German onshore wind power – output, business and perspectives
Quick facts
(Figures for 2023; Sources: BWE, AGEB, UBA, BNetzA)
Number of turbines installed: 28,667
Total capacity installed: 61 GW
Projected expansion: 115 GW (2030)
Share in gross power production: 22.2%
Output: 114 TWh
Employees (onshore & offshore): ≈ 130,000 (2021 est.)
Average auctioned support level: 7.31 ct/kWh (November 2023)
Overview
Germany has been a leading market and incubator for onshore wind power throughout the 2000s and early 2010s, as eager investors and guaranteed state support helped bring the technology to scale. As of 2022, the country boasted the largest installed onshore wind capacity in Europe and the third largest globally.
Nearly 29,000 turbines with a cumulated capacity of 61 gigawatts (GW) were in operation across the country at the end of 2023. The annual rate of expansion has varied greatly throughout the past years. With a net expansion of about 5.3 GW, 2017 showed the strongest growth in capacity of any year so far.
Following a change in the support regime in the following year, from fixed guaranteed remuneration rates to a system in which the required support is determined through auctions, the expansion rate dropped to less than 1 GW in 2019. Following a string of regulatory changes in the following years, particularly regarding licensing and land use, expansion climbed back to 3.5 GW in 2023.
After entering office in late 2021, the government of chancellor Olaf Scholz announced its goal to reach a total installed capacity of 115 GW by 2030. This means Germany will have to ramp up annual expansion figures to nearly 13 GW in the next few years, over four times more than in 2023. While the average capacity of installations keeps increasing steadily, marking an increase of 10 percent in 2023 alone, Scholz said the country will still have to build up to five new turbines per day to meet the target, a level that had already been reached in 2017.
The strong fluctuations in the expansion figures in recent years have not been without consequences for the industry. In 2019, the construction of new turbines sunk to the lowest level in two decades. A lack available construction space, investor uncertainty, skilled labour shortages and slow licensing procedures were considered the main obstacles to expansion. Scholz’s government since sought to address these hindrances with a raft of revised renewable power legislation, while additional reforms to boost wind power at the EU level in late 2023 are expected to further facilitate a faster buildout.
While mood in the industry has recovered since the dip in 2019, companies remain worried about long-term developments in the sector, illustrated for example by a state support payment worth more than 7 billion euros to wind turbine producer Siemens Energy.
The industry hopes that wind power’s key role in the Germany’s and the EU’s push for greater energy independence following Russia's invasion of Ukraine will allow the sector to gain greater planning security and embark on a steady growth path throughout the next years. Apart from a reliable order situation, industry representatives also have voiced calls for better industrial policy support at the EU level to ensure European manufacturers can withstand competition from highly subsidised Chinese producers.
The auctioning off a record nearly 13 GW of new onshore turbine capacity in 2023 showcased the German government’s ambitions, even if the earmarked volume was not matched in auctions. However, with about 7.5 GW in newly licensed capacity, the expansion appears to be on a solid footing for the near future. About 4 GW could be expected in new turbine capacity in 2024, the German Wind Energy Federation (BWE) said.
Reforms in licensing and land utilisation hoped to bolster buildout
Together with insufficient construction space, regulatory hurdles have been the main driver behind the slump in onshore wind expansion. According to a 2023 analysis by industry lobby group BWE, the average duration from planning to licensing of a wind farm is four to five years. Economy and climate minister Robert Habeck in late 2022 insisted that the individual efforts of states are entirely to blame for the slow expansion. Strict state regulations, like Bavaria’s 10H-rule requiring a minimum distance from residential of at least ten times a turbine’s height, have undermined the energy transition’s progress in the southern state.
The Onshore Wind Power Act introduced in 2022 standardised assessment procedures for species conservation across all states to speed up licensing procedures. It also stipulated that larger states must contribute 2 percent of their territory as possible locations by 2032, while city states are required to designate 0.5 percent. The space for is “clearly available”, according to a study by research institute Fraunhofer IEE, while an analysis by environmental think tank KNE found that only a fraction of the two percent-target are will ultimately be needed for constructing enough turbines.
At the beginning of 2022, around 0.85 percent of Germany’s land area had been designated for wind turbines, with figures varying widely between states. However, the government in 2023 said it is optimistic that the 16 states and their subordinate administrations have generally begun to embrace new turbines on their territory as an economic advantage.
Surveys suggest that people in Germany remain overwhelmingly in favour of further onshore wind expansion. Generally speaking, the acceptance of more renewable power infrastructure has grown further with the European energy crisis and Russia’s war on Ukraine, since more wind and solar power are believed to increase the country’s energy sovereignty.
Lawsuits brought by citizen campaigners and by environmental groups that used to be widespread throughout the past years have largely subsided, not least due to regulatory changes that set higher hurdles for legal objections.
Onshore wind has become workhorse of Germany's electricity system
Irrespective of the many challenges for turbine construction in recent years, onshore wind power since 2019 has become Germany’s single most important electricity source. The annual output has grown by 25 percent over four years until 2023. This firmly made onshore wind the main driver of Germany’s overall renewable power share of 52 percent of electricity consumption in that year, contributing about 22 percentage points to the mix.
The particularly windy year 2020, during which power consumption was depressed for many months due to the coronavirus pandemic, was the first in the country's history when renewables overtook fossil fuels in total electricity production. However, while power output has generally grown in parallel with installed capacity over the past few years, particularly weak-wind years, such as 2021, have dented the output curve and served as a reminder of the technology’s fluctuating production profile.
Wind power generation generally peaks during winter months, partly balancing out lower power input by solar installations at that time of the year. Onshore turbines delivered nearly 21 billion kWh of power in February 2022 alone, setting a new monthly record. Yet wind power’s volatility also becomes evident during the colder and darker months, when the vast majority of Germany’s power demand still has to be covered by conventional power plants.
Individual turbines also keep growing in size and output: new models added in 2023 had an average capacity of over 4.7 MW, a height of 206 metres and a rotor diameter of 141 metres. The height of the average turbine has more than doubled over the past two decades. New installations thus can produce more power and greatly increase output at a given location if old turbines are replaced in so-called repowering procedures.
A single modern onshore turbine on average produces enough electricity to supply up to 6,000 households. Replacing older models that in some cases have been in operation for more than 20 years through repowering is therefore seen as one of the most promising ways to quickly ramp up wind power’s share.
So far, the vast majority of wind turbines have been built in northern Germany, where favourable wind conditions benefited the industry’s early development in the 1990s. Greater energy yields and more operating hours per turbine, meanwhile, have compensated for a planned decline in support and made it possible to build on previously unattractive locations. But even though greater efficiency made inland regions further south with weaker winds more attractive to investors, expansion levels there still lag far behind those in the north.
Due to the high concentration of wind power in northern states and an energy grid unable to transport most electricity produced in windy areas to industrial consumers further south, turbine power production routinely has to be curtailed to avoid grid overload.
In the first half of 2022 alone, about four percent of renewable power produced in Germany could not be used, according figures by Germany’s Federal Network Agency (BNetzA). Almost 60 percent of the cuts fell on onshore wind turbines and they mostly occurred in Lower Saxony, the state with the highest wind power capacity in Germany.
From layoffs to skilled labour shortage: wind makes for volatile job machine
Wind power has been the most important creator of jobs in the renewable energy sector in recent years. Out of about 344,000 jobs linked to the renewable energy sector in Germany in 2021, roughly 130,000 were in the (onshore and offshore) wind power industry, Germany’s Federal Environment Agency (UBA) said in a 2022 analysis. In 2019, the wind power industry had a revenue of 9.6 billion euros, according to the German statistical office Destatis. This was more than half of total revenue in renewable power technology — even without including linked economic effects in associated industries and service sectors.
However, despite projections showing a huge uptick in the number of wind turbines being installed in Germany and elsewhere in Europe in the coming years, a job in the wind power industry so far did not necessarily mean secure employment. Industry association BWE estimated that up to 40,000 jobs might have been lost in the German wind power sector since 2017 due to the continually low buildout volumes.
The closure of Germany’s last wind turbine rotor production facility, announced by operator Nordex in mid-2022, led to further concerns that the country risks losing its domestic manufacturing capacity. The closure of a turbine plant by Danish manufacturer Vestas in a former east German coal region additionally raised doubts whether the renewable power industry is capable of replacing jobs lost in the fossil sector.
However, an annual survey by labour union IG Metall about business expectations conducted since 2015 showed that the mood within the industry has brightened significantly in the past years. While nearly 75 percent of labour representatives in 2019 said they have a negative outlook on business prospects in their sector, this figure dropped to less than 14 percent in 2023, while about 65 percent reported a clear positive outlook. Most respondents said they expect orders to increase, both in Germany and in other parts of the world – so much in fact that demand could exceed current production capacities by 2026.
Paradoxically, while manufacturing capacity has been shut down and jobs were lost, the government simultaneously warned that expansion targets could be at risk due to a lack of skilled workers to implement the envisaged expansion. Economy minister Habeck in early 2022 warned that Germany would need more skilled immigrants to implement its energy transition plans. A total of around 200,000 job openings would have to be filled to implement key elements of the energy transition. The government announced a reform of Germany’s immigration law in late 2022 to recruit skilled workers from abroad. Industry group BWE says up to 40 percent of all labour needs for climate neutrality would fall into categories in which finding skilled workers already is a challenge, which is why it launched its own recruiting initiative in 2022.
Regarding the wind industry’s impact on local economies, most jobs have been created in the major manufacturers’ home regions in northern Germany, where many final assembly processes for on- and offshore turbines take place and most installed turbines can be found. According to the German Institute for Economic Research (DIW), job creation in the wind power industry covers a wide range of skills: supplier companies for turbine manufacturing are located all over the country and provide chemical and metallurgical intermediary goods, construction expertise or other services to the engine builders.
From state support to open compeititon: German producers hope for global growth opportunities
State support for new wind farms was initially laid out in Germany’s Renewable Energy Act (EEG) in the year 2000. It granted operators guaranteed remuneration for electricity fed into the grid at fixed rates for a period of 20 years. In 2017, the support scheme underwent a fundamental shift from politically determined support rates to an auction system in which bidders demanding the lowest guaranteed remuneration for operating their turbines would be awarded. The switch from predetermined feed-in tariffs to rate-setting in auctions was aimed at strengthening market principles and competition in the wind power sector. It led project developers to compete for last-minute construction applications to secure a slot among the last projects eligible for guaranteed remuneration, which caused installations to spike in that year.
Besides implementing changes to the funding mechanism, the government also capped the total supported volume and by, 2019, only installations that won an auction were eligible to receive support for the first time. However, while the introduction of the auction system was followed by falling support levels, onshore wind tenders in the following years mostly were undersubscribed and ended up with fewer applications than expected. Engineering association VDMA Power Systems argued that investors shunned the sector due to the ongoing regulatory challenges. The auction turnout improved temporarily and participants submitted bids for more capacity than auctioned, before undersubscribed auctions returned in mid-2022.
Disrupted supply chains, rising material and energy costs as well as higher interest rates as a result of the combined economic impact of the COVID-19 pandemic and Russia’s war on Ukraine had worsened the investment climate again, according to wind power lobby group BWE. It therefore called for increasing support rates in auctions to compensate for the loss in investor confidence. The country's Federal Network Agency (BNetzA) ultimately raised the maximum support rates in auctions, from an average of 5.87 cents per kilowatt hour in late 2022 to 7.35 ct/kWh in 2023. Apart from that, the BWE vehemently opposed plans to siphon off ‘random’ profits made during the energy crisis with a windfall tax to fund broader social relief measures, arguing this would again stifle investment.
Moreover, the first turbines reached the end of their 20-year guaranteed support period in 2021. Observers warned that this could lead to a decrease in installed capacity if low expansion levels persist. The BWE said it was difficult to gauge when individual windmills will be decommissioned, adding that it hoped business models like power purchase agreements (PPAs) could cushion the effects of expiring guaranteed support.
Turbine manufacturers and wind power project developers from Germany early on in their development started to also operate in markets abroad. Between 2010 and 2018, about 60 percent of the manufacturers' total revenue was generated abroad, figures by VDMA Power Systems showed. The trend intensified after domestic business prospects deteriorated after 2017 while wind power expansion accelerated abroad. Service providers in other segments of the industry (project development, installation, maintenance, etc.), however, have a greater dependence on domestic sales. Turbine manufacturers also could not fully compensate for a weak domestic market by going abroad, VDMA said. Production chains built up over many years could be disrupted and technical expertise lost if companies relocate, the association warned.
Small profit margins and stiff competition in the past years have made it harder for companies to keep up against international competitors. In a global ranking by Bloomberg New Energy Finance in 2023, only two German-owned companies (Nordex and Siemens Gamesa) remained among the top ten wind turbine producers globally. Similarly, while Germany accounted for about seven percent of all installed onshore wind power capacity worldwide, it only contributed three percent to the capacity added in 2021, the Global Wind Energy Council's (GWEC) 2022 report showed.
