(ET)
If you want a vision of where attempts to clean up the world’s power grids would be without the transformative effects of trade, look to the wind industry.
In the areas of clean energy where international commerce is most viable, there has been breakneck growth in recent years. Solar electricity generation and the number of electric vehicles on the roads will both be about 60% higher in 2025 than the International Energy Agency, or IEA , expected as recently as 2020. That’s enough to put the world well on the way to net zero.
It’s no coincidence, however, that these same sectors are also the most vulnerable to fears about geopolitical competition and tariff barriers. Dependence on supply chains centered in China has dismayed those who see that country’s growing wealth as a global threat greater than climate change itself.
Unlike cars and solar panels, wind turbines are challenging to transport over long distances. The biggest models now feature blades as long as a football field, and stand as tall as the Eiffel Tower from the ground to their highest point. They are also highly dependent on local engineers to build foundations and grid connections. If you want an image of the clean-power industry in a deglobalized world, wind is a good place to start.
Generation this year will still probably end up about 14% above the IEA’s 2020 prediction — but the picture is darkening. The Global Wind Energy Council, an industry group, last month cut its forecast for new installations for the first time since at least 2021.Through 2028, the total will be about 55 gigawatts lower than expected 12 months earlier, an 8.3% reduction. That’s equivalent to the drop in clean energy from switching off all of Germany’s nuclear reactors, a policy widely recognized as a self-defeating setback.
Macroeconomics explains part of the problem. Inflation has driven the price of parts and labor well above the levels at which projects were first proposed, causing cancellations and renegotiations. Interest rate rises worsen the picture, since project finance is a cost every bit as significant. Permitting and grid bottlenecks, as well as disinformation campaigns to stoke local opposition to wind, are perennial issues.
Still, dwindling supply chains might be the most decisive factor of all. In a rising market, local manufacturers invest aggressively in fresh capacity, driving down costs and fueling fresh demand. When it stagnates or falls, that virtuous circle is reversed.
That’s what we’re seeing in the US, where installations last year fell to their lowest level in a decade. Delays in connecting to the grid and uncertainty about Biden-era tax and subsidy policies were part of the problem. Quite as important, though, was a general slump that is making suppliers reluctant to invest, increasing costs for project developers who can no longer count on getting the parts they need. This in turn raises break-even prices, and deals a further blow to demand.
In China, the biggest market for wind energy, costs have fallen by half since the start of 2020, thanks to increasing deployments. In the US, they have risen by more than a third.
Developers and policymakers around the world should learn from what’s happening. President Donald Trump’s attempts to block the wind industry have been egregious, and attention-grabbing. Equinor ASA hinted on April 30 that it might take legal action after the administration blocked an 810-megawatt offshore wind farm near Long Island.
Even so, significantly more wind was installed in the US in Trump’s first term than under Joe Biden. Deteriorating macroeconomics, a morass of red tape, and a disappearing supply chain under a pro-renewables Democratic president did more harm than all the threats and bluster of his pro-fossil fuel Republican predecessor.
The risk now is that other nations may go the same way. Many of the most promising regions are now in emerging nations such as Brazil, the Philippines, Saudi Arabia and Uzbekistan. Those countries will struggle, however, if they use local content requirements and trade barriers to treat wind only as a boondoggle for the local construction and manufacturing industries.
It’s the global market for solar panels, electric vehicles and lithium-ion batteries that has allowed them to become breakthrough renewable technologies. If wind remains resolutely local, it’s consigning itself to a small-scale future.
