02 Market and Industry Trends

Biomass Energy

There are many pathways by which biomass feedstocks can be converted into useful renewable energy. A broad range of wastes, residues and crops grown for energy purposes can be used directly as fuels for heating and cooling or for electricity production, or they can be converted into gaseous or liquid fuels for transport or as replacements for petrochemicals.1 (→See Figure 6 in GSR 2015.) Many bioenergy technologies and conversion processes are now well-established and fully commercial.2 A further set of conversion processes – in particular for the production of advanced liquid fuels – is maturing rapidly.3

In 2016, local and global environmental concerns, rising energy demand and energy security continued to drive increasing production and use of bioenergy. Bioenergy consumption and investment in new capacity are supported by policy in many countries. (→See Policy Landscape chapter.) However, in some countries, low fossil fuel prices during 2016 discouraged investment in bioenergy-based heating; unlike transport use of biofuels, bio-heat is not sheltered by blending mandates from changes in fossil fuel prices. Increased competition from other low-cost renewable sources of electricity acted as a barrier to bio-power production during the year.4 The continuing discussion about the sustainability of some forms of bioenergy has led to regulatory and policy uncertainty in some markets, and has made for a more difficult investment climate.5

Bioenergy Markets

Bioenergy (in traditionali and modern uses) is the largest contributor to global renewable energy supply.6 Total primary energy supplied from biomass in 2016 was approximately 62.5 exajoules (EJ).7 The supply of biomass for energy has been growing at around 2.5% per year since 2010.8 The bioenergy share in total global primary energy consumption has remained relatively steady since 2005, at around 10.5%, despite a 21% increase in overall global energy demand over the last 10 years.9

The contribution of bioenergy to final energy demand for heat in buildings and industry far outweighs its use for electricity and transport combined.10 (→See Figure 7.)

Figure 7. Shares of Biomass in Total Final Energy Consumption and in Final Energy Consumption, by End-use Sector, 2015

Bio-Heat Markets

Biomass in many forms – as solids, liquids or gases – can be used to produce heat. Solid biomass is burned directly using traditional stoves and more modern appliances to provide heat for cooking and for space and water heating in the residential sector. It also can be used at a larger scale to provide heat for institutional and commercial premises and in industry, where it can provide either low-temperature heat for heating and drying applications or high-temperature process heat. The heat also can be co-generated with electricity via combined heat and power (CHP) systems, and distributed from larger production facilities by district energy systems to provide heating (and in some cases cooling) to residential, commercial and industrial customers.

The traditional use of biomass for heat involves the burning of woody biomass or charcoal as well as dung and other agricultural residues in simple and inefficient devices. Given the informal nature of the supply, it is difficult to acquire accurate data on the use of these biomass materials.11 However, the traditional use of biomass in 2016 is estimated at 33 EJ; although there is growth in absolute terms, the share of traditional bioenergy in total global energy consumption has been falling gradually.12 (→See Figure 2 in Global Overview chapter.)

Consumption of fuelwood for traditional energy uses has remained stable since 2010, at an estimated 1.9 billion cubic metres (m3), equivalent to around 15 EJ.13 The largest shares of fuelwood (as well as other fuels such as dung and agricultural residues) are consumed in Asia, South America and Africa.14 The production of fuel charcoal for cooking (which is most common in urban areas) has increased by an average of around 2% a year since 2010, although the rate of growth has slowed in the last few years. Production decreased slightly in 2015, to 52 million tonnes, and a similar quantity is estimated to have been produced in 2016.15

Growth in the use of modern bioenergy for heating also has slowed in recent years, to around 1% per year. In 2016, modern bioenergy applications provided an estimated 13.9 EJ of heat, of which 9.1 EJ was for industrial uses and 4.8 EJ was consumed in the residential and commercial sectors, where it was used principally for space heating in buildings and for cooking.16 Based on these production data, modern biomass heat capacity in 2016 increased to an estimated 311 GWth.17

Bioenergy (mostly from solid biomass) accounts for around 7% of all industrial heat consumption, and its use in industry has not increased in recent years.18 This use is concentrated in bio-based industries such as the pulp and paper sector, timber, and the food and tobacco sectors. The cement industry also used larger volumes of waste fuels (estimated at 0.5 petajoules (PJ)) in 2016 relative to previous years.19

The principal regions for industrial bio-heat are Asia (e.g., bagassei, rice husks, straw and cotton stalks in India) and South America (particularly Brazil, where bioenergy from agricultural and wood residues is used to produce heat in the food, tobacco, and pulp and paper industries, and bioenergy from bagasse is used in the sugar and alcohol industries).20 North America is the next largest user: in Canada, 22% of industrial heat was provided by bioenergy in 2016, mostly in the pulp and paper industry.21 There are signs of reduced use of bioenergy in North America, with stronger growth in Asia, reflecting changes in production patterns in key industry sectors, especially pulp and paper.22

In the buildings sector, the United States is the largest consumer of modern biomass for heat. Despite low oil prices, the US market for woody biomass and pellet boilers remained stable in 2016.23

Europe is the largest consumer of bio-heat by region. EU member states have promoted renewable heat in order to meet mandatory national targets under the Renewable Energy Directive.24 Germany, France, Sweden, Italy and Finland and Poland were the largest producers and users in Europe in 2016.25 In Eastern Europe, the market for bioenergy in district heating continued to grow; in Lithuania, wood chips have overtaken natural gas as the major fuel in district heating schemes.26

The market for wood pellets for heating grew only slowly in 2016 as the mild winter in Europe – the world’s largest market – reduced demand.27 Nonetheless, Europe accounted for some 70% of global demand for pellets for heating, led by Italy, Germany, Sweden and France.28

Biogas also is used in industrial and residential heating applications. In Europe, it is used increasingly to provide heat for buildings (space) and industry (processes), often in conjunction with electricity production via CHP.29 Asia leads the world in the use of small-scale biogas digesters to produce gas for cooking and water and space heating. For example, around 4.9 million household and village-scale biogas plants are now present in India, fuelled mostly by cattle dung and agricultural wastes.30

Bio-Power Markets

Global bio-power capacity increased an estimated 6% in 2016, to 112 GW.31 Generation rose 6% to 504 terawatt-hours (TWh).32 The leading country for electricity generation from biomass in 2016 was the United States (68 TWh), followed by China (54 TWh), Germany (52 TWh), Brazil (51 TWh), Japan (38 TWh), India and the United Kingdom (both 30 TWh).33 (→See Figure 8.)

Figure 8. Global Bio-Power Generation, by Region, 2006-2016

Although the United States remained the largest producer of electricity from biomass sources, generation fell 2% in 2016 to 68 TWh, down from 2015 levels of 69 TWh, as existing capacity faced increasing price competition from alternative renewable generation sources under the Renewable Portfolio Standards of a number of states.34 However US bio-power capacity in operation reportedly increased by 197 MW (0.5%) to 16.8 GW through the installation of 51 small-scale generation plants.35

In Europe, growth in electricity generation from both solid biomass and biogas continued in 2016, driven by the Renewable Energy Directive.36 In Germany, Europe’s largest producer of electricity from biomass, total bio-power capacity increased 2%, to 7.6 GW, and generation was up 2.5% to 52 TWh.37 Elsewhere in Europe, the United Kingdom’s bio-power capacity increased 6% to 5.6 GW, due mainly to large-scale generation and to continuing growth in biogas production for electricity; however, generation was up only 1% because increases in output from solid biomass and anaerobic digestion were offset by reductions in generation from landfill gas.38 In Poland, the capacity auction schemes with dedicated tranches for municipal solid waste (MSW) plants and for biogas-based generation stimulated the deployment of new bio-power capacity. As a result, bio-power capacity grew from 1.27 GW to 1.34 GW, and generation increased 50% (from 10 TWh to 15 TWh) in 2016.39

In China, in response to revised objectives in the 13th Five-Year Plan, bio-power capacity rose by an estimated 13% in 2016, to 12 GW, and generation increased to an estimated 54 TWh.40 The combustion of MSW and of agricultural wastes accounted for most of this generation.41

Elsewhere in Asia, capacity and generation rose strongly in Japan, with bioenergy featuring in the feed-in tariff scheme. Japan’s imports of wood pellets for direct combustion and for use in co-firing installations has grown rapidly. The country’s capacity for dedicated biomass plants reached a total of 4 GW in 2016, and generation totalled some 38 TWh, a 5% increase from 2015.42 In the Republic of Korea, generation rose by 44% to 8 TWh, reflecting political efforts to reduce coal use in electricity generation by co-firing with biomass.43 India’s bio-power capacity increased as well, with on-grid capacity up by 164 MW (up 0.3%) to 8.3 GW, and off-grid capacity up by 18.9 MW (up 2%) to 330 MW; generation rose 8% relative to 2015, to 30 TWh.44

Brazil is the largest overall consumer of electricity and bio-power in Latin America. The country’s capacity, which grew rapidly in 2015, rose 5% in 2016, to 13.9 GW.45 Generation also rose 5%, to 51 TWh.46 Over 80% of the biomass-based electricity generation in Brazil is fuelled by bagasse, which is produced in large quantities in sugar production.47

Transport Biofuel Markets

In 2016, global biofuels production, which closely tracks demand, increased around 2% compared to 2015, reaching 135 billion litres.48 This increase was due largely to a rebound in biodiesel production after a decline in 2015. The United States and Brazil remained the largest biofuels producers by far, accounting for 70% of all biofuels between them, followed by Germany, Argentina, China and Indonesia.49 An estimated 72% of biofuel production (in energy terms) was fuel ethanol, 23% was biodiesel, and 4% was hydrotreated vegetable oil (HVO).50 (→See Figure 9.)

Figure 9. Global Trends in Ethanol, Biodiesel and HVO Production, 2006-2016

Global production of fuel ethanol was almost unchanged between 2015 and 2016 at approximately 99 billion litres.51 The United States and Brazil maintained their leading roles in ethanol production with 59% and 27%, respectively, of global production in 2016.52 China, Canada and Thailand were the next largest producers.53

US ethanol production rose 3.5% to 58 billion litres during the year.54 Domestic demand was supported by the annual volume requirements under the US Environmental Production Agency’s (US EPA) final Renewable Fuel Standard (RFS2) allocations. Ethanol production in Brazil fell slightly, to 27 billion litres.55 In Canada, which ranked fourth globally in 2015, production declined 3% in 2016, to 1.7 billion litres.56

After North and South America, Asia is the third largest regional producer of ethanol, and China is the region’s largest producer. Ranking third for ethanol production globally in 2016, China produced an estimated 3.2 billion litres, an increase of 5% over 2015.57 About 99% of the ethanol produced annually in China is based on conventional starch-based feedstocks. All ethanol production and distribution is controlled by state-owned oil companies, and only state-approved companies can carry out blending and receive incentives and subsidies.

China’s biofuels policies have focused mainly on ethanol production. An E10 mandate is in place in 4 provinces and 27 cities, but production has been constrained and, historically, no blending was allowed to take place outside of these areas.58 This limitation was eased in 2016, however, and some stockpiled grain was released for ethanol production in line with plans to boost domestic ethanol production.59

Elsewhere in Asia, ethanol production increased 3.9% in Thailand to 1.2 billion litres, and in India it reached 0.9 billion litres, encouraged by stronger policy support in the form of mandates.60

In Europe, the next-largest producing region, ethanol production fell 6% to 4.8 billion litres in 2016.61 Production fell sharply (by 14%) in France, one of Europe’s largest producers, due to a poor grain harvest, but grew strongly in Hungary (38%) and the United Kingdom (23%).62

Biodiesel production is more geographically diverse than ethanol, with production spread among many countries. The leading countries for production of fatty acid methyl ester (FAME) biodiesel were the United States (18% of global production), Brazil (12%), and Indonesia, Germany and Argentina (each with 10%).63 Following a significant decrease in 2015, when output was down 6.5% to 28.7 billion litres, global production rose 7.5% in 2016 to 30.8 billion litres.64 The increase was due mainly to restored production levels in Indonesia and Argentina and to significant increases in North America; US biodiesel production rose 15% in 2016, reaching 5.5 billion litres in response to improved opportunities for diesel within the RFS2.65 In Canada, production rose 19% to 0.4 billion litres.66

By contrast, biodiesel production in Brazil fell 3% to 3.8 billion litres, despite an increase in the blending mandate.67 The reduction probably resulted from a decline in demand for diesel consumption linked to a reduced level of business activity.68 In Argentina, biodiesel production recovered from a fall in 2015, rising 43% to 3.0 billion litres.69 This expansion was stimulated by increased domestic demand (which accounts for around 45% of production) and improved market prospects in the United States and Peru.70

European biodiesel production declined 5% to 10.7 billion litres.71 Germany was again the largest European producer (3.0 billion litres), followed by France (1.5 billion litres).72 Production fell by 11% in both of these countries but increased in Spain (1.1 billion litres, up 1%) and Poland (0.9 billion litres, up 8%).73

In Asia, after a significant decline to 1.7 billion litres in 2015, Indonesian production rose 76% to 3.0 billion litres in 2016, boosted by a number of measures aimed at stimulating a domestic market and at making Indonesia the region’s largest producer again.74 China’s biodiesel production fell an estimated 10%, to 0.3 billion litres, due to reduced diesel fuel use (linked to a slowdown in industrial activity) and an absence of widespread blending mandates.75

Global production of HVO grew some 22% from 4.9 billion litres to 5.9 billion litres.76 Production was concentrated in the Netherlands, the United States, Singapore and Finland.77

The production and consumption of biomethane as a transport fuel also continued to increase during the year. In the United States, for example, consumption grew nearly six-fold between 2014 and 2016, when biomethane provided the equivalent of 188 million gallons (712 million litres) of ethanol equivalent (15.1 PJ).78 Conversion of biomass to biomethane was stimulated by the 2014 EPA ruling on the RFS2, which increased incentives for biomethane by promoting it to an advanced cellulosic biofuels category.79 As a result of this substantial growth, in 2016 the United States overtook the other significant markets for biomethane in transport – Sweden and Germany – which together consumed an estimated 6.4 PJ of biomethane fuel in transport.80

Bioenergy Industry

The bioenergy industry includes feedstock suppliers and processors; firms that deliver biomass to end-users; manufacturers and distributors of specialist biomass harvesting, handling and storage equipment; and manufacturers of appliances and hardware components designed to convert biomass to useful energy carriers and energy services. Industry, with support from academia and governments, also is making progress in bringing new technologies and fuels to the market.

Solid Biomass Industry

A very diverse set of industries is involved in delivering, processing and using solid biomass to produce heat and electricity, ranging from the informal supply of traditional biomass, to the locally based supply of smaller-scale heating appliances, to regional and global players involved in large-scale district heating and power generation technology supply and operations.

In Europe, the trend to convert large-scale power station capacity from coal to wood pellets continued. For example, in Denmark, a 360 MW unit of a power station in Aarhus was converted from coal to run on wood pellets, which will supply biomass-based heat to more than 100,000 homes and electricity to about 230,000 homes.81 In the United Kingdom, Drax received European Commission approval to convert a third unit of its coal-fired plant to run on wood pellets.82

In both Japan and the Republic of Korea, wood pellet imports rose during the year, reflecting the rapidly increasing use of bioenergy for co-firing with coal in power generation. Japan imports 300,000 tonnes per year of industrial pellets, 70% of which come from Canada, along with 600,000 tonnes of palm kernel shells from Vietnam and other South-Eastern Asian countries.83

The global market for wood pellets for industrial (mostly power station) use and heating use has continued to expand. Demand in the industrial sector reached some 13.8 million tonnes in 2016.84 A similar quantity (around 14 million tonnes) of pellets went to heating markets (individual houses and district heating), notably in Italy, Germany and Sweden.85 The wood pellet heating market has grown steadily at a rate of nearly 1 million tonnes per year over a 10-year period.86

The United States is the largest exporter of wood pellets. In 2016, US manufacturers produced approximately 6.9 million tonnes of wood pellets and exported 4.8 million tonnes.87 During the first half of 2016, 85% of exported pellets were sold to the UK Drax plant.88 Canadian exports also rose 47% in 2016 to 2.5 million tonnes.89 Latvia, Europe’s largest producer, exported 1.9 million tonnes mainly to Denmark and the United Kingdom, as well as to Sweden and Italy.90

Along with some large-scale plants designed to provide supply chain security to particular users (such as Drax), the pellet industry mostly comprises independent producers and is based around sawmill operations.91 For example, 142 pellet plants are operational in the United States and 58 in Canada.92 However, there are signs of industry consolidation. In the EU, for example, Graanul (Estonia) was the largest producer in 2016, with 11 pellet plants across Estonia, Latvia and Lithuania.93

The sustainability of bioenergy, and particularly of the large-scale use of pellets derived from wood, continues to be a controversial issue.94 The European Commission, in its proposals for a new Renewable Energy Directive launched in November 2016, stated its intent to reinforce mandatory sustainability criteria for bioenergy by extending the scope to cover solid biomass and biogas for heating and cooling and electricity generation.95 As of 2016, such mandatory criteria applied only to biofuels, although member states can introduce criteria for the heat and electricity sectors, as the United Kingdom and Denmark have done.96

The torrefaction of wood enables the production of pellets with a higher energy density and results in a product compatible with systems designed for coal. Although commercialisation of the technology has been slower than expected, some promising developments occurred in 2016.97 For example, Airex Energy (Canada) started producing torrified pellets at its Bécancour plant in Canada, with a capacity of 15,000 tonnes per year.98 Finnish company Biopower Oy invested USD 74-84 million (EUR 70-80 million) to build a bio-coalii plant in Mikkeli, Finland that will produce 200,000 tonnes of bio-coal pellets annually and is due to come online in 2017-18.99

Liquid Biofuels Industry

Liquid biofuel production is concentrated among a small number of large industrial players with dominant market shares. These include ethanol producers Archer Daniels Midland (ADM), POET and Valero in the United States, and Copersucar, Oderbrecht (ETH Bioenergia) and Raizen in Brazil.100 A number of large-scale companies with fossil fuel backgrounds (such as Shell, Neste and Honeywell UOP) and from bio-based industries (such as UPM from the pulp and paper sector) are engaged in developing and producing new biomass-based fuels.101

New patterns of trade for ethanol are developing, particularly with the rise in both demand and production in China. In 2015, China became a major importer of ethanol from the United States; US exports to China rose 2.4-fold in 2016.102 Indigenous Chinese production also increased, based on high stocks of grains. China recently introduced an import tax on ethanol to support domestic production, and as of 2016 the country was exporting ethanol to some Asian markets.103

Net imports of biodiesel to the United States more than doubled between 2015 and 2016 (from 1.0 billion to 2.3 billion litres).104 Argentina was a leading supplier of this increase: the country has significant biodiesel production capacity, and since 2010 it has been supplying markets in the EU as well as in the United States, Peru and other countries. Despite growing domestic demand, however, Argentina’s biodiesel manufacturing capacity has been underutilised (at 40-55%) since 2013, when the EU imposed a heavy import tax on Argentinian biodiesel.105

In Africa, despite significant potential and attempts in some countries to design biofuels strategies, development of production has been slow, held back in part by problems in accessing appropriate technology.106 Some promising developments have occurred, however; for example, Nigeria launched a national biofuels strategy in 2016.107 The Nigeria National Petroleum Corporation (NNPC) announced plans to set up a biorefinery that will use agricultural products to produce ethanol and other products, and Union Dicon Salt has agreed to a joint project with Delta State (Nigeria) to plant 100,000 hectares of cassava and to build an ethanol processing plant that will produce 22,000 litres a day along with starch products.108 Biofuels Nigeria also is planning to build a biodiesel plant in Kogi State using jatropha as feedstock.109 In South Africa, Ethala Biofuels announced plans for a sweet sorghum biorefinery project that will produce ethanol and other products.110

In 2016, worldwide efforts to demonstrate the production and use of advanced biofuels were expanded. The aim of developing and commercialising advanced biofuels is three-fold: first, to produce fuels that can provide more life-cycle carbon savings than some biofuels produced from sugar, starch and oils; second, to produce fuels with less impact on land use (e.g., from wastes and residues), thereby reducing indirect land-use change impacts and also reducing competition for food or for productive agricultural land; and finally, to produce biofuels with properties that enable them to directly replace fossil fuels in advanced transport systems such as aviation engines, or to be blended in high proportions with conventional fuels (“drop-in biofuels”). A number of routes are under development to produce advanced biofuels in the form of ethanol, butanol, diesel jet fuel, gasoline, methanol and mixed higher alcohols from an array of feedstocks.111 (→See Figure 10.)

Figure 10. Some Conversion Pathways to Advanced Biofuels

The market for new biofuels in 2016 was led by HVO, followed by ethanol from cellulosic materials such as crop residues and by fuels from thermochemical processes including gasification and pyrolysis.112 Production of fuels from HVO (including used cooking oil (UCO), tall oiliii and others) increased greatly in 2016, mostly because capacity that had been announced or commissioned in 2015 came fully online and improvements were made in production efficiency.113 For example Neste, which owns three large-scale renewable HVO diesel production facilities in Singapore, the Netherlands and Finland, announced plans to increase its production to 2.6 million tonnes (3.3 billion litres) by 2017 by improving productivity at these existing sites rather than adding new locations.114 The US Renewable Energy Group, which has 14 production sites in the United States and Germany, announced that its cumulative biodiesel production had exceeded 2 billion gallons (7.6 billion litres) early in 2017.115

Plans were announced in 2016 for the construction of several additional cellulosic ethanol manufacturing plants, which will extend the geographical coverage of production outside the United States and Europe. Italy’s Beta Renewables (which operates the Crescentino cellulosic ethanol plant in Italy) engaged in further joint-venture projects in the United States, Brazil, China and the Slovak Republic.116 In Finland, North European BioTech Oy was developing advanced ethanol production plants in Pietarsaari and Kajaani; once in operation, these plants will be able to produce 50 million litres each of advanced ethanol per year using softwood sawdust, recycled wood and other forestry wastes and residues.117

In Asia, DuPont (United States) signed a licensing agreement with New Tianlong Industry Company Ltd. (China) to begin construction of China’s largest cellulosic ethanol manufacturing plant, to be located in Siping City.118 India Glycols opened India’s first cellulosic plant in Kashipur, which runs on wood chips, cotton stalk, cane bagasse, maize stover and bamboo.119 Also in India, during 2016, memoranda of understanding relating to five additional cellulosic ethanol plants were finalised.120 In Thailand, Toray and Mitsui (both of Japan) announced plans to build a large-scale plant to convert sugar bagasse to ethanol; the facility is expected to come online in August 2018.121

Commercialisation of thermal processes such as pyrolysis and gasification also advanced in 2016. Enerkem (Canada) commissioned a commercial-scale plant in Edmonton, Canada based on the gasification technology and ethanol synthesis technology demonstrated at the company’s Westbury plant. The Edmonton plant uses 300 tonnes per day of sorted municipal waste to produce methanol, and a facility allowing ethanol production was being constructed as of 2016.122 Also in 2016, the Altair Renewable Jet Fuel Project in the US city of Los Angeles began producing “drop-in” biofuels via Honeywell UOP’s Renewable Jet Fuel Process in a retrofitted part of an existing oil refinery. The plant, which uses vegetable oils, animal fats and greases as feedstocks, is capable of producing 2,500 barrels (0.15 billion litres) per day of bio-jet fuel.123

Strong interest in the development of aviation biofuels continued in 2016, although quantities remained relatively small and mostly for demonstration use.124 By the end of the year, the American Society for Testing and Materials (ASTMiv) had certified two additional technology pathways to produce bio-jet fuels, bringing the total to five.125 Several aircraft manufacturers have been instrumental in the development of bio-jet fuels, including Airbus and Boeing. In addition, a number of air carriers worldwide continued to use biofuels in 2016, including Aeromexico, Alaska Airlines, British Midland, FedEx, Finnair, Gol, KLM, Lufthansa, Qatar Airways, Scandinavian Airlines (SAS), Southwest Airlines and United Airlines. 126 Several voluntary initiatives at the local and regional levels have sought to establish bio-jet supply chains at specific airports, such as the supply of bio-jet fuel to Arlanda airport In Stockholm, Sweden by SkyNRG and Air BP.127 The US Air Force also continued to actively develop bio-aviation fuels for defence purposes, working with a number of companies to establish production facilities, and the US Navy continued with its Great Green Fleet initiative during 2016.128

In the marine sector, an initiative was established In the Netherlands to develop sustainable drop-in biofuels (similar to UPM’s wood-derived product) for marine applications.129 The Maersk Group (Denmark) is testing biofuels and other alternatives in larger ships and has a dedicated container ship for the purpose of testing biofuels derived from a wide variety of sources.130 In Italy, ENI provided biodiesel prepared using the company’s Ecofining process for the Italian navy’s offshore patrol vessel Foscari.131

Gaseous Biomass Industry

Most biogas production occurs in the United States, where it is based predominantly on the collection of landfill gas, and in Europe. Production in Europe is focused more on the anaerobic digestion of agricultural wastes, including animal manures, and increasingly on the digestion of recovered food wastes (for example, in Sweden and the United Kingdom).132 Other regions, including Asia and Africa, were taking up the technologies as of 2016. Growth rates have been higher in these new regions, albeit from a low starting level.133

Expanding markets for biogas and biomethane are stimulating commercial activity worldwide. In response to the recent growth of biomethane as a transport fuel in the United States under RFS2, BP announced that it will buy the bio-methane business owned by Clean Energy Fuels for USD 155 million (EUR 147 million).134 In Europe, waste management firm Suez bought a 22% stake in biogas producer Prodeval, which developed a high-performance membrane purification process for biomethane production.135 Meanwhile, strong growth in the market for biogas facilities has led to Xergi, a supplier and builder of such systems, being named one of the fastest growing businesses in Denmark.136

In India, where biogas capacity is estimated at 300 MW, many industrial processes now produce biogas, driven by strong water-quality standards that limit the release of effluents into waterways.137 In other parts of Asia, there is a similar trend to produce and use biogas obtained by treating liquid effluents and wastes. In late 2016, Green & Smart Holdings (Malaysia) announced the start of operations of its first biogas-based power plant (2 MW), which runs on palm oil mill effluent and will export electricity to the national grid.138

In Africa, biogas production has continued to expand, largely from municipal and agricultural wastes. In South Africa, renewable energy developer New Horizons teamed with gas firm Afrox to open an energy-from-waste biogas plant near Cape Town, at a cost of USD 29 million (ZAR 400 million).139 In Kenya, the country’s first biogas-powered grid-connected CHP plant commenced generation at a commercial farm, producing 2 MW of electricity and enough heat to cultivate 704 hectares of vegetables and flowers, with enough surplus power to supply 5,000 to 6,000 rural homes.140

Geothermal Power and Heat

Geothermal Markets

Geothermal resources provide electricity and thermal energy services (heating and cooling). In 2016, the estimated electricity and thermal output from geothermal sources was 567 PJi (157 TWh), with each providing approximately equal shares.1 Some geothermal plants produce both electricity and thermal output for various heat applications.

An estimated 0.4 GW of new geothermal power generating capacity came online in 2016, bringing the global total to an estimated 13.5 GW.2 Indonesia and Turkey were in the lead for new installations. Kenya, Mexico and Japan also completed projects during the year, and several other countries had projects under development.3 (→ See Figure 11.)

Figure 11. Geothermal Power Capacity Additions, Share by Country, 2016

The countries with the largest amounts of geothermal power generating capacity at the end of 2016 were the United States (3.6 GW), the Philippines (1.9 GW), Indonesia (1.6 GW), New Zealand (1.0 GW), Mexico (0.9 GW), Italy (0.8 GW), Turkey (0.8 GW), Iceland (0.7 GW), Kenya (0.6 GW) and Japan (0.5 GW).4 (→ See Figure 12.)

Figure 12. Geothermal Power Capacity and Additions, Top 10 Countries, 2016

Indonesia added about 200 MW of new capacity in 2016, ending the year with 1.64 GW.5 By early 2017, the country also had started commercial operations at the 110 MW Sarulla plant, one of the largest geothermal plants in the world. The plant is notable for being a combined-cycle operation, analogous to a Turkish plant coming online in 2017, where conventional flash turbines are supplemented with a binary system to extract additional energy from the post-flash turbine steam, maximising energy extraction and efficiency.6

Existing capacity in Indonesia is estimated to be less than 6% of the country’s total geothermal power potential, and Indonesia aims for continued rapid development of these resources.7 To facilitate progress, as of early 2017 the government had plans to mitigate the risks of exploration and development by mapping the country’s geothermal resources, and was considering a feed-in tariff to provide a predictable fixed price for geothermal energy to further reduce risk to project developers.8

Following the opening of 10 plants in 2015, Turkey added at least another 10 new geothermal power plants in 2016, increasing capacity by about 200 MW for a total of 821 MW.9 With so much additional capacity online, the country has seen continued rapid growth in electricity generated from geothermal energy; generation rose 25% in 2016 alone, to 4.21 TWh.10 All the new plants were binary Organic Rankine Cycle (ORCii) units, with capacity of up to 25 MW each.11 Turkey also is developing projects with conventional flash turbine technology that is suitable for the country’s remaining high-temperature resources. For example, the 70 MW Unit 2 of the Kizildere III plant, to be operational in 2017, will combine a 51 MW flash-steam turbine to harness high-pressure steam with a 19 MW binary-cycle unit to capture usable energy from the flash turbine’s exhaust stream.12

Kenya completed a 29 MW addition at the Olkaria III complex in 2016, increasing the facility’s capacity to 139 MW.13 At year’s end, Kenya’s total operating capacity was about 630 MW.14

In Mexico, a 25 MW condensing flash unit was added to the Domo San Pedro plant, taking over from two 5 MW temporary wellhead units that were installed in 2015 to get production under way.15 The net addition of 15 MW brought Mexico’s total capacity to about 950 MW. This plant is the first private geothermal project in the country, but another was in the early stages of exploratory drilling as of early 2017.16 Mexico awarded three additional exploration permits in 2016 to private Mexican companies under the country’s new Geothermal Energy Law, which governs the exploration and use of geothermal resources.17

Japan’s progress on geothermal development has been mixed, with competing desires for alternatives to fossil and nuclear fuels on one hand, and concerns about safety and potential unintended economic and environmental consequences on the other. A combination of a higher FIT and an exemption from environmental impact assessments for small plants (less than 7.5 MW) has encouraged interest in small-scale geothermal power projects in Japan.18 A small geothermal facility in Tsuchiyu was completed in 2015, and at least one small ORC generator came online in 2016. However, as of early 2017 the country had no large-scale projects under development.19

Another small project in Japan’s Fukushima prefecture was in the planning stage during 2016, but not without apprehension from local business interests.20 Many hot spring resort owners and local governments in Japan are concerned that development of geothermal power projects will put such businesses at risk.21 To alleviate these concerns, in 2016 the national government established an expert advisory committee to provide information on geothermal energy development to local governments. The government also announced plans to cover some of the initial costs of exploratory drilling and data gathering to address development risk.22

Project development and other geothermal activities were under way in several other countries during 2016, including the United States. Although the country saw no net increase in geothermal capacity, leaving the total at 3.6 GW (2.5 GWnet), electricity generation increased by 9.4% relative to 2015, to 17.4 TWh.23 The United States has about 0.8 GW of ongoing projects that are likely to be operational by 2020, and another 0.9 GW of projects that are under development with the potential to come online if small hurdles are overcome.24 However, progress is reportedly constrained by an unfavourable regulatory environment and by competition from relatively low natural gas prices.25

The Philippines is second only to the United States for total geothermal power capacity in operation. No capacity was brought online in 2016, and the country’s geothermal industry association called for FITs for geothermal power, similar to those granted to other renewables, to spur development of more-challenging low-temperature resources.26 Low-temperature resources may require deeper drilling and the application of binary-cycle technology, which increases development risk and the ultimate cost of produced energy.27 In early 2016, the Asian Development Bank (ADB) announced plans to back the first Climate Bond in Asia and Oceania, in the form of a 75% guarantee of principal and interest on a USD 225 million bond, specifically for the refurbishment of the Philippines’ Tiwi and Mak-Ban geothermal facilities.28

In China, the central government plans to increase the sustainable use of geothermal energy in cities to reduce local air pollution and greenhouse gas emissions.29 As of 2015, China had less than 30 MW of geothermal power capacity, mostly in Tibet, but the country’s 13th Five-Year Plan for geothermal energy calls for an additional 500 MW by 2020.30

Unlike many of its Asian neighbours, Malaysia had no geothermal plants in operation by end-2016. This will change upon completion of a 30 MW plant under construction in the state of Sabah on the island of Borneo.31 To support the nascent geothermal energy development in Malaysia, in 2016 the government was in the process of establishing a Geothermal Resource Centre to create a platform for collaboration with foreign institutions, to bring together stakeholders and specialists in geothermal energy and to offer training in related sciences.32

Croatia also initiated construction of its first-ever geothermal power project in 2016.33 This 16 MW binary plant will utilise the 170°C geothermal brine and steam from the Pannonian basin, one of the key geothermal areas in Europe.34

Ethiopia shares the geothermal riches of the Great Rift Valley with Kenya, but limited development has occurred to date, with about 7 MW in place.35 However, in 2015, the country pushed the agenda by signing a 500 MW PPA for the first phase of the Corbetti project, which is expected to be built in two stages within 8 to 10 years.36 The International Finance Corporation has worked with Ethiopia to enact regulations to facilitate private investor engagement in geothermal projects.37 In 2016, Ethiopia reclassified geothermal resources as renewable energy, making geothermal energy use exempt from royalty payments that are exacted from extractive mineral resources under the country’s mining laws.38

Many of the islands of the Caribbean are volcanic and have the potential to displace costly fuel imports with local geothermal energy. In 2016, the Abu Dhabi Fund for Development announced a new loan to St. Vincent and the Grenadines for the construction of a 15 MW geothermal power plant that is expected to reduce power costs, provide local jobs and improve the reliability of electricity service.39 Later in the year, New Zealand signed a partnership agreement with the Commonwealth of Dominica, pledging to support the construction of a 7 MW geothermal plant on the island.40 Plans also are under way to expand an existing 10 MW plant on the island of Guadeloupe.41

Geothermal direct use – direct thermal extraction for heating and cooling, excluding heat pumpsiii – was estimated to be 286 PJ (79 TWh) in 2016, based on historical growth rates for various geothermal heat applications, which suggests that an estimated 1.3 GWth of capacity was added in 2016, for a global total of 23 GWth.42 Direct use capacity has grown by an annual average of 6% in recent years, while direct heat consumption has grown by an annual average of 3.5%.43 The difference is explained in part by rapid growth in geothermal space heating (7.1% annually), which exhibits below-average capacity utilisation.44

The single largest direct use application is estimated to be swimming pools and other public baths, followed by space heating (including district heat networks).45 These two broad markets command around 80% of both direct use capacity and consumption. The remaining 20% of direct use capacity and heat output is for applications that include domestic hot water supply, greenhouse heating, industrial process heat, aquaculture, snow melting and agricultural drying.46

China utilised the largest amount of direct geothermal heat (20.6 TWh) in 2015.47 Other top users of direct geothermal heat are Turkey (12.5 TWh), Iceland (7.4 TWh), Japan (7.1 TWh), Hungary (2.7 TWh), the United States (2.6 TWh) and New Zealand (2.4 TWh).48 These countries accounted for approximately 70% of direct geothermal use.49 As of 2015, the countries with the largest geothermal direct use capacity were China (6.1 GWth), Turkey (2.9 GWth), Japan (2.1 GWth), Iceland (2.0 GWth), India (1.0 GWth), Hungary (0.9 GWth), Italy (0.8 GWth) and the United States (0.6 GWth).50 Together, these eight countries accounted for about 80% of total global capacity.51

Several EU countries have added direct use capacity through the continued expansion of geothermal district heating. Between 2012 and 2016, 51 new or renovated geothermal district heating plants were completed in the EU, adding about 550 MWth of capacity.52 In 2016, Europe had more than 260 geothermal district heating systems, including co-generation systems, with a total installed capacity of approximately 4 GWth. The main markets are France, the Netherlands, Germany and Hungary.53 One of the projects that started operations during the year is a 20 MWth plant for district heating in the city of Munich.54 The plant is the latest of many small-scale geothermal facilities in Bavaria that use relatively low-temperature resources, often to produce both heat and power.55

In France, geothermal district heating is extending beyond the Paris metropolitan area, which has seen significant development of these systems in recent years. In early 2017, the city of Bordeaux issued a contract to develop geothermal resources to serve the bulk of the heating needs of about 28,000 homes.56 In addition, the use of geothermal heat is spreading to the French industrial sector. In 2016, a 24 MWth enhanced geothermal plant opened in Rittershoffen, in the Upper Rhine Valley.57 The plant is reported to be the country’s first high-temperature (greater than 150°C) geothermal facility supplying industrial process heat; the heat is extracted from a 170°C aquifer at a depth of 2.5-3.0 kilometres.58 The Rittershoffen project benefited from lessons learned from the nearby pioneering enhanced geothermal system (EGS) power plant at Soultz-sous-Forêts. Chemical and hydraulic stimulations of the field did not result in notable induced seismic activity.59

Development of geothermal for heat also continued in China, where direct use of geothermal energy covered slightly more than 100 million square metres (m2) of heated space as of 2015.60 China’s central government envisions a significant increase, in pursuit of the sustainable use of geothermal resources to reduce air pollution while also protecting water resources. Under the 13th Five-Year Plan, China aims to increase direct use of geothermal heat by another 400 million m2 by 2020.61

Geothermal Industry

The geothermal industry continued to face challenges in 2016, burdened by the inherent high risk of geothermal exploration and project development, the associated lack of risk mitigation, and the constraints of financing and competitive disadvantage relative to low-cost natural gas. Yet the industry made progress with new project development in key markets, and industry leaders cemented partnerships to tackle new opportunities.

Progress on the development of geothermal energy around the world has been constrained, in part, by a lack of clear resource assessment standards. To help address this challenge, in 2016 new geothermal specifications were completed under the UN Framework for Fossil Energy and Mineral Reserves and Resources. The framework’s objective is to harmonise standards for reporting geothermal resources in a manner similar to other extractive industries worldwide, for the benefit of investors, regulators and the general public.62

The industry is sensitive to trends in oil and natural gas prices. Low oil and gas prices tend to reduce global demand for drilling rigs for oil and gas exploration, which can have a positive effect on the geothermal industry by reducing the associated costs of geothermal exploration and the development of new fields.63 Conversely, low fossil fuel prices in general, and natural gas prices in particular, tend to reduce the competitiveness of geothermal heat and power.64

In late 2016, Chevron Corporation (United States), one of the world’s largest operators of geothermal facilities, announced its intention to sell its geothermal assets in Indonesia and the Philippines. These include the Darajat and Salak fields in Indonesia and the Tiwi and Mak-Ban plants in the Philippines.65 The purchase of the Indonesian plants (637 MW in total) by a consortium of holding companies in the Philippines and Indonesia was completed in April 2017, with the acquisition of the remaining assets (747 MW in total) pending regulatory approvals.66

Some top technology providers have formed partnerships in recent years to pursue projects jointly. In 2015, Ormat Technologies (United States) and Toshiba Corporation (Japan) reached a strategic agreement to join Ormat’s binary technology and Toshiba’s flash technology in a combined-cycle configuration.67 In 2016, Mitsubishi Hitachi Power Systems Ltd., formed by the 2014 merger of the thermal power divisions of Mitsubishi (Japan; parent company of Turboden, Italy) and Hitachi (Japan), won an order for a 55 MW turbine in Costa Rica.68 The company anticipated that Japan’s International Cooperation Agency would pave the way for projects in all major geothermal power markets through low-interest loans for exploration and development.69

Technology advances continued during 2016 and into 2017. In early 2017, after 176 days of drilling, the Icelandic Deep Drilling Project achieved a significant milestone for the geothermal industry with the completion of its 4,659-metre-deep borehole on the Reykjanes Peninsula. The well successfully found supercritical fluid at a temperature of 427°C, with promising characteristics for energy production. The project aimed to investigate the feasibility of finding and utilising supercritical hydrothermal fluids, which modelling suggests could have 10 times the power output of a conventional geothermal well, potentially allowing for improved economics and reduced environmental impact per unit of energy produced.70

Also in Iceland, methods have been developed to reinject to the ground both carbon dioxide and hydrogen sulphide (H2S) for sequestration in mineral form.71 Together, CO2 and H2S comprise more than 80% of the off-gases at the country’s geothermal plants.72 In Iceland’s CarbFix project, more than 95% of injected CO2 has become bound as carbonate minerals within a period of two years, faster than was predicted.73 Alternatively, once separated from other gases, the CO2 can be made available to local commercial interests, such as greenhouses and algae producers.74

Because the CO2 concentrations in geothermal gases can be significant, some experts are concerned about the potential greenhouse gas impact of open-loop geothermal power generation, although emission rates depend on local geology and operating conditions. In California, CO2 emissions from geothermal power plants are significantly lower per kilowatt-hour (kWh) than those from coal- or natural gas-fired plants – emissions have been estimated at less than 0.2 kilograms per kWh from flash steam geothermal plants and about 0.03 kilograms per kWh for dry steam geothermal plants (all open-loop)iv.75

In Turkey, by contrast, studies have found that a “typical” open-loop 50 MW geothermal plant emits 1 kilogram of CO2 per kWh, or approximately 1,200 tonnes per day, probably due to high levels of dissolved calcite in the country’s geothermal reservoirs.76 In some instances, CO2 emissions from geothermal power generation in Turkey may be double those from coal-fired power plants.77 It has been postulated that this might place future projects in Turkey at odds with the environmental criteria of development agencies, including the developing criteria for green bonds.78 Efforts are under way to study means to capture the CO 2 from Turkey’s geothermal plants for commercial use.79

Some technology advances have promised to expand the application of geothermal power. In the US state of Utah, the world’s first geothermal-hydro plant hybridisation was realised when Enel S.p.A. (Italy) started operating a hydro-generator in a geothermal injection well during 2016. As a result, the 25 MW Cove Fort plant captures the energy of the geothermal brine flowing back into the earth, increasing plant efficiency.80 In North Dakota, a first-of-its-kind geothermal power project was launched during the year, utilising hot water that flows naturally from petroleum production wells to co-produce electricity. The sheer number of oil- and gas-producing wells at the site means that the energy production potential is significant.81

Research continued in the field of enhanced (or engineered) geothermal systems (EGS) during 2016, particularly in the United States, where government-funded research has aimed to realise commercial, cost-competitive power production.82 The common feature among all the most productive geothermal regions of the world is naturally occurring hydrothermal activity, defined by the presence of high heat, geothermal fluid and permeability. To achieve economical geothermal production elsewhere, or to enhance production at existing locations, fracturing of sub-surface rock formations can create the needed permeability to form a productive geothermal reservoir, which is known as EGS.83 In other instances, adequate permeability may exist in hot sedimentary aquifers, but fracturing may be needed to ensure adequate well productivity. 84

An example of an EGS project is the Rittershoffen project in France, mentioned above; this facility is a thermal application, but such systems also can be used to generate electricity with the use of binary-loop technology. EGS has been identified as a key to expanding the potential of geothermal heat and power production worldwide.85

Hydropower

Hydropower Markets

Global hydropower capacity additions in 2016 are estimated to be at least 25 GW, with total capacity reaching approximately 1,096 GWi.1 The top countries for hydropower capacity are China, Brazil, the United States, Canada, the Russian Federation, India and Norway, which together accounted for about 62% of installed capacity at the end of 2016.2 (→ See Figure 13 and Reference Table 5.) Global hydropower generation was estimated to be 4,102 TWh in 2016, up about 3.2% over 2015.3 Global pumped storage capacity (which is counted separately) was an estimated 150 GWii at year’s end, with about 6.4 GW added in 2016.4

Figure 13. Hydropower Global Capacity, Shares of Top 6 Countries and Rest of World, 2016

More than one-third of new hydropower capacity was commissioned in China. After China, the countries adding the most capacity in 2016 were Brazil, Ecuador, Ethiopia, Vietnam, Peru, Turkey, Lao PDR, Malaysia and India.5 (→ See Figure 14.) China also was the leading installer of pumped storage capability during the year, followed by South Africa, Switzerland, Portugal and the Russian Federation.6

Figure 14. Hydropower Capacity and Additions, Top 9 Countries for Capacity Added, 2016

China added 8.9 GW of hydropower capacity in 2016 for a year-end total of 305 GW.7 In addition, 3.7 GW of pumped storage capacity was completed for a total of 27 GW.8 Hydropower generation in China continued its upwards trend, rising about 6% to 1,193 TWh, due in part to improving hydrological conditions.9 Projects completed in 2016 represent an investment of USD 8.8 billion (CNY 61.2 billion), down 22.4% from 2015; as such, 2016 marked the fourth consecutive year of decline.10 China’s 13th Five-Year Plan for Hydropower Development envisions significant additional deployment of hydropower capacity (rising to 340 GW by 2020), as well as pumped storage (rising to 40 GW) to support the country’s overall power infrastructure.11

In Brazil, hydropower capacity increased by 5.3 GW (5.8%), including 5.0 GW of large-scaleiii (greater than 30 MW) capacity, for a year-end total of 96.9 GW.12 Brazil’s hydropower output increased 7.4% over 2015, to 410 TWh, thanks to improved hydrological conditions in 2016 following several years of drought-induced decline. The improved hydropower production, combined with a significant increase in wind power generation, allowed the country to reduce output from thermal power plants by 30% relative to the previous year.13

The final three units (totalling 1,092 MW) of Brazil’s 1.82 GW Teles Pires plant came online in August.14 In addition, about one-sixth of the 11.2 GW Belo Monte plant was completed, with three of the larger 611 MW turbines installed during the year; the remainder of the facility is expected to be finished by 2019.15 Among other notable projects commissioned was the 3.75 GW Jirau plant, with the 10 remaining units (75 MW each) installed in 2016.16

Ecuador ranked third for newly installed hydropower capacity. Two large projects started operations, nearly doubling the country’s hydropower capacity.17 The 1.5 GW Coca Codo facility and the 487 MW Sopladora plant are expected to meet nearly half of the country’s electricity needs and could allow Ecuador to export electricity to neighbouring Colombia.18 To the south, Peru also brought online two significant projects in 2016. The 525 MW Cherro del Águila facility and the 456 MW Chaglla plant expanded Peru’s hydropower capacity by almost one-quarter, to 5.2 GW.19

In Africa, Ethiopia reached a significant milestone in 2016. The remaining 1.5 GW of Ethiopia’s Gibe III came online, marking the completion of this 1.87 GW plant.20 The plant nearly doubles the power generating capacity of the country and is expected to serve about half its output to neighbouring countries Kenya, Sudan and Djibouti.21 To accommodate power exports, Ethiopia also is building a transmission interconnection with Kenya to be completed in 2018, along with internal transmission upgrades to improve poor grid reliability at home.22

Several other countries, all in Asia, added significant hydropower capacity – including Vietnam, Lao PDR, Malaysia, Turkey and India. Vietnam ranked fifth worldwide for additions, commissioning a total of 1.1 GW, for a cumulative 16.3 GW of capacity in operation.23 The two remaining units of the 1.2 GW Lai Chau plant were connected to the grid, following the first unit coming online in 2015. In addition to generating hydropower, this plant is expected to regulate flows for flood protection and water supply during the dry season.24 Also online in 2016 was the second 260 MW generating unit of Vietnam’s Huoi Quang plant and the 30 MW Coc San facility.25 Neighbouring Lao PDR finished two stages (420 MW) of its project on the Nam Ou River, which is the largest tributary of the Mekong River in northern Lao PDR.26 Malaysia continued rapid expansion of its hydropower capacity with the completion of the 372 MW Ulu Jelai project, and two new dams added 265 MW at Tasik Kenyir, the largest manmade lake in South-Eastern Asia.27

Turkey’s reported hydropower capacity expanded by 0.8 GW in 2016, bringing total installed capacity to 26.7 GW.28 Following a sharp recovery in production in 2015, hydropower output remained virtually unchanged in 2016, at 66.9 TWh.29

India brought online approximately 0.6 GW of new hydropower capacity, all in units of 65 MW or smaller.30 At year’s end, the country had a total of 47.5 GW of hydropower capacity.31 India’s hydropower facilities generated 129 TWh during 2016, similar to total output in the previous year.32

The United States continued to rank third globally for installed hydropower capacity, adding a net of 380 MW, for a year-end total of 80 GW.33 Output increased 6.7% relative to 2015, with 266 TWh generated.34 The state of California saw its hydropower output more than double, from 13.8 TWh in 2015 to 28.9 TWh in 2016, thanks to high levels of precipitation after several years of persistent drought conditions.35 Following erosion damage to spillways at California’s Oroville Dam, the state announced a plan in early 2017 to bolster dam safety and flood protection. The plan will require the state to allocate additional funds for flood control and emergency response capability, to enhance its existing dam inspection programme and to seek federal action to further improve dam safety.36

The Russian Federation remained one of the top countries for total capacity. During 2016, the country’s stated hydropower capacity increased by about 230 MW for a total of 48.1 GW.37 Two new facilities were finalised late in the year in the northern Caucasus. The 30 MW Zaragizhskaya facility in Kabardino-Balkaria completes a three-plant cascade and was built without a dam, and the 140 MW (160 MW in pump mode) Zelenchukskaya is a mixed pumped storage plant that incorporates two reversible turbines to combine conventional hydropower generation with pumped storage capability.38 Both plants are expected to boost local power generation and to contribute to system reliability. The Russian Federation also completed modernisation projects at several hydropower facilities in order to improve their reliability, safety and efficiency.39 Hydropower generation (178 TWh) increased by a significant 11.3% in 2016, following a drop in 2015, due to improved hydrological conditions.40 For example, inflows to reservoirs in the far east of Russia were 30-60% above the long-run average.41

The World Bank remains committed to continuing its support for well-designed and well-implemented hydropower projects of all sizes for both local development and climate mitigation, while noting that resettlement of communities, flooding of large areas of land and significant changes to river ecosystems must be carefully considered and mitigated.42 Under the Africa Climate Business Plan, launched at the Paris climate conference in late 2015, the Bank highlighted the importance of deploying hydropower (and associated water regulation), along with other renewable power technologies, as a key component in its efforts to accelerate climate-resilient and low-carbon development in sub-Saharan Africa.43

The Bank aims to increase the share of hydropower in sub-Saharan Africa’s energy mix from 24% in 2016; progress during the year included advancement of the Lom Pangar project in Cameroon, which is expected to ensure all-season water flows in addition to providing needed electricity.44 Also in 2016, the World Bank suspended financing for the 4.8 MW Inga-3 Basse Chute project in the Democratic Republic of the Congo following the country’s decision to deviate from a previously agreed strategic direction.45 However, the Bank said it would continue dialogue with the government, with the goal of ensuring that the project follows international good practice.46

Growing shares of variable renewable energy have given extra impetus to the deployment of additional electricity storage capacity.47 (→ See Feature and Enabling Technologies chapters.) Pumped storage is the dominant source of large-scale energy storage, and new projects are under development. Global pumped storage capacity rose by more than 6 GW in 2016, with new capacity installed in China, South Africa and Europe.48

South Africa completed the installation of three turbines (333 MW each) of the 1.3 GW Ingula pumped storage plant in 2016; the fourth and final turbine became operational in January 2017.49 Peak flow through the plant’s turbines is reported to equal the volume of eight Olympic-sized swimming pools every minute.50

In Europe, Switzerland’s 1 GW Limmern pumped storage plant was partially completed in 2016 as two of four reversible pump turbines were synchronised with the grid. The two remaining turbines were expected to begin operation in 2017.51 Portugal started operating the 189 MW Baixo Sabor pumped storage plant and completed construction of the 780 MW Frades II station (also known as Venda Nova III), with the latter entering service in early 2017.52 Both are open-loop storage plants, using reversible pumps to supplement generation from natural flow with pumping capability.53 During several days in May 2016, Portugal met all of its electricity demand with domestic renewable power, due in part to the country’s ability to use pumped storage to balance demand and supply.54

On a smaller scale, pumped storage is being pursued to supplement mini-grids and to help integrate variable renewable energy. For example, a 200 MW pumped storage facility is being implemented in the Canary Islands as part of a larger programme to improve grid stability and to accommodate variable generation.55 In Gaildorf, Germany, a hybrid wind power and pumped storage pilot project is under way; the upper reservoirs are being integrated into the towers and bases of the wind turbines, creating the added benefit of taller hub heights and thus greater potential wind power generation.56

Hydropower Industry

As the vast stock of hydropower facilities around the world ages, modernisation and retrofitting of existing facilities continues to be a significant part of industry operations, with the potential to increase greatly the performance of existing plants. For example, as part of a comprehensive modernisation programme of RusHydro (Russian Federation), completion of the Kamskaya plant retrofitting in 2016 increased the plant’s capacity by 14%, and modernisation was expected to improve reliability and safety as well.57

In addition to ongoing improvements to mechanical equipment such as turbines, plant operators also continued to implement advanced control technologies and data analytics for digitally enhanced power generation. It is expected that these steps will help to optimise plant management for greater reliability, efficiency and lower cost, while also allowing for more flexible integration with other grid resources, including variable renewable energy.58 With improved system integration, hydropower plants can better enhance their added value within larger power systems – for instance, by shifting generation from baseload duty to cycling duty, as system conditions may dictate. (→ See Feature and Enabling Technologies chapters.)

Climate risk is a pressing concern for the hydropower industry. On one hand, freshwater reservoirs emit greenhouse gases, and there is a significant risk that hydropower may be excluded from some “green” investment mechanisms due to its perceived carbon footprint. On the other hand, the impacts of climate change may positively or negatively affect the hydropower sector in the future.59 The relative resilience of hydropower projects in the face of climate variability – including increased glacial run-off and variability of rainfall – is both a planning and operational consideration going forward, and a further risk in the context of securing project financing. To address these concerns, in 2016 an international research initiative developed a tool for estimating net greenhouse gas emissions from planned and existing reservoirs to provide a more consistent estimate of hydropower’s greenhouse gas footprint.60 Also in 2016, the Climate Bond Initiative launched a working group with the aim of developing criteria to identify hydropower-related investments that deliver climate mitigation benefits and/or incorporate climate resilience and adaptation.61

The most significant providers of hydroelectric equipment in 2016 included GE (United States), Andritz Hydro (Austria), Voith Hydro (Germany), Harbin (China), Dongfang (China) and Power Machines (Russian Federation).62

As hydropower development at home has slowed, Chinese-based corporations have been expanding their involvement in hydropower projects elsewhere, including construction, the supply of hydroelectric equipment, and plant operations, with particular focus on developing countries.63 For example, Dongfang was the equipment supplier for the 1.87 GW Gibe III plant in Ethiopia, and Harbin (with Andritz) supplied hydroelectric equipment for the 1.5 GW Coca Codo plant in Ecuador.64

GE’s renewable energy segment reported increased revenues during the year, in part due to higher hydropower-related sales following the acquisition of Alstom hydropower operations in 2015.65 Andritz Hydro reported unchanged, difficult market conditions with a continued decline in new orders (-13%) and sales (-5%) for 2016, and announced the launch of structural reorganisation of operations.66 Voith Hydro also was affected by weakness in the global market during 2016. Although the company managed to increase sales by 6%, new orders were down slightly (-1%).67

Despite the value of pumped storage to grid stability and integration of renewable energy in general, the European regulatory environment is characterised as unfavourable for pumped storage facilities.68 For example, seven years on since the initial project approval for the Limmern plant in Switzerland, the plant owner has questioned its short- to medium-term profitability due to low wholesale electricity prices and to the small price differential between peak and off-peak power.69 Yet, with an eye to growing shares of variable generation and the plant’s 80-year investment horizon, the long-term prognosis is considered to be favourable.70

Ocean energy

Ocean Energy Markets

Ocean energy refers to any energy harnessed from the ocean by means of ocean waves, tidal range (rise and fall), tidal streams, ocean (permanent) currents, temperature gradients and salinity gradients.1 Very few commercial ocean energy facilities have been built to date. Of the approximately 536 MW of operating capacity at the end of 2016, more than 90% was represented by two tidal barrage facilities: the 254 MW Sihwa plant in the Republic of Korea (completed in 2011) and the 240 MW La Rance tidal power station in France (built in 1966).2

Aside from tidal range facilities such as Sihwa and La Rance, which use established in-stream turbine technology, ocean energy technologies are still largely in pre-commercial development stages. Tidal current technologies are the furthest along, with the first tidal turbine arrays nearing commercial deployment. Wave energy converters are advancing to the pre-commercial demonstration stage, and some pilot projects have been developed utilising ocean thermal energy conversion and salinity gradient technologies.3 Since most of the advancement in the industry is tied to pre-commercial testing and development, the global ocean energy sector continues to rely on backing from national and regional governments in the form of funding and infrastructure support.4

A potentially significant commercial tidal range project, the 320 MW Swansea Bay Tidal Lagoon in Wales, was awaiting final government approval at the end of 2016.5 An independent review into the feasibility and practicality of tidal lagoon energy in the United Kingdom, completed late in the year, found a strong case for a pioneering project on a scale comparable to Swansea Bay based on economic and decarbonisation benefits, among others, but it also noted the need for monitoring for potential impacts on marine life.6

A great number of research and development (R&D) projects is under way in a growing number of countries, with several new deployments of ocean energy devices in 2016. Most of the projects focus on tidal stream and wave energy, but some active projects also exist in the areas of thermal and salinity gradients. To accommodate R&D, ocean energy test centres are proliferating around the world, often with the active support of local governments.7 As of late 2016, projects were under way in Canada, Chile, China, the Republic of Korea, the United States and several countries in Europe.

Ocean Energy Industry

The character of 2016 was similar to the previous year for the ocean energy industry, with a growing number of companies around the world advancing their technologies and deploying new and improved devices. However, commercial success for ocean energy technologies remained in check due to perennial challenges. These include financing obstacles in an industry characterised by relatively high risk and high upfront costs and the need for improved planning, consenting and licensing procedures.8 As in 2015, at least one ocean energy technology developer succumbed to the economic headwinds.9

The tidal industry was again very active in 2016 and celebrated notable achievements, with several deployments in Scotland as well as in France and Canada. In Scotland, Nova Innovation (United Kingdom), with Belgian partner ELSA, claimed the distinction of operating the world’s first grid-connected tidal array with two 100 kilowatt (kW) M100 direct-drive turbines deployed in Shetland’s Bluemull Sound; a third turbine was installed in early 2017.10 Scotrenewables Tidal Power (United Kingdom) installed its 2 MW SR2000 turbine for the first time at the European Marine Energy Centre (EMEC) in Orkney, Scotland.11 Claimed to be the world’s largest tidal turbine, the SR2000 is an integrated tidal energy generator with two horizontal-axis turbines mounted on a floating hull platform.12

Also in Scotland, the Meygen tidal energy project reached a significant milestone in late 2016 with the first 1.5 MW tidal turbine installed and delivering power to the grid. The Andritz Hydro Hammerfest (United Kingdom) turbine fully met its expected power specifications.13 By early 2017, all three Andritz turbines were in place, and the first Lockheed Martin-designed (United States) 1.5 MW AR1500 turbine was deployed at the site, completing the first project phase.14 The project, which is to reach 400 MW over several years, is owned by Tidal Power Scotland – of which Atlantis Resources (United Kingdom) is a majority stakeholder – and by Scottish Enterprise.15

Tidal stream technology developer Sabella SAS (France) completed one year of testing of its full-scale, grid-connected 1 MW D10 tidal turbine off the coast of Brittany, in the Fromveur Strait, where it had supplied electricity to Ushant Island.16 Also in French waters, OpenHydro (a subsidiary of DCNS, France) installed two open-centre tidal turbines at EDF’s (France) tidal array at Paimpol-Bréhat.17 Another OpenHydro turbine hit the water across the Atlantic, where Cape Sharp Tidal (Canada) installed its first 2 MW tidal turbine at the Fundy Ocean Research Center for Energy (FORCE) development facility in the Bay of Fundy, supplying electricity to the Nova Scotia power grid.18 The project, which plans to install a second turbine in 2017, is a joint venture between OpenHydro and Emera Inc. (Canada).19 As of early 2017, several other tidal technology developers were planning for deployment at FORCE in the coming years.20

Wave energy also continued to progress in 2016 with several pilot and demonstration projects around the world, including in Spain, Sweden, the United States, the Republic of Korea and China. Spain saw its first floating wave energy converter connected to the grid at the Biscay Marine Energy Platform (BiMEP), in the form of a 30 kW prototype by Oceantec (Spain).21 Spain is home to the Mutriku multi-turbine wave power plant, the first such facility in the world. The plant has been in operation since 2011 and generates electricity by harnessing wave-driven compressed air (oscillating water column, OWC), similar to the new Oceantec device.22 On the southern tip of the Iberian Peninsula, Eco Wave Power (Israel) connected a 100 kW array of its energy conversion devices to the power grid of Gibraltar in 2016, with plans to expand the array to 5 MW.23

Swedish wave energy companies also made progress. In early 2016, Waves4Power deployed its WaveEL wave energy buoy in Norwegian waters, and Seabased connected its 1 MW Sotenäs Wave Power array to the grid.24 The Sotenäs plant couples linear generators on the sea floor to surface buoys (a technology known as point absorbers) and is said to be the world’s first array of multiple wave energy converters in operation.25

In the Pacific, the Bolt Lifesaver device by Fred Olsen (Norway) was deployed for one year of testing at the US Navy’s Wave Energy Test Center (WETS) in Hawaii. The test was completed in March 2017 with the unit having produced power continuously over a span of six months.26 Northwest Energy Innovations (United States) continued grid-connected testing of its half-scale 20 kW Azura wave energy device at WETS.27 In addition, Columbia Power Technologies (United States) began land-based testing of its StingRAY wave energy converter at the National Wind Technology Center, due to its core similarities to direct-drive wind turbines, with open-water tests at WETS scheduled for 2017.28

Wave energy technologies are among the variety of ocean energy technologies being developed in the Republic of Korea. Among notable projects launched in 2016 was a study focused on integrating wave energy converters, such as OWC devices, with mini-grid connected energy storage on islands and other remote locations that have suitable breakwaters.29 The construction of a 500 kW OWC pilot plant near Jeju Island was completed during the year.30

In 2016, electricity started flowing from the first two turbines of a seven-turbine, 3.4 MW wave energy demonstration project in Zhejiang Province, China.31 China also installed a 10 kW ocean thermal energy conversion (OTEC) device; OTEC uses the temperature difference between cooler deep and warmer surface waters to produce energy.32 At the start of 2017, the country released its 13th Five-Year Plan on Ocean Energy, which targets 50 MW of installed capacity by 2020.33 The plan also envisions expanded testing and demonstration facilities and a research focus on tidal, wave and thermal energy conversion.34

Plans and roadmaps to support the industry advanced in other parts of the world as well, often through collaborations between government and industry. The core agenda of the European Commission’s Ocean Energy Forum was completed in 2016 with the publication of the Ocean Energy Strategic Roadmap. Intended to establish a path towards a thriving European market for ocean energy, the Roadmap outlined four Action Plans designed to establish: a common technology development process to minimise project risk and waste; a European investment support fund for ocean energy farms; a European insurance and guarantee fund to underwrite project risk; and an integrated planning and consenting programme.35

Some examples of smaller-scale, cross-border co-ordination already exist in Europe. The FORESEAi project, launched in 2016, provides competitive funding opportunities to ocean energy technology companies to place their devices at test centres in the United Kingdom, Ireland, the Netherlands and France. With a total budget of USD 11.3 million (EUR 10.8 million), more than half of which is funded by the EU, a first round of awards was made in late 2016 and another in early 2017.36

Another example of active support from government came from Wave Energy Scotland (WES), formed in 2014 as a subsidiary of the Highlands and Islands Enterprise of the Scottish Government. By late 2016, WES had awarded nearly USD 14.5 million (GBP 11.8 million) to wave energy developers.37 Another USD 3.7 million (GBP 3 million) was awarded to 10 wave energy projects in early 2017 to explore new materials and manufacturing processes.38 The European Investment Bank committed up to USD 10.1 million (EUR 10 million) in loans for the Finnish wave energy technology developer AW-Energy. The funding was expected to keep the company on track towards commercialisation of its WaveRoller technology, with a 350 kW full-scale device pending installation in Portugal.39

Project de-risking by governments can come in the form of direct research funding and also through the establishment and operation of ocean energy test centres. In 2016, the US Department of Energy (DOE) awarded USD 40 million to the Northwest National Marine Renewable Energy Center in the state of Oregon to construct a full-scale, grid-connected facility to test wave energy technologies in open water. For the occasion, the DOE noted that the country’s technically recoverable wave energy resources are in the vicinity of 1,000 TWh annually, which is about one-quarter of US net generation in 2016.40

Mexico also completed preparations for the Mexican Centre for Innovation in Ocean Energy (CEMIE-Ocean), which aims to foster collaboration between academia and industry for the advancement of ocean energy science and technologies. The Centre’s activities were scheduled to commence in early 2017.41 Far to the south, Chile’s Marine Energy Research and Innovation Center (MERIC) started its work to establish a foundation for ocean energy development in the country. The centre was launched in 2015 with USD 20 million in funding for the first eight years of operation. Early research has focused on resource assessment, permitting and legal frameworks related to marine concessions, biofouling and marine corrosion.42

In a similar vein, two important reports examining ocean energy-related challenges were published in 2016. One report focused on the status of scientific knowledge on potential interactions between ocean energy devices and marine animals, such as the risk of animals colliding with moving components; various potential impacts of sound propagation from ocean energy devices; and any biological effect of electromagnetic fields generated from underwater cables.43 Many of the concerns associated with such interactions are driven by uncertainty, due to lack of data, which continues to confound differentiation between real and perceived risks.44

The other report addressed the challenges of consenting processes for ocean energy development, where lack of clarity in the process may create potential barriers to the industry. The report's recommendations include the need to acknowledge and define the role of marine spatial planning; to clarify jurisdictions of different authorities; and to co-ordinate and streamline licensing and consenting processes.45

As in 2015, a UK ocean energy company was forced into administration mere months after deploying its device. In late 2015, Tidal Energy Ltd. had launched its 400 kW DeltaStream tidal demonstration device off the coast of Wales, but by October 2016 difficult economic tides forced the company to seek new ownership.46

Solar Photovoltaics (PV)

Solar PV Markets

During 2016, at least 75 GWdci of solar PV capacity was added worldwide – equivalent to the installation of more than 31,000 solar panels every hour.1 More solar PV capacity was installed in 2016 (up 48% over 2015) than the cumulative world capacity five years earlier.2 By year’s end, global solar PV capacity totalled at least 303 GW.3 (→ See Figure 15.)

Figure 15. Solar PV Global Capacity and Annual Additions, 2006-2016

For the fourth consecutive year, Asia eclipsed all other markets, accounting for about two-thirds of global additions.4 The top five markets – China, United States, Japan, India and the United Kingdom – accounted for about 85% of additions; others in the top 10 for additions were Germany, the Republic of Korea, Australia, the Philippines and Chile.5 For cumulative capacity, the top countries were China, Japan (which passed Germany) and the United States, with Italy a distant fifth.6 (→ See Figure 16.) While China continued to dominate both the use and manufacturing of solar PV, emerging markets on all continents have begun to contribute significantly to global growth.7 By end-2016, every continent had installed at least 1 GW, at least 24 countries had 1 GW or more of capacity, and at least 114 countries had more than 10 MW.8 The leaders for solar PV capacity per inhabitant were Germany, Japan, Italy, Belgium and Australia.9

Figure 16. Solar PV Global Capacity, by Country and Region, 2006-2016

Market expansion was due largely to the increasing competitiveness of solar PV, as well as to rising demand for electricity and improving awareness of solar PV’s potential as countries seek to alleviate pollution and reduce CO2 emissions.10 In many emerging markets solar PV now is considered a cost-competitive source for increasing electricity production and for providing energy access.11 Nevertheless, markets in most locations continue to be driven largely by government incentives or regulations.12

In 2016, China added 34.5 GW (up 126% over 2015), increasing its total solar PV capacity 45% to 77.4 GW, far more than that of any other country.13 (→ See Figure 17 and Reference Table R6.) The record increase came despite a downwards adjustment in China’s target for 2020, made in response to a slowdown in the growth of electricity demand.14 A rush of installations (an estimated 20 GW) came online in advance of a mid-year cut-off date for approved projects to receive the 2015 FIT rate.15 Following a brief dip, the market picked up again and continued strongly into 2017, in anticipation of the next cut-off deadline (June).16

Figure 17. Solar PV Capacity and Additions, Top 10 Countries, 2016

Xinjiang province (3.3 GW) was the top market in China – followed by Shandong (3.2 GW) and Henan (2.4 GW) provinces – even though Xinjiang was a “no-go” development area due to high curtailment rates.17 Although much of the new capacity was installed far from population centres, 15 provinces added more than 1 GW each, and 9 of those are in China’s eastern regions.18 Large-scale solar PV plants continued to represent most added capacity and more than 86% of the cumulative total at end-2016, despite the central government’s effort to encourage smaller-scale distributed installations. Even so, the distributed market more than tripled relative to 2015.19

The rapid increase in solar PV capacity in China, up 11-fold since the end of 2012, has caused grid congestion problems and interconnection delays.20 Curtailment started to become a serious challenge in 2015, and problems increased during 2016 due to inadequate transmission.21 To address challenges related to curtailment, in 2016 China set minimum guaranteed utilisation hours (purchase requirements) for solar (and wind) power plants in affected areas and continued to build several ultra-high-voltage transmission lines to connect north-western provinces with coastal areas.22 Against these challenges, solar PV generated 66.2 TWh of electricity during the year (up 69% over 2015), equivalent to 1% of China’s annual generation.23

The United States was a distant second after China for new installations in 2016. For the first time, solar PV represented the country’s leading source of new generating capacity.24 More than 14.8 GW of capacity – almost double the installations in 2015 – was brought online, for a total of 40.9 GW.25 Overall, 22 states installed more than 100 MW each, up from 13 states in 2015.26 California again led for capacity added (5.1 GW), followed by Utah (1.2 GW) and Georgia (1 GW), which became the third largest state market even without additional mandates, subsidies or tax incentives beyond federal tax credits.27

Although all US sectors expanded, growth occurred primarily in the utility segment.28 A record 10.6 GW of large-scale capacity came into operation, with a further 17.8 GW in the pipeline at year’s end.29 Renewable Portfolio Standards (RPS) accounted for the largest portion of projects in development in the United States, but new procurement was driven by other factors, such as cost-competitiveness with new natural gas plants in an increasing number of locations across the country.30 Large corporate customers accounted for a record 10% of large-scale additions.31

The US non-residential (commercial and industrial) market increased 49%, to 1.6 GW, due primarily to looming regulatory deadlines in two key states and to an increase in community solar projects.32 The residential sector experienced slower expansion (up 19%), after record growth in recent years, in part because some major markets are approaching saturation among early adopters.33 The majority (70%) of new residential installations occurred in just five states; even so, additional states began to emerge as important markets.34 The success of distributed solar PV and falling costs have led some US utilities to establish their own solar programmes and others to fight for revisions or elimination of supportive policies. 35 Net metering, which has driven most US customer-sited solar PV capacity, continued to be at the centre of regulatory disputes in several states during 2016.36

Japan’s market was the world’s third largest in 2016 – despite contracting 20% after the 2015 boom – and was enough to propel the country past Germany to rank second for cumulative solar PV capacity. An estimated 8.6 GW was installed, bringing the country’s total to 42.8 GW.37 Japan’s slowdown was the result of several factors, including declining FIT payments as prices fall, ongoing land shortages and difficulties securing grid connections.38

Large-scale projects have driven most of Japan's solar PV expansion in recent years.39 However, the country saw growing demand in the residential sector, which accounted for 11.8% of new installations.40 There also was increased interest in residential solar-plus-storage options: as of early 2016, roughly 50,000 residential systems in Japan included storage.41

Since the introduction of a FIT in 2012, Japan has seen a rapid increase in renewable power capacity, with solar PV representing most of the total. The large volume of solar PV projects and their output has begun challenging Japan’s fragmented electric power grid, leading the government to revise regulations and leading some utilities to refuse new interconnections and to curtail output from existing plants without compensation.42 The first curtailment of solar PV occurred under the new regulations in early 2016.43 Even so, solar PV’s share of Japan’s power mix increased to 4.4% in 2016 (from about 0.4% in 2012).44

The third largest market in Asia was India, which ranked fourth globally for additions and seventh for total capacity.45 India added about 4.1 GW (up from 2 GW in 2015) for a total approaching 9.1 GW.46 Tamil Nadu (with nearly 1.6 GW) overtook Rajasthan (1.3 GW), followed by Gujarat (1.1 GW) and Andhra Pradesh (1 GW) for cumulative capacity.47 Much of Tamil Nadu’s annual market was due to the commissioning of one 648 MW facility.48 Demand for large-scale solar projects in India has been driven by rapidly falling prices combined with strong policy support in several states and at the national level since 2014. 49

India’s rooftop solar market has expanded significantly in recent years but accounted for only about 10% of the country's total solar PV capacity at the end of 2016.50 Financial, regulatory and logistical challenges have hindered growth, and India remains a long way from its rooftop target of 40 GW by 2022.51 But the most immediate challenges for India’s solar sector are congestion in the grid and curtailment.52 To help address these challenges, by year’s end India was constructing eight “green energy corridors”: transmission lines to carry power from solar-rich states to high-demand regions.53

The Republic of Korea followed India in the region, adding 0.9 GW to rank seventh for additions and to end 2016 with 4.4 GW.54 The Philippines and Thailand both passed national targets, adding nearly 0.8 GW (total of 0.9 GW) and more than 0.7 GW (total of 2.15 GW) respectively, although a pause in Thai government procurement drove many developers to seek out new markets.55 Pakistan and Vietnam both had several large plants under development by year’s end, but policy uncertainties were delaying progress.56

The EU became the first region to pass the 100 GW milestone in 2016 (quickly surpassed by Asia); the region ended the year with an estimated 106 GW, more than 32 times its 2006 capacity.57 Even so, as global additions increased 48% relative to 2015, EU demand fell by 24%.58 The United Kingdom accounted for most of the market decline, with several other EU countries seeing capacity increases relative to 2015.59

Approximately 5.7 GW was added in 2016, mostly in the United Kingdom, Germany and France – which together installed about 70% of the region’s new grid-connected capacity.60 Others adding capacity included Belgium, Italy and the Netherlands.61

Europe has become a challenging market for several reasons. The region is transitioning from FIT incentives to tenders and feed-in premiums for large-scale systems, and to the use of solar PV for self-consumption in residential, commercial and industrial sectors.62 Further, electricity demand is stagnating and conventional utilities are lobbying simply to maintain their position.63 In Germany and elsewhere, the reaction from utilities is mixed – ranging from opposition to distributed solar PV deployment to participation.64 Electricity market design and new business models are receiving increased attention.65 (→ See Feature chapter.)

Despite the market contraction in 2016, the United Kingdom remained the region’s top market, adding about 2 GW for a total of 11.7 GW.66 The country’s biggest month for additions was March, just before the Renewables Obligation closed to projects of 50 kW and larger.67 Solar PV generated more electricity than coal from April through September, reflecting historic lows for coal-fired generation and the changing face of the UK electricity supply; solar PV represented about 3% of UK generation for the year.68 Despite ranking third in Europe, France saw its lowest annual growth since 2009, adding 0.6 GW for a total of 7.1 GW.69

Germany’s annual market remained at about 1.5 GW, well below the Renewable Energy Law (EEG) annual target of 2.5 GW, bringing total capacity to about 41.3 GW.70 In October, Germany and Denmark opened the world’s first cross-border auctions for solar PV, in which companies could bid for installations in either country.71 All successful bids were awarded to projects to be sited in Denmark, due to differing conditions between the two countries (e.g., site restrictions in Germany but not Denmark).72 Germany’s solar-plus-storage market is growing rapidly as consumers shift from FITs to self-consumption.73 The share of newly installed residential systems paired with storage rose from 14% in 2014 to 41% in 2015 and more than 50% in 2016, when Germany represented about 80% of Europe's home energy storage market.74

Utilities in Australia also are facing major impacts from solar PV. The country added nearly 0.9 GW in 2016, for a total approaching 5.8 GW.75 Australia’s market has been predominantly residential, although the commercial and large-scale sectors started to take hold in 2015 and 2016.76 By late 2016, almost 1.6 million solar PV installations were operating in the country.77 About 30% of dwellings in both Queensland and South Australia had solar PV installations, with high shares also in several other states and territories.78

Australia’s low wholesale electricity prices and high retail prices are encouraging consumers to shift to solar PV while providing them with little incentive to sell their generation into the grid.79 Additionally, utilities have continued to lobby for further charges on self-consumption by solar PV system owners.80 These factors have driven a small but rapidly growing market for residential storage.81 The market for rooftop solar-plus-storage systems took off in 2016: an estimated 5% of new solar rooftop installations included storage, amounting to 6,750 battery installations (52 megawatt-hours (MWh)), up from 500 in 2015.82

In addition to Australia, Germany and Japan, interest in solar-plus-storage is picking up in other developed countries (e.g., France, Italy and the United Kingdom) for on- and off-grid applications, where incentives exist or economics align.83 Markets also continue to expand in many developing countries (e.g., Bangladesh, India, Malawi, Peru), particularly in the off-grid sector.84 (→ See Distributed Renewable Energy chapter.)

Solar PV is playing an important role in providing energy access in Latin America and the Caribbean, although the vast majority of capacity installed to date has been in large-scale projects.85 Chile was the region’s top installer and ranked tenth globally for newly added capacity, thanks to a booming mining industry that has pushed rapid development in the north.86 (→ See Figure 18.) The country added over 0.7 GW in 2016 for a year-end total of 1.6 GW.87 Mexico followed, adding about 150 MW for a total of 0.3 GW.88 The market was driven largely by the country’s first tenders, although distributed systems accounted for at least one-third of additions in response to rising electric rates for large consumers combined with falling solar PV prices.89 Argentina also held its first tender during the year.90 In Brazil, the only renewable energy auction scheduled for 2016 was cancelled, and most projects awarded contracts in tenders through 2015 were stalled by a variety of factors, including high costs associated with local content rules and difficulty obtaining affordable financing.91 Throughout the region, grid access, financing and administrative barriers remained challenges to growth.92

Figure 18. Solar PV Global Capacity Additions, Shares of Top 10 Countries and Rest of World, 2016

Although relatively little capacity was operating in the Middle East by the end of 2016, interest in solar PV has started to pick up. Countries without domestic fossil fuels have begun investing in solar power to diversify energy sources and economies, and oil producers are taking advantage of good solar resources, low land and labour costs, and favourable loan rates to preserve their fossil resources for export.93 Israel remained the region’s leading market, adding 0.1 GW for a total over 0.9 GW.94 Jordan and Kuwait both brought large plants online during the year, and, in early 2017, Dubai inaugurated a 200 MW plant.95 Jordan, Saudi Arabia and Abu Dhabi and Dubai (UAE) all held tenders, and Iran signed several agreements to deploy solar PV and build manufacturing facilities.96

Across Africa, countries are turning to solar PV to diversify their energy mix, meet rising electricity demand and provide energy access.97 (→ See Distributed Renewable Energy chapter for more on solar PV for energy access.) Rapidly falling costs, new business models and a global certification scheme have combined to enable the emergence of projects of all sizes.98 Leaders for new capacity in 2016 were South Africa (0.5 GW) and Algeria.99 Due to a number of challenges – including lack of financing and clear policies, weak legal frameworks, poor transmission infrastructure and unclear land rights – numerous projects that began years ago still awaited construction at year’s end.100 However, several countries, including Ghana, Senegal and Uganda, brought plants online in 2016.101 Tenders for projects (on- and off-grid) were launched or PPAs were signed in several countries across Africa, including Algeria, Egypt, Kenya, Morocco, Nigeria and Zambia, which set a new regional benchmark for low-cost solar PV power.102

While demand is expanding rapidly for off-grid solar PV, the capacity of grid-connected systems is rising more quickly and continues to account for the vast majority of solar PV installations worldwide.103 Decentralised (residential, commercial and industrial rooftop systems) grid-connected applications have struggled to maintain a roughly stable global market (in terms of capacity added annually) since 2011, particularly with the transition from FITs and net metering to self-consumption.104 Centralised large-scale projects, by contrast, have comprised a rising share of annual installations – particularly in emerging markets – despite grid connection challenges, and now represent the majority of annual installations.105 (→ See Figure 19.) The drivers include increased use of tenders and availability of low-cost capital.106 By one estimate, the average solar (mostly PV) project size in early 2016 ranged from 3 MW in Europe and 11 MW in North America, to 45 MW in Africa and 64 MW in South America.107

Figure 19. Solar PV Global Additions, Shares of Grid-Connected and Off-Grid Installations, 2006-2016

Around the world, the number and size of large-scale plants continued to grow in 2016. By year’s end, at least 164 (up from 124 a year earlier) solar PV plants of 50 MW and larger were operating in at least 26 countries, with Israel, Jordan, the Philippines and the United Kingdom joining the list during the year.108 The cumulative capacity of plants of 50 MW and larger that came online in 2016 was more than 5.9 GW.109 China’s Yanchi project in Ningxia reportedly became the world’s largest plant, at 1 GW.110 Considering plants of 4 MW or larger, about 35 GW of projects was installed in 2016, bringing the world total to an estimated 96 GW.111

Several retailers and international corporations based in China, Europe, India, North America and elsewhere invested heavily in solar PV during the year.112 Locally owned community solar also continued to expand, although the pace of growth slowed in some countries due to policy changes.113 New projects came online in Australia, Europe and the United States.114 Japan had an estimated 45 MW of community-ownedii solar PV capacity by the end of 2016.115 Increasingly in Australia and the United States, utilities and other energy companies are developing “community” projects to retain existing customers and attract new ones.116

Solar PV plays a substantial role in electricity generation in several countries. In 2016, solar PV accounted for 9.8% of net generation in Honduras and met 7.3% of electricity demand in Italy, 7.2% in Greece and 6.4% in Germany.117 At least 17 countries (including Australia, Chile, Honduras, Israel, Japan and several in Europe) had enough solar PV capacity at end-2016 to meet 2% or more of their electricity demand.118 At the end of 2016 there was enough solar PV capacity in operation to produce close to 375 TWh of electricity per year.119

Solar PV Industry

Despite tremendous demand growth in 2016, the year brought unprecedented price reductions for modules, inverters and structural balance of systems.120 Due to even greater increases in production capacity, as well as to lower market expectations (particularly in China) for 2017, module prices plummeted.121 Average module prices fell by an estimated 29%, to USD 0.41 per watt (W) between the fourth quarter of 2015 and a year later, dropping to historic lows.122

Downwards pressure on prices has challenged manufacturers, whose costs have not declined as quickly and who are seeing small, if any, margins.123 By contrast, 2016 was a good year for developers.124 Lower capital expenditures and improvements in equipment efficiency and capacity factors are helping to drive down costs; the cost of solar generation fell faster during the year than experts had expected, and continued downwards in early 2017.125 Subsequently, solar PV is increasingly cost-competitive with traditional power sources, with large-scale solar PV outcompeting even new fossil fuel projects in some markets, especially in regions with low-cost financing.126 However, challenges remain, with solar PV still vulnerable to policy changes or measures to protect fossil fuels in some countries.127

Countries around the world increasingly have been using tenders to raise their solar generating capacity (→ See Policy Landscape chapter), and new record low bids were set again in 2016, with bidding in some markets below USD 0.03 per kWh.128 Argentina, Chile, India, Jordan, Saudi Arabia, South Africa and the UAE all saw very low bids for solar PV in 2016 and early 2017.129 The year also brought national record low bids for winning tenders in China (Inner Mongolia), Denmark and Germany, and a new low for Africa in Zambia.130 In the United States, falling PPA pricesiii have made solar PV more attractive than new natural gas capacity in many locations.131

Low bids were due at least in part to expectations that technology costs would continue to fall, as well as to relatively low weighted average cost of capital and expected low operating costs in some locations.132 The cost of financing plays a major role in determining project costs, and depends heavily on operational and regulatory risk.133 Yet low bids have spurred questions about whether the cheapest projects will be profitable, or even built.134 There also is concern that low prices threaten product quality.135

A wide range in prices exists among different locations due to variations in soft (non-technology) costs and cost of capital, as well as in solar resource, market and regulatory conditions. Project scale also has a significant impact on price.136 Distributed rooftop solar PV remains more expensive than large-scale solar PV but has followed similar price trajectories, and is competitive with (or cheaper than) retail prices in many locations.137

China dominated global shipments in 2016, for the eighth year running.138 Asia accounted for 90% (and China 65%) of global module production; Europe’s share continued to fall, to about 5% in 2016; and the US share remained at 2%.139 The top 10 module manufacturersiv accounted for about 50% of shipments during the year, and the vast majority of manufacturing is China-based, with overseas plants in South-Eastern Asia.140 They included JinkoSolar in the top spot, followed by Trina Solar and JA Solar (all China), as well as Canadian Solar (Canada) and Hanwha Q Cells (Republic of Korea); GCL (China), First Solar (United States), Yingli Green, Talesun and Risen (all China) rounded out the top 10.141

Locked in a race to build bigger, more advanced factories to produce panels faster and more cheaply than their competitors, companies announced expansions throughout the year.142 The largest Chinese manufacturers continued expanding module assembly capacity in South-Eastern Asia, in response to ongoing trade disputes and to avoid US and EU import duties.143 Chinese giants GCL-Poly and Longi Silicon Materials both announced plans for new production lines.144 Expansions elsewhere included: the first module manufacturing plant in Ghana opened to serve the West African market; Canadian Solar commenced module production at a new facility in Brazil; Japanese thin film module producer Solar Frontier began commercial production at a new plant; a new facility opened in Kosovo; and, in early 2017, Solarion (Germany) announced plans to expand its Leipzig facility to supply projects in Turkey.145

However, some manufacturers and other solar companies scaled back expansion plans, closed facilities, changed strategies or restructured to adjust to changing landscapes.146 Although some new production capacity opened in Europe, the region’s overall module manufacturing output declined by 16%, to 2.7 GW.147 Companies including Panasonic (Japan), Enel (Italy) and Mainstream Renewable Power (Ireland) sought new markets abroad as incentives and markets dried up at home.148 Dow Chemical (United States) halted production of its solar shingle line, and some big US manufacturers announced plans to refocus at home (e.g., from large plants to rooftops) and to expand into emerging markets abroad.149

On balance, global production of crystalline silicon cells and modules rose significantly in 2016. Estimates of cell and module production, as well as of production capacity, vary widely; increasing outsourcing and rebranding render the counting of production and shipments more complex every year.150 Preliminary estimates of 2016 production capacity exceeded 80 GW for cells (up 29% year-over-year) and 83 GW for modules (up 33% year-over-year).151 Thin film production increased by an estimated 11%, accounting for 6% of total global PV production (down from 8% in 2015).152

Consolidation continued as downwards pressure on prices and slim margins made 2016 a challenging year for even the most competitive producers, and led manufacturers in and outside of China to lay off workers and some companies to fail.153 In Japan, the number of bankruptcies in solar-related companies reportedly reached a record high (65), due to fierce competition in a shrinking market.154 The highest-profile insolvency case was that of US-based project developer SunEdison which, after rapid growth and substantial debt accumulation, filed for bankruptcy protection in April and liquidated assets throughout 2016.155

Mergers and acquisitions, as well as new partnerships, continued as companies aimed to capture value in project development or to move into new markets (locations or applications).156 For example, solar PV inverter specialist Ingeteam (Spain) purchased Bonfiglioli’s (Italy) solar PV business to strengthen its position internationally for sales and for operation and maintenance (O&M).157 Longi, Trina Solar and Tongwei (all China) partnered to build a 5 GW monocrystalline silicon ingot pulling production plant in China, and China National Building Materials Group partnered with UK solar developers WElink Energy and British Solar Renewables to develop solar energy projects and zero-carbon homes in the United Kingdom.158 Numerous projects around the world changed hands; rapidly declining prices have created high demand for projects won under tenders and not yet built.159

Falling prices and expanding markets for solar PV have lured new players to the industry.160 In 2016, Apple supplier Foxconn (Taipei) purchased financially troubled Sharp (Japan), which started making solar PV cells in the 1960s; and US electric vehicle manufacturer Tesla partnered with Panasonic (Japan) and acquired US installer SolarCity with plans to make an integrated solar PV-storage-EV product.161 Four of the world’s top wind turbine companies – GE, Gamesa, Goldwind and Mingyang – had entered the solar industry by year’s end.162 Electric utilities became more active in the sector, serving the distributed market and constructing and operating large-scale solar PV plants.163 For example, Tata Power Company acquired a 1.1 GW solar and wind power portfolio from Welspun Renewable Energy in India’s largest clean energy deal; RWE subsidiary Innogy acquired developer Belectric Solar & Battery (both Germany) to further its transition to renewable energy; and EDF (France) acquired installer Global Research Options to expand its US presence.164

Fossil fuel producers also moved further into solar energy in 2016. For example, Bangchak Petroleum (Thailand) bought SunEdison’s solar PV plants in Japan; Coal India Limited, Thai state-owned oil and gas company PTT and Wärtsilä (Finland) all entered into solar PV project development, as did oil and gas operator Eni (Italy) and Africa’s largest oil and gas company Sonatrach (Algeria), which agreed to develop projects jointly in Algeria.165 Statoil (Norway) invested in the UK technology company Oxford PV.166

Banks, pension funds and mutual funds also are investing in large-scale solar PV (and wind power) projects and partnering with solar companies, providing new pools of funding.167 For example, APG Asset Management, the Netherlands’ largest pension fund, committed to investing in solar companies in India, and the largest US public pension fund invested in solar farms in California.168 Crowdfunding also continued to be an important means for financing projects as well as technology innovations, with new platforms launched in 2016.169

Innovations and advances continued during the year in manufacturing, product efficiency and performance, installation and O&M.170 They were driven largely by rapid price reductions, which have forced companies to move forward their roadmaps to decrease costs and differentiate themselves, as well as by growing customer demands for increased functionality and a rising number of grid requirements in some countries.171 SolarWorld (Germany) and REC Solar (Norway) were among the big players that upgraded production lines to Passivated Emitter Rear Cell (PERC) technologyv, a trend that continued into 2017.172 Module manufacturers continued increasing the number of busbarsvi to reduce internal electrical resistance, as well as reducing barren spaces on modules to enhance light trapping.173 Perovskitesiii achieved further improvements in efficiency and stabilisation through ongoing R&D, and Oxford PV purchased a former Bosch Solar facility to ramp up production of its perovskite technology.174

Efficiency gains from such advances have reduced the number of modules required for a given capacity, lowering soft costs.175 Labour and other soft costs of large-scale projects also are falling thanks to customised design testing, pre-assembly of systems and advances in racking.176 The year also saw an increased interest in hybrid projects that locally integrate solar PV with other renewables and energy storage technologies, an innovation that can strengthen a plant’s generation profile and enable sharing of resources for construction and maintenance.177

As component and installation costs fall and as markets mature, attention is focused increasingly on O&M.178 Significant challenges remain in many developed markets where O&M is exposed to rising price pressures and where there are significant inconsistencies in scope and quality of service, as well as in emerging markets that lack O&M skills and local capacity for manufacturing solar components.179 However, O&M costs have fallen rapidly in some countries due to clustering of projects and economies of scale, improved performance and reliability of inverters, evolution in plant and tracker designs, and robotic cleaning systems.180

Inverters also are becoming more sophisticated and making a growing contribution to grid management, and manufacturers are working to improve long-term reliability and system-prediction methods.181 During 2016, key areas of focus included advancing both materials and self-regulating technologies in order to build higher-voltage central inverters and thereby reduce balance of systems costs and the levelised cost of electricity (LCOE), as well as improving performance and software to reduce O&M costs.182 As with solar PV production, inverter manufacturing is shifting to Asia (and Asia-based companies), and, in 2016, large US and European manufacturers were fighting to maintain market share.183 As the market matures, the industry is becoming more concentrated, and the top 10 vendors accounted for 80% of global shipments in the first half of 2016.184 The top companies globally for shipments during the full year were Huawei (China), Sungrow (China) and SMA (Germany).185

The concentrating PV (CPV) industry had another challenging year. Despite record efficiencies and declining system prices, CPV has been unable to compete with conventional solar PV.186 A handful of companies remains; most are based in North America, and many are relatively new to the industry.187 In 2016, heavily indebted Semprius (United States) was working with partners to improve conversion efficiency in previously uneconomical locations.188 Saint-Augustin Canada Electric acquired Soitec’s (France) CPV technology to increase its presence in the renewable energy sector, with plans to open its first production line in 2017.189 Also in 2016, Korea Electric Power Corp (Kepco) acquired the Alamosa (Colorado) project from Cogentrix Solar Holdings to move into the US power market.190

Efforts to advance recycling processes continued, although there was relatively small demand for recycling of waste and solar panels (at end-of-life, or damaged or defective panels) as of 2016.191 In addition to recycling’s potential environmental benefits, the process can yield materials to be sold in global commodity markets or can be used for the production of new solar panels.192 In 2016, Australia’s Reclaim PV teamed with major manufacturers to refine its processes; a US industry programme was launched with the goal of making the national industry landfill-free; Japanese companies NPC and Hamada established a joint venture with the aim of recycling 80% of panel materials and reusing the rest; and the Japanese government issued recycling guidelines.193 The EU has regulated solar PV-related waste since 2014.194

Concentrating Solar Thermal Power (CSP)

CSP Markets

Concentrating solar thermal power (CSP), also known as solar thermal electricity (STE), saw 110 MW of capacity come online in 2016, bringing global capacity to more than 4.8 GW by year’s end.1 (→ See Figure 20 and Reference Table R7.) This was the lowest annual increase in total global capacity in 10 years, at just over 2%.2 Even so, CSP remains on a strong growth trajectory, with as much as 900 MW expected to enter operation during the course of 2017.3

Figure 20. Concentrating Solar Thermal Power Global Capacity, by Country and Region, 2006-2016

South Africa led the market in new additions in 2016, becoming the second developing country to do so after Morocco in 2015.4 South Africa was followed by China, where the first of numerous new CSP plants came online in 2016.5 CSP market growth continued to be driven outside of the traditional markets of Spain and the United States, and, by year’s end, facilities were under construction in several countries representing nearly all regions.6

For the second year in a row, all new facilities that came online incorporated thermal energy storage (TES).7 Most new CSP plants are being developed with TES, and 2016 marked a decade since the first commercial CSP system with TES was deployed.8 (→ See Figure 21.) TES continues to be viewed as central to the competitiveness of CSP by providing the flexibility of dispatchability.9

Figure 21. CSP Thermal Energy Storage Global Capacity and Annual Additions, 2007-2016

Parabolic trough and tower technologies continued to dominate the market, with parabolic trough systems representing the bulk of capacity that became operational in 2016 as well as most of the capacity expected to come online during 2017.10 Fresnel and parabolic dish technologies are still largely overshadowed, apart from some smaller plants in the development and construction phases.11

Spain remained the global leader in existing CSP capacity, with 2.3 GW at year’s end, followed by the United States with just over 1.7 GW.12 These two countries still accounted for over 80% of global installed capacity.13 However, no capacity has entered commercial operation in Spain since 2013, and no new facilities were under construction in either country at end-2016.14

South Africa brought its first commercial tower plant online with the launch of the 50 MW (with 2.5 hours of TES; 465 MWhi) Khi Solar One facility in early 2016, followed shortly thereafter by the 50 MW (9.3 hours; 100 MWh) Bokpoort parabolic trough plant.15 These two plants brought total installed capacity in the country to 200 MW.16 At year’s end, a further 300 MW was under construction and was expected to come online during the course of 2017, 2018 and 2019.17 Several additional CSP projects under development faced uncertainty after the state-owned utility, Eskom, delayed the signing of PPAs under the Department of Energy’s Renewable Energy Independent Power Producer Procurement Program (REIPPPP).18

China brought its first 10 MW of capacity online in 2016.19 China’s aggressive CSP programme, which aims to have 1.4 GW of CSP installed by 2018, started to bear fruit in 2016 with the addition of the 10 MW (15 hours; 150 MWh) Shouhang Dunhuang facility.20 As much as 650 MW of trough, tower and Fresnel capacity was at varying phases of construction by year’s end.21

Around the world, several projects that are being built are expected to come online over the next three years. CSP continued its push into developing countries that have high direct normal irradiance (DNI) levels and specific strategic and/or economic alignment with the benefits of CSP technology. In this respect, CSP is receiving increased policy support in countries with limited oil and gas reserves, constrained power networks, a need for energy storage, or strong industrialisation and job creation agendas.22

Apart from China, India was the only Asian country with CSP facilities under construction by the end of 2016. India’s projects included the 25 MW Gujarat Solar 1 plant (9 hours; 225 MWh) and the 14 MW National Thermal Power Corporation’s Dadri Integrated Solar Combined-Cycle (ISCC)ii plant.23

While Morocco did not bring new capacity online in 2016, it continued to be a key driver of CSP expansion. Both the 200 MW Noor II parabolic trough (7 hours; 1,400 MWh) and the 150 MW Noor III tower (7 hours; 1,200 MWh) facilities are expected to enter commercial operation during 2017.24 These follow the 160 MW Noor I facility, commissioned in 2015, and will bring Morocco’s total capacity to over 0.5 GW.25

Elsewhere in the Middle East and North Africa (MENA) region, construction continued on Israel’s 121 MW Ashalim Plot B tower facility, which aims to achieve commercial operation in 2017.26 The 110 MW Ashalim Plot A parabolic trough facility also was under construction in 2016, with operation expected to begin in 2018.27

In Saudi Arabia, two ISCC plants were under construction during the year. The 42 MW Duba 1 facility and the 50 MW Waad al Shamal plants are expected to enter operation in 2017 and 2019, respectively.28 Construction continued on Kuwait’s 50 MW (10 hours; 500 MWh) Shagaya plant, which is planned for operation in 2017.29 In the UAE, the Dubai Electricity and Water Authority received a strong response to its request for proposals, released in early 2017, for a 200 MW CSP facility at the Mohammed bin Rashid Al Maktoum Solar Park.30

In Latin America, construction was halted at Chile’s 110 MW (17.5 hours; 1,925 MWh) Atacama 1 (Planta Solar Cerro Dominador) plant due to financial challenges faced by Abengoa (the initial developer and owner of the facility, now involved only as a contractor).31 Construction is expected to resume in 2017, with operations commencing in 2019.32 The 12 MW Agua Prieta II plant in Mexico is scheduled for commissioning in 2017.33

Some CSP activity continued in Europe during 2016. In France a 9 MW Fresnel facility was under construction in the Pyrenees-Orientales district.34 In Denmark, a hybrid biomass-CSP facility that will incorporate 17 MW of CSP was under construction.35 As a CHP plant, the facility will generate both electricity and low-temperature heat for district heating, representing an important potential application for CSP in colder climates.36

CSP Industry

CSP activity saw a significant shift from Spain and the United States to developing countries in 2015, and this trend continued in 2016. The ongoing stagnation of the Spanish market, along with a long-predicted slowdown in the United States, resulted in ongoing growth of industrial activity and increased partnerships in new markets, including South Africa, the MENA region and particularly China.37

Recognising CSP’s potential for local manufacturing, engineering and skills development, many countries – including Morocco, Saudi Arabia, South Africa and the UAE – continued to promote or enforce local content requirements in their CSP programmes during 2016.38

Abengoa (Spain), the industry’s largest developer and builder, avoided the threat of insolvency that emerged early in 2016 when it reached a USD 1.2 billion (EUR 1.14 billion) restructuring deal with its creditors.39 The company undertook significant changes, including the restructuring of ownership and the disposal of non-core solar PV and wind power assets.40 Abengoa’s rising debt was partially a result of Spanish energy reforms enacted in 2013, which reduced FITs for CSP facilities.41

With the exception of the fundamental restructuring that took place at Abengoa, 2016 was a relatively quiet year for CSP companies in terms of mergers, acquisitions and closures, with no major reports of significant corporate shifts.42 Abengoa and Saudi Arabia’s ACWA Power led the market in the ownership of projects that commenced operations or were under construction during 2016.43 As a developer, owner and operator, ACWA continued to make strong inroads into the global CSP market, most notably through projects in South Africa and Morocco.44 Other top companies that were engaged in construction, operation and/or manufacturing in 2016 included Rioglass Solar (Belgium); Supcon (China); Acciona, ACS Cobra, Sener and TSK (all Spain); and Brightsource, GE and Solar Reserve (all United States).45

Although commercial developers have continued to focus on trough and tower plants, with many facilities exceeding 100 MW in size, Fresnel facilities also are being planned and built, particularly for non-traditional or smaller facilities. This development is most notable in China, where four Fresnel plants totalling 90 MW were under construction at end-2016, and in France, where a 9 MW facility also under construction will be the first Fresnel plant to include several hours of TES capacity.46

The track record of larger TES systems continued to advance during the year, with various facilities proving their ability to generate power in the absence of sunlight and even throughout the night. In South Africa, for example, the newly commissioned Khi Solar One facility reached a technological milestone for the region when it completed a 24-hour cycle of uninterrupted solar power generation.47 The bulk of new facilities coming online in 2017 is expected to include TES; the exceptions are plants that are hybridised with, or located alongside, natural gas plants – such as Israel’s Ashalim facilities and the ISCC plants under construction in Saudi Arabia.48

CSP costs vary widely depending on the specific economic characteristics and DNI levels of a given location. Nonetheless, research specific to the US market found that CSP prices have declined in line with the trajectory proposed in 2012 by the US DOE's SunShot Initiative.49 The initiative targeted a 75% decline in the cost of CSP systems between 2012 and 2020, to USD 0.06 per kWh; since 2012, costs have declined from a non-incentivised USD 0.206 per kWh (for an oil-based parabolic trough facility with no TES) to an estimated USD 0.12 per kWh in 2015 based on a new power tower facility with 10 hours of TES.50 Cost declines also are evident elsewhere, with a 30% reduction over two bid cycles in Chile in 2015 and a 43% reduction over five bid cycles between 2011 and 2015 in South Africa.51

Although CSP costs have seen a significant decline, CSP deployment has been hampered by rapid and substantial decreases in the price of solar PV, driving the CSP industry’s continued focus on maximising value through the use of TES systems, which enable CSP facilities to provide dispatchable power.52

R&D in the CSP sector in 2016 continued to focus strongly on improvements, alternatives and cost reductions in TES; on cost reductions in key CSP components (such as collectors); on alternate applications of CSP; and on efficiency of the heat transfer process.53 R&D efforts were under way in numerous countries around the world, with universities, public scientific organisations and private companies in Australia, Europe and the United States announcing potentially significant advances.54

In Australia, for example, researchers achieved 97% efficiency in converting sunlight into steam.55 Previously (in 2014), Australian researchers generated “supercritical” steam at the highest temperatures achieved from a non-fossil-based thermal fuel.56 Research supported by the EU yielded advances in thermochemical energy storage and hybridised CSP systems.57 In the United States, wide-ranging research programmes under way during 2016 included the analysis of sand-like particles as an alternative to molten salt in TES systems; efforts to advance thermochemical storage systems for CSP, which offer the possibility of increased energy storage density at lower costs; and the application of the supercritical CO 2 Brayton Cycleiii, which offers the potential to increase CSP efficiency and further reduce costs.58

Significant progress is being made in understanding the real value of CSP with TES in providing dispatchable power to grids with increasing shares of variable renewable power.59 (→ See Feature chapter.) While CSP remains more expensive than wind power and solar PV on a pure generating cost basis, the overall value of CSP with TES can be higher as a result of its ability to dispatch power during periods of peak demand. During 2016, SolarPACES, an international network of CSP researchers and industry experts, made significant progress in quantifying the real value of CSP incorporating TES and standardising yield assessment methodologies required to evaluate new projects.60

Solar Thermal Heating And Cooling

Solar Thermal Heating and Cooling Markets

Solar thermal technology is used extensively in all regions of the world to provide hot water, to heat and cool space, to dry products and to provide heat, steam or refrigeration for industrial processes or commercial cooking. By the end of 2016, solar heating and cooling technologies had been sold in at least 127 countries.1 The cumulative capacity of glazed (flat plate and vacuum tube technology) and unglazed collectors in operation increased to a year-end total of 456 GW (→ See Figure 22.)

Figure 22. Solar Water Heating Collectors Global Capacity, 2006-2016

As in 2015, the top five countries for cumulative capacity were China, the United States, Turkey, Germany and Brazil.3 (→ See Figure 23.) Solar thermal collectors of all types provided approximately 375 TWh (1,350 PJ) of heat annually by the end of 2016, equivalent to the energy content of 221 million barrels of oil.4

Figure 23. Solar Water Heating Collectors Global Capacity in Operation, Shares of Top 12 Countries and Rest of World, 2015

Due to low fossil fuel prices throughout the year, new global installations of solar thermal systems declined again in 2016. The year’s gross additions of 36.7 GW (→ See Figure 24.) Among the 20 largest markets, significant market growth was reported in Denmark (84%), Mexico and India (both 6%).7 As in 2015, the five leading countries for new installations in 2016 were China, Turkey, Brazil, India and the United States. The top 20 countries for solar thermal installations accounted for an estimated 94% of the global market in 2016.

Figure 24. Solar Water Heating Collector Additions, Top 20 Countries for Capacity Added, 2016

In most of these top 20 countries, markets were dominated by flat plate collectors. In China and India more than half of 2016 additions were vacuum tube collectors.8 In the United States, Australia and South Africa more than half of new installations were unglazed collectors (used mostly for heating swimming pools). Among the top 20 markets, vacuum tube collectors accounted for 75% of new installations, flat plate collectors made up 21%, and unglazed water collectors accounted for the remaining 4%.9

Despite the downwards trend in China since its record year in 2013, the country remains the world’s largest solar thermal market by far. New gross installations totalled 27.7 GWth (39.5 million m2) in 2016, almost 19 times more than the second largest market, Turkey.10 At year’s end, Chinaʻs operating capacity was 325 GWth (464 million m2), just over half of the 560 GWth by 2020 target that was announced in the 13th Five-Year Plan for Solar Applications.11

The transition in China from small residential solar thermal units to larger projects for multi-family houses, tourism and the public sector accelerated in 2016, with large projects accounting for 68% of the country’s annual additions, up from 61% in 2015.12 This trend was supported by an increasing demand for centralised solar space heating systems in southern China, where heating systems have been uncommon thus far and where fossil fuels are expensive.13 The transition also was driven by building codes in urban areas, which mandate the use of solar thermal (and heat pumps) in new construction and major renovations as a means to reduce local air pollution.

Turkey’s market remained strong but is difficult to measure because it again consisted of a formal sector with brand-name companies and an informal sector, in which systems are provided by unregistered small producers. The formal market remained fairly stable, with an estimated 1.1 GWth (1.53 million m2) installed in 2016.14 Residential demand (primarily for vacuum tube collectors) accounted for 47% of new installations, up from 40% in 2015.15 Demand for flat plate collectors remained strong for commercial projects at schools, dormitories, military stations and prisons.16 Unregistered small producers accounted for another one-third of the year’s installations, bringing total new additions to around 1.47 GWth (2.1 million m2).17 The 13.6 GWth (19.4 million m2) of solar thermal capacity in operation at the end of 2015 saved Turkey around 10% of its annual natural gas consumption.18

Brazil continued to rank third for new installations and remained the largest solar thermal market in South America. With 0.91 GWth (1.3 million m2) added in 2016, Brazil was only slightly ahead of India.19 The decrease in Brazil’s solar thermal market was relatively small (-7%) considering the country’s ongoing economic and political crises and the slowdown of the social housing programme Minha Casa Minha Visa (“My House, My Life”), which mandated solar water heaters in new buildings for very poor families.20 Reduced purchasing power resulted in a 10% decline in sales of unglazed collectors for swimming pools.21

India added 0.9 GWth (1.28 million m2) in 2016, an increase of 6% relative to 2015.22 The market appears to be bouncing back, following a temporary reduction in demand that resulted from the suspension of India’s national grant scheme in 2014.23 The share of imported vacuum tubes grew to 88% (up from 82% in 2015).24 This segment included an increasing number of vacuum tubes backed with aluminium mirrors (so-called compound parabolic concentrators), which are used primarily for industrial process heat applications. This trend was supported by a national 30% capital subsidy scheme for concentrating solar thermal technologies, which has reduced the payback times to three to four years for manufacturing businesses.25 Only 0.11 GWth of flat plate collectors (down from 0.15 GWth in 2015) was sold by the handful of manufacturers that remains in India.26

The United States was the fifth biggest market worldwide. The country’s market volume was down only 3% relative to 2015, with 0.68 GWth (974,977 m2) added in 2016, despite low oil and natural gas prices and the country’s increasing focus on solar PV.27 The United States continued to be the largest market for unglazed swimming pool systems (0.56 GWth), followed by Brazil (0.38 GWth) and Australia (0.27 GWth).28 The significantly smaller US segment of glazed collectors saw additions of 0.12 GWth in 2016, representing a slight increase (1%) following two consecutive years of decline; the increase was driven by state-level rebate schemes such as the California Solar Initiative – Solar Thermal, and rebates in Massachusetts and New York State, as well as the solar obligation in Hawaii.29

The European Union (EU-28) was again the second largest regional market after Asia, with estimated gross additions of 1.8 GWth (approximately 2.5 million m2), 6.4% lower than in 2015.30 The largest European market was again Germany, followed by Denmark, which almost doubled its new installations in 2016.31 Beyond Denmark, 2016 was a challenging year in key markets because of factors such as low oil and gas prices, declining demand from homeowners and reduced interest in solar thermal technology among installers. In Germany and Italy, these impeding factors had a stronger impact on investment decisions than did a high level of subsidies.32

In addition, energy-efficient building regulations supported the installation of heat pumps in new buildings in Germany and France, suppressing markets for solar thermal systems.33 In Poland, a lack of political support for solar thermal and increased competition with hot water heat pumps, which are considered cheaper and easier to install, resulted in a 58% decline in the annual solar thermal market, to 81 MWth.34 The EU´s cumulative installed capacity in operation at the end of 2016 was approximately 34.4 GWth, representing around 8% of the worldʼs total.35

Over the last five decades, the primary application of solar thermal technology globally has been for water heating in single-family houses; the residential segment accounted for 63% of the total installed collector capacity at the end of 2015 (the most recent data available).36 In recent years, however, markets have been transitioning to large-scale systems for water heating in multi-family buildings and in the tourism and public sectors. In 2015, this commercial sector accounted for only 29% of the total collector capacity in operation worldwide, but it represented 54% of newly installed collector capacity.37 (→ See Figure 25.)

Figure 25. Solar Water Heater Applications for Newly Installed Capacity, by Economic Region, 2015

Globalisation of solar heating and cooling technologies continued in 2016, with sales picking up in several new emerging markets, including Argentina, the Middle East and parts of eastern and central Africa.38 In Argentina, solar water heater installations doubled year-on-year between 2012 and 2015.39 They have seen increased popularity since July 2016, when the country’s president ordered a 260-litre thermosiphon system for his residence.40 Rising electricity prices (e.g., Argentina) and solar building obligations (e.g., Kenya and Dubai) also helped to drive demand in these new markets.41

Solar district heating enjoyed increased attention across Europe and China, led by Denmark, which had a record year for new installations and experienced the fastest growth of new solar thermal capacity among the top 20 markets. Denmark brought into operation 31 new solar district heating plants and expanded 5 existing plants, for a total of 347 MWth added in 2016; this compares to 15 new and 3 expanded plants (totalling 175 MWth) in 2015.42 The large majority of all plants use flat plate collectors; the exception is the installation in Brønderslev (18.9 MWth), which uses parabolic trough collectors.43

The strong market in Denmark was supported by good framework conditions – including national taxes on fossil fuels, sufficient land for cost-effective ground-mounted collector fields, and the existence of non-profit, user-owned co-operatives that operate local district heating systems. It also was motivated by pending expiration (in December 2016) of a 2012 energy savings agreement between Danish district heating companies and Denmark’s energy ministry, which prompted several utilities to complete their solar district heating systems by year’s end.44 In December, the Danish Energy Ministry signed a new agreement with district heating companies, allowing them to fulfill energy savings mandates for the period 2016-2020 by extending existing solar district heating plants or by initiating the construction of new facilities by mid-2018.45

Among Denmark’s new installations is the world´s largest solar thermal plant, with 110 MWth (156,694 m2) of installed capacity, in the town of Silkeborg.46 The solar district heating plant was commissioned (by Danish turnkey supplier Arcon-Sunmark) in December, after only seven months of construction.47 The world’s second largest solar thermal plant – the 49 MWth (70,000 m2) district heating field in Vojens – also is located in Denmark.48 At the end of 2016, Denmark’s solar district heating capacity totalled 911 MWth (1.3 million m2), with 104 systems in operation.49

The successes in Denmark have inspired intensive discussions and project development activities in other central European countries, especially in Germany and Poland.50 Consequently, Germany’s first record-size solar district heating plant in 11 years came online in August 2016, when 5.8 MWth (8,300 m2) of vacuum tube collectors began feeding into the municipal district heating network in Senftenberg.51 In total, Germany installed a combined 9 MWth (12,921 m2) in four new systems, increasing the country’s district heating capacity to 39 MWth by year’s end.52

In addition, two other solar district heating plants larger than 350 kWth (500 m2) began operation in Europe in 2016: Sweden added a 0.7 MWth (1,050 m2) installation in Tornberget, and a 0.58 MWth (830 m2) solar thermal plant began supplying heat to multi-family houses in a new neighbourhood near Paris, France.53 Spain’s plans for new large-scale solar thermal installations in Barcelona did not materialise due to a lack of affordable space for the collectors in the dense urban area.54 At the end of 2016, Europe was home to 290 large-scale systems with a total of 1.1 GWth (1.58 million m2), making up around 3% of the region´s total operating solar thermal capacity.55

Interest in solar district heat increased beyond Europe as well. In the Chinese province of Shandong, a subsidy scheme was announced in 2016 to support central space heating systems in public buildings, such as schools, hospitals, nursing homes and daycare facilities.56 One of the first larger solar district heating plants, completed in 2013, is a 8.1 MWth (11,592 m2) vacuum tube collector system that provides heat for student flats at the Hebei University of Economics and Business; in recent years, this facility has helped to draw attention to the huge potential of solar thermal technology in the world’s largest district heating market.57

The share of solar energy that can be achieved in a district heating network depends heavily on the type and scale of integrated storage solutions. The plant in Silkeborg, Denmark was built with short-term storage of 32,000 m3 and was designed to meet around 20% of the annual heating demand of the network’s 21,000 users.58 In contrast, the solar share at Denmark’s Vojens plant has reached 45% because the facility includes a water-filled basin with 203,000 m3 of storage.59 Canadaʼs Drake Landing Solar community, with borehole seasonal storage, demonstrated in 2016 that solar district heating has the potential to cover even a 100% share of a system’s heating demand in winter. System improvements such as lowering the district loop temperature and enhancing the thermal stratification in the tank made it possible for the system to meet the entire space heating demand of 52 energy-efficient residential buildings during the winter of 2015-16.60

Solar thermal technologies – including concentrating collector types such as linear Fresnel, parabolic trough and dish collectors – also are used to provide process heat for a growing number of manufacturing facilities.61 Process heat accounts for around two-thirds of final energy consumption in the industry sector, and 52% of that heat demand is in the low- and medium-temperature range (below 400°C) and thus suitable for solar thermal technologies.62 The potential for solar thermal in the industry sector is significant.

The year 2016 saw the first assessment for the world market of solar heat for industrial processes (SHIP).63 At the end of 2016 at least 525 SHIP plants were in operation, totalling a minimum of 416,414 m² of collector and mirror area (291 MWth) – enough capacity to provide approximately 18 GWh (1 PJ) of industrial process heat by the end of 2016.64 Prior to the assessment, it was estimated that 195 SHIP systems were in operation worldwide, with a total collector/mirror area of 177,892 m2 (125 MWth).65

The industry segments with the highest numbers of realised SHIP plants in 2016 were food and beverage, machinery and textiles.66 A number of projects were built around the world during the year, paving the way for other manufacturing businesses. One example was the Amul Fed Dairy in India, which installed a 561 m2 parabolic trough collector field to supply steam for milk pasteurisation; this project has the potential to be replicated by several other dairies in the region.67 In South Africa, the Cape Brewing Company installed a 120 m2 flat plate collector field to supply heat for its brewing process; this system was only the fifth SHIP plant in the country.68

Good sun conditions for solar concentrating technologies in Australiaʼs desert, coupled with relatively high gas and oil prices, facilitated the construction of a concentrating solar plant at a tomato farm in the state of South Australia.69 A mirror field (52,000 m2) reflects the sunlight towards a receiver that provides heat for three different applications: heating greenhouses in winter and during cold summer nights, desalinating seawater and periodically running a steam turbine to produce electricity.70 Austria saw the installation of a record-size process heat installation at the automotive consulting company AVL List; the new 1,585 m2 flat plate collector field supplies energy for the heat demand of the factory’s test facilities.71

Copper mining and enhanced oil recovery have seen the largest SHIP installations to date. The largest solar process heat plant in operation worldwide in 2016 was a 27.5 MWth (39,300 m2) facility located at the Gabriela Mistral mine in Chile. Over the first 35 months of its operation, the plant recorded a specific yield of 1,112 kWh per m2; the output was as simulated, notwithstanding the operational challenges of the large fieldʼs hydraulics and the dusty surroundings.72 In September 2016, Mexico saw the completion of its first solar-heated copper mine project at La Parreña, in the centre of the country. The 4.4 MWth (6,270 m2) facility was designed to cover 58% of the mine’s demand for heat.73 Despite these positive developments, deployment of solar thermal technology in copper mining has been limited due to the industry’s reluctance to make long-term investments while the global price of copper has been in decline.74

Also in 2016, construction continued on the 1 GWth enhanced oil recovery plant in Oman.75 As of early 2017, the USD 600 million facility, which is 36 times bigger than the largest SHIP plant in operation, was ahead of schedule and under budget, and the first of 36 greenhouse blocks was expected to start producing steam before the end of 2017.76

Solar process heat is far from meeting its economic and technical potential. Low fossil fuel prices and lack of concern among industry stakeholders about CO2 emissions and other environmental challenges have limited interest in alternative energy sources, including solar thermal. According to suppliers of SHIP, the most important conditions for enabling robust market development are high fossil energy prices and political mandates for the use of solar process heat.77 In a survey, 79% of participating SHIP suppliers identified energy heat supply contracts as an important means to increase deployment; however, only 34% offered such contracts as of 2016.78 The industry has acknowledged a need to develop business models that reduce the risk and the upfront costs for small and medium-sized enterprises in order to expand the SHIP market.79

Solar PV-thermal (PV-T) technologies capture the waste heat from solar PV modules, which utilise only 12-15% of the incoming sunlight, to provide heat for space and water. Monitoring of a largescale demonstration PV-T plant in Switzerland found that the system could achieve an annual thermal yield of 330 kWh per m2 in addition to the annual 163 kWh per m2 of solar electricity that it produced.80 In 2016, France and Switzerland both reported increased numbers of new PV-T projects, but with different applications. In France, about 55,000 m2 of systems — mostly air-based PV-T elements for single-family houses — was installed during the year; this total was close to the newly installed water-driven flat plate collector area (65,900 m2). 81 In Switzerland, unglazed water collectors dominate the market, increasingly in combination with heat pumps to regenerate boreholes over the summer; by the end of 2016, the country had an estimated 300 PV-T installations.82

Solar thermal cooling continued to face challenges during 2016 in the key markets of Europe and China due to falling solar PV prices, which allow for the cost-effective operation of compression chillers powered by solar electricity during daylight, and to low fossil fuel prices.83 Even so, significantly hot summer periods in southern Europe, as well as the use of natural refrigerants like water or ammonia, have increased the awareness of solar cooling technologies in the region’s construction industry. As a result, solar cooling systems are used increasingly for commercial and public buildings when also supplying year-round solar hot water.84

Preliminary findings in Europe are that multi-usage solar thermal systems that supply hot water throughout the year, space heating during transition periods, and space cooling during hot summer periods are highly efficient and have the potential to cover up to 50% of the total heat and cooling demand of high-efficient buildings in the region.85 Server centres also are a promising market for solar cooling (as in Italy).86 Thanks to the high subsidy of the national rebate programme Conto Termico 2.0, Italy was the key sales market for solar thermal-driven chillers in Europe in 2016.87

In China, increasing use of solar space heating installations during 2016 also offered new opportunities for solar cooling because surplus heat in summer can be used for air conditioning. This combined heating and cooling operation mode was first demonstrated in 2016 in an office building in Shanghai with a 200 m2 flat plate collector field and a 23 kW absorption chiller.88

Increasing demand for air conditioning in sun-rich countries, combined with financial support from international development agencies, has helped to spread interest in solar heat-driven cooling systems in non-OECD countries. In 2016, three new solar cooling systems were completed in Jordan: Royal Culture Center (160 kW of cooling), Irbid Chamber of Commerce (50 kW of cooling) and Mutah University (20 kW of cooling).89 During the non-cooling season, these systems can support the buildings’ hot water demand and thereby increase the usable solar yield over the year. In neighbouring Egypt, a 35 kW chiller, supplied by a linear Fresnel collector, began cooling a medical centre north of Cairo in October 2016. The project was jointly implemented by experts from Egypt, Greece, Italy and Cyprus and received European funding.90

Also in 2016, a Brazilian university in the province of Minas Gerais, in co-operation with a local electricity supplier, installed two solar cooling demonstration systems, with a 10 kW and a 35 kW imported absorption chiller and locally produced collectors.91 As of early 2017, a 3.1 MWth (4,450 m2) collector field was under construction to supply space cooling and hot water to a hospital in Managua, Nicaragua.92 The USD 4.2 million (EUR 4 million) project was financed through a soft loan provided by Raiffeisen Bank International for developing countries.93

Solar Thermal Heating and Cooling Industry

The year 2016 was a turning point in the solar thermal industry. Demand from homeowners, for many years the core sales segment for the solar thermal industry, again declined, and installers – the key supply chain partners of the industry in Europe – showed less interest in solar thermal technology. To counter the declining demand from established sales partners and end-consumers, an increasing number of manufacturers of solar collectors and tanks changed their product lines and sales strategies.

Many suppliers of solar thermal systems responded to the challenges by taking new directions and diversifying their portfolios. In Austria, for example, several collector manufacturers added heat pumps and solar PV solutions to their product offerings in order to provide complete heating system solutions.94 In China, manufacturers concentrated on new applications such as space heating and cooling, as well as drying of agricultural products.95

In addition to focusing on new applications for solar thermal technologies, some suppliers are developing new business models. In Germany, manufacturers of solar thermal systems provided potential end-consumers with online sales platforms for heating systems with or without solar energy; clients could provide information online about their desired heating system and then receive an offer directly from the system supplier, bypassing the installer.96 In Spain, the industry has sold a growing number of non-subsidised systems (20% of the total market volume) by offering loans in partnership with financial institutions.97

Despite the challenges in much of Europe and China, some industrial players benefited from strong tailwinds in 2016. In response to strong market growth in Argentina, at least 32 businesses started commercial activities during the year, for a total of at least 134 solar thermal businesses.98 Greek manufacturers saw their exports rise 14% in 2016 (to 231 MWth), following a 7% increase in 2015, due to the cost-competitiveness and good reputation of their products. Their exports even exceeded domestic sales, of 189 MWth.99

Manufacturers of air collectors in Germany and Austria recorded increasing sales, despite the general downwards trend in these countries. This growth was supported by cost-effective system solutions (e.g., in contrast to water-driven solar systems, air units do not need tanks, pumps or expansion vessels), combined with high investment subsidies.100

The year 2016 was a bright period for suppliers of solar district heating systems in Denmark, where the capacity of solar thermal plants supplying district heat doubled in 2016.101 The strong demand led market leader Arcon-Sunmark to greatly increase its production volume; this Danish collector manufacturer and turnkey system supplier was responsible for 87% of Denmark’s new installations during the year.102 In mid-2016, Arcon-Sunmark expanded its business model to China, the world's largest district heating market, with around 463 GWth of installed capacity as of 2014 (the latest data available).103 Arcon-Sunmark established a joint venture with China’s market leader, Jiangsu Sunrain Solar Energy, to offer large-scale solar heating solutions to the Chinese market.104

Denmarkʼs district heating networks are optimised for the feed-in of solar heat with low feed-line and return temperatures. Outside of Denmark, district heating networks usually operate at significantly higher temperatures, reducing the efficiency of conventional flat plate collectors.105 To meet this challenge of transferring solar district heating to other countries, an increasing number of manufacturers in Europe developed mid-temperature flat plate collectors that employ either a second glass cover or a foil between the absorber and the glass cover.106 In mid-2016, initial monitoring results confirmed the remarkable performance of this new generation of collectors even for use with higher-temperature district heating networks (feed-line 80-129°C and return line 58-70°C).107

Most leading solar thermal manufacturers worldwide consolidated their positions in 2016. The largest manufacturers of vacuum tube collectors were again Sunrise East Group (including the Sunrain and Micoe brands), Himin, Linuo Paradigma and Sangle – all based in China.108 The largest manufacturers of flat plate collectors were again Greenonetec (Austria), Fivestar (China), Soletrol (Brazil) and Bosch Thermotechnik (Germany).109 Two large players dropped from the ranking in 2016: Ezinç (Turkey) stopped production in June, and Prosunpro (China) has cut production sharply in recent years because of financial troubles.110

Poland’s industry experienced significant consolidation in 2016. The Polish collector manufacturer Hewalex, which is among the leading flat plate collector manufacturers worldwide, saw its sales fall by 60% in 2016, due to a 58% drop in domestic sales.111 Following the production closure of Watt in 2015, two additional Polish flat plate collector manufacturers – Solver and Geres Asco – stopped production in 2016. Several solar thermal system suppliers that focused on imported vacuum tubes closed up shop, following a near 90% drop in sales of vacuum tube collector systems in Poland during the year.112

An increasing number of companies considered solar thermal for industrial processes (SHIP) to be an attractive business area in 2016. A world map published in early 2017 included 71 SHIP-related companies from 22 countries; 42 of these companies reported that they had already completed turnkey SHIP reference plants.113 An additional 29 companies were SHIP start-ups or market-ready SHIP plant suppliers that already had experience with commercial solar installations, such as solar for cooling or power generation.114 Nearly two-thirds (58%) of the identified SHIP suppliers operated their own collector production facilities, with the most common collector type being parabolic trough (18 companies), followed by flat plate (10), linear Fresnel and vacuum tube (5 companies each) and concentrating dish (4). 115 The hubs of turnkey SHIP technology supply are China, Mexico, India and Germany.116

In the solar cooling industry, a key area of focus has been on reducing costs. Standardisation of systems is one way to reduce investment costs of technologies, such as solar cooling, that continue to see only small market volumes. Individually engineered solutions that consist of a chiller, a collector field, tanks and a re-cooler generally result in higher costs. Manufacturers from around the globe have responded to the challenge by developing pre-engineered solar cooling kits with cooling capacities between 2.5 kW and 40 kW that are suitable for single-family, multi-family and commercial properties.117 As of early 2017, 10 such commercial or semi-commercial solar cooling kits were available, including 4 powered by solar thermal collectors, 5 powered by solar PV units, and 1 powered by both of these solar energy sources.118

PV-T technologies combine solar electricity with solar heat production in one element. After several years of a highly fluctuating industry landscape, with PV-T manufacturers coming and going, in 2016 the market was firmly in the hands of specialised suppliers with approved PV-T technologies.119 As of early 2017, 53 manufacturers and suppliers of PV-T panels were identified, with 52% of them based in Germany (10), Italy (8), France (5) and Switzerland (5).120 The majority of them (38 companies) offered water-driven unglazed PV-T elements, 9 firms sold air-driven PV-T collectors, and 6 companies offered glazed, water-driven PV-T models.121

Wind Power

Wind Power Markets

Almost 55 GW of wind power capacity was added during 2016, increasing the global total about 12% to nearly 487 GW.1 Gross additions were 14% below the record high in 2015, but they represented the second largest annual market to date.2 (→ See Figure 26.) By the end of 2016, over 90 countries had seen commercial wind power activity, and 29 countries – representing every region – had more than 1 GW in operation.3

Figure 26. Wind Power Global Capacity and Annual Additions, 2006-2016

A significant decline in the Chinese market (following a very strong 2015) was responsible for most of the market contraction.4 Even so, China retained its lead for new installations, followed distantly by the United States and Germany, with India passing Brazil to rank fourth.5 Others in the top 10 for additions were France, Turkey, the Netherlands, the United Kingdom and Canada.6 (→ See Figure 27 and Reference Table R9.) New markets continued to open elsewhere in Asia and across Africa, Latin America and the Middle East; and Bolivia and Georgia installed their first wind plants of scale in 2016.7 At year’s end, the leading countries for total wind power capacity per inhabitant were Denmark, Sweden, Germany, Ireland and Portugal.8

Figure 27. Wind Power Capacity and Additions, Top 10 Countries, 2016

For the eighth consecutive year, Asia was the largest regional market, representing about half of added capacity, with Europe and North America accounting for most of the rest.9 Growth in some of the largest markets was affected by uncertainty about future policy changes, and cyclical or policy-related slowdowns affected some markets; however, wind deployment also was driven by cost-competitiveness and by environmental and other factors.10 Wind has become the least-cost option for new power generating capacity in an increasing number of markets.11

China added 23.4 GW in 2016, for total installed capacity approaching 169 GW, and accounted for one-third of total global capacity by year’s end.12 New installations were down 24% relative to 2015, when a record annual market was driven by looming reductions in China’s FIT.13 The drop was due in part to weak electricity demand growth and to grid integration challenges.14 About 19.3 GW was integrated into the national grid and started receiving the FIT premium in 2016, with approximately 149 GW considered officially grid-connected by year’s end.15

The top provinces for capacity additions were Yunnan (3.3 GW), Hebei (1.7 GW) and Jiangsu (1.5 GW), with the latter two relatively close to demand centres.16 Although the northern and western provinces were still home to a significant portion of China’s wind power capacity at year’s end, for the first time new installations increased substantially in the southern and eastern regions, in response to new regulations to steer investment away from high-curtailment areas.17

Despite the central government’s introduction of new regulations to ensure guaranteed annual full load hours for wind (and solar) energy, curtailment remained a major challenge (even for nuclear power) in China in 2016 due to poor grid connections, lack of transmission infrastructure, slower-than-expected demand growth and grid managers’ preference for coal-fired generation.18 Overall, an estimated 49.7 TWh of potential wind energy was curtailed, or a national average of 17% for the year, with far higher rates in some provinces.19 Even with curtailment, wind power’s share of China’s total generation has increased steadily in recent years, reaching 4% in 2016 (up from 3.3% in 2015), or 241 TWh.20

Elsewhere in Asia, India installed 3.6 GW to end 2016 with 28.7 GW, firming up its fourth-place position for total capacity.21 India’s record installations were due largely to a rush to take advantage of incentives that were set to decline or expire in early 2017.22 Turkey had a record year, adding nearly 1.4 GW in 2016 to rank again among the top 10 for new capacity, for a total of 6.1 GW.23 Pakistan (0.3 GW), the Republic of Korea and Japan (both around 0.2 GW) also added capacity, helping to push Asia’s total above 203 GW.24 By late 2016, significant additional capacity was under construction in the region, including Indonesia’s first utility-scale wind farm, and Vietnam had just contracted another 940 MW.25

The United States ranked second for additions (8.2 GW), for cumulative capacity at year’s end (82.1 GW) and for wind power generation (226.5 TWh; only 6% below China) during 2016.26 Wind power accounted for one-fourth of newly installed US power generating capacity, ranking third after solar PV and natural gas for gross capacity additions, and second for net additions.27 Texas led for capacity added (2.6 GW), and at year’s end the state was home to one-quarter of US capacity; it was followed by Oklahoma (added 1.5 GW), Iowa (0.7 GW), Kansas and North Dakota.28 Nebraska became the 18th US state to exceed 1 GW of cumulative wind power capacity.29

US utilities continued to invest strongly in wind power, with some going beyond state mandates based on favourable economics.30 The cost-competitiveness of wind power also drove corporate and other purchasers, with a diverse range of new companies entering the market. Non-utilities accounted for 39% of more than 4 GW contracted in 2016, down from 2015 (52%) but up significantly over the previous two years (23% in 2014 and 5% in 2013).31 By the end of 2016, an additional 10.4 GW of wind power capacity was under construction.32

To the north, Canada added 0.7 GW, about half the 2015 level, for a total of 11.9 GW.33 Although growth slowed relative to 2014 and 2015, wind energy has represented Canada’s largest source of new electricity generation for 11 years.34 The province of Ontario continued to lead for cumulative capacity, adding 0.4 GW (for a total of 4.8 GW), followed by Québec (added 0.2 GW for a total of 3.5 GW), while Prince Edward Island had the country’s highest penetration rate (25%).35

The EU installed nearly 12.5 GW of gross capacity (12 GW net, accounting for decommissioning), down 3% from the region’s 2015 record high; additions were up 11% onshore and down almost 50% offshore.36 Total capacity at year’s end reached 153.7 GW (92% onshore and 8% offshore).37 Wind represented the largest percentage of new power capacity in the region (51% of gross additions), followed by solar PV; new fossil fuel power capacity (less than 14% of additions) was far exceeded by retirements.38 By the end of 2016, 16 EU member states had more than 1 GW each.39

However, ongoing economic crises and austerity measures, combined with the transition from regulated prices (under FITs) to tenders has affected growth.40 In response to abrupt and, in some cases, retroactive policy changes, annual installations have contracted significantly in several well-established markets, including Italy and Spain.41 As of early 2017, only seven EU member states had renewable energy targets in place for beyond 2020.42 Consequently, installations were concentrated in a handful of countries: the top five markets in 2016 (Germany, France, the Netherlands, the United Kingdom and Poland) accounted for 75% of the region’s newly added capacity.43 Despite ranking among the top five, installations in Poland and the United Kingdom were down significantly relative to 2015.44

Germany again was the largest European market, increasing operating wind power capacity by almost 5 GW for a total of 49.5 GW (45.4 GW onshore and 4.2 GW offshore).45 Germany’s boom was driven largely by the looming shift from guaranteed FITs to competitive auctions for most renewables installations as of January 2017.46 Five other EU countries had a record year for new installations, including France (adding 1.6 GW), the Netherlands (0.9 GW, mostly offshore), Finland (0.6 GW), Ireland (0.4 GW) and Lithuania (0.2 GW).47 Finland and Lithuania both saw their total wind power capacity increase by over 56%, and the Netherlands joined the global top 10 for annual additions for the first time in decades.48 Total EU generation from wind power in 2016 was around 300 TWh, up only slightly over 2015 due to a relatively poor wind year following an unusually strong one.49 Elsewhere in Europe, the Russian Federation ended the year with little capacity but awarded about 700 MW of projects in its first wind power auction in 2016.50

Latin America and the Caribbean was the next largest installer by region. Eight countries added more than 3.5 GW and, by end-2016, the region had over 18.8 GW in at least 16 countries.51 Additions were significantly below 2015, due largely to reductions in Brazil and Mexico.52 Brazil continued to lead the region and to rank among the global top 10, despite the ongoing economic recession and weak electricity demand growth.53 Approximately 2 GW was commissioned for a total exceeding 10.7 GW, although not all was grid-connected by year’s end, due to a lack of transmission lines and to the slow pace of construction.54 Brazil met 5.7% of its electricity demand with wind power in 2016.55 The cancellation of December’s auction made this the first year since 2009 that Brazil did not procure renewable power; as a result, wind equipment manufacturers were seeing idled capacity in early 2017.56

Other countries in the region to add capacity included Chile (0.5 GW), which had a record year; Mexico (0.5 GW), which held its first auction in 2016; Uruguay (0.4 GW); and Peru (0.1 GW).57 Both Chile and Uruguay passed the 1 GW mark for total capacity.58 Argentina brought no capacity online but built up a solid pipeline of more than 1.4 GW over the year in response to tenders.59

The African market was smaller than in 2014 and 2015, with South Africa adding only 0.4 GW for a total approaching 1.5 GW.60 Morocco auctioned 850 MW of wind projects at record-low prices, and construction continued on Kenya’s Lake Turkana project.61 The Lake Turkana project (310 MW) is the single largest private investment in Kenya’s history to date and, upon commissioning in 2017, will represent approximately 15% of the country’s generating capacity and will be Africa’s largest wind farm.62

There was little activity in the Oceania region during the year. Australia added only 140 MW for a total of 4.3 GW.63 In the Middle East, Kuwait was constructing a 10 MW wind farm during 2016, and, in early 2017, Saudi Arabia commissioned its first utility-scale turbine and announced a 400 MW tender.64

Offshore, about 2.2 GW of capacity was connected to grids (and 9 MW decommissioned) in 2016, for a world total approaching 14.4 GW.65 As in previous years, Europe was home to the majority of capacity brought online (1.6 GW; 70% of global additions) and total operating offshore (12.6 GW; almost 88%).66 (→ See Figure 28.) Germany (0.9 GW), the Netherlands (0.7 GW) and the United Kingdom (56 MW) were the only European countries to add capacity offshore, although several gigawatts of projects were under construction in European waters at year’s end, driven by rapidly falling costs.67

Figure 28. Wind Power Offshore Global Capacity, by Region, 2006-2016

China accounted for most of the remainder (adding 0.6 GW), driven in part by limited potential for further onshore deployment in the country’s northern and western regions.68 Even so, development is proceeding relatively slowly, and China remains far short of its original target of 5 GW by 2015 (pushed to 2020 in 2016).69 The Republic of Korea and the United States both completed their first commercial offshore wind farms (30 MW each), and Japan connected a single (7 MW) floating turbine.70 The US offshore industry has advanced relatively slowly for several reasons, including a complex regulatory environment and higher relative costs; however, as of late 2016, several gigawatts of additional capacity were in various stages of development.71

In terms of total offshore capacity, the United Kingdom maintained its lead, with almost 5.2 GW at year’s end, followed by Germany (4.15 GW), China (1.9 GW), which overtook Denmark (1.3 GW), and the Netherlands (1.1 GW), which passed Belgium (0.7 GW).72

Offshore and on land, independent power producers (IPPs) and energy utilities remained the most important clients in terms of capacity under construction and in operation, but interest increased in other sectors.73 Corporations continued to purchase wind power from utilities, signing PPAs or buying their own turbines to power operations to obtain access to reliable low-cost power.74 By end-2016, US cumulative corporate PPA capacity exceeded 5.6 GW, and Europe’s had reached 1 GW.75 Sweden and Norway, for example, have seen a surge in demand for wind generation from insurance companies and large corporations.76

Community and citizen ownership of wind generation also expanded during 2016, but only slowly.77 Spain’s first community-owned wind project was under development; a project was completed in Australia; and Ontario (Canada’s) first community-owned project achieved commercial operation.78 Japan had an estimated 37 MW of communityi wind power capacity at end-2016.79 However, there is concern that policy changes – particularly transitions from FITs to tenders – are slowing the pace of development.80

Policies also have affected the market for small-scaleii turbines, which are used for a variety of applications, including defence, rural electrification, water pumping, battery charging and telecommunications, and increasingly to displace diesel in remote locations.81 The global market grew 5-7% in 2015 (the latest data available), and total capacity was up an estimated 12-15%.82 By year’s end, more than 995,000iii small-scale turbines, or over 935 MW, were operating worldwide (up from 830 MW at end-2014).83

While most countries have some small-scale turbines in use, the majority of units and capacity operating at the end of 2015 was in China (415 MW), the United States (230 MW) and the United Kingdom.84 Other leaders included Italy (59 MW) and Germany (26 MW), with Italy seeing a significant increase in 2016.85 In response to obstacles such as policy changes and competition with solar PV, the top markets have contracted in recent years.86 China has seen a steady decline since its 2009-2011 high, the UK market was down significantly in 2015, and the US market increased slightly in 2015 but was down substantially relative to 2013.87 However, other markets such as Japan are starting to emerge.88

Repowering has become a billion-dollar market, particularly in Europe.89 While most repowering involves the replacement of old turbines with fewer, larger, taller, and more-efficient and reliable machines, some operators are switching even relatively new machines for upgraded turbines (including software improvements).90 During 2016, at least 721 turbines (totalling around 533 MW) were decommissioned, representing a significant increase in numbers and capacity over 2015.91 Germany dismantled 242 turbines (262 MW), followed by Denmark, the United States, Finland, Canada, the United Kingdom, the Netherlands, Sweden and Japan.92 In the United States, the extension of federal tax credits has incentivised repowering (and retrofitting) of existing assets, which enables owners to quality for another decade of credits.93

Wind power is playing a greater role in power supply in a growing number of countries. In 2016, wind energy covered an estimated 10.4% of EU demand and equal or higher shares in at least 11 EU member states, as well as in Uruguay and Costa Rica.94 (→ See Figure 29.) At least 24 countries around the world met 5% or more of their annual electricity demand with wind power.95 In the United States, utility-scale wind power represented over 5.5% of total electricity generation and accounted for more than 15% of generation in nine states, including Iowa (36.6%).96 Two German states had enough wind capacity at year’s end to meet over 86% of their electricity needs, and four had enough capacity to meet over 60% of their needs.97 Globally, wind power capacity in place by the end of 2016 was enough to meet an estimated 4% of total electricity consumption.98

Figure 29. Share of Electricity Demand Met by Wind Power, Selected Countries with over 10% and EU-28, 2016

Wind Power Industry

The year saw several developments that could have significant implications (positive and negative) for the wind power industry in future years, including ratification of the Paris Agreement, the United Kingdom’s vote to exit the EU, elections in key wind power markets and additional large energy companies entering the sector.99 It was a good year for top turbine manufacturers, with several seeing their orders and revenue up over 2015.100 Driven largely by competition with low-cost natural gas capacity and increasingly with solar PV, companies continued innovating in order to reduce prices and improve yields.101

Energy costs vary widely according to wind resource, regulatory and fiscal framework, the cost of capital and other local influences.102 In 2016, the LCOE of wind energy continued to fall as know-how about siting and maintenance advanced, turbine production became more standardised, and turbine size, efficiency and capacity factors increased further.103 There were record low bids in tenders in Chile, India, Mexico and Morocco, and prices fell rapidly in some offshore tenders in Europe (see below).104 Onshore wind was the most cost-effective option for new grid-based power during 2016 in many markets, including Brazil, Canada, Chile, Mexico, Morocco, South Africa, Turkey, and parts of Australia, China, Europe and the United States.105

Even so, challenges remain, with wind power still vulnerable to policy changes or measures to protect fossil fuels in some countries.106 In addition, as the amount of wind output and its share of total generation have increased, so have grid-related challenges in several countries. Challenges for wind power – both onshore and offshore – include lack of transmission infrastructure, delays in grid connection, lack of public acceptance, and curtailment where regulations and current management systems make it difficult to integrate large amounts of variable renewables.107 (→ See Feature chapter.) Curtailment in China cost the country’s industry significant revenue in 2016.108

Most wind turbine manufacturing takes place in China, the EU, India and the United States, and the majority is concentrated among relatively few players.109 In 2016, Vestas (Denmark) retook its lead from Goldwind (China), due largely to its strong year in the US market.110 GE (United States) rose one step to take second place, followed closely by Goldwind (down two), with Gamesa (Spain; up one) and Enercon (Germany; up one) rounding out the top five.111 Others in the top 10 were Siemens and Nordex Acciona (both Germany), followed by United Power, Envision and Mingyang (all China).112 ( → See Figure 30.) Goldwind and other top Chinese companies lost ground due mainly to their heavy reliance on the domestic market.113 Vestas was the most globalised supplier in 2016, with installations in 34 countries.114

Figure 30. Market Shares of Top 10 Wind Turbine Manufacturers, 2016

The world’s top 10 turbine manufacturers captured 75% of the 2016 market.115 However, components are supplied from many countries: blade manufacturing, for example, has shifted from Europe to North America, South and East Asia and, most recently, Latin America and North Africa, to be closer to new markets.116

In response to increasing demand for wind power technologies and projects, turbine suppliers and project developers expanded or opened new factories and offices around the world. In the United States, at least seven companies enlarged existing manufacturing plants.117 To support the European offshore industry, Siemens opened a new blade plant in England and broke ground on a nacelle factory in Germany.118 The company also finalised an agreement to build a rotor blade manufacturing factory in Morocco.119 Senvion (Germany) opened regional subsidiaries in Japan and India; Innogy (RWE; Germany) moved into Ireland to build an onshore portfolio, and DONG (Denmark) opened an office in Chinese Taipei to develop offshore projects.120

Companies expanded their scale and reach through some important mergers and acquisitions, and consolidation continued across the value chain.121 Nordex completed its acquisition of Acciona Windpower, which was well-positioned in emerging markets, to form a new major player.122 In June, the merger between Siemens and Gamesa was confirmed (and cleared by the EU in early 2017), creating the world’s largest wind power company in terms of capacity in operation.123 Later in the year, Siemens-Gamesa announced plans to purchase French nuclear firm Areva’s share of Adwen (Germany), a player in the offshore industry.124 To gain assets upstream, GE acquired LM Wind Power (Denmark), a blade manufacturer that has supplied blades to most of the world’s top turbine manufacturers; Senvion acquired blade manufacturer Euros Group (Germany); Nordex purchased SSP Technology (Germany), a developer and manufacturer of rotor blade moulds; and Vestas acquired Availon (Germany) to expand its service business.125 Several state-owned Chinese companies acquired assets around the world, and Electricité de France (EDF) became the first European wind operator to enter the Chinese market when it acquired UPC Asia Wind Management.126

The wind industry also showed growing interest in hybrid installations, particularly with solar PV. By the end of 2016, four of the world’s top turbine companies – GE, Gamesa, Goldwind and Mingyang – had entered the solar industry.127 Some companies were developing locally integrated solar PV-wind hybrid projects during the year, and Suzlon (India) and Gamesa both announced plans to increase their focus on wind-solar hybrids, which can strengthen a plant’s generation profile and enable sharing of resources for construction and maintenance.128 Hybrid projects that include storage technologies also are being developed.129 Early in 2016, Gamesa unveiled a hybrid solar-wind-diesel system with energy storage for the off-grid sector.130

At the same time, non-wind companies are moving (back) further into the wind power sector. During 2016, Shell (Netherlands), Statoil (Norway) and Keystone (United States) leveraged their expertise in offshore oil into offshore wind energy development; Swedish utility Vattenfall, which started with coal, had more offshore wind power capacity than coal-fired power capacity by year’s end; and DONG Energy announced that it was selling its core oil and gas business to focus on offshore wind power.131 In addition, China General Nuclear Power acquired 14 Irish wind farms from Gaelectric, and Russian state-owned nuclear company Rosatom entered the wind energy market with plans to develop a 610 MW project pipeline.132

Wind energy technology continued to evolve, driven by mounting global competition; by the need to improve the ease and cost of turbine manufacturing and transportation; by the need to optimise power generation at lower wind speeds; and increasingly by demanding grid codes to deal with rising penetration of variable renewable sources.133

The industry refined materials and design, as well as O&M regimes – particularly for blade tips, which undergo much wear and tear. To reduce logistical challenges and costs of transport, and to increase use of local labour, innovations have included two-part blades, nesting towers and portable concrete manufacturing facilities for tower construction.134 Siemens unveiled a low-noise blade add-on, inspired by the silent flight of owls, and Vestas began testing its four-rotor concept turbine, which aims to reduce transportation requirements and to minimise structural costs.135

Digitalisation continued in an effort to provide better quality of and access to data for siting and design, performance management, and trading and balancing of output.136 GE introduced new software applications for its digital ecosystem, released in 2015; other major manufacturers, including Vestas and Envision, launched advanced data analytics packages; and Goldwind introduced a 3 MW platform with smart turbine controls.137

To boost output, the general trend continued towards larger machines – including longer blades, higher hub heights and, in particular, larger rotor sizes.138 Such changes have driven capacity factors significantly higher within given wind resource regimes, creating further opportunities in established markets as well as new ones.139 For example, average capacity factors for all operational wind farms in Brazil increased from 38.8% in 2015 to over 40.9% in 2016, as new projects with better technology came online.140

Manufacturers raced to launch larger turbines during 2016, with new machines released or announced by several companies, including Enercon, GE, Nordex and Senvion for onshore, and Siemens and MHI Vestas for offshore.141 Increasingly, large manufacturers are developing new turbine options based on tested and well-proven existing platforms, which enables them to more easily develop turbines for specific markets while also minimising costs.142

Not surprisingly, capacity ratings also climbed in 2016: the average size turbine delivered to market was up 6.4% over 2015, to 2.16 MW.143 By region, average turbine sizes were highest in the Middle East and the Commonwealth of Independent States (2.8 MW), due to the installation of several 3.3 MW machines, followed by Europe (2.7 MW), Latin America (2.3 MW), North America (2.2 MW), and Africa and Oceania (both below 2 MW).144 Turbines in the 2-2.5 MW size range accounted for nearly two-thirds of global supply in 2016.145

Offshore, the need to reduce costs through scale and standardisation has driven up sizes of turbines as well as of projects.146 In Europe, the average capacity of new turbines under construction offshore was 4.8 MW, up 15% relative to 2015 and 62% larger than a decade ago; the average size of turbines ordered in the second half of 2016 was 7.7 MW.147 Vestas, Siemens, GE and Adwen all had 8 MW turbines on the market or nearly commercialised by year’s end, and the first 8 MW turbines to be installed offshore were grid-connected in 2016.148 In early 2017, MHI Vestas Offshore Wind unveiled an up-rated version of its 8 MW turbine that can achieve a rated power of 9 MW; the turbine’s swept area is larger than the London Eye ferris wheel.149

The offshore wind industry differs technologically and logistically from onshore wind.150 Siemens was the leading offshore turbine supplier in 2016, accounting for nearly 67% of added capacity, followed by Shanghai Electric Wind Power Equipment, or Sewind (China; 24.6%); considering all capacity operating globally by year-end, Siemens and MHI Vestas combined had supplied nearly three-fourths of the total.151 DONG Energy (Denmark) was the largest owner, accounting for more than 16% of cumulative offshore installations in Europe, followed by Vattenfall, E.ON and Innogy.152 During the year, GE moved into the offshore marketplace, and European developers, including DONG, were positioning to play a role offshore in the United States.153

The offshore industry continued to move farther out and into deeper waters, and the average size of projects under construction continued to rise.154 Substructures are evolving to help reduce project costs and logistical challenges. Although the majority of turbines installed off Europe in 2016 continued to stand on monopiles (88%), followed by jackets (12%), a wide array of foundations is in demonstration and development.155 Siemens, for example, is developing a hybrid gravity-jacket concept.156 The industry also continued to develop floating turbines (anchored by mooring systems), adapted from deep water oil and gas drilling rigs.157 In 2016, Japan added a turbine to its demonstration project off the coast of Fukushima, making it the largest floating project to date, and France awarded tenders for pilot plants.158 A commercial project using Statoil’s Hywind design off the Scottish coast was under development during the year, and, in early 2017, projects using floating turbines were announced or granted consent in Ireland, Japan and Scotland.159

Other significant advances in 2016 included the installation of DONG Energy’s advanced BEACon radar system, developed by SmartWind Technologies (United States), which provides minute-by-minute three-dimensional data of wind as it flows through a wind farm or stretch of sea. The radar can provide valuable insights to inform the siting, design and operation of future offshore projects.160 In addition, Siemens launched a customised transport vessel that allows for rolling nacelles on and off deck, avoiding the need for crane operations.161

The economics of offshore wind power have improved far faster than experts expected, driven down rapidly by a combination of economies of scale achieved by larger turbines and large projects; increased competition among developers; increased experience, which reduces operating costs; technical improvements with turbines, installation processes, grid connection, and maintenance strategies and logistics; and lower cost of capital due to reduced perception of risk in financial markets.162

In June 2016, nine European countries agreed to co-operate on offshore wind power through joint tenders. The same day, 11 companies signed an open letter calling for a stable legal framework and aiming to produce offshore wind power more cheaply than coal within the decade: for less than EUR 80 per MWh (USD 84 per MWh as of end-2016) per project by 2025.163 The industry moved closer to these targets during the year, and tenders in late 2016 brought record low bids for projects off the Danish and Dutch coasts: between EUR 50 per MWh and EUR 72 per MWh GBP 100 per MWh (USD 123 per MWh), excluding grid-connection costs.164 By one estimate, the industry achieved a 2012 UK government goal – to reduce the offshore LCOE by one-third, to GBP 100 per MWh (USD 123 per MWh) by 2020 – four years ahead of schedule. 165

Small-scale wind turbine costs also are trending downwards, while capacity factors are rising.166 To increase the competitiveness of small-scale wind, several leading US companies have begun offering long-term leases to build on the success of third-party financing for solar PV.167 In 2016, Statoil and United Wind (United States) announced a joint venture, securing Statoil’s entry into the US small-scale and distributed wind market; and Northern Power Systems announced that it was partnering with LFC Capital (both United States) to offer a lease programme.168 Other companies are building, owning and operating on-site turbines and selling power through PPAs.169

China, Germany, the United Kingdom and the United States account for a large portion of small-scale turbine manufacturers; aside from China, developing countries still play a minor role.170 Even so, the number of producers in China and the United States has declined significantly in recent years.171 Endurance Wind Power (Canada) filed for bankruptcy in 2016, after UK FIT cuts reduced demand in the company’s primary market.172 US manufacturers continued to rely heavily on export markets; US exports doubled (to 21.5 MW) from 2014 to 2015 (latest available data) and accounted for 83% of sales (up from 29% in 2010).173 Chinese manufacturers also rely on international markets, mainly developed countries, for larger machines (e.g., 20-30 kW).174

See Sidebar 2 and Table 2 on the following pages for a summary of the main renewable energy technologies and their characteristics and costs.175

Table 2. Status of Renewable Energy Technologies: Costs and Capacity Factors

Table 2. Status of Renewable Energy Technologies: Costs and Capacity Factors (continued)