In September, the countries around the North Sea announced that they would make ‘their sea’ the largest green power plant in Europe. They would build 260 gigawatts of power by 2050, meaning many thousands of offshore wind turbines in the coming years. That acceleration is necessary to achieve the climate goals and to become independent from Russian energy, Ireland’s climate minister Eamon Ryan said when presenting those plans.
But for now it remains with good intentions. In the third quarter, the European industry umbrella organization WindEurope recorded orders for 2 gigawatts, 36 percent less than a year ago, when 3.1 gigawatts were registered. A total of 7.7 gigawatts of wind power has been ordered from European builders this year, while an additional 39 gigawatts must be built annually if the 2030 climate targets are to be achieved. ‘At this level, they are nowhere near being reached’, a spokesperson for WindEurope responds.
Financial uncertainty deters investors
‘The situation is worrying’, says Kees van der Leun, director of the Common Futures consultancy, which specializes in the energy transition. The main reason for the setback is the increased financial uncertainty among investors and wind farm operators. Long waiting times for permits also play a role. ‘Although the latter has not really changed,’ says Van der Leun.
Due to the sharp rise in raw material costs, turbines have become more expensive. Rising interest rates also create uncertainty, making investors hesitant. That in itself does not have to be a problem, because the electricity price has also risen sharply. But because it is uncertain how the electricity price will develop, according to Van der Leun it has nevertheless become an influence. If in a few years’ time the price of electricity falls again, while parks have turned out to be much more expensive, the question is whether the investment can be recovered. So banks and energy companies are keeping a tight hand on the purse strings. The stagnation could not have come at a worse time, because the entire European turbine builder sector is already running at a loss.
The price ceiling creates even more uncertainty: how will that work out?
There is another important factor that creates uncertainty and therefore deters investors: the price ceiling that European member states have agreed on of 180 euros per megawatt hour. According to Van der Leun, this raises many questions: ‘Will the ceiling remain at this level? What will Member States do? They can put their own spin on it. Will countries soon introduce their own ceiling? Or will they introduce the measure retroactively?’
It is also uncertain how the measures will work out for international deals, where a wind farm from one country also supplies power to other countries. Quick clarity will remove some of the uncertainty.
Siemens Gamesa and Vestas are still the largest wind farm builders in the world. But there are already six Chinese companies in the top ten. As a result, a similar scenario is likely to unfold as with the European solar industry. It was also all-powerful two decades ago and was quickly swept away by cheap Chinese competition. Now that Europe wants to become less dependent on China, that would be a bad development.