European wind faces winter chills
We look at whether Covid-19 and the Ukraine war are bringing long-term benefits for renewables, and round up the biggest news in wind.
It all seemed to be going well. The Covid-19 pandemic was devastating in so many ways, but it did at least boost renewable energy. All the promises of a ‘green’ recovery hinted that the energy transition was irreversible.
We read a similar story when Russia invaded Ukraine. Renewables, including wind, were touted as sources of ‘freedom’ energy that would aid long-term security and beat Putin. This would help drive the energy transition.
But we were always more circumspect. On 24th February, we said it was “not a guaranteed outcome” that the Ukraine crisis would help renewables and that countries including Germany would turn to fossil fuels as a short-term fix; and on 10th March we warned that rising prices for wind turbines could hinder the competitiveness of European makers compared to their Chinese rivals.
These issues are now coming to the fore as winter approaches. Is the Ukraine war bolstering renewables? Or is it pushing countries back to fossil fuels while causing inflation that is hampering European turbine makers? In recent weeks, we've seen a few stories that suggest European wind is facing a tough winter.
1) Research says pandemic boost was 'short-term'
This week, we caught up with an academic paper, ‘Pandemic, War and Global Energy Transitions’, in MDPI journal Energies, that said Covid-19 did not led to long-lasting environmental changes or increased investment in renewables.
It also said policymakers had focused on short-term solutions to fill their energy gaps after the Ukraine war, including new fossil fuel supply routes.
“As such, the fossil fuel industry may emerge even stronger after these energy crises creating new lock-ins,” it argued. This includes stimulating investment in natural gas production, in regions from the Mediterranean to the Middle East, and extending the use of nuclear and coal power plants. The paper provides a sobering analysis after the ‘green’ policy statements when the war started.
The paper made four policy recommendations it said could improve resilience of energy systems to global energy trade shocks, while also supporting a move towards low-carbon energy sources. They are:
- Rethink consumption to help customers participate in energy markets, including self-generation, consumption and storage of green power.
- Reinvent urban space, infrastructure and the transport sector to reduce the energy use of buildings and vehicles.
- Pursue decentralised and resilient energy systems, including cooperation between regions on liquefied natural gas to support green hydrogen.
- Ensure a just energy transition by helping poor and vulnerable people to access essential energy services, even if power prices are high and rising.
2) European turbine maker calls for quotas
European wind turbine makers are not just feeling the squeeze from pro-fossil policymakers. Last week, Siemens Gamesa CEO Jochen Eickholt, argued that Europe’s large turbine makers needed the European Union to bring in quotas on the amount of EU-produced turbines used on wind farms in the region. He said this was vital to stop them from being undercut on price by Chinese rivals.
“If our product is critical to the infrastructure of our countries... then certainly, not for 100% of the installations but for a certain portion of the installations [in Europe’, you need to have things in your own hands,” he said.
Eickholt did not give more detail about how this would work, but his warning echoes our own from the beginning of the year. Chinese turbine makers have long been looked down upon in Europe due to offering products that are seen as lower quality, but this is no longer the case. With higher profit margins than European rivals, they are in a strong position to invest more in their machines.
For the EU, it should be unthinkable that the continent’s wind manufacturing industry could be hollowed out by Chinese rivals, even if protectionism raises project prices. But we have not yet seen evidence that the EU is set to act.
3) Another undersubscribed German auction
The Ukraine war was meant to herald an increase in the development of wind farms in Germany and other European countries.
However, the fact that Germany’s onshore wind auction was under-subscribed again this month shows that too many developers see maximum bid prices are set too low. Many will have decided that it is unviable to bid in an era of rising prices of raw materials and higher interest rates raising borrowing costs.
The pandemic and Ukraine war promised positive moves for renewables, but the reality has been more sobering. Firms must prepare for a tough winter.