UK small wind blows despite recession

LONDON, ENGLAND - Britain's small wind sector is booming despite the recession as many rural homes, farms or small business are putting up turbines in the yard to counter higher energy prices and blackouts.

Orders for turbines with less than 50 kilowatts capacity have soared before the introduction in April of feed-in-tariffs for small renewables, a system similar to those that have propelled wind farm growth in Germany or Spain.

"In terms of UK, orders have tripled already," said Pete Allen, chief executive officer of Evance, which makes stand alone turbines with capacity of 5 kilowatts — enough to power two average homes in Britain.

"The UK market is set to double next year," he told Reuters.

It is a sea change in the country, which has failed to speed up construction of onshore farms despite its plentiful wind. Onshore projects have often stalled due to local objections.

To help achieve an 80 percent cut in carbon emissions by 2050 from the 1990 level, the government announced in July it would introduce the feed-in-tariffs for small green generation of up to 5 megawatts. The tariff levels are yet to be decided.

It also comes at a time when a third of Britain's power generators, including coal and nuclear, are starting to retire, triggering worries over possible power shortages next decade.

The British Wind Energy Association (BWEA) calculated the feed-in-tariffs would cut payback time for turbines of less than 1.5 kilowatts at windy sites to less than 10 years and for 5-6 kilowatt turbines to less than five years.

"With fossil fuel prices inevitably going to increase sharply, interest in self-generation is going to increase," said Alex Murley, small system manager at BWEA.

"The UK market is already the second biggest in the world, behind the U.S., accounting for 20-25 percent of the global demand," he added.

The BWEA projects more than 12,000 units of small turbines to be deployed in Britain next year after about 3,500 units — or 7.2 megawatts — were installed last year.

Under the scheme, owners of small renewables are paid a fixed tariff for every unit of electricity they generate. They can avoid or limit purchasing power from the grid. They can also sell a surplus, if any, to the grid for a fixed rate.

"It is the fastest growing part of the wind market," said Stephen Mahon from Low Carbon Investors UK, a venture capital investing in clean energy, including small wind.

"Globally the market is probably about 150 million pounds.... We expect this to become a multi-billion pound market over the next five years," Mahon told Reuters.

Growth will come mainly from Britain and the United States.

Though Britain has failed to attract leading large turbine makers, such as Vestas or Suzlon, it is home to 18 manufacturers of small wind turbines, including Scotland's Proven Energy, a world leader in this category.

The country is already the world's top exporter of small turbines and it is benefiting from generous subsidies in the United States, where the industry is projected to grow 30-folds to 1,700 megawatts by end-2013. It grew 78 percent last year.

BWEA expected British exports of small turbines to exceed 13,000 units next year after a forecast 2009 jump to around 9,500 units this year from around 32,000 units last year.

"We predict a dramatic increase in all regions, particularly the UK," said Peter Griffiths, marketing manager of Proven Energy. "Certainly there will be a double digit growth in the run-up to UK feed-in-tariffs," he told Reuters.

Proven Energy, taken over by investment company Low Carbon Accelerator Ltd in October, has sold about 2,500 units of its 3.2-15 kilowatt turbines worldwide since 1992, though most were installed in the past three years.

While government incentives are crucial for small turbines at present, costs for deploying small turbines are set to come down as production volume increases. Some industry officials saw government support becoming redundant in 5-10 years.

"It's still early days," said BWEA's Murley. "Costs of the technology will come down, while the costs of fossil fuel will go up, which will make small turbines (economically) viable."

He said setting up a turbine of about 5 kilowatt cost about 20,000 pounds per unit, similar to a small family car, though such cars had 200 times as many components as the turbine.

"The key is the volume," Murley said. "If the volume reaches 5,000 or 50,000 units... suddenly the costs of that is much less than the car."

Evanc's Allen agreed, saying: "If we made the technology we have today in high volumes, we could bring the costs down by as much as 80 percent."

"If it all went up to the same volume as solar PV (photovoltaic), it will be about 10 times as cost effective... I would like to think that we would be able to reach that point within the next 5-10 years," he added.