Concerns over the European wind sector

It is easy for those of us in Europe to think the big threats for renewables come from outside this continent. Barely a day goes by without something explosive happening in President Trump’s White House, to remind us of the current instability in the US.

And yet, in the last year, 10GW of wind farms have been finished in the US, and 26GW are in advanced development or being built. Trump and his fast-changing set of advisers have not touched the production tax credit; and, from April to June, 29 projects totalling 3.8GW entered construction or the latter stages of development. Those figures are from the American Wind Energy Association.

Now let’s compare them to numbers put out by European industry association WindEurope last week.

On the face of it, the European figures look okay. In the first half of 2017, wind farms of 6.1GW were commissioned in the European Union: 4.8GW onshore and 1.3GW offshore. This represents growth of 4% from EU installed capacity of 154GW at the end of last year. This may not be stellar growth but it at least looks solid.

However, it masks fragility in Europe: the continent relies heavily on its three biggest economies. How long can this continue?

Nearly half (48%) of the wind farms completed in the first six months of 2017 in the EU were in Germany, but this 2.3GW onshore follows a boom from the projects in development before auctions came into effect in January. We cannot expect activity to continue at that level in the coming years.

One quarter (27%) of completions in the first half of 2017 were in the UK – 1.2GW onshore and 518MW offshore – but the end of
the Renewables Obligation four months ago will make large wind developments less attractive. Again, the onshore figure looks good but we cannot guarantee the level of activity will carry on in a post-RO world – leaving aside the fact that UK statistics would not continue in EU figures post-Brexit.

And the third-largest country for wind installations in the first half was France, where schemes totalling 492MW (or 8% of the EU’s total) were completed. In France, there is at least optimism that President Macron wants to continue the move to renewables, and is looking to cut some red tape in order to make it happen.

The remaining 25 EU member states represented a combined 17% of installations, and no single country exceeded 190MW of onshore wind completions in the first half of the year. There are also ten countries on track to install no capacity this year.

This concentration of the market in key countries was also evident in the investment figures. New asset financings worth €8.3bn were made in the first half of the year -- €5.4bn onshore and €2.9bn offshore – of which 53% were in Germany.

Now, the reliance on a handful of large markets is not solely a European challenge: every country and continent has some areas that are windier or more supportive than others. The US is driven by activity in key states including Texas, Iowa and Oklahoma.

But the unevenness of the European market does mean that investors and developers are likely to see fewer opportunities as activity slows in Germany and the UK. We cannot be sure that big countries like Spain, which has run two renewables auctions this year, or France will fill the gap; and markets that once looked promising, like Poland, have faded away.

Less activity does not have to be a killer for businesses in Europe. The best players can adapt. But these companies also face the bigger challenge that they have little clarity over what level of installations they can expect in the 2020s, making it tough to plan.

And the EU has a relatively unambitious target of 27% electricity from renewables by 2030, with no binding targets on individual countries. This gives poor performers an opportunity to hide and hoped that they are pulled along by the nations that do best.

With this fragility, those of us in Europe have no right to be smug.