Early signs of German decline confirmed -- Added political threat to prices follows poor five months

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The world's wind energy workhorse appears to be showing early signs of exhaustion. The trend in disappointing first quarter installations for 2003 has been confirmed in the two following months, indicating that Germany is bowing out of its role as a guaranteed market for thousands of megawatts of wind power each year.

About 560 MW of new projects were built in the first five months of 2003, down by nearly 230 MW compared with the same period the previous year, reports Jochen Keiler who runs the wind energy data base, Betreiber-Datenbasis in Rade. If political discussions about reducing wind energy payments firm up into an amendment to Germany's renewable energy law, the slow market exit could be accelerated.

Back in January, federal environment minister Jürgen Trittin issued a muted warning to the industry. Tucked among a number of foundation stones for a planned amendment to the Erneuerbare Energien Gesetz (EEG) later this year, he stressed that support for wind stations onshore should be targeted more carefully "because I don't want to create a stimulus for development of weak wind sites." But growth over the next three years will be driven by development at just such sites, predicts the federal wind energy association Bundesverband Windenergie (BWE).

"Already the annual 1.5% reduction in wind energy payments stipulated by the EEG and inflation of 2.5% require huge efforts from all players," says BWE's Peter Ahmels. A further payment cut could jeopardise many developer's plans at inland, low wind sites.

BWE bases its conclusions on a market survey by Deutsche Windguard. It asked for information from 80 wind project developers of their plans from 2004 to 2006. The 27 that responded intend to install 1850 MW of wind capacity in 193 stations using 1025 turbines. Of these, 923 MW is due for installation in 2004, 580 MW for 2005 and 318 MW for 2006. The projects for 2004 will be in areas with average wind speeds of 5.1 m/s at 30 metres. In 2005, the average wind speed for planned sites falls to 5 m/s, dropping to 4.8 m/s in 2006. (A wind speed of 4.8 m/s at 30 metres is equivalent to 5.7-6.0 m/s at a hub height of 100 metres.) At current EEG rates of pay for wind power, these wind speeds are "the absolute bottom line at which projects are economically feasible," says Ahmels.

"The quality of new wind sites being developed is declining. Politicians will decide whether and how wind energy expansion should continue," says Knud Rehfeldt of Deutsche Windguard. If the weaker wind sites are not developed, the market will slump. The 27 developers reveal that neither offshore development nor repowering of old turbines will play a major role over the next three years. By the end of 2006, no more than two to four pilot projects are expected offshore, Rehfeldt reports. And only 4% of the turbines they are developing will be installed in repowering projects in 2004, rising to 7.3% in 2006.

Repowering limits

About 2200 wind turbines rated at 600 kW were installed in Germany between 1982 and 1994. Replacing these with 1.5 MW turbines -- assuming permitting can be obtained -- opens up potential for 3300 MW of new wind power, points out Norbert Allnoch of the Internationales Wirtschaftsforum Regenerative Energien, an economic forum for renewables. This amounts to no more than one year of wind turbine manufacturing at current production levels, he says. German wind industry exports are unlikely to be sufficiently large to compensate for the national market decline. "The German market has until now absorbed 40-50% of annual installed capacity worldwide," points out Allnoch.

The decline in the German market has been predicted for some time, he adds. In 2002 the respected Deutsches Windenergie Insitut predicted a drop in annual installations from 2400 MW in 2003 to 1975 MW in 2004, 1458 MW in 2005 and 1124 MW in 2006. Furthermore, a survey of German wind developers' plans in February by Övermöhle Consult of Hamburg revealed a likely slow decline from 2800 MW in 2003 to 2400 MW in 2005 and 1500 MW in 2006.

The Betreiber-Datenbasis bases its count of megawatts installed so far this year directly on market observation and information from developers. This puts it in a position to provide the first indications of the German market's slower growth. Kieler comments that data transparency has been hit by a decision at several stock exchange-listed turbine manufacturers to cease reporting monthly figures because of the impact on share prices.

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