(Figures for end of 2018)
Number of turbines installed: 1,305 (1,073 North Sea / 232 Baltic Sea)
Total capacity installed: 6.38 GW
Projected expansion: 7.7 GW (2020) / 15 GW (2030)
Output: 19.4 TWh (preliminary)
Average auctioned support level: 4.66 cents/kWh (2018); 0.44 cents/kWh (2017)
Germany is an international leader in wind power generation and boasts one of the largest installed capacities in the world. But despite its experience in onshore wind power that dates back to the early 1990s, harvesting wind offshore is a relatively young industry branch. The country’s first offshore wind farm, Alpha Ventus, started test mode in 2009. Since then, German offshore wind has seen a rapid growth in the sector.
In 2018, Germany added 136 turbines with a capacity of 0.96 gigawatts (GW) in the North Sea and the Baltic Sea. Turbines installed in the country's territorial waters accounted for roughly 40 percent of worldwide capacity in 2017, making it the second-biggest offshore wind power market in the world after the United Kingdom.
Offshore wind’s contribution to Germany’s power production mix reached 3.0 percent in 2018, a significant increase from 0.1 percent just five years earlier, making it the fastest-growing renewable power source in the country. According to the lobby group Renewable Energy Agency (AEE), offshore wind alone could provide a share of almost 12.5 percent by 2030.
The cumulated offshore capacity of 6.38 GW provided over 19 terawatt hours (TWh) of electricity in 2018, according to preliminary figures from energy market research group AGEB. This is about 8 percent more than in 2017 and more than the power consumption of Berlin, Germany’s capital and largest city, of approximately 14 TWh.
The German government projects to have at least 7.7 GW of offshore capacity in operation by 2020 and 15 GW by 2030. It decreased the expansion target figure from 25 GW in 2013 due to the technology’s initially high prices. According to research institute Fraunhofer IWES, Germany could potentially install up to 54 GW of offshore and generate nearly 260 TWh of electricity at sea.
With an average capacity of 7.1 megawatts (MW) for new turbines and an average rotor length of 158 metres, offshore turbines have not only grown significantly since their introduction in the early 2000s but are also bigger and more productive than turbines operating ashore. They deliver power almost all year round and produce nearly twice as much power as land-based turbines, says offshore service company Deutsche Windguard. The growth in size and output had a considerable effect on power generation prices, which fell substantially in recent years.
Unbalanced distribution and persisting grid challenges
The majority of German offshore turbines is located in the North Sea, with more than 1,000 spinning off Germany’s western coast, compared to just over 200 turbines in the Baltic Sea in the East. Wind yields on average are higher in the North Sea than in the Baltic, attracting investors with higher returns.
The technology’s expansion is therefore set to take place primarily in the North Sea, the region where other projects by the UK, Denmark, the Netherlands, Belgium and Germany together have created the largest offshore wind power cluster in the world. In order to spread turbines more evenly in German waters, 0.5 GW out of a total tendered capacity of 1.6 GW in the country’s second offshore wind power auction in April 2018 were issued in the Baltic Sea.
Lower Saxony, Germany’s northwestern federal state on the North Sea, which also hosts most of Germany’s onshore turbines, was home to over 50 percent of all existing offshore wind farms in 2018. Schleswig-Holstein, the northernmost state that borders both the North Sea and the Baltic, boasted about one third, while northeastern Mecklenburg-Western Pomerania on the Baltic had less than 15 percent of installed capacity in that year, figures by the industry association BWO show.
The clustering of power generation capacity in northwestern Germany illustrates the challenge of providing sufficient grid capacity to transmit large volumes of electricity produced centrally in a small area. Lacking grid connection from the sea to the mainland in the past already led to a situation mocked by critics of the technology in which turbines had to be powered with diesel generators to prevent corrosion from the salty sea air and aling them to the wind direction. Regular operation of the turbines was not possible since these produce much more electricity than what is needed to power them up while the surplus could not be disposed of.
However, this sort of problem largely is a thing of the past, according to grid operator TenneT. In the offshore wind power industry's 2018 status report, the BWO says there currently are merely 0.3 GW of installed capacity that lack a grid connection. The existing grid has a transmission capacity of 6.8 GW and another 1.4 GW are slated for completion by the end of 2020. The total connected capacity is projected to be 10.8 GW in 2025.
But transmitting power from production sites at sea to the mainland is only one part of the problem. Another and perhaps even bigger challenge is to cover the much longer distance from windy northern Germany to industrial centres in the south, which the Federal Network Agency (BNetzA) has outlined in its offshore grid-development plan.
The major transmission line projects, SuedLink and SuedOstLink, are scheduled for completion by 2025 [See the CLEW dossier on Germany’s power grid for background]. However, constant opposition from both local residents and lawmakers to the large-scale infrastructure projects that run hundreds of kilometres through the country has put this timeline in danger.
Artificial island plans and a cable to Norway testify to offshore dynamic
The ambitions to maximise the German North Sea wind’s utility do not end in Germany. Transmission grid operator TenneT, which, like competitor 50Hertz in the Baltic, is responsible for providing the link to the mainland in the North Sea, is also building a cable that will run some 620 kilometres from German waters to Norway. The so-called “NordLink” cable with a capacity of 1.4 GW is meant to help fill Norwegian hydropower plants with excess German offshore wind power, thereby increasing supply security and price stability in both countries. It is scheduled to start operation in 2020.
Each offshore wind farm has its own substation that bundles the output of all turbines and converts the power produced to a different voltage level. Most German offshore wind farms are built quite far from shore compared to projects in other countries to keep them out of sight from coastal dwellers. New installations are built an average distance of 74 kilometres from the coast and at a depth of 33 metres, according to the BWE. The generated power is therefore usually converted into direct current on the spot in order to minimise transmission loss before it is transmitted to the nearest node on land.
Grid operator TenneT’s plans to build an artificial converter island that is connected to several wind farms at once could further improve grid infrastructure in the North Sea to the benefit of all neighbouring countries. By removing the need for individual substations at a central location at sea, the island could substantially reduce costs for offshore wind power installations, but its construction hinges on the bordering nations as well as the EU’s ability to agree on legislation, regulation and funding, TenneT says. It could be finished sometime between 2030 and 2050, the company adds.
Cost drops follow change in support scheme
The wind farms’ distance from the shore and the harsh conditions at sea, where heavy waves and salty water require special equipment training for deployed personnel and the used materials to be particularly resilient, in the past have been a major deterrent for investors. But the constantly high yields and the prospect of steep learning curves as well as associated cost drops have triggered renewed interest in offshore wind power.
Investors could close funding gaps with financial assistance from German development bank KfW, which funded the country’s first ten offshore projects at customary interest rates. According to the German economy ministry (BMWi), commercial banks were reluctant to finance the pioneer projects as financial risks were hard to gauge. The five-billion euro programme by the KfW was therefore intended to allow daring operators to gather experience and sound out cost reduction potentials.
According to a study by the Hertie School of Governance in Berlin, cost control has made significant improvements in German offshore wind power projects. While the country’s first offshore wind farm, the Alpha Ventus, overshot cost projections by some 30 percent, financial planning subsequently became more and more advanced. The average cost overrun for Germany’s offshore wind farms has been around 20 percent, the researchers found, with much of the additional costs due to lagging grid connection. By contrast, nuclear plants have an average cost overrun of 187 percent, the study says.
The German government in 2014 set support rates for offshore wind at 15.4 cents per kilowatt hour (kWh) over a period of 12 years or 19.4 cents/kWh over eight years in order to offer interest advantages for investors. After this period, the support rate paid by customers as a surcharge on their power bill falls to a basic level of 3.9 cents/kWh and ends after 20 years of support.
Guaranteed support for offshore turbines was already gradually decreasing when Germany’s renewable energy support scheme switched to auctions in 2017 and produced substantial cost reduction results, especially in the wind sector. Although other countries had switched to tendering new renewables installations before it and also saw prices falling, Germany was the first case in which bidders said they could operate their offshore wind farms at a profit without any support payments at all. That is, if their assumptions on technology costs and power prices for 2025, the time when the farms have to start operating, hold true.
The average support level in the first auction was 0.44 cents/kWh, which according to the German Wind Energy Federation (BWE) has made the cost question much less relevant. In the second auction in April that year, however, average support levels surged to 4.66 cents/kWh, although some bidders again offered to build for 0 cents/kWh.
According to industry association AGOW, the higher average support rate is mostly due to the so-called "Baltic quota," which ensured that projects in the less productive Baltic Sea took precedence over those in the North Sea and led to lower competition, AGOW says. The next offshore wind auctions are scheduled to take place only in 2021 but industry groups call for holding additional auctions to ensure steady expansion.
At the end of 2017, the Netherlands followed suit in producing zero-support bids in offshore wind power auctions. Contrary to the German auction winners, the Dutch turbines are already slated for completion by 2022, meaning that these would be the first projects to actually operate without subsidies.
Offshore jobs less affected by wind industry worries
As more and more offshore turbines have been built in recent years in the North Sea and the Baltic, employment in this highly specialised industry sector has been constantly increasing. As early as 2010, turnover along the value chain in Germany reached 5.9 billion euros and could reach 22 billion euros by 2021, according to lobby group Stiftung Offshore Windenergie. About 20,000 people are employed in the offshore wind industry and its supplying branches, the BWE says.
While offshore wind creates jobs at bearing, gearing and generator producers across the country, the coastal regions are unsurprisingly those benefitting most from the technology’s rise. Ports on the North Sea and the Baltic, such as Bremerhaven, Cuxhaven and Rostock, are upgrading their capacities to host giant turbine components, foundation systems and mounting equipment. Shipyards and service providers that cater for maintenance and wind farm operating personnel add to those profiting from the expansion boom at sea, the Stiftung Offshore Windenergie says.
Siemens Gamesa, Germany’s largest turbine maker, was formed by a merger between the wind power branch of German engineering heavyweight Siemens and Spanish turbine manufacturer Gamesa. It commissioned a total of 6.8 GW capacity in 2017, 15 percent of global production. According to Bloomberg New Energy Finance (BNEF), this put the company in the second spot for all turbine makers, only outperformed by Danish Vestas. However, if only offshore turbines are taken into account, Siemens Gamesa leads the field by a wide margin. The merged company commissioned 2.7 GW of offshore turbines in 2017, with Vestas, Germany-based Senvion and Chinese Sewind following with about 0.5 GW each, BNEF says.
The switch to auctions in Germany’s renewables support scheme has compounded cost pressure for turbine makers, which already caused companies like Nordex and Senvion to lay off staff. Siemens Gamesa said it also needs to cut jobs internationally due to a fall in global revenue. However, according to a survey among employee representatives by labour union IG Metall, jobs that are focussed on the offshore sector will be less affected by the companies’ austerity plans. Most of those surveyed say the prospects for offshore wind are better than those for the German wind power industry as a whole.
But despite the rather comfortable current situation in the offshore industry, local politicians and industry representatives are calling on the federal government to ramp up its offshore plans due to the technology’s cost drops and reliable power supply. In their “Cuxhaven appeal”, lawmakers from northern Germany and wind power company leaders say rigorous support of the technology has been responsible for lower prices and is still needed to ensure that Germany exploits the technology’s full potential in order to achieve the Paris Climate Agreement’s emissions reduction targets.
In its coalition treaty, the federal government’s coalition parties state that they are considering an additional offshore auction and a new offshore test field. Offshore wind lobbyists are calling for much more: They say the country should increase its 2035 expansion goal to 30 GW and ensure that a swift grid connection of newly installed capacity is not disturbed by regulation.