Wind Lifted by Higher Tariffs in Germany

Thomas Schnorrenberg from REpower Systems AG, one of Germany’s leading manufacturers of wind turbines, said the extra money was needed to revive investment in wind and balance out soaring costs have that have hit profit margins, leaving many projects on the drawing board.

"The new tariff will make building offshore wind parks especially attractive," Schnorrenberg told RenewableEnergyWorld.com.

Large offshore wind parks need to be built if Germany is to meet an ambitious new target to increase electricity from renewable sources to at least 27 percent by 2020 — a target also encased in this June’s amendment to the country’s renewable energy law.

Constructing wind parks in the seas in the north of Germany did not pay off under the old tariff scheme, and so investors have put plans for 25,000 MW of installed offshore wind capacity on ice.

However, the new, higher tariff will now make going forward with the construction of large wind parks at sea lucrative, Schnorrenberg said.

As an incentive to speedy action, the tariff has been increased to 15 cents/kWh in cases where construction on an offshore wind park begins before 2015.

The German Wind Energy Association (BWE) has estimated that 45,000 MW of modern wind capacity will need to be installed to generate 110 billion kWh of electricity by 2020 if the government is to reach its target of having about one third of the country’s electricity coming from clean sources by 2020.

With the potential of hydropower more or less exhausted in Germany — just about every river that can have a dam has one, Schnorrenberg said — and solar power still very expensive, wind power remains the best option for increasing clean electricity.

The BWE has calculated that 3,500 MW of new wind capacity needs to be installed each year from now on — double the capacity of 1,667 MW installed in 2007.

"Offshore wind parks are the only renewable energy source that can deliver that kind of growth because the good sites on land have already been taken," Schnorrenberg said.

He estimated that wind turbines located in the sea and benefiting from the steady winds there could generate electricity for up to 4,000 hours per year. That means, 25,000 MW of offshore installed capacity could supply 11% to 13% of Germany’s electricity needs by 2020, much more than the equivalent amount on land.

Wind turbines on land generate electricity for an average of 1,700 hours a year, though this figure can rise to 2,200 hours on the best coastal sites.

In 2007, a total of 22,247 MW of wind capacity was installed on land in Germany, producing 7 percent of the country’s electricity and accounting for two thirds of all the renewable electricity production.

The June amendment also gives an incentive to replacing older wind turbines on land with new, more efficient turbines.

A typical 500-kW turbine from the mid-1990's in a medium location generates 1.1 million kWh of electricity while a modern 2000-kW wind turbine generates six times more electricity or 6.6 million kWh.

It is important to extract the most energy possible from the existing wind farms on land given the lack of room for expansion, Schnorrenberg said. He also said that profits generated by more efficient wind turbines have been cancelled out by rising prices for steel and copper and other components.

In 2007, the wind energy market in Germany shrank by 25 percent compared to 2006, bucking the global trend for rapid growth according to the German Wind Energy Institute (DEWI).

More than 80 percent of the cost of building a wind turbine falls on steel. However, the spot price of steel has doubled since 2004 while the price of copper has tripled, hitting wind energy producers hard.

Unlike Spain or France, Germany has no mechanism for compensating wind power producers for increases in raw materials or costs embedded in its renewable energy law.  That was why an amendment to the law was introduced in June to update wind power tariffs. REpower’s main problem will be how to meet the expected surge in demand for new wind turbines, especially offshore, Schnorrenberg said.

However, the amendment did not contain any incentives for installing micro wind turbines — predicted to be the next big growth sector in the renewable energy market.

"The use of decentralized small wind turbines could deliver an additional cost-effective and customer friendly source of potential electricity in as far as optimized turbines in large quantities can be manufactured," a report from BWE said.