Wind is the fastest growing energy source in the world and a crucial part of Europe’s industrial base.
The wind sector represents over 300,000 jobs and generates €72 billion in annual turnover.
The European industry has a 40% share of all wind turbines sold globally.
European Commission President Jean-Claude Juncker has pledged to make the EU number one in renewables.
2. Wind power today
Wind energy already meets 10.4% of the EU’s power demand with high penetration levels in several countries (Denmark 42%; Spain 20%; Germany 13%; UK 11%).
Wind is the most competitive source of new power generation (onshore wind LCOE ranges from €52 to €110/MWh – Ecofys 2015).
Blue chip companies including Google, BMW and Heineken are now investing significantly in wind – it makes business sense.
Technology costs will decline further in Europe provided there continues to be a robust home market in the EU.
3. Wind power tomorrow
Wind is set to be the backbone of the future power system, meeting almost 30% of Europe’s power demand by 2030, according to the IEA. However, this requires policymakers to provide the right framework.
Both onshore and offshore wind are key to the EU’s long term decarbonisation, energy security and competitiveness objectives.
Wind energy can provide grid support services, contributing to the secure and cost-effective management of the power system.
Implementing ambitious post-2020 renewables policies will generate net benefits for the EU economy (WindEurope’s high scenario for 2030 shows a net benefit of €13bn and would boost the job count to 688,000).
4. Challenges and opportunities
a. Paris Climate Agreement creates opportunities for renewables globally
Wind energy is the most cost-effective climate change mitigation technology. In 2015 wind power avoided 218m tonnes of CO2 in the EU alone.
The Paris Climate agreement sets ambitious long-term goals to limit temperature rises and gives investors a clear sign that high-carbon assets are not viable in the long run.
70 countries highlighted wind energy in their Paris commitments. Many outlined specific GW or percentage targets for wind and other renewables.
The Paris commitments point to significant growth potential outside the EU and show that wind and other European renewable industries will see tougher international competition in the future.
b. Challenges face wind energy in Europe
Declining policy ambition and poorly managed shifts to new forms of support mechanisms, including retroactive changes, have created uncertainty for onshore wind development in some EU countries.
As things stand, onshore markets will decline significantly and remain weak in the UK, Poland and Italy. Germany’s annual installations will only be two thirds of what they are today.
New wind investments are increasingly concentrated in a smaller number of markets – with Germany accounting for 40% in 2016 – as a result of abrupt policy changes in previously thriving markets.
EU ambition on renewables is declining just as emerging markets ramp up their commitments on wind. Only 7 Member States out of 28 have post-2020 plans for renewables.
As things currently stand, Europe will not be number one in renewables. EU companies risk losing their lead over competitors with a negative impact on jobs and growth.
c. Delivering the Energy Union is crucial
Energy policies and electricity markets are not supporting investments in clean and flexible power on the large scale required to deliver Europe’s energy transition.
Overcapacity is the biggest challenge. Inefficient and inflexible capacity must be phased out as soon as possible. Capacity Remuneration Mechanisms should only be used as a last resort and must be coordinated regionally.
Fair and well-functioning markets with stable supplementary national regulatory mechanisms will reduce investment costs via lower capital costs.
Those dispatching clean energy should have access to balancing and other ancillary services markets. Intraday trading of electricity in markets with a broad geographical scope should be the norm. This requires significant investment in transmission networks and interconnections.
Europe should fully integrate the polluter-pays principle and ensure a robust CO2 price through a reformed Emissions Trading System. Electrification of heating/cooling and transport based on large shares of wind energy is also critical to the EU’s decarbonisation objectives.
Sustaining EU leadership in wind requires a strong industrial policy and publicly funded R&I at European and national level covering technology and system integration – including demand side response and storage.
Leveraging the cost-effective investments needed for the energy transition requires stable policies and the mitigation of investor risk that comes from policy changes. Investors should also have access to an EU-level dispute settlement mechanism.