New German government cuts support for wind turbine industry

Source: Special to E&E • Posted: Thursday, November 14, 2013

The future German governing coalition of the Christian Democrats and the Social Democrats (SPD) agreed to cut aid for new onshore wind projects and scale back offshore wind targets, setting up an economic hit for an industry that is struggling to recover from a slump.

Germany needs cheap renewable power, as it has decided to close all its nuclear power plants by 2022. The country will target 6.5 gigawatts of offshore wind by 2020 and 15 GW by 2030, down from previous goals of 10 GW and 25 GW, respectively.

Onshore turbine aid will also be cut by a yet-to-be-specified amount, and owners of new green energy parks will have to sell power on the market. The solar power subsidy system, which features periodic cuts in feed-in tariffs, will remain unchanged.

“We want to cut support for onshore wind especially in areas with strong winds,” Hannelore Kraft, prime minister of the Nordrhein-Westfalen state, was quoted as saying in German media.

In exchange for the cuts, which were agreed on in the wake of renewable energy subsidies that have soared more than fivefold since 2009, the new government will raise the target for renewable energy to 40 percent of the nation’s total output by 2020, from the current target of at least 35 percent.

There will be no retroactive cuts to subsidies already granted. The new government will also agree to slow biomass expansion and will temporarily ban hydraulic fracturing for natural gas exploration until environmental concerns are straightened out.

Shares in turbine makers drop

Chancellor Angela Merkel’s Christian Democrats and the SPD continue to negotiate, with an aim of forming a coalition government by the end of the year. In a video message to supporters, Merkel said the energy subsidy reform was one of the first big projects for the new government.”

Shares of German wind turbine maker Nordex fell by 25 percent, the most in eight years, after the news, while Danish rival Vestas Wind Systems also lost 6 percent.

“The changes have been awaited by the industry for some time as current subsidies have been under criticism by several politicians,” said Patrik Setterberg, a wind energy analyst at Nordea Bank in Sweden. “However, the indicated changes seem larger than anticipated. Even though many parameters are still unclear, the development in Germany is bad news for Vestas.”

Germany was the fourth-largest wind market in the world last year, and it made up 10 percent of Vestas turbine sales. The company has recently agreed to form a joint venture with Mitsubishi Heavy Industries to manufacture the biggest offshore turbine yet, an 8-megawatt machine aimed at the North Sea market, which includes Germany. If Germany installs fewer offshore turbines, Vestas, Mitsubishi, and rivals like Siemens and General Electric will have a smaller offshore market to fight for.

“Germany has a huge need for energy, so it’s surprising that they are taking this step,” said Jan Hylleberg, chief executive of the Danish Wind Industry Association lobby group. “It’s especially surprising that they are cutting offshore parks, because that’s where you can find the biggest amount of wind energy.

“We’ll have to see what the final agreement says,” Hylleberg added. “But a cut of 10 GW in offshore will surely have a big impact on the market potential up to 2030.”