22 September 2022
Gas and electricity prices are dominating politics. Record high prices, exacerbated by Russia’s invasion of Ukraine, are driving the energy crisis. Governments throughout Europe are looking at ways to protect consumers from the ballooning costs.
In the medium and long-term most people see renewables as an essential strategy for energy independence and fighting climate change. Countries are stepping up their plans and increasing targets for renewables build out. Germany has legislated for 10 GW a year of new onshore wind from 2025. The 9 “North Seas” countries have committed to 76 GW of offshore wind by 2030, and the 8 Baltic countries to 20 GW by then. Ireland has increased its offshore wind target to 7 GW and France and Spain have raised their short-term plans for wind build-out.
At the same time Governments are under huge pressure to act now to support citizens and businesses struggling with energy bills. Several countries have measures in place to either cap gas prices or apply taxes to ‘windfall’ profits to try to help reduce bills for consumers.
EU Energy Ministers have now agreed Europe should cap the revenues of wind farms and other ‘infra-marginal technologies’ at €180/MWh. This extraordinary measure is meant to be temporary. But it will have an impact on the revenues of certain wind farms and risks undermining investor confidence for the sector as a whole. Not least if National Governments set their own lower caps than the EU cap.
Coming out of the crisis will mean investing massively in new wind generation. And Europe cannot do this without clear investment signals. Or without a healthy supply chain. All 5 major OEMs in Europe are currently running at a loss which is unsustainable.
Renewables auctions need to be designed in a way that incentivises investment in the European supply chain, for example by including inflation links in prices and introducing non-price criteria that award bids for innovation or benefit to the environment, and not just the price. Germany have changed their offshore wind auctions to a system of uncapped negative bidding. This is not good. It increases the cost of offshore wind and these costs will be passed on to the supply chain and/or consumers.
Things are now moving in the right direction on permitting, which has been the persistent bottleneck for accelerating wind deployment. The European Commission proposed as part of REPowerEU, its energy response to the Ukraine war, that renewables expansion should be a matter of overriding public interest. They want to clarify what permits are covered in the binding 2-year deadline for approving new projects – that the clock starts ticking when the environmental impact assessment is submitted. France, Italy and Germany have taken measures to limit administrative constraints on new wind farms. Poland on the other hand is sticking with its 10H set back distance rule for now. And overall we still have a long way to go to get the right permitting rules at national level.
Ultimately, investment signals, permitting and the state of the supply chain will determine whether renewables will be able to deliver Europe from this energy crisis.
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.