EU key if European wind is to reach 2030 goals

International pressures are taking their toll on European wind.

The European Wind Energy Association has this week published its ‘Wind energy scenarios for 2030’ report, which gives EWEA's views on how wind will grow across Europe over the next 15 years.

This shows that increasing uncertainty over European Union policy and slow growth across the region are making investors more wary about doing deals; and means that, as a result, EWEA is markedly less optimistic about wind’s prospects than it was four years ago.

The figures in this report still, at first sight, tell a pretty good story.

EWEA says its new ‘central scenario’, which means that growth stays steady rather than being dramatically good or bad, shows that the EU would have an estimated 320GW of installed wind in 2030.

Of this, around 254GW would be onshore and 66GW offshore. It also means that the market in 15 years’ time would be two-and-a-half times larger than it is today, which cannot be a bad thing.

But it gets more interesting when we compare it to a similar report from EWEA back in 2011. Since then, EWEA’s forecast for total wind installations in the EU in 2030 has dropped by 20% to 400GW, with a 56% drop in the offshore target, from the previous 150GW.

It shows how far things have slipped when the current ‘high’ forecast — of 392GW in 2030 — is now below what EWEA thought was conservative four years ago.

EWEA has also cut its forecast for how much of electricity in the EU will come from wind in 2030, from 30% to 25%. All these slippages reflect the fact that wind investors are now facing more uncertainty than four years ago in both the wider economy and energy policy.

Economically, growth in the EU is slower than expected and, as we wrote in our Eurozone report last week, the chance of Greece exiting the eurozone is still a big threat. The economic storm that is brewing in China is likely to put a further dampener on growth.

But investors are also wary about changes to the European energy market that the EU is set to flesh out over the next two years.

These include an ‘energy union’ to boost the trade of renewable power between nations; reforms to the EU’s Emissions Trading Scheme; and other changes to the European power market. While the intention of these policies to boost the use of renewables is good, it also means that investors need to wait for further details about the policies before they can make their investment decisions.

And, as with most new laws, there are also likely to be unintended consequences that will concern businesses, and need to be ironed out to improve investor confidence. These big changes to Europe’s energy market could easily slow the pace of investment until 2020.

In fact, that leads us to our concern about this new EWEA forecast: 320GW by 2030 could prove to be too high.

It relies on the idea that changes to Europe’s energy market will recognise the potential of wind as a flexible energy source. It assumes the Emissions Trading Scheme will be reformed in an efficient way to give meaningful price signals. And it depends on the EU achieving greater interconnectivity with its ‘energy union’ plans.

In short, it means everything has to go smoothly on the policy front, which would be a rarity. If things do not happen that smoothly then investors will not have the stable long-term rules that they need.

If that does not happen then it could be a disaster for investment and mean that Europe does not tap into the full potential of wind.

That is not to say that we expect a disaster, but we do think it would be unwise to assume everything will all go according to EU plan.