Bigger is almost always better in the wind industry, whether we're talking about the size of the wind turbine or the size of a wind farm. The latest developments in the industry have turbines reaching almost 10 megawatts (MW), enough to power 2,210 homes (using 221 homes per MW). A solar farm with only a few wind turbines could produce enough power for a small town and a big one, like the 1,550 MW Alta Wind Energy Center in California, could generate enough power for a small city.
As wind turbines get bigger, their costs continue to come down, which should help the industry grow. Companies like Vestas Wind Systems (NASDAQOTH:VWSYF) and General Electric (NYSE:GE) are pushing the limits of what wind farms can do.
Bigger and bigger
One of the largest production wind turbine today is a 9.5 MW offshore turbine produced by Vestas Wind Systems. It has been chosen as the turbine for projects in Scotland and was recently ordered for an 800 MW project off the coast of Martha's Vinyard in Massachusetts. But even 9.5 MW turbine isn't big enough for Vestas, which recently announced a 10 MW turbine that will be ready for installation in 2021. The new giant will have a rotor diameter of 164 meters and a swept area of 21,124 square meters, or the size of nearly four football fields.
General Electric is trying to keep up, announcing that it's developing a 12 MW offshore wind turbine that will be 260 meters high with blades that span 107 meters, creating a swept area of 38,000 square meters. This will replace a 6 MW turbine that's falling behind in cost and efficiency. To build the 12 MW turbine, GE is making a $400 million investment, including a new $100 million plant to build blades, but it's a bet GE has to make to stay relevant in wind.
Siemens is the other big wind player that's publicly traded in the U.S., but it's lagging with just an 8 MW offshore wind turbine. That's big, but not as big as the competition and may not keep up with the market long-term.
Costs fall as wind turbines get bigger
There's a good reason manufacturers and wind farm developers are going after bigger wind turbines and building bigger wind farms -- they're more cost-effective. According to the Energy Information Administration, the capacity factor, or actual energy production divided by potential energy production, of wind turbines in the U.S. rose to 34.6% in 2017, up from 32.4% in 2013, as turbines got bigger and more efficient. But even larger turbines will take that to another level, with GE estimating its 12 MW turbine will be able to achieve a 63% capacity factor. Bigger is definitely better when it comes to wind energy production.
At the same time, you can see below that large wind farms are less expensive to build than smaller ones.
Everything in wind is getting bigger, and lower cost is the main driver. For wind manufacturers, keeping up with the market will force them to develop bigger and bigger wind turbines, both onshore and offshore.
Taking wind offshore will open new areas for growth
What's encouraging about the size and cost-effectiveness of wind offshore is that it will open many more untapped markets. Coastal areas are typically where the highest electricity demand lies, but it's often farthest from the windy locations, particularly in the U.S., where the midwest has the best wind assets. This will help grow the global wind addressable market from $157 billion in 2017 to $254 billion in 2024, according to analysis by Wintergreen Research.
Offshore, though, the dynamic changes. Wind is powerful and consistent, even near the coast, making wind turbines an attractive energy option, and that should help drive the industry's growth as turbines and projects get bigger and more cost-effective. According to Global Market Insights, offshore wind's global market is expected to grow from $21 billion to $60 billion in the same timeframe and that's a big reason manufacturers are investing in building bigger, better offshore turbines.