German onshore wind power – output, business and perspectives
Quick facts
(Figures for 2022; Sources: BWE, BNetzA, BDEW)
Number of turbines installed: 28,443
Total capacity installed: 58 GW
Projected expansion: 115 GW (2030)
Share in gross power production: 17.2%
Output: 99 TWh
Employees: ≈ 83,000 (2019)
Average auctioned support level: 5.87 ct/kWh (December 2022)
Overview
Germany has been a leading market and incubator for onshore wind power throughout the 2000s and early 2010s, as eager investors and guaranteed state support helped bring the technology to scale. While domestic expansion has slowed in recent years, the country still boasted the largest cumulative onshore wind capacity in Europe and the third largest globally in 2022. At the end of that year, more than 28,440 onshore turbines with a combined capacity of about 58 gigawatts (GW) were in operation across the country. With a net expansion of about 5.3 GW, 2017 showed the strongest growth in capacity of any year thus far. The expansion rate then dropped to less than 1 GW in 2019, and 2.4 GW of capacity were added in 2022. The new target of the government under chancellor Olaf Scholz to reach 115 GW by 2030 means Germany will have to ramp up annual expansion figures to nearly 13 GW in the next few years, five times more than what was achieved in 2022.
The dip in domestic expansion has taken a toll on the industry over the past few years, as the construction of new turbines in 2019 sunk to the lowest level in two decades. A lack of land for construction, investor uncertainty and slow licensing procedures are considered the main obstacles to expansion, which the government has since sought to address with a raft of revised renewable power legislation. The industry therefore hopes for a quick turnaround in order to spearhead the country's intended push for greater energy independence following Russia's invasion of Ukraine. The plan to auction off a record 12 GW of wind capacity in 2023 is indicative of this goal, which industry considers “very much possible” despite the pressing need to overcome other bureaucratic hurdles. Chancellor Scholz has said the aim is to construct up to five new turbines per day in the coming years until 2030. While this is an ambitious promise, it is not without precedent and roughly equals the daily additions in 2017, the strongest expansion year so far.
Reform of licensing procedures hoped to deliver breakthrough
The drop in capacity expansion after 2017 was the result of several combined factors, yet regulatory hurdles are widely considered the main issue. An analysis by energy industry group BDEW found that the falling number of permits issued for onshore wind turbines had been the main factor driving the decline. Issued licences dropped by 70 percent over three years – and projects that were successful often had to wait for a long time to receive their permit. According to wind power industry lobby group BWE, the average duration from planning to licensing of a wind farm routinely takes four to five years.
According to a committee aimed at improving federal government and state cooperation, long approval procedures and insufficient land designation continued to slow onshore wind expansion in 2022. At the beginning of that year, only around 0.85 percent of Germany’s land area had been designated for wind turbines, with figures varying widely between states. According to the Onshore Wind Power Act, two percent of Germany’s land area is to be designated for wind turbines by 2032, space that is “clearly available” in the country according to a study by research institute Fraunhofer IEE. An analysis by environmental think tank KNE found that only a fraction of the two percent-target are will ultimately be needed for constructing enough turbines.
Further challenges for turbine makers and wind farm operators stem from lawsuits brought by citizen campaigners and environmental groups. However, surveys suggest that people in Germany remain overwhelmingly in favour of further expansion — and that the acceptance of more renewable power infrastructure has generally grown further with the European energy crisis and Russia’s war on Ukraine, since more wind and solar power are believed to increase Germany’s energy sovereignty.
A 2020 agreement between the Ministry for the Economy (BMWK) and the 16 federal state governments removed some of the most nagging obstacles for wind power by allowing states to set their own minimum distancing requirements. Moreover, legislation to standardise assessment procedures for species conservation across all states, agreed in early 2022, aims to significantly speed up procedures. A decision by the EU to temporarily suspend some environmental checks until mid-2024 is aimed at speeding up renewables construction in the energy crisis. Germany had pushed for the emergency measure at the European level in the hope that this will amplify measures taken at the national level.
Economy and climate minister Robert Habeck in late 2022 insisted that the individual efforts of states are entirely to blame for the slow expansion. Strict state regulations, like Bavaria’s 10H-rule requiring a minimum distance from residential of at least ten times a turbine’s height, have undermined the energy transition’s progress in the southern state. In early 2023, chancellor Scholz said he would reform progress reporting procedures such that states would need to explain their plans to fulfil target volumes on a monthly basis.
Wind power’s impact on energy system growing despite difficulties
Irrespective of the many challenges for turbine construction, onshore wind is Germany’s most important electricity source since 2019. In 2022, it accounted for more than 17 percent of the country’s gross electricity production. While power output has generally grown in parallel with installed capacity over the past few years, particularly weak-wind years, such as 2021, dented the output curve and served as a reminder of the technology’s fluctuating production profile. Yet, as fluctuation works in both directions, the share at times can also be significantly above the average: wind power altogether provided over a third of Germany’s total power production in the first three months of 2022. Throughout 2022, onshore turbines generated about 99 terawatt hours (TWh) of electricity (and offshore turbines another 25 TWh).
Wind power delivered nearly 21 billion kWh of power in February 2022 alone, setting a new monthly record. The particularly windy year 2020, during which power consumption was depressed for many months due to the coronavirus pandemic, was the first in the country's history when renewables overtook fossil fuels in total electricity production. Wind power generation generally peaks during winter months, partly balancing out lower power input by solar installations at that time of the year. Yet wind power’s volatility also becomes evident during the colder and darker months, when the vast majority of Germany’s power demand still has to be covered by conventional power plants.
Individual turbines also keep growing in size and output: new models added in 2023 had an average capacity of over 4.3 MW, a height of 206 metres and a rotor diameter of 137 metres. The height of the average turbine has more than doubled over the past two decades. New installations thus can produce more power and greatly increase output at a given location if old turbines are replaced in so-called repowering procedures. A single modern onshore turbine on average produces enough electricity to supply up to 6,000 households. Replacing older models that in some cases have been in operation for more than 20 years through repowering is therefore seen as one of the most promising ways to quickly ramp up wind power’s share.
So far, the vast majority of wind turbines have been built in northern Germany, where favourable wind conditions benefited the industry’s early development in the 1990s. Greater energy yields and more operating hours per turbine, meanwhile, have compensated for a decline in financial support and made it possible to build on previously unattractive locations. But even though greater efficiency made inland regions with weaker winds more attractive to investors, expansion levels there still lag far behind those in the north.
Due to the high concentration of wind power in northern states and an energy grid unable to transport most electricity produced in windy areas to industrial consumers further south, turbine power production has routinely been cut to avoid grid overload. In the first half of 2022 alone, about four percent of renewable power produced in Germany could not be used, according figures by Germany’s Federal Network Agency (BNetzA). Almost 60 percent of the cuts fell on onshore wind turbines and they mostly occurred in Lower Saxony, the state with the highest wind power capacity of any in Germany.
Wind industry worried about staffing shortages in expansion push
Wind power has been by far the most important creator of jobs in the renewable energy sector in recent years, according to the German statistical office Destatis. With roughly 83,000 employees and a revenue of 9.6 billion euros in 2019 ( the latest year for which data is available at Destatis), wind power accounted for more than half of total revenue in renewable power technology — even without including linked economic effects in associated industries and service sectors.
However, despite projections showing a huge uptick in the number of wind turbines being installed in Germany and further afield in coming years, wind jobs do not necessarily provide secure employment. Wind industry association BWE estimated that up to 40,000 jobs might have been lost in the German wind power sector since 2017 due to the continually low buildout volumes. The situation was exacerbated for companies by the switch from guaranteed remuneration at fixed rates to an auction system in that year, which intensified competition and cost pressure for companies (see section on funding below for more details).
The closure of Germany’s last wind turbine rotor production facility, announced by operator Nordex in mid-2022, led to further concerns that the country risks losing its domestic manufacturing capacity. The closure of a turbine plant by Danish manufacturer Vestas in a former east German coal regiona dditionally raised doubts whether the renewable power industry is capable of replacing jobs lost in the fossil sector. However, an annual survey by labour union IG Metall about business expectations since 2015 showed that the mood within the industry has brightened significantly in the past three years. Nearly 77 percent of those surveyed in 2022 answered they have a positive view of the industry’s prospects, up from merely four percent in 2019, when a series of factory closures and bankruptcies prompted warnings that about a third of all jobs in the sector were directly at risk.
Paradoxically, while manufacturing capacity has been shut down and jobs were lost, the government simultaneously warned that expansion targets could be at risk due to a lack of skilled workers to implement the envisaged expansion. Economy minister Habeck in early 2022 warned that Germany would need more skilled immigrants to implement its energy transition plans. A total of around 200,000 job openings would have to be filled to implement key elements of the energy transition. The government announced a reform of Germany’s immigration law in late 2022 to recruit skilled workers from abroad. Industry group BWE says up to 40 percent of all labour needs for climate neutrality would fall into categories in which finding skilled workers already is a challenge, which is why it launched its own recruiting initiative in 2022.
Regarding the wind industry’s impact on local economies, 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 installed turbines can be found. According to the German Institute for Economic Research (DIW), job creation in the wind power industry covers a wide range of skills: supplier companies for turbine manufacturing are located all over the country and provide chemical and metallurgical intermediary goods, construction expertise or other services to the engine builders.
Changes to funding from fixed remuneration to auctions brought mixed results
Support for new wind farms was initially laid out in Germany’s Renewable Energy Act (EEG) of 2000, that granted guaranteed remuneration for produced electricity to operators at fixed rates for 20 years. In 2017, the remuneration underwent a fundamental shift from politically determined support rates to an auction system in which bidders demanding the lowest guaranteed remuneration for operating their turbines would be awarded. The switch from predetermined feed-in tariffs to rate-setting in auctions was aimed at strengthening market principles and competition in the wind power sector. It led project developers to compete for last-minute construction applications to secure a slot among the last projects eligible for guaranteed remuneration, which caused installations to spike in that year.
Besides implementing changes to the funding mechanism, the government also capped the total supported volume and by, 2019, only installations that won an auction were eligible to receive support for the first time. However, while the introduction of the auction system was followed by falling support levels, onshore wind tenders in the following years mostly were undersubscribed and ended up with fewer applications than expected. Engineering association VDMA Power Systems argued that investors shunned the sector due to the ongoing regulatory challenges. The auction turnout improved temporarily and participants submitted bids for more capacity than auctioned, before undersubscribed auctions returned in mid-2022.
Disrupted supply chains, rising material and energy costs as well as higher interest rates as a result of the combined economic impact of the COVID-19 pandemic and Russia’s war on Ukraine had worsened the investment climate again, according to wind power lobby group BWE. It therefore called for increasing support rates in auctions to compensate for the loss in investor confidence. The country's Federal Network Agency (BNetzA) ultimately raised the maximum support rates in auctions, from an average of 5.87 cents per kilowatt hour in late 2022 to 7.35 ct/kWh in 2023. Apart from that, the BWE vehemently opposed plans to siphon off ‘random’ profits made during the energy crisis with a windfall tax to fund broader social relief measures, arguing this would again stifle investment.
Moreover, the first turbines reached the end of their 20-year guaranteed support period in 2021. Observers warned that this could actually lead to a decrease in installed capacity if low expansion levels persist. The BWE said it was difficult to gauge when individual windmills will be decommissioned, adding that it hoped business models like power purchase agreements (PPAs) could cushion the effects of expiring guaranteed support.
Ambitious renewables targets could revive Germany’s wind power industry
Early on, German turbinemanufacturers and wind power project developers started to eye markets abroad. Between 2010 and 2018, about 60 percent of the manufacturers' total revenue was generated abroad, figures by VDMA Power Systems showed. The trend intensified after domestic business prospects deteriorated after 2017 while wind power expansion accelerated abroad. Service providers in other segments of the industry (project development, installation, maintenance, etc.), however, have a greater dependence on domestic sales. Turbine manufacturers also coul not fully compensate for a weak domestic market by going abroad, VDMA said. Production chains built up over many years could be disrupted and technical expertise lost if companies relocate, the association warned.
Small profit margins and stiff competition in the past years have made it harder for companies to keep up against international competitors. In a global ranking by Bloomberg New Energy Finance in 2022, only two German or partly German companies (Nordex and Siemens Gamesa) remained among the top ten wind turbine producers globally. Similarly, while Germany accounted for about seven percent of all installed onshore wind power capacity worldwide, it only contributed three percent to the capacity added in 2021, the Global Wind Energy Council's (GWEC) 2022 report showed.
However, the government’s new and higher renewables targets have reinforced hopes that better times for the industry lie ahead. In 2022, half of wind power labour representatives in the IG Metall survey said their company was actively looking for ways to relocate parts of its production and services abroad, while 68 percent said the German market will continue to play an important role in their business strategy. Business expectations in the industry were clearly trending upward after taking a dip around 2018 and by 2022, more than half of the company representatives surveyed said they expect their company's situation to improve. The German renewable industry umbrella association BEE said the government’s renewable power targets and the EU’s Net Zero Industry Act give reason for optimism that manufacturing capacities start recovering in Germany and Europe in 2023.
