Germany’s depressed onshore wind market finally looks set to get some relief.
Long a global leader, Germany's wind market fell to its lowest point in years in 2019, due in part to a botched auction design. The design change saw lawmakers replacing feed-in tariffs with an auction system that was opened up to community projects.
Under the new system, community developers weren’t required to have obtained a permit prior to bidding, and were given a generous four-and-a-half-year commissioning period, making their projects comparatively more competitive. As a result, community projects swept the board in Germany’s 2017 and 2018 auctions, which together saw 5.1 gigawatts of capacity awarded.
With few permits in hand, a stretched permitting system and no rush to build those community projects, Germany's wind market saw installation rates plummet.
Germany installed barely 1 gigawatt of new wind capacity last year, down from 2.4 gigawatts in 2018 and 5.3 gigawatts in 2017, according to figures from the German wind association Bundesverband WindEnergie.
The drop in installations hit turbine makers hard. Germany's Enercon, the leading turbine supplier within the domestic market, swallowed a triple-digit-million-euro loss in 2019.
But with the deadline for the completion of the first community projects now looming, things are slowly picking up. The first half of this year saw 591 megawatts of new capacity installed, compared to 291 megawatts over the same period in 2019, according to Bundesverband WindEnergie.
Wood Mackenzie expects installations to roughly double this year, to 2 gigawatts, and to rise further in 2021, to 3.5 gigawatts.
"You will witness a surge in activity in 2021," said Shashi Barla, principal analyst for global wind supply chain and technology at Wood Mackenzie, in an email.
“The rise in installations is largely attributed to the auction projects awarded back in 2017 and 2018," Barla said. “We expect most of these projects will be commissioned in 2021."
Denmark's Vestas, the world's leading wind turbine supplier, recently noted the recovering German market as it secured an order for the Dreieck Spreeau wind project, which will be the largest in the country to feature Vestas' V150-4.2-megawatt turbines.
“With a slowly growing volume of permitted projects, we see that the order intake and installations are going up as well,” Alex Robertson, Vestas' vice president of sales for Germany, Austria and Switzerland, said in a statement.
Germany far from achieving its climate and renewables goals
Still, even as the outlook brightens for German onshore wind, the country remains a long way from achieving its renewable energy goals. Bundesverband WindEnergie forecasts that the country will install about 1.5 gigawatts this year, lower than WoodMac's projection.
“Three times that would be necessary for the government’s plan of 65 percent renewable energy in the year 2030,” Bundesverband WindEnergie spokesperson Frederick Keil said in an email.
The market has not been helped by the COVID-19 pandemic. Earlier this year, the German government announced measures to ensure auctions for 2.9 gigawatts of onshore capacity would not be adversely affected by lockdowns. While welcome, the measures include potential extensions to project deadlines, adding to the delays already besetting the market.
On the positive side, the German government this month moved to speed up the construction process with a law that allows permitted projects to move forward even if they are being contested in the courts. It also dropped the controversial '1-kilometer distance rule' that would have blocked projects near towns. States can now opt-in to the rule if they wish. But supporting already-permitted projects is not enough; what the market needs above all else is more permits being issued in the first place.
“We see a slight recovery in the first half of 2020, but we cannot interpret this as a turnaround," said Matthias Philippi, a spokesperson at German wind developer Enertrag. "If nothing changes here, we will miss the climate targets by far."
“To achieve climate protection goals, we need to reduce approval hurdles and consistently pursue agreed[-upon] expansion paths," Philippi said in an email. "If these hurdles are not dismantled as quickly as possible and the way is paved for a sustainable economy, there is a risk of numerous jobs being lost.”