Germany Drives Onshore Wind Growth in Northwest Europe

But changes are coming to region’s largest wind market, according to a new Wood Mackenzie report.

A record year for installations helped Germany power growth in onshore wind across Northern and Western Europe, figures from Wood Mackenzie Power & Renewables show.

The analyst group’s Northern and Western Europe Onshore Wind Power Outlook showed Germany notched up 5.3 gigawatts of new capacity in 2017, helping to deliver a record year for onshore wind installations in the region.

The U.K. and France also saw significant capacity additions, said senior analyst Andrea Scassola during a webinar presenting the findings.

In Germany and the U.K. especially, and to a lesser extent Ireland, Finland and Denmark, developers rushed to complete projects before feed-in tariffs gave way to auction mechanisms.

The outlook for Northern Europe, essentially the British Isles plus Denmark, Finland, Norway and Sweden, and Western Europe, including Austria, Benelux, Germany, France, the Netherlands and Switzerland, is mainly dependent on the German market, said Scassola.

There, capacity additions will decline through 2019 but start to pick up from 2020 onwards. The country will not break any records this year. A further 3.3 gigawatts are expected in 2018, after which developers will no longer be able to take advantage of feed-in tariffs in Germany.

The future of the German market

Next year will be something of a “gap year,” Scassola said, with just 1 gigawatt of installations because projects awarded in 2017 auctions are not due to come online until 2020.

There is also some uncertainty over how much capacity will come online then because in 2017 “most winning projects were not permitted and that lowers to chances of successful completion,” said Scassola.

However, commissioning rates in Germany will rise thereafter and peak around 2021 and 2022, he said. The country is committed to continuing long-term onshore wind buildouts to help deal with the decommissioning of nuclear and coal power plants.

Nuclear should come offline by 2022, but if wind is to take its place then Germany also needs to increase grid capacity across the country. In addition, the future of the German market will depend to some extent on wind energy costs.

German auction prices dropped throughout 2017, but rose again this year. The reason is that community projects were able to bid last year with a set of privileges that allowed for very low costs but also resulted in greater uncertainty over whether projects would get built.

These privileges were removed this year, which has led to higher prices but also greater certainty that projects will actually come online.

In any case, in Germany and elsewhere, “consistently with cost reduction, onshore wind is becoming increasingly market-based,” Scassola said.

This means that in some markets, developers are not even waiting for the introduction of auctions to start making final investment decisions based on deals with corporate offtakers and, to a lesser extent, merchant sale prospects.

A surge in PPA activity

Corporate power-purchase agreements (PPAs) have so far cropped up in only a handful of markets, Scassola said, such as Norway, Sweden, the Netherlands, U.K. and Ireland.

In the Nordic countries, he said, PPAs could play a major role in making projects viable in the face of subsidy pricing uncertainty.

In the future, though, corporate PPAs could also provide opportunities for developers in Ireland, Finland and the U.K., where government support could remain capped by auctions.

Wood Mackenzie Power & Renewables is not alone in predicting a surge in onshore wind PPA activity. The industry body WindEurope has also claimed that a PPA revolution is just around the corner.

Regardless, Scassola said, “policy should play a key role in ensuring growth to 2030, because obviously there is a high level of uncertainty that goes with unsubsidized projects. Policy will be key to maintain revenue stability.”

“Policy is also key to meeting decarbonization targets as well as renewable energy objectives,” he said.

On the policy front, subsidy mechanisms are in flux across Northern and Western Europe, with some markets having up to three different forms of support for onshore wind.

Most markets are now moving toward auctions. But even this option could fade after 2020, when the need for state aid will need to be justified according to Europe’s new Renewable Energy Directive, Scassola said.


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