Brexit, political turmoil in Italy, the rise of far-right parties in eastern Europe: Europe had quite enough on its plate already.
The decision of German chancellor Angela Merkel last week to step down as leader of the Christian Democratic Union party has added more uncertainty to the European economic and political landscape, as well as to the German wind energy market.
Merkel announced last week she wouldn’t seek re-election as either leader of the CDU or as chancellor at Germany’s next federal elections, due in 2021. She is set to step down as head of the party in December. Given that she has now put an end date on her premiership, plenty will ask if she’ll get to 2021.
She also said she wouldn’t seek any other office either. Her position was already weakened after last year’s federal elections, but disastrous regional elections in Hesse and Bavaria for her CDU brought about her final decision last week.
This truly marks the end of an era. Merkel has not only led the CDU party for 18 years and served as chancellor for 13 years, but she has also played a key role in the growth of the German wind energy sector. She earned the nickname of “klimakanzlerin” – climate chancellor – for her fight to establish binding emission reduction targets and she has also been a key figure for Germany’s ‘energiewende’, the country’s transition toward green energy.
However, her government has drawn criticism too.
For example, the introduction of competitive onshore wind auctions in July 2016, and new project permitting hurdles, are set to stifle new onshore wind farms in 2019 and 2020. In fact, recent onshore wind auctions have been undersubscribed and prices are rising. German consultancy Deutsche WindGuard forecasts 9GW of wind to be added in the next five years, compared to the 22GW added from 2014 to 2018.
This situation has taken its toll on turbine makers including Senvion and Nordex: a drop in turbine orders have caused their profits to slump, forcing them to cut jobs in the country and focus their attention on other markets.
In addition, the German government has been criticised for delaying plans for 4GW of additional support for onshore wind to be auctioned in next two years, as well as for a yet unspecified volume of offshore wind.
And the country is also set to miss its 2020 greenhouse gas emissions targets, after it ramped up coal production following Japan’s 2011 Fukushima nuclear disaster.
Merkel’s decision comes at a time when the German wind industry is in desperate need of political stability and support.
As her tenure is set to come to an end in three years’ time, the stability of the wind market in the short- to- medium term is likely to be affected as well as developers’ and investors’ decision-making processes. They are set to keep a close eye on any further political development over by 2021.
On the other hand, three years could be enough for Merkel to sort out some of the issues facing the German wind sector right now – if she has the will.
Improvements of the national grid should be a priority, for example. Wind power is mainly generated in the north part of the country, while energy demand is higher in the south where the industries are based. Over 7,500km of transmission lines need to be built or upgraded to promote the further development of both onshore and offshore wind, but Merkel’s government has been slow to make progress.
Also, the permitting process is making harder for developers to participate in onshore wind auctions.WindEurope has said that two years ago it took 300 days to get a permit for new wind farms in Germany, but now takes around 700 days. Even when developers are able to get a permit, they are exposed to legal challenges because regional siting plans to determine the location of wind farms aren’t robust enough.
And finally, plans to define auction volumes in the coming years are key, if Germany wants to keep its leading spot in the European renewable energy market.
Merkel’s departure could kickstart a transitional phase for the German wind market. A fresh start under a new leader could help the sector regain some of its momentum.
Four Republican congressmen have called for a halt to US offshore wind projects because of unsubstantiated claims blaming the industry for whale deaths. But this obvious misinformation can still be a threat for the growth of the industry.