Only 219 MW offshore wind capacity was installed in Germany in the first half of 2020, but the industry is in a much more optimistic mood than it was thanks to the adoption of higher long-term goals
The latest report on the German market from Deutsche WindGuard – produced on behalf of industry associations including the Bundesverband Windenergie, Bundesverband der Windparkbetreiber Offshore, Stiftung Offshore-Windenergie, VDMA Power Systems and WAB – said the German Government’s plan for 40 GW of offshore wind by 2024 has – at last – created long-term security, enabling companies active in the sector to plan. “With the increased expansion targets, offshore wind will strengthen climate protection and create economic development,” said Deutsche WindGuard’s report.
Only 32 offshore wind turbines, with a capacity of 219 MW, were connected to the German grid in H1 2020, a figure that compares poorly with the 2 GW the domestic value chain installed in 2015. According to Deutsche WindGuard, there are now 1,501 turbines in German waters with a total output of 7,760 MW.
“We have long warned that an expansion gap was imminent. We are now in the middle of it,” said the industry associations. “The challenge now is to keep this expansion gap as small as possible and to strengthen the domestic market.” They said that, in addition to anchoring the long-term goals in law, it is important that areas available for offshore wind development are put out to tender as quickly as possible.
The industry bodies also highlighted the need for an economically efficient funding mechanism for future projects, the basis for which should be agreed quickly after the German Government’s summer break.
As highlighted previously by OWJ, industry bodies would like to see the German Government adopt a contract for difference (CfD) scheme similar to that used in the UK, France, Italy and Denmark. They say that implementing a CfD scheme would also make cross-border tenders easier.
In contrast, they say, the ‘second bid’ component that the government recently proposed in the amendment to the Offshore Wind Law (WindSeeG) would increase investment costs and generation costs.
Regarding the CfDs, the industry bodies also noted it is important to examine whether their use can be successfully combined with using power purchase agreements (PPAs). The industry associations cited work by the German Institute for Economic Research that suggests that, if CfDs are adopted, the cost of electricity from offshore wind could be reduced by about 30% compared to the scheme proposed by the German Federal Ministry of Economics and Technology.
The industry associations welcomed publication of the German Government’s hydrogen strategy and highlighted offshore wind’s key role in the production of green hydrogen. “With its high full-load hours, offshore wind energy is excellently suited for the production of green hydrogen,” the industry organisations explained. “Since direct electrification is not technically or economically feasible in all sectors, synthetic energy sources based on renewable energy are an indispensable element in achieving climate targets.
“The hydrogen strategy opens up the opportunity to use about 3 GW of offshore wind energy to produce green hydrogen. For this purpose, additional areas must be investigated and put out to tender as quickly as possible.”
In a preliminary draft of the area development plan for offshore wind, the Federal Maritime and Hydrographic Agency identified the first two potential sites for power-to-X in the North Sea and the Baltic. “The award procedure for these areas should begin in 2021,” said the industry associations. “Here, too, an incentive system with efficient levy and redistribution mechanisms must be developed to bring about a rapid market ramp-up for green hydrogen in Germany.”
The wind energy associations said the programme of the German EU Council Presidency also recognises offshore wind energy as an important pillar of the ‘Green Recovery’ and energy transition. “Since Germany has also held the Presidency of the North Sea Cooperation since the beginning of the year, the coming six months will provide a good basis to lay the foundations for cross-border offshore wind projects,” they said.
“International interconnection of offshore windfarms is a strategic task that is becoming increasingly important. Maritime spatial planning is a decisive first step in this direction. What is needed now is rapid identification of areas suitable for cross-border projects to clarify the investment framework.
“The potential of the North and Baltic is not yet exhausted,” they concluded. “There are free areas available and grid capacity of 1,860 MW which could be allocated at short notice. If the right course is set now, this will not only make a significant contribution to sustainable economic recovery after the coronavirus crisis but will also contribute greatly to achieving climate targets and security of supply during the energy transition.”
Riviera held a series of webinars on offshore wind in June. These are available to view in our webinar library