Europe poised to reset its approach to wind

On 24th February, Russia started its invasion of Ukraine and sparked fury in the West. This is the largest military attack in Europe since World War II and has caused thousands of casualties, with an estimated two million Ukrainians forced to flee.

This is a humanitarian crisis and we hope for a quick and peaceful resolution.

But as well as the humanitarian crisis, this is also an energy crisis. There is no sense in which the suffering of Ukrainians can be compared to the impacts on energy users in other countries having to pay more for their oil and gas.

However, this reminds us of how closely the worlds of politics and energy are linked, and shows that the soaring cost of fuel will have impacts on European energy users for the foreseeable future.

It has also shown the folly of Europe continuing to rely on cheap Russian gas even after the annexation of Crimea and conflict in the Donbas.

This may prompt a long-overdue reset in the continent’s approach to wind.

Further inflation

If Europe chooses to turn its back on cheap Russian gas then this would drive up the cost of materials and risks “undermining the entire European industrial model”, some analysts have warned.

Materials used in wind turbines including steel would become more expensive and would force European turbine makers to raise their prices.

This would be a further challenge for manufacturers such as Vestas, Siemens Gamesa and GE Renewable Energy, which are already grappling with rising costs of raw materials. They also face pressure from rising fuel prices, which will further increase the cost of transporting turbines and components.

You can read more about this in our Wind Investment Trends 2022 report

But it remains to be seen how far Europe will turn away from Russian gas. Countries in the European Union import the vast majority of their gas, of which 45% came from Russia in 2021 according to the International Energy Agency (IEA). Countries will not be able to easily stop the use of Russian gas or oil even if they say they will – as Shell found to its cost last week.

Last week, the IEA shared a ten-step plan that it said would help Europe reduce its imports of Russian gas by around one-third within the next year. These include an accelerated rollout of wind and solar; maximising power generation from bioenergy and nuclear; and accelerating efforts to swap gas boilers for heat pumps.

Meanwhile, on Tuesday, the European Commission followed up with its own plan, in which it commits to reducing purchases of Russian gas by two-thirds before the end of 2022. This involves a faster rollout of onshore and offshore renewables; and working with member states on how to speed up permitting for wind and solar. But the proposals would still mean steep increases in the cost of oil and gas in Europe.

Frans Timmermans, EU climate policy chief, said it was “bloody hard” but “possible”. It may also be needed if Russia follows through on its threat on Tuesday to close the Nord Stream 1 gas pipeline to Germany if European nations ban Russian oil imports. There is still a long way left to run.

Time for reset

This could put the European wind sector in a difficult position. It would mean Europe is looking to speed up the expansion of wind power at the same time as producing wind turbines gets more expensive and difficult.

If the prices of European wind turbines rise then it might also open the way for rivals from China to take a bigger slice of the European market.

The Chinese government has shown little appetite to criticise Russia for the war in Ukraine, let alone to move away from Russian oil or gas. In fact, the two countries signed a supply deal in February.

But it is not all bad for European firms. If energy prices are higher generally then they will be able to charge more for the electricity from their wind farm, and so gives them the ability to offset some of the extra costs they incur. This could give the industry an opportunity to reset after years of seeing prices squeezed in competitive tenders.

It may also prompt the EU to boost the support it gives to firms in the wind industry. EU countries have been slow to remove planning roadblocks for new wind projects, but the EU now has a chance to reset its approach to wind as it is clear why wind farms are so vital to the continent’s energy independence.

The EU's plan suggests that an extra 30GW of wind could be deployed in the bloc by 2030 on top of the existing decarbonisation scenario of 450GW. Wind could make up 50% of the EU's electricity mix by 2050.

It could also mean EU onshore wind growing from 173GW today to 1,000GW by 2050, with offshore wind up from 16GW to 300GW over the same period.

These are huge targets. To get there, European countries have to throw its weight behind the wind sector, which firms say is in “poor health”. This would be a positive step. But it’s a shame it takes a war for the step to be made.

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