Robert Scheid, Germany Trade & Invest, Germany
Germany is the world’s number one exporter in the wind energy sector, with an export ratio of 80 per cent. Additionally it is the number two producer of wind energy, with nearly 24 000 MW of installed capacity in 2008. Germany was number one until the USA overtook it in 2008 with a 49.7 per cent growth rate, reaching a capacity of 25 000 MW.
C-Power’s 300 MW Thornton Bank offshore windfarm project near Zeebrugge in Belgium. Germany’s REpower Systems has installed its 5M turbines at the facility
In terms of percentage of electricity consumption, wind energy provides for over six per cent of Germany’s total energy use. In some federal states, almost 40 per cent of net electricity consumption is a result of wind energy production. These states, namely Saxony-Anhalt (with 37.2 per cent consumption from renewables) in the east, as well as Mecklenburg-Vorpommern (34.4 per cent) and Schleswig-Holstein (33.5 per cent) along the northern coasts, make up part of the country’s and Europe’s rapidly developing renewable energy hub. Numerous offshore wind energy installations are slated to dot the coastlines of the latter two states.
By providing access to optimal wind power, offshore wind farms are the next big step toward strengthening Germany’s wind power industry. The promotion of offshore wind farms means that Germany is not only moving closer to reaching its renewable energy goals, but also securing its position as one of the world’s leading investment locations in wind energy. Support for offshore wind farms opens possibilities for new investors in turbine manufacturing and component supply, as well as research and development.
An Ongoing Success Story
Recent investment stories show that major international investors have confidence in the German market. GE Energy, the energy business of the American conglomerate, recently announced that it is expanding its manufacturing capacity in Salzbergen. The investment is targeted at meeting an increasing demand for wind-based power generation throughout Europe.
In Salzbergen, the company will produce its 2.5xL line of turbines (with a rotor diameter of 100 m, which it calls its “most advanced wind turbine technology in terms of efficiency, reliability, and grid connection capabilities.” This new investment by GE Energy will create 160 jobs.
Germany has made it an explicit goal in recent years to keep environmental protection and economic growth developing in tandem. Evidence of this can be seen in its commitment to supply at least 20 per cent of its primary energy from renewable energy sources by 2020. This dedication is translating into revenue, job creation, and optimism in difficult times for the global economy.
In 2007, German renewable energy companies earned nearly €25 billion ($32 billion) in revenue and employed close to 250 000 individuals. Roughly 94 000 of these jobs are directly or indirectly linked to the German wind industry. Domestic conditions in Germany combined with the nation’s leading reputation in exports suggest that renewable energy will remain a strong industry in 2009.
This dedication to renewable energy translates into direct benefits for the wind energy industry. In late January 2009, the Federal Association for Wind Energy (BWE) announced that it expects revenue growth for the industry in Germany to be in the double-digits. The federal government is taking the appropriate steps to ensure that this prediction comes true. Measures have been put in place for investors to continue installing both onshore and offshore turbines.
Offshore: A Cost-Benefit Challenge
From a purely meteorological point of view, offshore wind farms provide the greatest potential for wind energy generation. As any sailor knows, wind speeds accelerate the further one is from the shore. Wind production offshore can amount to a 50-100 per cent production increase compared to onshore installations.
However concerns about connections to electric grids, as well as maintenance have kept offshore wind parks largely on the drawing board for many years. The prevailing wisdom was that it was simply too expensive to operate and maintain them, leaving this potentially beneficial contribution to carbon reductions and energy efficiency untapped.
Germany is taking the necessary steps to ensure that offshore wind parks will become an even stronger presence on the German wind energy scene in coming years. The Federal Maritime and Hydrographic Agency (BSH), the authority responsible for granting permission for offshore wind turbine construction, has permitted pilot-scale projects (up to 80 installations per project) to allow for the environmental impact of offshore wind turbines to be fully measured and understood. Furthermore, the number of permitted installations per project ensures the economic viability of the investment for participating companies. The Federal Ministry for the Environment, Nature Conservation and Nuclear Safety (BMU) predicts that by 2020 there will be an installed offshore capacity of 12 000 MW in Germany. Leading players on the German energy scene are currently testing the effectiveness and viability of offshore wind energy.
Beginning in July 2009, the installation of the turbines of the Alpha Ventus wind park will start. This project will consist of 12 wind turbines of the 5 MW class. Research results from this plant will be made public to aid the design and building of future offshore plants. The wind turbines will be located 45 km off the island of Borkum at a water depth of 30 m in the so-called German Bight of the North Sea. With several challenges and much to be gained from the project, it has been carried out as a joint project between three of Germany’s leading energy companies: EWE AG, E.ON Climate & Renewables, and Vattenfall Europe New Energy.
The EEG: A Policy Commitment to Wind
Germany has also changed its benchmark law on renewable energy to benefit wind energy, which takes offshore wind energy into consideration. The country’s Renewable Energy Sources Act, or EEG as it is known in German, has become renowned and modeled throughout the world for its ability to stimulate investment through so-called ‘feed-in’ tariffs. The tariffs require power companies to purchase energy from the owners of renewable energy equipment at a fixed price that is generally above the standard retail price for energy.
This system establishes measures for companies to own and service renewable energy equipment in Germany, and therefore provides a convenient domestic market for manufacturers. The law has already served as the principal driver of Germany’s success in photovoltaic (PV) energy, rapidly turning the country into the world’s largest PV market. Nearly half of the world’s installed PV capacity is in Germany.
In terms of the wind industry, the EEG encourages energy coming from both onshore and offshore installations, including an extra bonus for offshore wind installations.
The offshore tariff intends to compensate for the risk and high up-front cost of offshore installations. It provides benefits to owners that have turbines that are both far from the shore and have a base well below the waterline. The deeper the wind turbine stands and the further from shore it is located, the longer tariff compensation will be paid when the power company purchases its energy.
Additionally, the EEG also provides bonuses for companies to improve network integration and to re-power wind energy facilities. The latter concept refers to updating onshore wind turbines and generating facilities, as technologies advance and become more efficient.
In June 2008, Germany amended the EEG to further increase the tariff for both onshore and offshore wind installations. The updated EEG helps compensate for the erratic fluctuation in raw materials prices that have reduced the attractiveness of new wind energy investments.
These legal changes, coupled with the previously established requirement of transmission system operators to provide grid connections at sea to which a site operator can directly connect make offshore sites especially attractive. By itself, the condition for transmission system operators covers roughly one-third of the initial investment costs to companies setting up new offshore sites.
Baltic and North Sea Coastlines: Vast and Untapped
What makes Germany such an attractive location for offshore wind energy is that it has many kilometers of coastlines along both the North and Baltic Seas. For example the federal state of Mecklenburg-Vorpommern, in the northeast, offers over 350 km of coastline along the Baltic Sea.
Nordex AG’s N90, 2.3 MW wind turbine, as manufactured in Rostock, Mecklenburg-Vorpommern
One of Germany’s major players in the industry, Nordex AG, expanded in the city of Rostock located in Mecklenburg-Vorpommern. It is currently spending €86 million on new production halls with a total size that is equivalent to seven football fields. Nordex’s expansion into Rostock will add to its already significant workforce in the coastal city and solidifies the federal state’s position as a leading investment location for wind energy.
Mecklenburg-Vorpommern is also a popular location for wind energy investments because of the state’s proximity to Hamburg, Europe’s second largest port city. This positioning allows wind turbine and component manufacturers to take advantage of export markets both inside and outside of Europe.
The example of Nordex shows that companies are already fully benefiting from the reassurance provided by the ‘Made in Germany’ label. In its most recent quarterly report, the company announced that 95 per cent of new orders came from outside of Germany.
German wind energy companies are also expecting that the new presidential administration in the United States will improve their export business. President Obama made the promotion of renewable energy one of his central campaign themes, and the US Congress’s decision to extend an investment credit for renewable energy is viewed as a further indication of increased dedication to renewables. Given Germany’s competence in this field, it is expected that the USA will become an important export market for German wind energy products.
In addition to these factors, investors can also take advantage of a generous incentive and economic stimulus regime in eastern Germany. In some cases, new market entrants can have half of their investment costs covered by direct grants.
Where to Turn: Investing Made Easy
For those looking to enter or expand in Germany’s wind energy sector, Germany Trade & Invest has a comprehensive package of services available at no charge. The organization was formed following the merger of Invest in Germany GmbH and the German Office for Foreign Trade.
It now has the dual mandate of advising and supporting foreign companies seeking to expand into the German market and assisting German companies looking to enter foreign markets. There is a dedicated team of experts in renewables, including wind energy, ready to assist foreign investors as they explore the possibilities of entering the German market.
Germany Trade & Invest has developed a tradition of supporting investors in the wind energy industry, including Vestas, whom Germany Trade & Invest advised on its major investment in the federal state of Brandenburg in 2001. The company was looking for a location that was spacious enough for a factory with approximately 500 workers that could produce 900 rotor blades annually. In addition, the site had to offer an excellent infrastructure along with non-bureaucratic and reliable authorities to enable the company to take advantage of its strong export markets in Europe, the US, and Canada.
The company chose the city of Lauchhammer, located between Berlin and Dresden, to be its location, with production commencing in May of 2002. Since its initial investment, Vestas production has significantly increased.
Due to the success of the Lauchhammer plant, Vestas has established further production facilities in Germany, including a foundry in Magdeburg and a generator production plant in Lübeck.
Vestas is a well-known example, but Germany also provides conditions for companies of all sizes to succeed. Government policy is geared toward encouraging businesses to take risks in order to facilitate breakthroughs. Regulatory authorities are efficient and professional. Most importantly, German workers play a seminal role in ensuring that the ‘Made in Germany’ label is recognized as a sign of quality and praised by managers throughout the world. The country’s efforts combined with the world’s trust in German wind energy products together show that now is an optimal time for wind energy investors to make Germany the site of their next project.