Germany takes a battering as industry descends on Hamburg

Business cards? Check. Comfortable shoes? Check. Fitness watch to keep track of exactly how many miles you cover? Definitely. Then like many in the European wind industry, you’re ready to pound the floors of WindEnergy Hamburg and WindEurope conference in Hamburg next week. Good luck!
The events were last held concurrently in 2016, which was a good time to immerse yourself among Germany’s wind companies. The country was in a wind construction boom as a result of political stability and the wind-down of the country’s centrally-set feed-in tariff regime. Yes, life was pretty good.

It’s no secret that life in the German onshore wind industry is tougher now. Firms are adapting to slimmer margins and less government appetite for new wind farms after the move to competitive auctions at the start of 2017. Companies are also looking for more clarity on the government’s plans for grid expansion, and new onshore support is set to be limited to 2.8GW a year in 2018 and 2019, and 2.9GW in 2020.

Then there’s the political uncertainty around Chancellor Merkel, which has reduced her ability to push through new programmes for wind and solar development, even as the country looks set to miss its 2020 decarbonisation target. This is important as it has tarnished Germany’s reputation as a green leader.

Yes, the country may have a lot of companies doing great things on renewables, not least in wind. However, while the country’s decision to move away from nuclear after the 2011 Fukushima disaster in Japan has led to growth in wind and solar, it has led to expansion of coal in Germany too. The country has done well to position itself as a green leader, but this growth of coal has tarnished both its reputation and Merkel’s.

Finally, we have seen the prices being paid to developers creep up in onshore wind auctions in 2018. Average winning prices in rose from €47.30/MWh in February to €57.30/MWh in May and €61.60/MWh in August. This is good for investors in one respect as it means less pressure on their margins, but it is also a reflection of the lengthy permitting process for onshore wind and a lack of clarity from Germany’s political leaders on the future for wind up until 2030. Fewer firms are bidding.

This reduced level of activity clearly makes tougher across the value chain, from manufacturers downwards, and for the people who work for them. That will depress the mood in Hamburg. Yes, 2.8GW a year is good compared to most markets, but it is down from annual installations of over 5GW between 2013 and 2017.

And we shouldn’t underestimate the impact that lower activity in Germany is set to have on the rest of Europe. Of the 12.5GW of onshore wind capacity completed in Europe last year, 42% of that was in Germany (5.3GW). Wind companies in Europe can ill afford to lose that capacity, particularly when the UK (2.6GW) and France (1.7GW) are seeing their own markets squeezed too due to political problems. The only region that looks set to fill that gap for European onshore firms is Scandinavia.

Germany has long been one of Europe’s most influential onshore wind markets, as evidenced by the fact that two of its biggest conferences are being held there next week. But now its wind market is catching a cold, will that lead to a pandemic?

Perhaps. Yes, that might seem like journalistic hyperbole, but companies are having to make investment decisions now in a climate of severe uncertainty. Ahead of next week’s events, WindEurope last week published its ‘Wind Energy Outlook Report’ in which it forecast ‘solid growth’ for the next five years, but with the prospect of major uncertainty partly caused by a lack of ambition from national governments after that. Current growth is supported by investment decisions that have already been made.

As WindEurope CEO Giles Dickson put it: “Most governments still haven’t clarified their plans for new wind farms up to 2030. And partly because of this it’s getting harder to secure permits for new wind farms.” Lots to ponder as you’re racking up the steps in the endless conference halls.