Sales of new wind turbines collapsed last year in Europe as a lethal combination of soaring industrial inflation and “unhelpful” national interventions in electricity markets led to only 9GW of orders being placed – far off the pace needed for the EU to meet its stated energy and climate security targets, according to new figures from WindEurope.
The 47% tumble in turbine sales in 2022 reflected a drop in investments in new projects, with final investment decisions (FIDs) being taken for only 12GW of wind farms during the year, well under half the 30GW calculated necessary to be build in the bloc if it is to meet its 2050 energy transition objectives.
Despite the EU’s high ambitions for offshore wind power – to go from more than 15GW turning today to over 100GW by the end of the decade – not a single FID was signed in 2022, WindEurope noted.
“WindEurope latest data on wind turbine orders in Europe in 2022 paints an extremely worrying picture,” said the industry advocacy body’s CEO Giles Dickson. “The problem is inflation, with costs rising at a higher rate than prospective revenues. Investors are also being turned away by unhelpful national interventions in electricity markets.
“The figures for wind turbine orders in 2022 should ring an alarm bell: Europe’s energy and climate targets are at risk if the EU fails to ensure an attractive investment environment for renewables.”
WindEurope had flagged warning signs on turbine orders last October after charting a fall of more than a third in the most recent third quarter.
According to WindEurope calculus, inflation in commodity prices and other input costs raised the price of wind turbines by some 40% over the last two years. This burden was “compounded… by last year’s market interventions have made Europe less attractive for renewables investors than the US, Australia and elsewhere”.
“Unhelpful interventions in electricity markets by different national governments have compounded the inflation challenge. Investors understand the need to support families and businesses. But the fact that governments have been able to deviate from the EU’s emergency €180/MWh ($195/MWh) revenue cap on generators and set different caps for different technologies has created real confusion and uncertainty.”
The so-called Net-Zero Industry Act now being hatched by the European Commission would be “essential [to market recovery] and can’t come soon enough”, said WindEurope.
“The EU must make Europe an attractive place for renewables investments again - the forthcoming market design proposals must address this. The fall in investments and turbine orders is also compounding the problems faced by Europe’s wind energy supply chain.
“Europe’s wind and other clean energy supply chains need to invest in new manufacturing and logistics in order (a) to become competitive and (b) to build up the capacity needed to produce the volumes of low carbon equipment needed for the Green Deal.”
Investment tax credits – such as the US is stumping up in its Inflation Reduction Act – is expected to be central to solving the current sector malaise, said WindEurope, and “existing EU funds can play a key role in de-risking and leveraging the private investments needed in new factories and in Europe’s port, transport and other infrastructure”.
“The EU needs to set up the mechanisms and get the money moving asap. Clean energy industries are debating now where they should invest and need clear signals now if it’s going to be Europe,” said Dickson.
WindEurope also foresees a prime opportunity to improve sectoral conditions in the revised EU electricity market design slated to be tabled in March.
“The market design should leverage the potential of CfDs [contracts for difference] and PPAs [power purchase agreements] and leave space for investors to access some market revenue so they can meet their PPA obligations. It must avoid forcing CfDs retrospectively onto existing assets, or onto new assets,” said Dickson.
“The EU must restore trust in the functioning of the electricity market to unlock investments that are both ready and urgently needed.”