 Round 2
2016 auction
70 Auction 1
2018 VI Auction 2
60 auction I&V
50
Round 3
II III
40 IV
Round 4
30
2016 auction 2017 tender
20 Dumat Al Jandal LCOE
bid
10
0
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
U.K. South Africa Italy Morocco Turkey
Germany France Greece Saudi Arabia Poland
Source: BloombergNEF

34 June 11, 2019

Consolidation has made the
turbine market more global
Global onshore turbine manufacturers market share
100%

90% Other
80% Windey
Guodian UP
70%
Nordex
60% Ming Yang
Enercon
50%
Envision
40% 82% Siemens Gamesa
75%
70%
30% GE
Goldwind
20%
Vestas
10% Top 10

0%
2015 2016 2017 2018

Source: BloombergNEF. Note: Only includes onshore wind capacity.

35 June 11, 2019

Smart auctions design can help
markets respond

Source: BloombergNEF.

36 June 11, 2019