EXPRESS #4 - August 14, 2018
The German wind industry is being hit hard by lower growth, itself a result of scaled-down incentives. “The German wind power market is threatening to implode”, Handelsblatt reported dramatically.
Whereas last year some 5300 MW of new wind turbines were built, the figure this year will be around 3500 MW and next year only some 1500 MW. Manufacturer Enercon, which has annual sales of some €5 billion, has cut 835 jobs and has said it will concentrate international markets.
The crisis in the German wind market is a result of the switch from 20-year guaranteed FIT tariffs to an auction system which puts pressure on prices. The German wind industry employs some 143,000 people, says Handelsblatt. Already 2,000 jobs have been cut in the north of Germany in the sector. Nationwide some 10,000 jobs were lost last year. A number of smaller companies (Senvion, Powerblades, Carbon Rotec) have gone bankrupt.
Regrettable of course, but surely the German wind industry can’t have expected to go on booming forever on the back of generous subsidies?
Worldwide the wind industry does not seem to be doing too badly. China installed 7.9 GW of new wind power in the first half of 2018, a 30% year-on-year growth, according to China’s National Energy Administration. The sector is also doing better at controlling curtailment. China now has 171.6 GW of wind power installed, including 2.7 GW of offshore wind.
In the U.S., PacifiCorp, owned by Warrant Buffett’s Berkshire Hathaway, got final approval for a $3 billion wind and related transmission expansion plan in the states of Wyoming and Washington.
In Massachusetts Avangrid and Copenhagen Infrastructure Partners are building a 800 MW offshore wind farm which will provide power for 6.5 cents/kWh, reports Bloomberg. That’s much lower than was expected. “That’s pretty shocking for us”, said Tom Harries, a wind analyst at Bloomberg NEF. “I think the wider industry expected much higher prices.”
Meanwhile, Swedish utilities and power generators “have installed so many wind turbines that the Nordic nation is on course to reach its 2030 renewable energy target” already this year, Bloomberg reported last month. “Forward prices in the renewable certificate market are 70 per cent lower for 2021 than a year earlier because of all the new installations.”
The half-year results of two big European energy companies – Enel and Uniper – seem to confirm that renewables are the way to go.
Enel announced that its “all-time record levels of renewables expansion” fueled profits growth in the first half. The group posted a net profit of €2 bn, 9.4% more than a year before. By 2019, Enel will see renewables account for half of its 83 GW of capacity.
By contrast, Uniper, the split-off from Eon which specializes in centralized (gas, coal, nuclear) power generation, returned to the red in its first-half results. The company reported a €522 million net loss.
Uniper, which is one of the partners in Gazprom’s Nord Stream 2 pipeline, also revealed that it is engaged in arbitration proceedings with Gazprom to renegotiate the terms of their long-term procurement contracts with the Russians.
Uniper also urged the French government not to push through plans to make France coal power free by the end of 2021, saying this was too short a transition period. Uniper has two 600 MW coal-fired plants in France and 900 MW of other plants. Uniper warned that if the coal power plants have to be closed, “the commercial existence of our entire business in France would be endangered. In this case, we’d have to think seriously about Uniper’s future in France.”
The question is, though, is this a problem for France – or for Uniper?