Analysis: Mixed messages on the Energiewende

GERMANY: Despite surges in wind business driven by low costs of onshore wind in China and the emerging markets, Germany's conviction in pursuing its Energiewende - the transition to ever stronger reliance on renewable energies - still appears to be playing a lighthouse role for the industry.

Speaking at the WindEnergy Hamburg trade fair, which brought together the onshore and offshore wind and maritime industries from around the world, Steve Sawyer, secretary general of the Global Wind Energy Council (GWEC), spoke glowingly about Germany's strategy. "The Energiewende is a tremendously bold, inspirational signal to the world. The Anglo Saxon world doesn't believe in it — but Germany is actually doing it," he said.

But the wind industry's concerns about numerous paradoxical developments within Germany are causing the lighthouse's light to flicker. Among these, the planned long-term support from Germany for a new 3.2GW nuclear station in the UK contrasts sharply with the increasingly unfavourable outlook for renewable energies, noted German wind federation BWE on 23 September. "It is not logical to support nuclear generation for 35 years at £92.5 (EUR 117.7) per megawatt hour adjusted for inflation — not taking into account costs of radioactive waste disposal — and at the same time massively criticise the 20-year support for wind on land in Germany at an average EUR 70/MWh," said BWE president Hermann Albers.

There is also perplexity at a lack of contribution from governments in Ukraine. There is a feeling countries could do more by promoting renewable energy, thereby reducing dependence on Russian gas and the risk of terrorist attack or sabotage of nuclear plants in Ukraine. "We would like to see an energy masterplan within the European Union to reduce dependence on energy raw materials from regions dogged by crisis and conflict — this is urgently necessary in view of the situation in Ukraine and [parts of] east and south-east Europe," Albers said.

Germany's new renewable energy framework perplexes industry experts, who expect it to slow growth of cheap onshore wind, weakening Germany's lighthouse effect. Ironically, the switch to a tendering system planned for 2017 could then potentially raise costs as new uncertainty is priced in to financing models, they fear.

In 2014 German onshore wind is likely to increase by 3.3-3.7GW, compared with 3GW onshore in 2013, as a result of the pull-forward effect to beat the 6-20% cut in support caused by the new Renewable Energy Act that took effect on 1 August.

But in 2015, installations are likely to fall sharply, albeit remaining in the onshore wind corridor of 2.4-2.6GW targeted by the new law. This was the prediction of Senvion CEO Andreas Nauen, who is also head of the power systems division of engineering federation VDMA, at the WindEnergy Hamburg event.

From 2016, quarterly cuts in German onshore support rates — the size depending on expansion in the previous one-year period ending five months before that quarter begins — can mean a reduction of up to 4.8% per year. The switch to a tendering system to fix the amount of support for wind energy is then due in 2017. During this four-year period to 2019, annual growth may amount to only "2GW plus a little" for German onshore wind, Nauen said.

Also speaking at the Hamburg event, federal economy minister Sigmar Gabriel expected onshore wind to continue to grow, "but it will be no surefire success," he conceded.

Lessons from solar industry

Very low support for onshore wind, combined with strategically intelligent behaviour of competitors receiving subsidies, could keep European turbine builders out of the market, warned Albers. He was referring to the two-year period from around 2011 in which subsidised Chinese photovoltaic production led to the demise of much of the European solar manufacturing sector. "Germany and Europe had no answer to this," he said.

There is also frustration that the Renewable Energy Act prevents German wind projects from selling their electricity directly to end-customers. The new law requires that direct marketing of wind and renewables generation must take place via the electricity exchange, whereby the electricity loses its "green" quality. During proceedings leading up to the 2014 act, the German economy ministry was charged by parliament with drawing up an ordinance with rules for the economically feasible marketing of green electricity to end customers, which should be ready within the next few months, said Albers.

On the positive side, project finance for onshore wind is for the moment still doable, said Gerrit Schmidt of Bremer Landesbank at a BWE forum at the Hamburg event. "We learned from the extreme cuts in support for photovoltaic that it is still possible to plan," he said, adding that current low interest rates compensate to some extent for the 6-20% reduction in onshore wind support.

The question is, what will happen after 2017. "No-one knows," Schmidt said.