12 Nov 2019, 12:00

German onshore wind power – output, business and perspectives

Onshore wind power is a central pillar of Germany’s transition to low-carbon electricity generation and projected to become the country's number one power source. This factsheet takes a look at German wind power industry’s most important actors, financial support for the technology, and its future in a world that increasingly embraces renewables but poses unprecedented challenges at home. [UPDATES Decreasing expansion levels; business figures and expectations in late 2019.]

Output

Germany has led the field in installing onshore wind power capacity in Europe for many years, is by far the biggest market in the region and a global technology leader. By July 2019, almost 29,250 onshore turbines with a total capacity of over 53,156 megwatt (MW) were in operation across the country. With a gross expansion of about 5,300 megawatts (MW), the year 2017 saw the strongest capacity growth ever. But expansion slowed down by more than half in 2018 to 2,402 MW and dropped to the lowest level in almost 20 years in the first half of 2019, when merely 287 MW were added. An analysis by energy industry lobby group BDEW found that the number of permits issued for onshore wind turbines fell by 70 percent over three years.

The decrease in expansion can be traced back to several reasons but mainly is blamed on many projects being held up due to regulatory problems, which affected about 11 gigawatts (GW) of capacity or roughly 2,000 turbines as of mid-2019. Challenges arise from mandatory minimum distances from residential areas and aviation infrastructure, or as a result of lawsuits brought by citizen movements and environmental groups. Economy minister Peter Altmaier promised to remedy the situation with a national wind power summit in September 2019. But new minimum distances of 1,000 metres from the next residential area included in Germany's Climate Action Package have been criticised by industry actors for substantially cutting the available land area for turbine construction.

Meanwhile, power production with onshore wind continued to grow in the country. Over the whole year of 2018, onshore wind power fed about 89.5 terrawatt hours (TWh) of electricity into the grid and generated almost 15 percent of Germany's power mix, making it the single most important renewable energy source. In the first six months of 2019, onshore and offshore wind together provided almost a quarter of net electricity generation.

Most wind turbines so far have been built in Germany's northern half, where favourable wind conditions also helped to spur the industry’s early development in the 1990s. However, wind power expansion in central and southern German states has caught up in recent years, as growing turbine efficiency has allowed to unlock regions with weaker average wind conditions further inland. 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. Greater power yields and more operating hours per turbine meanwhile have compensated declining financial support rates and made harnessing previously unattractive locations possible.

Source: GWEC
Source: GWEC

Technologic progress & limitations

Turbines added in the first half 2019 on average had a capacity of over 3.3 MW, a hub height of 133 meters and a rotor diameter of 122 meters. Average turbine heights have more than doubled over the past two decades, meaning new installations can produce more energy. A single modern onshore turbine could supply up to 6,000 households. 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, electricity generation became significantly cheaper. Depending on the turbine’s location and size, prices for one kilowatt hour (kWh) of electricity ranged around in 2014, according to researchers at Fraunhofer IWES. Factoring in investment and operation costs as well as interest rates, they are projected to fall well below 5 ct/kWh by 2020 and already reached slightly over 6 cents by mid-2019, according to wind power association BWE.

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

Germany covered over one third of its entire net electricity production in March 2019 with wind power alone, setting a new record for the renewable energy source’s share in the country’s power mix. Onshore and offshore turbines together brought wind’s share to 35 percent of total power production, while renewables together accounted for 55 percent. The turbines produced 3.6 times more electricity in that month than lignite plants or nuclear plants.

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 the few hours of sunshine typical for the winter months, doldrums can bring the turbines' entire output below 1,000 GW for a whole 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 one 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. Engineering association VDMA Power Systems said the annual value added to the German economy by domestic wind turbine sales alone amounted to 6.7 billion euros in 2017 and generated 1.5 billion euros in tax revenues.

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) said. High expansion volumes have also bolstered employment: with about 60,000 people directly employed in the industry and a total of around 120,000 people if linked economic activity is included, wind power is by far the most important job creator in the renewable energy sector, 2019 Destatis figures say

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

Most 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. 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 landlocked states North Rhine-Westphalia (18,500), Bavaria (11,820) or Saxony-Anhalt (13,120), according to the BWE.

But the slump in expansion beginning in 2018 and worsening 2019 has started to take its toll on manufacturers. Turbine maker Senvion filed for insolvency in early 2019 and the country's leading producer Enercon in November of the same year announced it will axe up to 3,000 jobs, mainly in northern Germany. Also global wind power leader Vestas from Denmark cut jobs in Germany, saying the slump in the country's market partly forced it to make the decision. Engineering association VDMA Power Systems warned that almost one third of all jobs directly linked to onshore wind power are at risk if the current trend of low expansion levels persists. It added that total installed capacity could shrink due to older turbines being taken out of operation, making Germany's 2030 emissions reduction targets almost impossible to reach.

In a survey among wind power companies on their business expectations published in September 2019, labour union IG Metall Küste, 74 percent of respondents expected a worsening of conditions in the onshore wind power market, up from 17 percent in 2015. One out of four companies surveyed said they expect further job losses in the near future and about half said they consider relocating parts of their business abroad.

Wind power industry lobby group BWE said the decrease in production could be blamed mostly on political decisions rather than on market conditions and warned that the German government puts the survival of one of the most important branches of the future economy at risk. Since wind power is set to become the country's most important power source, a collapse of the domestic industry meant that Germany's competitiveness as a whole comes under threat, BWE said.

Support

A steep ascent in turbine commissioning in 2016 was partly due to national ambitions to fulfil Germany’s national CO2 emissions reduction targets but also owed 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 strengthening market principles and competition in the wind power sector, 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 widen this “expansion corridor” over the following years. 2019 is the first year in which only installations that have won an auction receive support.  But onshore wind power auctions in 2019 repeatedly ended with fewer applications than expected, with VDMA Power Systems arguing that investors shunned the sector due to ongoing regulatory challenges.

Moreover, the end of the 20-year guaranteed support period is approaching for the first turbines and will take effect by 2021. Observers warn that this could lead to a decrease in installed capacity if low expansion levels persist. The BWE says it is difficult to gauge how many windmills will be mothballed after 2020 and hopes that business models like power purchase agreements (PPAs) will cushion the effects of expiring guaranteed support.

Other investors, such as the public utility of Munich, pursue a different model and plan 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.

 Timeline of renewables surcharge on power price by technology. Source - BMWi

New perspectives abroad

Source: GWEC 2019

VDMA Power Systems said turbine makers could compensate part of the dwindling business at home by focussing more on international markets. Between 2010 and 2018, about 60 percent of the manufacturers' total revenue was generated abroad. Service providers in other segments of the industry (project development, installation, maintenance, etc.), however, have a greater dependence on domestic sales. But also manufacturers cannot fully compensate a weak home market by going abroad, VDMA warned. Production chains built up over many years could be disrupted and technical expertise lost if companies relocate, the association said.

The Global Wind Energy Council's (GWEC) 2018 report estimates that the international expansion volume for onshore wind will reach more than 50 GW per year until 2023, with growth taking place especially in developing markets in Africa, the Middle East and Latin America and "mature markets" in East Asia, Europe and North America continuing with "stable volumes."

Bloomberg New Energy Finance found that three German or partly German manufacturers (Siemens-Gamesa, Enercon and Nordex) figured in the list of the world's 10 leading onshore wind turbine producers in 2018 but cautioned that small profit margins and stiff competition in the market mean that companies will have a hard time defending their positions.

Despite the challenging conditions at home, Germany remained one of the biggest wind power markets in the world. With five percent of new installations and just under ten percent of total installations, it came third behind China and the US in 2018, according to the GWEC. With 20 percent of worldwide installations coming from German producers, their market share was twice as high as Germany's share in total installations, German wind power lobby group BWE said - and that figure would climb to 40 percent if China’s relatively insulated market is excluded, it added.

Po Wen Cheng, holder of Germany’s first chair in wind energy at Stuttgart University, told Clean Energy Wire German there was a good chance turbine manufacturers would remain internationally competitive. “Wind power turbines require a lot of know-how,” Cheng explained. 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 said.

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