Early signs of rebound in German onshore wind power

Author: Varoon Kumar

2020/08/25

Strong onshore wind tender results in June and recovering capacity growth represent early signs for a rebound in a stagnant area of the German renewables transition.

However, with many bureaucratic hurdles still in place and fierce resistance from local resident groups, significant regulatory reform will be needed to support the recovery.

Onshore wind buildout had plummeted to its lowest rate in 2019 since before 2000. Tenders were heavily undersubscribed throughout the year, with one exception, on faltering investor confidence.

Unclear policy and frustrations in obtaining planning permits were cited as the key factors leading investors away from Germany’s cornerstone renewable technology.

The tide has started to turn with onshore wind growth rising to 591MW in the first six months of 2020, over double the installed capacity in the same period in 2019.

Although the growth rate is still lower than in previous years, the rebound remains a positive signal ahead of the next tenders, which are due on 1 September.

LEGISLATION CHANGES

To encourage investment and further revitalize the sector, the German government has outlined a series of revisions to legislation in 2020.

On 12 August, the government approved a draft of the Investment Acceleration Act, designed to expedite the construction of onshore wind projects.

The law aims to speed up planning procedures and streamline permitting processes, the latter a key hurdle for onshore wind in recent years. A study last year estimated more than 10GW onshore wind capacity was stuck waiting for building permits, which dampened investor sentiment.

The act will also ensure a shorter administrative court appeal period, reducing the time taken to handle objections to new projects. This is likely to see onshore wind farms coming online quicker after the planning stage.

Further changes to legislation were made back in June, when a proposed country-wide minimum distance of 1km between new turbines and public buildings was relaxed, leaving an opt-in clause available to federal states to have the final say on the issue.

Although states can still impose the distance, scrapping the nationwide enforcement of the regulation represents a net positive for onshore wind investment.

OUTLOOK REMAINS UNCERTAIN

While increased legislative clarity will promote a short-term boon in the sector, it is unclear whether recent momentum will continue.

The overarching investment outlook remains uncertain in 2020 and 2021 with several of the major global powers - including Germany - entering recession due to the coronavirus pandemic.

The resulting economic slowdown could affect investment in renewables projects and impact supply chains involved in the construction of turbine parts.

If sluggish onshore wind expansion were to return as a result, security of supply may also become a more pertinent issue in Germany, with the country removing nuclear capacity from the generation mix by the end of 2022 and with coal generation being phased out by 2038.

The tightness in supply may counteract bearish pressure on German power prices from the expected dominance of cheap renewables generation over the next decade. Varoon Kumar