Where will the wind blow?

The energy transition remains high on the global agenda, with much hope now being pinned on wind power generation, which rose 17% in 2022, having outpaced other renewables.[1]

Accounting for 7.5% of the world’s electricity, wind turbines were the key source of clean power last year (see Fig. 1), which is more than double the share in 2015 (3.5%), while that of solar made up only 4.5% at the end of 2022.

Wind and solar together produced more of the EU’s electricity than fossil fuels for the first time last year and are set to reach 40% of global electricity by 2030, a huge leap from 12% in 2022, estimates by the IEA suggest.[2]

Over the past decade, investments in wind energy have grown markedly, from $72 billion in 2013 to $174 billion in 2022 (see Fig. 2).

Big oil and gas corporations are among key contributors to wind energy deployment. BP and Equinor, for example, have embarked on a joint offshore wind project in the US,[3] while Enbridge is developing several wind farms off the coast of Europe, which are expected to go live by the end of this decade.[4] Shell has over 2.2 GW of offshore wind capacity in operation and under construction,[5] while Eni’s joint venture has acquired four onshore wind projects in Italy with a total capacity of 0.1 GW.[6]

Yet this year, the wind power industry has run into headwinds. Financing wind projects is a big challenge, with their economics affected by the mounting inflation pressure and higher interest rates, while opportunities for revenue growth are usually restricted by the government. The rise in commodity prices, such as steel, has also pushed the price of wind turbines up 40% over the last two years, according to estimates by the industry body WindEurope. The problem is exacerbated further by wear and tear due to design defects and poor workmanship. For example, the leading wind turbine maker Vestas has flagged quality issues with turbine blades in its onshore fleet and has provided an extra €600 million to fix them.[7] It has also emerged that Siemens Gamesа will need at least €1 billion to fix major issues with wind turbine components.[8]

It’s yet to be seen how all these factors will impact the pace of wind power deployment and oil majors’ capacity expansion plans. But the course towards energy transition is clearly favored by both the general public and political elites.