Interviews

Wind turbine manufacturers in EU are beginning to return to profit

Wind turbine manufacturers EU beginning return to profit industry

Photo: Balkan Green Energy News

Published

January 4, 2024

Country

Comments

comments icon

0

Share

Published:

January 4, 2024

Country:

Comments:

comments icon

0

Share

Another challenging year is ahead for the European wind industry, which has long been struggling with inflation and high input costs, supply chain bottlenecks, slow permitting and grid limitations, according to WindEurope’s Chief Executive Officer Giles Dickson. Nevertheless, the tide seems to be turning in many segments, he told Balkan Green Energy News in an interview. “It’s extremely positive that governments have now recognized the strategic nature of Europe’s wind industry and will be taking measures to actively support it – with the underlying principle that the expansion of wind in Europe should be ‘made in Europe’,” Dickson said.

The European Union is about to change its electricity market design. In addition, the administration in Brussels recently launched its Wind Power Package, which won support from almost all member states and over 300 companies, followed by the Action Plan for Grids. Giles Dickson, who became the CEO of WindEurope in 2015, outlined the organization’s expectations for 2024 in an interview with Balkan Green Energy News.

What were the most important setbacks in the difficult year for Europe’s wind power industry that is behind us and are there signs of a turnaround?

The European wind industry was struggling with inflation and high input costs in 2023, as they had been in 2022. In many cases the manufacturers of wind turbines could not pass these higher costs on to their customers. So for much of the last two years the manufacturers have been operating at a loss.

Persistent permitting bottlenecks haven’t helped. Poor auction design in many countries has compounded the problem, by undermining the revenues of the wind farm developers and therefore the turbine manufacturers. And the supply chain has suffered also from bottlenecks in permitting and grid connections, which have suppressed the volumes in the market.

The long-term perspective for wind energy in Europe is absolutely positive with governments committing to ever more ambitious targets

Permitting bottlenecks are now starting to ease in many countries as new EU permitting rules begin to kick in. The inflation in input costs has also eased. And many governments are now properly indexing their auction prices which is improving the revenues of the wind farm developers. The wind turbine manufacturers are beginning to return to profit on the back of this.

The long-term perspective for wind energy in Europe is absolutely positive with governments committing to ever more ambitious targets for the expansion of onshore and offshore wind. And 2023 saw a key breakthrough with the EU adopting a Wind Power Package with immediate measures that will now be taken to strengthen Europe’s wind supply chain – measures which national governments endorsed at the end of the year in a new European Wind Charter.

2024 will remain challenging. But we’re seeing the start of a turnaround, and it’s extremely positive that governments have now recognized the strategic nature of Europe’s wind industry and will be taking measures to actively support it – with the underlying principle that the expansion of wind in Europe should be ‘made in Europe’.

In contrast, what were the positive developments and what are the priorities for 2024?

Europe is now more serious about the energy transition than ever before. The Russian invasion of Ukraine and the weaponisation of its gas supplies have convinced everyone that Europe needs to ramp up its domestic energy production capacities in order to strengthen its supply security.

Every megawatt-hour produced by wind energy in Europe reduces the need to import fossil fuels from Russia and elsewhere. The REPowerEU package, the EU’s energy policy answer to the Russian invasion of Ukraine, has started to show results. In Germany, the good changes to wind energy permitting have reduced permitting times and led to a rapid rise in new wind energy permits. In Poland, the new government wants to accelerate the transition towards wind energy and other renewables. Across the bloc, European governments have increased wind energy expansion targets and pledged closer cross-border collaboration on renewables.

The industry will need to build nearly twice as many wind turbines each year as we’re building right now

2024 will be a crucial year for the ramp-up of Europe’s wind energy supply chain to deliver on the 2030 energy and climate targets. The EU wants 420 GW of wind energy by 2030, up from 230 GW today. The industry will need to build nearly twice as many wind turbines each year as we’re building right now. On top of that it will need to hire 200,000 additional workers and invest in supporting infrastructure such as electricity grids, vessels and roads. It’s a huge task which will require collaboration between industry, governments and public authorities.

2024 will be all about the competitiveness and resilience of Europe’s wind energy supply chain. Chinese turbine manufacturers have started to win orders in parts of Europe – not least in the Balkans. Chinese turbines are offered at a lower price and with deferred payment terms that companies headquartered in OECD countries are not allowed to offer.

But buying Chinese turbines means increasing our economic dependency and undermines our energy security. There are cybersecurity aspects at play as well. There are 300 sensors on a modern wind turbine. The data from those sensors should be stored and analysed exclusively in Europe.

And buying Chinese turbines reduces the economic benefits of wind energy manufacturing in Europe – 300,000 jobs, EUR 53 billion a year contributed to EU GDP. It is not in Europe’s collective interest to transfer those benefits outside of Europe.

Is there any way around grid constraints in the short term?

The EU has come to terms with the fact that more renewables mean more investments in grid infrastructure. The current grid can’t accommodate the renewables that now want to connect. And electricity demand is set to grow by 60% by the end of the decade.

In November 2023 the EU Commission launched an Action Plan for Grids – a 14-point plan to modernise Europe’s electricity grid and prepare for the renewables-based electrification of the energy system.

It says EUR 584 billion of new investments are required to reach the 2030 energy and climate targets. Absolutely. These investments can’t come fast enough. There’s simply no (energy) transition without transmission (lines). And similarly to the permitting of new wind energy projects, grid permitting needs to be fast-tracked, digitalised and supported by employing more staff in the permitting authorities.

What do you expect from the European Wind Charter now that 26 European Union member states endorsed it?

The Wind Power Package proposed in October 2023 was a game-changer for Europe’s wind industry. It opened up new financing channels to drive investment in wind energy manufacturing in Europe. It proposed to double the money available for clean tech manufacturing under the next call of the EU Innovation Fund to EUR 1.4 billion.

It enabled the European Investment Bank (EIB) to provide de-risking tools and counter-guarantees to cover the exposure of private banks when they lend money to the wind industry. The EIB has also changed its lending policy to finance manufacturing in addition to its extensive financing of wind farms.

Equally important, it contained crucial changes to wind energy permitting and auction design. These changes need to be implemented at the member state level – by Europe’s national governments. So it was crucially important that 26 EU member states and more than 300 companies along the wind energy supply chain signed the European Wind Charter in December 2023.

Twenty six EU member states and more than 300 companies along the wind energy supply chain signed the European Wind Charter in December

Among the signatories were the governments of Romania, Bulgaria, Croatia, Czech Republic, Greece, Poland, Slovakia and Slovenia. With their signature, they manifested their firm support for wind energy manufacturing in Europe and committed to take urgent action to implement the excellent measures outlined in the Wind Power Package.

The European Wind Charter will help unlock investments, improve long-term visibility via clear auction schedules, fast-track and digitalise permitting and create wind energy auctions that truly award the wider societal value of wind energy projects. Especially the governments committed to make use of prequalification criteria in critical areas such as cybersecurity to raise the bar on which turbines can be built in Europe. The Charter is just what the European wind industry needed. We are now looking more optimistically to the future.

How does the new electricity market design reshape the sector, in the form that was recently agreed? Should any details be changed before the plenary vote in the European Parliament?

In mid-December 2023 the European Parliament and the Council reached an agreement on the EU’s electricity market design revision. The deal is a good compromise which will help restore the confidence of renewables investors. Crucially it avoids permanently enshrining inframarginal revenue caps in the EU’s electricity market design. National revenue caps on wind and other renewables were a clear policy failure. They fragmented the European market and damaged investor confidence just when we needed to massively scale up renewables investments.

We also welcome that the proposal continues to allow for different routes to market for renewables. We support contracts for difference (CfDs) but they don’t work for all projects. Having all routes to market, CfDs, power purchase agreements (PPAs) and the merchant route, and allowing their combination, is the right way forward.

Before entering into force the agreement now needs to be formally adopted by the Council and the Parliament. The Council will do so in early 2024, and the Parliament in April 2024.

Comments (0)

Be the first one to comment on this article.

Enter Your Comment
Please wait... Please fill in the required fields. There seems to be an error, please refresh the page and try again. Your comment has been sent.

Related Articles

UGT Renewables UGTR Hyundai Engineering US Serbian solar battery Adam Cortese interview

UGT Renewables, Hyundai Engineering opening new era in US-Serbian relations with giant solar-battery project

22 October 2024 - UGT Renewables and Hyundai Engineering are at the forefront of the US-Serbia energy cooperation agreement, UGTR's CEO Adam Cortese said

dejan paravan krsko 2 jek2 gen interview slovenia

Nuclear power plant Krško 2 would ensure energy security for Slovenia, region

08 October 2024 - In an interview with Balkan Green Energy News, GEN’s CEO Dejan Paravan explains why he believes nuclear energy is the right solution

Ahmed Al Awadi Southeastern Europe major role Masdar’s 100 GW target interview

Southeastern Europe has major role in Masdar’s 100 GW target

08 October 2024 - The acquisition of Terna Energy will facilitate Masdar’s growth in the CEE region and beyond, Business Development and Investment Director Ahmed Al Awadi said

Jan_Konrad unicorn interview easing digitalization electricity market entry new players

Unicorn is easing digitalization, electricity market entry for new players

03 September 2024 - TSOs need tools to exchange data with lower-level market segments down to individual devices. Unicorn Systems' software helps integrate all market players, CCO Jan Konrád says.