BIGGEST WIND MARKET TAKES A BREATHER, Long term consolidation within reach but not certain

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The phenomenal growth curve of German wind energy over the last five years is levelling off -- sparking industry warnings of a collapsing domestic market. Sales during the year's first quarter were slightly down, at around 65 MW compared with 73 MW in the same period last year. But this dip in the curve had been predicted for some time (Windpower Monthly, October 1995) and industry fears of a collapse appear exaggerated in face of the facts. Sales forecasts from the main wind turbine manufacturers indicate a stabilisation of the German market this year at around, or a little more than the 500 MW in 1995.

The market is understandably jittery, though. Continued utility attacks on its legislative basis, the Electricity Feed Law, are having their effect -- banks and private investors are more wary of putting their money in wind projects. Meantime, new rules for wind turbine siting have still to materialise and grid expansion work has held up several large projects. But with political will towards wind as strong as ever -- and still plenty of space in Germany for wind plant -- there seems little cause for panic.

"I have quite a positive outlook for the next few years," says Thies Reimers of Vestas Deutschland. "But the political framework is very important. If this breaks down the market will collapse." It was this fear of losing political support which apparently prompted Franz Tacke, chairman of the wind group in the German engineering federation, to speak recently of "a collapsing domestic market" in which "the industry was doing its best to pull out of the dive by making huge efforts in exports."

But rather than a sign of market collapse, the low installation figures for the first three months probably have more to do with northern Europe's severe winter weather than a long term catastrophe. Frozen ground in Schleswig-Holstein prevented the installation of all but 23 turbines during the first three months. Neither is the installation figure of 66.44 MW for the first quarter, estimated by IWET of Hamburg, yet final.

As good an indication as any of the likely size of this year's market are the order books of wind firms. Germany's leading supplier, Enercon, admits it is only making six to seven of its E40 500 kW turbine a week, compared with ten a week at peak production. Nonetheless it has orders for some 300 E40s this year, about the same as last year. In 1997, sales of the E40 may be slightly down, says the company, but this would be compensated for by expected orders for the new 1.5 MW E66.

Tacke Windtechnik expects the same volume of sales in Germany as last year at around 130 MW. To adjust to this stagnation, it has fired 40 staff. Nordtank is slightly concerned about 1997, but is satisfied with the current situation: "An increase in installations and turnover is expected of around 40-50%," says Jörg Beland. Nordtank sold 50 turbines in Germany in 1995. Vestas, too, expects to install 130-135 turbines this year, compared with 120 in Germany last year and predicts this level of sales in 1997. And a similar story is told by Erich Grundwaldt of AN Maschinenbau. Last year it sold 52 AN Bonus turbines in Germany, compared to 79 in 1994, but this year and next it expects to sell 80 machines a year. Nordex, recently taken over by Balcke-Dürr, also expects an improvement in 1996: 65 MW compared with 13 MW in 1995.

The only negative note is sounded by Micon, though the firm's Harry Maisel says talk of a "market collapse" is exaggerated. This year Micon expects to sell 60-70% of its 1995 volume. "We have several big wind stations in planning where only the grid connection is holding us up," he says. "Our performance will depend on whether these go ahead," he says.

Maturing not collapsing

The manufacturers agree that the future of the German market is dependent on a more stable legislative climate, clearer planning rules and the continuation of grid expansion in windy areas. As long as these three requirements are met, as expected, the market will settle down.

Planning procedure is currently a thorn in the side of the industry. In Schleswig-Holstein and Lower Saxony, in particular, local authorities are engaged in area planning to earmark sites for wind. But once this work is complete, within a year at most, a wave of new activity is predicted. Planning is also a temporary stumbling block in the east, particularly in coastal Mecklenburg-Vorpommern, where a huge potential is as yet unexplored.

The effect, too, of a court ruling in 1994 removing the planning privilege for single turbines of over 100 kW in green belt areas should not be underestimated, says Helmut Häuser of IWET. Grunwaldt of AN Bonus agrees: "The market for single turbines is dead since the 1994 ruling and licensing procedures for wind stations now take on average four years to complete rather than the 18 months usual in former times." This is still shorter than the ten years needed for conventional power stations, he adds wryly. Häuser says lack of single turbine installations prevents the "seeding" benefits of these projects. "People see the turbine working, decide they want to have one too, and a new local market is created," he explains. A planned amendment to the Building Statute Book to return the privileged status to wind turbines is expected.

Grid limitations also play a role in curbing market growth. Slow progress on a transformer station expansion at Marne in Schleswig-Holstein has held up a series of wind projects, but the way is now open for an additional 120 MW of planned wind capacity. Vestas reports it now has a large number of projects ready to go ahead. Nevertheless, says the company's Reimers, competitive pressure on prices is making Germany a far tougher market.

Last but not least, the market is adjusting to the withdrawal of subsidies, both from regional and federal government. A consequence has been the demise of smaller manufacturers and the increasing domination by four or five larger companies, comments Norbert Allnoch of the Wind Energy Working Group at Münster University. Bankruptcies tend to spread worry. His calculations point to a 25.5% market growth in 1995, but mainly restricted to the industry's major players: Micon installed 82.6% more turbines in 1995 than in 1994, Enercon 49.5%, Tacke 40.8% and Nordtank 35.1%. Vestas nearly kept pace with a 23.3% increase. History tells us that such rates of growth are more likely to naturally stabilise than continue.

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