November 2020 – Before the coronavirus pandemic, the German wind power sector found itself in a deep structural crisis. On a positive note: the companies which survived the downturn in business are emerging from it stronger. The outlook for the offshore business in particular is improving appreciably.
In December, there is generally a particularly harsh, cold breeze blowing in front of the Hamburg exhibition halls. -The participants from all over the world at this year's leading “WindEnergy Hamburg” fair will not, however, notice it at all in their well-heated offices or their re-purposed offices at home. As with almost all trade fairs, the WindEnergy Hamburg has become a virtual event, taking place from December 1 to 4, 2020.
The virtual nature of the conference won't change the volatility of the topics being discussed. The global wind power sector, particularly in Germany, is finding itself at a crossroads. After an exemplary boom, urged on largely by the remunerations secured for power from alternative energies through the Renewable Energy Sources Act, the wind energy sector in Germany virtually came to a standstill back in 2019. Some companies along the entire value chain are embroiled in tangible, economic problems; notable corporations have completely waved goodbye to their commitment to the wind energy sector. As a final step, the fall in prices on the electricity market further exacerbated the crisis.
2019 should actually have been a year to celebrate: for the first time, wind power pushed brown coal from its top spot as the most important German energy source. Nevertheless, in 2019, only another 325 wind power plants were erected on the coasts or the hillsides of the interior. In 2002, in contrast, 2,328 new plants had been erected according to figures from the German Wind Energy Association and the WindGuard GmbH consulting firm.
Additional construction and overall trend in the onshore wind power plants in Germany since 2000
Source: German Wind Energy Association; WindGuard GmbH
As well as the decline in the statutorily guaranteed remuneration, another reason for the dire circumstances is the increasingly critical attitude from parts of society and politics towards new wind power plants – particularly close to urban areas and in areas where protected bird species are present. The halted additional construction on land is felt by all participants on the market: the manufacturers of wind power plants, suppliers, project managers, planners, wind consultants, lawyers, public auditors, technical consultants and investors.
“2020 won't be a better year for the German wind power sector either,” says Inka Klinger, Global Head of Infrastructure Project Finance at the Hamburg Commercial Bank, quashing optimism for a fast recovery in the style of the much-quoted V-shaped economic trend. But the future is much more important to the world economy than the present. And ahead of the Hamburg wind trade fair, the positive signs are increasing.
The regularly extolled “Wind energy trend:index” is for the first time reporting a generally better mood among the latest online survey of around 7,500 market participants from the onshore and offshore industry. “The outlook for the future of the international wind market is globally good and is on the rise again. The future of the German market is being assessed positively for the first time in a year,” according to the evaluation of the survey results.
The German federal government is making its contribution to the improved mood: the planned “Wind energy at sea act” from the Federal Ministry of Economic Affairs is setting ambitious targets in the expansion of offshore wind power: by 2030, instead of 15 gigawatt (GW), now 20 gigawatt are to be erected, and 40 GW by 2040. Currently, the power that wind turbines generate in the open sea in Germany stands at around 7.5 GW. Federal Minister of Economics Peter Altmaier: “The target increase in wind plants at sea makes it clear that Germany will continue to be a leading market for offshore wind power. The clear long-term goals provide planning and investment security.”
The European Union has even bigger targets. According to an internal paper, just quoted in the “Handelsblatt”, offshore wind farms around Europe's coastlines are to deliver a total output of 300 gigawatt by 2050. This equates to the output of around 450 atomic reactors or 450 large coal generating units.
New upwind on land too: Peter Almaier who himself at one point complicated matters with the 1,000-meter interval rule for interior construction of new wind power plants, is once again choosing more wind-rich locations between the North Sea coast and the foothills of the Alps. The federal government promises an increased expansion of wind power on land from the “investment acceleration act”.
Even the wave of complaints against the new construction of modern wind power plants is expected to tail off. Significantly streamlined legal processes have provided investors and project managers with more and faster clarity. “The demand from local authority or municipal providers for local wind power plants to appease their own energy requirements is also noticeably on the rise,” notes market expert Inka Klinger. In addition to this there is a growing interest in fixed power supply contracts: More and more companies who are doing something for their carbon footprint and would like to supply their offices, factories or data centers with green energy, are concluding direct supply contracts with individual wind farms. The renewable energy experts at Hamburg Commercial Bank have been particularly focusing on these transactions in recent years – alongside all other financing types in the wind business. Inka Klinger: “There is a particularly large amount of institutional capital flowing in this field. As market experts and intermediaries, we establish ties between plant operators and investors.”