31 Jan 2019, 17:00

German onshore wind power – output, business and perspectives

Onshore wind power is a central pillar of Germany’s transition to low-carbon electricity generation. This factsheet takes a look at the industry’s most important actors, financial support for the technology, and the future of German wind power in a world that increasingly embraces renewables. [UPDATE with 2018 data]

Workers at a repowering site in northern Germany. Photo - BWE/Tim Riediger

Output

Germany has led the field in installing onshore wind power capacity in Europe for many years. With a gross expansion of about 5,300 megawatts (MW), 2017 saw the strongest capacity growth ever. But expansion slowed down by more than half in 2018, when only 2,402 MW were added.

In 2018, onshore wind power fed about 89.5 terrawatt hours (TWh) of electricity into the grid. By the end of 2018, a total of 29,213 onshore turbines were in operation across the country. With a total capacity of 52,931 MW, onshore wind turbines generated almost 15 percent of Germany's power mix in 2018, making them the single most important renewable energy source by far.

Most wind turbines so far have been built in northern Germany, where favourable wind conditions also helped to spur the industry’s early development in the 1990s. However, wind power expansion incentral and southern German states has caught up in recent years.

Due to the high concentration of wind power in northern states, Germany’s Federal Network Agency (BNetzA) rated the country’s coastal regions and hinterland as a “grid expansion area,” where new wind power installations are capped at about 60 percent of previous levels to account for lagging grid expansion. Growing turbine efficiency has allowed to unlock regions with weaker average wind conditions further inland, leading to a catch-up in areas far away from the coast.

Greater power yields and more operating hours per turbine have also compensated declining financial support rates and made harnessing previously unattractive locations possible. “There has been an impressive learning curve in recent years,” as Matthias Zelinger, General Manager at the German Engineering Federation (VDMA) Power Systems, put it.

Average turbines generated up to 3 million kWh annually, equalling the consumption of 1,000 average households. But windmills with a capacity of 3 to 5 MW, capable of powering up to 6,000 households at ideal locations, are becoming more and more common.

Technologic progress & limitations

With output expanding, also the turbines’ average size has grown considerably over time. Turbines added in 2018 on average had a capacity of 3.23 MW, a hub height of 118 meters and a rotor diameter of 132 meters. Since the beginning of the century, average heights have doubled. At the same time, new installations can produce more energy at lower rotation numbers, making them less noisy. About 15 percent of wind power capacity added in 2018 were part of so-called “re-powering” measures, where more capable installations replaced older models at the same location.

Due to a steadier feed-in and better grid compatibility of new installations, also electricity generation became significantly cheaper. Depending on the turbine’s location and size, prices for one kilowatt hour (kWh) of electricity roughly ranged between 9 and 5 cents in 2014, according to researchers at Fraunhofer IWES. Factoring in investment and operation costs as well as interest rates, prices are projected to fall well below 5 ct/kWh by 2020, potentially giving wind power a long-term competitive edge over coal-fired power production, they add.

In the latest onshore wind power auction in October 2018, average support rates offered by project developers rose slightly to 6.26 ct/kWh.

Timeline of average Enercon wind turbine sizes. Source - Jahobr.

Power output in 2018 grew by 4 percent compared to the previous year. According to industry magazine Wind Journal, the 2018 peak in wind power feed-in was achieved on 8 December, when windmills with a capacity of 44,730 MW fed into the grid. This is more than three times the combined capacity of all of the country’s active nuclear plants at the time.

Wind power generation in Germany generally peaks during winter months, partly balancing out lower power input by solar installations during that time of the year. But the problem of wind power’s volatility also becomes evident during the colder and darker months of the year, when the vast majority of Germany’s power demand still has to be covered by conventional power plants. A period of dark days with no wind - “Dunkelflaute” in German - means that besides few sun hours typical for the winter months, doldrums can bring the turbines' entire output below 1,000 MW for an entire day.

Annual fluctuation of German wind power generation.

Business & Jobs

Revenues in Germany’s wind power sector including exports amounted to 17.7 billion euros in 2016, which equals about a quarter of all revenues made with environmentally friendly products, according to Germany's Statistical Office (Destatis). With 14.6 billion euros, over 80 percent were made with onshore wind power and the remainder with offshore turbines.

According to figures by the economy ministry on economic stimuli by renewable energy plants, wind power also attracted the highest level of investments in recent years. They amounted to over 10 billion euros in 2016, the German Wind Power Association (BWE) says. High expansion volumes have also bolstered employment: With an estimated 135,000 jobs related to onshore wind power in 2016, more people in Germany have been employed in the industry than ever before, accounting for nearly 40 percent of total employment in the renewable energy sector.

Timeline of employment in renewable energy sector. Source - BMWi.

Most of these jobs have been created in the major manufacturers’ home regions in northern Germany, where many final assembly processes for on- and offshore turbines take place and most operating turbines can be found. Due to a high degree of vertical integration in production, many production steps take place in-house.

However, job creation in the wind power industry covers a large spectrum of activities: Supplier companies for turbine manufacturing are located all over Germany and provide chemical and metallurgic intermediary goods, construction work expertise or other services to the engine builders, the German Institute for Economic Research (DIW) explains. In 2012, about half of all wind power-related jobs were found at suppliers, it adds.

While most jobs per state were located in the coastal state of Lower Saxony (32,300) in 2017, sizeable job clusters could also be found in the western state of North Rhine-Westphalia (18,500), Bavaria in the south (11,820) or Saxony-Anhalt in the east (13,120), according to the BWE. Yet, job growth in turbine manufacturing has not been on par with wind power expansion: the industry association says employment in production fell by more than 9,000 in 2015, only partially offset by an increase in maintenance and operation services, leading to a net drop of six percent in total employment.

The drop in wind power’s electricity generation costs is partly responsible for falling wholesale power prices in Germany - with potentially adverse effects for the industry. Germany's industry leader Enercon announced to axe over 800 jobs in 2017 and to focus on its export business rather than the domestic market. Reduced wind power expansion levels have also hit Enercon's competitors Nordex, Senvion, and several industry suppliers, leading to a cumulated loss of over 2,000 jobs in 2017 in northern Germany alone, newspaper Handelsblatt reports.

In a survey among wind power companies on their business expectations published in July 2018, labour union IG Metall Küste recorded the lowest confidence since it started the survey four years earlier. About two thirds of company representatives said they have a rather dire business outlook for the next years, a considerable increase from the year before. About 40 percent of the 32 companies surveyed said they expect job losses by the end of the year.

Support

The industry’s steep ascent in 2016 is partly due to national ambitions to fulfil Germany’s national CO2 emissions reduction targets but also partly owes to drastic changes in Germany’s renewables support regime, which became effective for new projects on New Year’s Day 2017. The switch from predetermined feed-in tariffs to price finding in auctions, aimed at increasing wind power’s market exposure, led project developers to bustle about for a last-minute wave of construction applications to secure a slot among the last projects eligible for guaranteed remuneration.

Development of Germany's 20-year guaranteed support rates for onshore wind power. Source - CLEW.

Apart from the switch to tenders, the federal government also capped support to an annual onshore expansion capacity of 2,800 MW until 2019 and decided to slowly expand this “expansion corridor” over the following years. 2019 will also be the first year in which only installations that have won an auction receive support. BWE and VDMA warn that the switch might lead to a significant drop in installed capacity, as operating older installations could no longer be profitable.

The BWE says it is difficult to gauge how many windmills will be mothballed after 2020 when the first generation of installations has completed its 20-years cycle and no longer receives feed-in tariffs. But there are also investors who want to put older turbines to good use, such as the public utility of Munich, which plans to buy old wind farms no longer eligible for support, retrofit them and continue to generate a profit by operating them at market prices. Similarly, carmaker Daimler has announced it wants to use older wind turbines to fulfill its goal to decarbonise production.

Wind industry lobby group BWE criticises that special provisions for smaller citizen energy projects in wind power auctions increased uncertainty for the industry. As citizen projects, which managed to secure the bulk of tendered volumes in the first auctions, are exempt from obtaining a construction license before the auctions and also have a much longer time limit for implementation than other bidders, it is unclear whether they will be carried out in line with the government's expansion plans, the BWE says.

According to estimates by the German Association of Energy and Water Industries (BDEW), over 5.3 billion out of 25.5 billion euros in renewables support were paid to onshore wind power producers in 2016, compared to 10.5 billion to solar power producers and 6.7 billion to bioenergy producers. Out of 6.35 ct/kWh renewables surcharge paid by customers, 1.33 cents went to onshore wind power installations. 

In total, German wind power producers received an average remuneration of 9.5 ct/kWh in 2016, the Federal Ministry for Economic Affairs (BMWi) says. Timeline of renewables surcharge on power price by technology. Source - BMWi

New perspectives abroad

According to VDMA Power Systems head Zelinger, Germany’s wind power industry seeks to compensate the feared contraction of the German market with a focus on exports – with an estimated global expansion volume of 54,000 MW in 2017, the market potential abroad appears encouraging.  With 20 percent of worldwide installations coming from German producers, their market share is twice as high as Germany’s share of global installed capacity.

“Three quarters of the jobs in Germany exist thanks to international business,” BWE spokesman Wolfram Axthelm explains. German manufacturers are well positioned on the international stage, accounting for 20 percent of global production and even for 40 percent if China’s relatively insulated market is excluded. “South America, Asia without China, and the US are growing – while Europe is rather stagnant,” Axthelm says. “But the German market is needed as a showcase and to get turbines ready for serial production,” he explains. 

Po Wen Cheng, holder of Germany’s first chair in wind energy at Stuttgart University, says German turbine manufacturers remain internationally competitive in spite of high costs. “Wind power turbines require a lot of know-how,” Cheng explains. Unlike with PV systems, differences in manufacturing quality matter greatly: “A rotor blade still requires a lot of manual labour. The quality depends on the workers’ skills.” Companies in emerging markets had yet to catch up with this level of skill, making a rapid relocation of production capacities as seen with PV technology unlikely for wind power, Cheng says. 

Market growth in Europe is set to increase, Heiko Stohlmeyer of business consultancy PwC expects. “Maybe even more so than in Germany alone,” he says. He explains that markets in many countries around the world that so far have not been figuring prominently in wind power expansion plans might soon start to emerge, also encouraged by price signals in the first auction. “There’s reason to be optimistic.”

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