Still the second largest market in the world -- International investors get a toehold

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Annual additions of wind capacity in Germany are getting smaller by the year but in 2005 the market was still the second largest in the world after the United States. The industry brought 1808 MW on line, just 56% of the 3247 MW achieved when the market peaked in 2002. By the end of 2005 cumulative capacity stood at 18,428 MW.

This year, additions are likely to fall further to 1500 MW, says Bundesverband Windenergie (BWE), the German wind energy association, before nose diving in 2007. A study commissioned by the environment ministry forecasts that onshore wind capacity will reach 23 GW in 2010, leaving an annual market after this year of just 600 MW for the following four years. Interest from international investors looking to get into the lucrative market before it is too late has never been stronger.

Wind turbines were supplied by eight companies in 2005 (table) although just two of them, Enercon and Vestas, accounted for 69% of the market. Enercon's slice was 42% and Vestas' 27%. The bulk of the capacity went up in three regions -- 443 MW in the windy northern region of Lower Saxony, and 440 MW and 347 MW in the eastern states of Brandenburg and Saxony Anhalt (map). The densely populated industrial state of North Rhine Westfalia added 174 MW, but the windiest and most northerly state, Schleswig-Holstein managed no more than 101 MW, reflecting the growing scarcity of suitable sites in the region. Mecklenburg Vorpommern, with its long Baltic Sea coastline, appears slow to exploit its full potential, adding just 77 MW last year.

Four federal states have the potential for annual wind generation to exceed 20% of net electricity consumption. In Schleswig-Holstein wind could meet 35% of electricity needs, in Saxony-Anhalt 34%, in Mecklenburg-Vorpommern 31% and Brandenburg 25%.

Ownership of the German wind fleet is highly splintered, although Enercon is the largest single investor in the market, owning well over 500 MW, followed by Dutch utility Essent with 380 MW. Surprisingly, German utilities are poorly represented among owners. EWE in the windy north-west has about 60 MW on its books, E.on Hanse in Schleswig-Holstein owns no wind plant at all, apart from a research project, and E.on-Edis, the largest regional energy company in eastern Germany, owns about 102 MW.

Around 4000 MW, with diverse ownership, is bundled into the wind station management portfolios of 45 developers and operators who are members of BWE. The largest of these are WPD in Bremen, which manages more than 412 MW, and UmaAg of Cuxhaven with 296.1 MW in its care. Conergy, which acquired Ostwind Technic, manages 310 MW of wind plant developed by Ostwind. Neither Conergy nor Plambeck Neue Energien, which manages 542 MW, are on BWE's list. Most of the rest of Germany's wind plant is in the hands of individuals, farmers, small engineering companies and small independent operators.

Some consolidation is taking place among operators. WKN and Enersys jointly acquired PSM Nature Power Services & Management at the end of 2005, following the insolvency of PSM parent wind developer Umweltkontor. PSM manages about 260 MW of wind, now added to the WKN and Enersys portfolios, both in excess of 250 MW.

The march of international investors into Germany is starting. They acquired about 360 MW last year. Among them, GE Energy Financial Services bought 166 MW, Spanish utility Iberdrola 100 MW, Danish investment fund Difko 14 MW, and investor Babcock & Brown 22.5 MW. An unnamed "internationally active investor" bought 44 MW from Plambeck following a 15 MW purchase from Plambeck, probably by the same company.

For now repowering of old plant with new state-of-the-art turbines plays a minor role. Deutsches Windenergie-Institut says just 18 machines, with a combined capacity of 18 MW, were dismantled in 2005 and 12 MW across six sites was in repowering projects. But only 183 MW of German wind capacity is more than 13 years old -- and there are no incentives to pull down well functioning machines that have long since paid back their bank loans in order to repower with better producing turbines.

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