A record year for installations helped Germany power growth
in onshore wind across Northern and Western Europe, figures from Wood Mackenzie
Power & Renewables show.
The analyst group’s Northern
and Western Europe Onshore Wind Power
Outlook showed Germany notched up 5.3 gigawatts of new capacity in
2017, helping to deliver a record year for onshore wind installations in the
region.
The U.K. and France also saw significant capacity additions,
said senior analyst Andrea Scassola during a webinar presenting the findings.
In Germany and the U.K. especially, and to a lesser extent
Ireland, Finland and Denmark, developers rushed to complete projects before
feed-in tariffs gave way to auction mechanisms.
The outlook for Northern Europe, essentially the British
Isles plus Denmark, Finland, Norway and Sweden, and Western Europe, including
Austria, Benelux, Germany, France, the Netherlands and Switzerland, is mainly
dependent on the German market, said Scassola.
There, capacity additions will decline through 2019 but
start to pick up from 2020 onwards. The country will not break any records this
year. A further 3.3 gigawatts are expected in 2018, after which developers will
no longer be able to take advantage of feed-in tariffs in Germany.
The future of the German market
Next year will be something of a “gap year,” Scassola said,
with just 1 gigawatt of installations because projects awarded in 2017 auctions
are not due to come online until 2020.
There is also some uncertainty over how much capacity will
come online then because in 2017 “most winning projects were not permitted and
that lowers to chances of successful completion,” said Scassola.
However, commissioning rates in Germany will rise thereafter
and peak around 2021 and 2022, he said. The country is committed to continuing
long-term onshore wind buildouts to help deal with the decommissioning of
nuclear and coal power plants.
Nuclear should come offline by 2022, but if wind is to take
its place then Germany also needs to increase grid capacity across the country.
In addition, the future of the German market will depend to some extent on wind
energy costs.
German auction prices dropped throughout 2017, but rose
again this year. The reason is that community projects were able to bid last
year with a set of privileges that allowed for very low costs but also resulted
in greater uncertainty over whether projects would get built.
These privileges were removed this year, which has led to
higher prices but also greater certainty that projects will actually come
online.
In any case, in Germany and elsewhere, “consistently with
cost reduction, onshore wind is becoming increasingly market-based,” Scassola
said.
This means that in some markets, developers are not even
waiting for the introduction of auctions to start making final investment
decisions based on deals with corporate offtakers and, to a lesser extent,
merchant sale prospects.
A surge in PPA activity
Corporate power-purchase agreements (PPAs) have so far
cropped up in only a handful of markets, Scassola said, such as Norway, Sweden,
the Netherlands, U.K. and Ireland.
In the Nordic countries, he said, PPAs could play a major
role in making projects viable in the face of subsidy pricing uncertainty.
In the future, though, corporate PPAs could also provide
opportunities for developers in Ireland, Finland and the U.K., where government
support could remain capped by auctions.
Wood Mackenzie Power & Renewables is not alone in
predicting a surge in onshore wind PPA activity. The industry body WindEurope
has also claimed that a
PPA revolution is just around the corner.
Regardless, Scassola said, “policy should play a key role in
ensuring growth to 2030, because obviously there is a high level of uncertainty
that goes with unsubsidized projects. Policy will be key to maintain revenue
stability.”
"Policy is also key to meeting decarbonization targets
as well as renewable energy objectives," he said.
On the policy front, subsidy mechanisms are in flux across
Northern and Western Europe, with some markets having up to three different
forms of support for onshore wind.
Most markets are now moving toward auctions. But even this
option could fade after 2020, when the need for state aid will need to be
justified according to Europe’s new Renewable Energy Directive, Scassola said.
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