6 April 2023
After seemingly weathering the first winter in the wake of Russia’s invasion of Ukraine, Europe entered the new year having drastically reduced its reliance on Russian natural gas imports – and with 19 GW of additional wind power installed across 2022. While this is a new record, it is also short of what we need to reach the EU’s climate and energy targets. 2022 was a challenging year for the wind industry. We were plagued with high inflation, difficulty accessing raw materials, a lack of clear project pipelines and increasing competition from non-European manufacturers.
Some recent regulatory developments have not helped matters. In Poland revisions to the 10H setback distance rule saw a last-minute amendment introducing a 700 m setback distance instead of the 500 m originally proposed. While this is an improvement on the 10H rule, the new law which was adopted at the start of March will continue to hinder the development of onshore wind. Denmark temporarily paused its open door scheme for offshore wind farm development, suspending permitting for almost all projects. It has now resumed permitting for some projects but uncertainty remains.
But it isn’t all doom and gloom, and some positive developments have started to take shape. France has now adopted its first renewable energy law aimed at fast-tracking the expansion of renewable energy projects. And it has introduced an inflation mechanism that helps to offset the high costs not just of the OPEX of wind energy projects but also their CAPEX. Similarly Germany and the UK adopted new rules that should lead to smoother deployment of wind energy projects and electricity grids.
In the EU the European Commission has put forward its Electricity Market Design Reform proposal and Green Industrial Plan. The market design measures are generally positive. Contracts-for-Difference (CfDs) will be the key support system for future renewables auctions and National Governments are encouraged to design auctions combining CfDs and Power Purchase Agreements (PPAs). Merchant projects are also permitted – giving developers the flexibility to efficiently finance projects. The Council and Parliament should stick with this balanced proposal – giving us greater economic and regulatory certainty and helping to restore investor confidence.
The Net-Zero Industry Act (NZIA) sets a target for wind energy manufacturing capacity in Europe of 36 GW a year. This is a good first step, but the details are still hazy. There needs to be clarity on where the funding will come from in the short to medium-term. And the NZIA now calls for non-price criteria in auctions as a way to promote environmental sustainability, system integration and to restore supply chain security. But it allows auctioning authorities to ignore them if the overall price is increased by 10%. This rule sends conflicting messages, creates unnecessary uncertainty and should be removed. And more needs to be done to ensure that the NZIA provides the support that the wind energy supply chain will need to ramp up over the next few years.
This online resource covers the latest changes in policy and regulation across European countries impacting wind energy and is regularly updated.
I hope you enjoy the findings.
Head of Market Intelligence