Output and expansion
Germany has led the field in installing onshore wind power capacity in Europe for many years, boasts the biggest market in the region by far and is a global leader in the technology's development. But German wind power companies have struggled over the past years, as domestic expansion dropped to the lowest level in two decades in 2019. The construction of new turbines has picked up again but in 2021 still lingered at the same level as ten years earlier. But the industry can expect a quick turn of the tide, as it will have to spearhead the country's push for greater energy independence following Russia's invasion of Ukraine. In April 2022, the government released its "Easter Package" of renewable energy policy reforms that includes more than doubling the speed of onshore wind expansion.
At the end of 2021, a total of 28,230 onshore turbines with a combined capacity of about 56 gigawatts (GW) were in operation across the country. With a gross expansion of about 5.3 GW, the year 2017 had the strongest capacity growth so far. Expansion then dropped to less than 1 GW in 2019 and 1.6 GW were added in 2021. The new expansion target is an annual capacity addition of 10 GW by 2025 and a total installed capacity of 115 GW by 2030.
The expansion collapse after 2017 was caused by several factors, but regulatory problems are widely seen as the main issue. An analysis by energy industry lobby group BDEW found that the falling number of permits issued for onshore wind turbines was the main factor behind the decline, with issued licenses dropping by 70 percent over three years. The average turbine currently takes four to six years from construction application until the start of operation, according to wind power industry groups, and about 10 GW of turbine capacity were held up in licensing processes in 2021. New distance rules between wind turbines and weather radar installations as well as rotating radio beacons will free up some 5 GW quickly, equalling around 1,200 new turbines, the economy and climate ministry (BMWK) said.
Challenges for turbine makers and wind farm operators also arise from mandatory minimum distances from residential areas or as a result of lawsuits brought by citizen movements and environmental groups, even though recent surveys suggest Germans remain overwhelmingly in favour of further epxansion. An agreement between the BMWK and the 16 federal states' governments in June 2020 removed some of the most nagging obstacles for wind power by largely leaving it to the states to decide what minimum distance rules they want to introduce. Strict minimum distances, for example the 10H-rule in Bavaria, meaning the distance to residential areas must be at least ten times the turbine's height, have drawn criticism from industry groups for hampering the energy security and competitiveness. Moreover, legislation to harmonise procedures regarding species conservation across all states agreed in early 2022 is hoped to significantly speed up procedures.
Despite the difficulties for turbine construction, power production with onshore wind generally was growing steadily over the last years, but suffered a setback in 2021 due to unfavourable weather conditions and stagnating capacity expansion. Over the whole year of 2021, onshore wind power fed about 92 terwatt hours (TWh) of electricity into the grid and contributed just under 16 percent of power production, making it the single most important renewable energy source. Together with offshore turbines, which in 2021 produced some 25 TWh (4% of total), wind power in total became Germany's dominant power source for the first time in 2019. In 2020, onshore wind power had contributed almost 20 percent to Germany's net power production and wind power altogehter provided over a third of power production in the first three months of 2022.
Technologic progress & limitations
Turbines added in 2021 on average had a capacity of over 3.9 MW, a hub height of 140 meters and a rotor diameter of 133 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 produces enough power to supply up to 6,000 households.
Due to a steadier feed-in and better grid compatibility of new installations, electricity generation has become significantly cheaper over the years. Depending on the turbine’s location and size, average prices for one kilowatt hour (kWh) of electricity stood slightly over 4 cents by mid-2021, according to wind power association BWE.
So far, the vast majority of wind turbines 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. However, expansion levels there still lag far behind those in the North. The new government ultimately wants every German state to designate at least two percent of its land area to wind power production.
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.
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 coronavirus pandemic, also was the first in the country's history when renewables overtook fossil fuels in power production. Wind power generation in Germany generally peaks during winter months, partly balancing out lower power input by solar installations at that time of the year. But the problem of 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.
Business & Jobs
Revenues in Germany’s wind power sector in 2019, the latest year for which data is available at the German statistical office Destatis, stood at roughly 9.6 billion euros, almost a quarter less than in the year before. However, this was still more than half of the total revenues in renewable power technologies, which amounted to just over 17 billion euros in that year. 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 was by far the most important job creator in the renewable energy sector, according to 2019 Destatis figures.
Economy minister Habeck in early 2022 warned that Germany in the future would need more skilled immigrants to implement its energy transition plans, even though layoffs and plant closures in the wind power industry have worried observers in the year before.
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.
The BWE started an initiative to recruit more people for wind turbine planning, production, installation and operation in 2022. The industry group said the federal employment agency estimates up to 40 percent of all labour needs for climate neutrality would fall into categories in which finding skilled workers already is a challenge.
In a survey among wind power companies on their business expectations in September 2019 by 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.
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.
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 the ongoing regulatory challenges.
Moreover, the end of the 20-year guaranteed support period had reached the first turbines in 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 when individual windmills will be mothballed and hopes that business models like power purchase agreements (PPAs) can 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.
New perspectives abroad
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.