Onshore Wind Power in Africa, Asia, and Latin America: New Installed Capacity CAGR Expected to Reach 14% from 2023 to 2028
The Asia-Africa-Latin America market is the third largest onshore wind power market after Europe and the United States. In 2023, the newly installed onshore wind power capacity will be 13.7GW, accounting for 38%. It is expected to continue to grow in the next few years, with the newly installed capacity reaching 26.5GW in 2028, and the CAGR of newly installed capacity from 2023 to 2028 is expected to reach 14%, mainly due to the growth in other parts of Asia, Africa and Latin America.
Central Asia: Kazakhstan Boasts the Most Abundant Wind Energy Potential (354 GW)
Kazakhstan’s 2023 Power Consumption Structure & Wind Energy Resource Distribution
Kazakhstan has the richest wind energy resources among the five Central Asian countries. This is mainly because it is located in the northern hemisphere wind belt and has a strong convective climate. Northeast and southwest winds prevail all year round. The potential wind energy resources reach 354GW, while the other four countries are less than 10GW.
Kazakhstan: Single power structure & imbalance in power supply and demand between the north and the south, need to develop renewable energy.
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(1) Single energy power structure: Kazakhstan has one of the largest coal reserves in the world, and is also the largest oil producer and major natural gas producer in Central Asia. Taking the power consumption structure in 2023 as an example, 87.25% of the total electricity comes from fossil fuels, of which coal accounts for more than half.
(2) Imbalance in power supply and demand between the north and the south: Thermal power is concentrated in the northern region where coal resources are rich, while power consumption in southern cities accounts for about 70% of the country. The power supply is insufficient and needs to be transported from the north over long distances. The corresponding wind resources in the south are particularly abundant.
(3) Goal: The Kazakhstan Development Strategy 2050: New Policy Guidelines for a Successful State proposes that renewable energy account for 15% of total energy consumption by 2030 and 50% by 2050.
Central Asia: Kazakhstan Prioritizes Renewable Energy Grid Integration and Is Friendly to Chinese Investments
Policy support for new energy sources:
(1) Priority grid connection and dispatch for renewable energy: The Kazakh government requires the Kazakhstan Power Grid Management Company to ensure grid connection and priority dispatch for renewable energy, and exempt all other fees except for reasonable charges for the lines between renewable energy projects and the main grid lines;
(2) PPA auction price mechanism and grid-connected electricity guaranteed to be fully purchased: The electricity price auction is conducted anonymously and remotely online in the form of a unilateral auction by the Kazakhstan Power and Power Market Online Trading System Company. According to the auction results, the Renewable Energy Financial Settlement Center specially established by the Kazakh government, as the only buyer of renewable energy designated by the Kazakh government, signs a PPA with the successful bidder and purchases all grid-connected electricity generated by the renewable energy IPP within 20 years as the sole off-taker;
Support for Chinese investment: Kazakhstan is one of the main target countries for Chinese companies to implement overseas investment in Central Asia. Since the establishment of diplomatic relations in 1992, the relationship between China and Kazakhstan has been developing steadily. In particular, with the proposal of the “Belt and Road” initiative, the two sides have successfully implemented a large number of investment and capacity cooperation projects.
(1) Tariff reduction and exemption and subsidies in kind: According to the Guidance Catalogue of Industries Encouraged for Investment, project companies registered as local legal persons in Kazakhstan and engaged in power generation have the right to apply for and obtain investment incentives such as tariff reduction and exemption and subsidies in kind. Based on the investment amount and other indicators of the project, the Ministry of Investment and Development has the right to exempt the project company from import tariffs for no more than 5 years.
Middle East – Saudi Arabia: Developing Wind Power to Reduce Dependence on Fossil Fuels, with Projects Primarily Through Government Public Bidding
Wind Energy Resource Distribution in Saudi Arabia
The development of wind power in the Middle East has made significant progress in recent years, mainly concentrated in several key countries such as Saudi Arabia and Egypt.
The average annual onshore wind speed in Saudi Arabia is about 6.0-8.0m/s, and the onshore wind speed in many regions of the country is higher than the standard economic wind speed (7+m/s). Among them, the northeastern region, the central region and the western mountain range all have high potential for developing wind energy.
(1) The development of wind power is mainly to reduce dependence on fossil fuels: Saudi Arabia is one of the world’s largest oil exporters, but over-reliance on oil has brought about problems such as economic homogeneity and environmental pollution. The development of wind power will help achieve energy diversification and maintain competitiveness in the transformation of the global energy market.
(2) In December 2023, Saudi Arabia announced that it would add 20GW of renewable energy each year, and the total installed capacity would reach 130GW by 2030.
(3) Wind power projects are subject to government open competitive bidding: the Dumat Al Jandal 400MW bidding was launched in 2018, and the scale of the fourth round of wind power projects launched in 2022 reached 1.8GW.
Middle East – Egypt: Notable Electricity Shortages and Abundant Wind Energy Resources, Primarily Attracting Private Capital Participation
Egypt’s 2023 Power Energy Structure & Wind Speed Distribution at 100m Height
Egypt: Developing wind power reduces dependence on imported energy. In recent years, as Egypt’s population has expanded, the number of electrical appliances used in residents’ lives has increased rapidly. At the same time, Egypt has vigorously promoted energy-intensive industries, and electricity consumption has grown rapidly. From the perspective of power structure, Egypt’s natural gas power generation accounts for as high as 84%, and the power generation structure is single. Due to the continuous high temperature for 24 years, the fuel supply of power plants has been insufficient. We believe that Egypt urgently needs to develop local renewable energy to reduce its dependence on imported energy and enhance energy security.
Egypt has abundant wind energy resources. There are excellent wind power conditions near the Gulf of Suez in the east, with an average wind speed of up to 10.5 meters per second. In addition, the eastern and western deserts along the Nile River and parts of the Sinai Peninsula also have the potential for large-scale development of wind power.
Nearly 2/3 of wind power projects mainly attract social capital participation. The Egyptian government plans to add about 7.2GW of wind power capacity, of which one-third will be invested and developed by the New and Renewable Energy Authority (NREA) under the Egyptian Ministry of Electricity and Renewable Energy (MoE&RE) in cooperation with international financial institutions, and the remaining two-thirds will mainly attract social capital to participate in investment.
In May 2022, the Egyptian government authorized a consortium consisting of three energy companies, including the UAE energy giant Masdar and its joint venture Infinity Power with Infinity Energy, and Egypt’s leading utility company Hassan Allam Utilities, to invest US$10 billion to develop a wind farm with a capacity of 10GW.
Africa – South Africa: A Major Power Hub in Africa with Abundant Wind Energy Resources and a Belt and Road Initiative-Friendly Environment for Chinese Investments
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As a major electricity producer in Africa, South Africa mainly relies on coal-fired power generation. Since 2018, power rationing in South Africa has severely restricted economic development.
(1) Resources – South Africa is rich in coal, has abundant sunshine, but lacks water resources. It mainly relies on imports for oil and gas. South Africa is a major coal producer in the world, ranking 8th in the world in terms of output and 3rd in terms of export volume. It ranks first in African countries in terms of coal resources, and most of the coal fields are located in the northeastern region of South Africa. The average wind speed at a height of 100m in South Africa is about 7m/s, and the southeastern coastal areas are particularly rich in wind resources. The inland areas are rich in sunshine resources, which are equivalent to the level of Class I regions in China.
(2) Government support for the development of renewable energy – The South African government plans to increase the share of solar and wind energy in the country’s energy structure to 40% by 2030, expand the scale of its renewable energy development, and enhance its green energy supply capacity. Wind power projects are mainly publicly tendered through the Renewable Energy Independent Power Producers (REIPPPP). The average winning bid price for the fifth phase of wind power is 3.2 cents/kWh. After the power generation enterprises are put into operation, their on-grid electricity prices will be raised annually according to the CPI announced by the South African government. In 2022, 13 new projects were signed under the fifth REIPPP bidding window, with a total installed capacity of 1,759 MW, including 784 MW of onshore wind power projects.
(3) South Africa is the first African country to sign a cooperation document with China on the joint construction of the Belt and Road Initiative. Chinese state-owned power generation companies already have experience in wind power projects in Africa that integrate investment, construction and operation.
Latin America: Wind Power Primarily Distributed in Brazil and Colombia, with Wind-Solar New Installations Accounting for Over 50%
Wind power and photovoltaic power generation account for more than 50% of new installed capacity. Most Latin American countries rely heavily on fossil fuels to meet their energy needs. Oil remains the main fuel, accounting for 40% of the total energy supply in Latin America and the Caribbean. In recent years, oil power generation has slowed down, while wind and solar power generation has increased significantly, accounting for more than half of the annual new installed capacity in the past three years.
Wind resources are mainly distributed in the northeast and south of Brazil, Colombia, etc. Brazil, Chile, Colombia, Mexico and Argentina have more new installed capacity.
Latin America – Brazil: Strong Wind Power Price Competitiveness, with Government Funding Support and Tax Incentives
(1) Brazil, as the largest economy in Latin America, proposed in 2022 that it would reduce greenhouse gas emissions by 50% from 2005 levels by 2030.
(2) Renewable energy accounts for more than 80% of Brazil’s power structure. The growth of wind power generation is mainly due to its price competitiveness, and about 80% of the projects are independently developed by the market.
(3) Economic side – tax exemptions are provided for the import and production of wind power equipment to reduce project costs. At the same time, the government has significantly increased low-carbon investment in the new round of five-year strategic planning, from a total of US$4.4 billion from 2024 to 2027 to US$11.5 billion from 2024 to 2028, and the proportion of total investment in the same period has jumped from 6% to 11%. Among them, 73% of the new investment (about US$5.2 billion) will be used in new areas such as solar energy and onshore wind energy.
Domestic Companies Expected to Increase Market Share Overseas Due to Cost Advantages
European and American OEMs such as Siemens Gamesa are gradually shrinking to the European domestic market and the US market. Overseas OEMs such as Siemens Gamesa have proposed streamlining their onshore wind power business and will focus mainly on the European and US markets in the future.
Compared with overseas, domestic wind turbine companies have obvious price advantages and are gradually deploying in the Asian, African and Latin American markets. Their market share is expected to increase significantly in the future. Referring to the delivery price of Vestas onshore wind turbines, it has basically remained at the level of 7,000 yuan/kw since 2022, and has shown an overall upward trend after the epidemic. The highest average winning price of domestic onshore wind turbines excluding towers in June 2024 is 1,534 RMB/kw, which has obvious cost advantages.
