There are two drivers for the improved fortunes of the German market. First, there is a rush to get projects built under the existing renewable energy law before its amendments come into force, possibly in early June. Not only will the amended law reduce Germany's regulated wind power payments, they will no longer be available for plant built on sites with only a minimal wind resource, ruling out a large number of planned projects (Windpower Monthly, December 2003). Second, the investment climate for the wind sector has improved recently, with the result that a number of projects postponed in 2003 for lack of finance or insurance coverage are now in a position to go ahead.
The current rush to get turbines commissioned is a continuation of the hectic activity seen in the last few weeks of 2003. A big industry push brought the annual total of new wind plant to 2645 MW, reports the federal wind association, Bundesverband Windenergie (BWE), 150 MW more than the most optimistic forecast by the Deutsche Wind Energie Institut (DEWI) a year ago. By the close of 2003, 15,387 wind turbines were contributing 14,609 MW of installed capacity to the national power generation base. Given a year of normal winds, the turbine fleet could generate nearly 6% of Germany's electricity needs, says BWE.
END OF YEAR rush
The wind sector's traditional end-of-year rush is a seasonal occurrence sparked by two particularly German factors: a desire to get turbines commissioned and signed on for the old tariff rate before its scheduled downward adjustment at the end of each year; and a realisation by private investors that time is running out to take advantage of a tax shelter wind fund investment for 2003.
This time, the end of year rush of equity was particularly acute: investors were recovering from a bad bout of cold feet. In the early part of the year, when they were already squeezed by the economic down turn, investors had been made wary of wind by reports of technology failures, increased insurance premiums, three years of poor winds and failing returns, and wind turbine manufacturers and developers running into financial difficulties. Uncertainty about what the government might do to the renewable energy law contributed to dampening enthusiasm for wind power. Raising project equity through the tried and trusted wind fund model was suddenly taking weeks or even months, says BWE's investment expert Dirk Jesaitis.
As if the dearth of equity was not problematic enough, Commerzbank, which until 2003 had financed about half of all German wind development, suddenly pulled up the drawbridge to its vaults, leaving a hole too big for other banks to fill. Jesaitis says Commerzbank will be back, but with a new internal rating mechanism for assessing the soundness of projects, including the liquidity of current plant is has lent to.
All that was last year, however. Confidence in the wind sector is returning as banks and insurers tighten up their procedures and criteria. Yesterday's fears are being overridden by the drive to make the most of the old law before the new one -- now wending its way through parliamentary process -- is ushered in. At the same time there is talk of changing the annual downward adjustment in the tariff from end-year to mid-year, a further incentive to get projects running before June.
Not that there is any sign of a return to the booming market of the past decade. Windy sites not yet occupied by turbines remain in short supply in Germany and repowering of old projects and development of wind plant offshore are no more than dots on the radar. Last year's effort, while better than expected, was still 18.5% down on the 3247 MW installed in Germany in 2002. "We aren't clear what will happen in the second half of the year when the new renewable energy law has taken effect. And whether banks will continue to be reserved about financing remains to be seen," says Nick Reimers of the BWE.
The maturing German market is also seeing increased industry consolidation. Just two companies, Enercon and Vestas, accounted for over half of all installations. Enercon led the field, installing 33% of 2003's capacity, while Vestas advanced its lead over GE Wind to take 24% of the market. Repower Systems overtook NEG Micon, AN Windenergie (as Denmark's Bonus is known in Germany) and Nordex, moving into fourth place. GE Wind, NEG Micon, AN Windenergie, Nordex, DeWind and Fuhrländer all lost market share.