European Onshore Wind Industry To Be Driven By Policy Incentives
New policy research has shown that policy-based incentives are expected to drive the expansion of the onshore wind sector throughout Northern and Western Europe over the next decade, with capacity worth in excess of 70 gigawatts (GW) expected through the next ten years.
Andrea Scassola, Senior Market Analyst at MAKE Consulting, now a Wood Mackenzie Business, published the company’s Northern and Western Europe Onshore Wind Power Outlook report earlier this month which forecasts over 70 GW worth of new onshore wind power capacity between 2018 and 2027, thanks in large part to policy-based incentives which will drive the lion’s share of expansion over the next decade.
Together, Northern and Western Europe added over 10 GW worth of new onshore wind capacity in 2017, led by Germany which accounted for half of all operating capacity in the two regions combined, followed by France, the UK, and Sweden.
Looking forward through the next ten years, competitive wind energy tenders will contribute to the annual growth rate, but onshore wind’s reliance on policy support will only decline gradually over the next ten years.
In Northern Europe, developers achieved impressive levels of new capacity growth in 2017, though this was mainly driven by growth in the UK. Elsewhere, 2017 and 2018 has reflected the expiry Feed-in Tariff/Premium (FiT/FiP) in Ireland, Denmark, and Finland. Looking forward, then, growth in Northern Europe will be dominated by Sweden, the UK, and Norway.
In Western Europe, on the other hand, the onshore wind market reached its highest annual growth level in 2017, with Germany accounting for 70% of this growth. Moving forward, Germany is expected to hold on to its leadership position in the region, while tenders, FiP schemes, and open door Contracts for Difference (CfD) will support growth in France.
MAKE’s report was published not far in advance of Germany’s Federal Network Agency, the Bundesnetzagentur (BNetzA), revealing details of its third onshore wind auction held earlier this month. August’s auction was the third onshore wind auction held this year, in which each auction has seen the average price of awarded projects increase — from €47.3 per megawatt-hour (MWh) in February to €57.3/MWh in May and €61.6/MWh in August.
Commenting on the announced bids, Giles Dickson, CEO of the European wind energy trade body WindEurope, explained that the increase “is mainly due to the lengthy permitting procedures that deterred some investors and reduced the competition.
“But it’s also because of the continued lack of clarity over the design of future auctions which is undermining investor certainty in the sector,” Dickson continued. “It is essential the German Government gives early clarity on annual wind energy volumes, permitting rules, and auction design as part of their 2030 National Energy Plan. This will go a long way in putting Germany on track towards its 65% renewable energy goal for 2030.”
In the wake of this news, I asked Wood Mackenzie’s Andrea Scassola whether the legislative uncertainty which has been a hallmark of this year’s German onshore wind auctions impact the country’s capacity additions moving forward?
“I believe it has already impacted them,” Scassola replied.
“First of all, due to the inertia of the decision-making process, it was not possible to deliver the additional 4 GW announced by the coalition deal. Additional tender volumes will be allocated most likely next year, but both grid connection and permitting might get in the way.
“Overall, the introduction of mandatory permitting as a precondition to take part in auctions is positive. However, after 2016 there has been a slowdown in permitting that has shrunk the pool of eligible projects, with many developers now bidding the highest price as a result of low competition. The tender scheme that is in force now will impact on onshore wind additions until around 2023. After a dip in 2019 and, to a lesser extent in 2020 I would expect new grid connections to soar in 2021 and 2022 and then start reaching a new normal in line with auctioned volumes from 2023 onward.”
Stepping beyond Germany in particular, the entire European Union will play an important part in any renewable energy capacity growth over the next decade, but as we saw earlier this year, there is no unified and wholesale commitment to renewable energy. In the middle of June, the European Union announced that it had increased its renewable energy by 2030 target from 27% to 32% — despite increasing pressure from campaigners to implement a 45% target, and a faction of EU Member States who wanted to push towards a target of 35%. 
“Going for a renewables target that is barely above business-as-usual is a spectacular failure by the EU,” said Imke Lübbeke, the Head of Climate and Energy at the WWF European Policy Office. “It will undermine jobs, the economy and the climate in one fell swoop. Renewables will continue to gain market share because they make economic sense, but the EU has missed its chance to boost them further through a strong and binding target, and reap the benefits for its citizens and industry.”
Given this underwhelming target, I asked Andrea Scassola how the EU’s renewable energy target will impact Northern and Western Europe’s onshore wind capacity additions over the next decade.
“There are many aspects to consider in regard to the new directive, but just to mention the ones I think are most important,” Scassola explained.
“Unlike the previous directive, it doesn’t have binding targets for each single member state. However, member states will still have to:
- Write a National Energy and Climate Plan
- Provide a five-year visibility over support mainly entailing timing, volumes and budget which will be more difficult to make retroactive changes in legislation
- They will also have to remove regulatory barriers to corporate PPAs, making it easier for companies to source their electricity from renewables
- Simplify administrative procedures for repowering projects
“So it focuses more on removing market barriers rather than providing direct incentives,” Scassola concluded. “Also, it will depend on how this directive is received and translated into national legislation. We have seen that progress toward 2020 targets has varied a lot based on the measures taken by each member state and this is likely to be the case also toward 2030 targets.”
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