A Mere Breeze: Era of Fast Growth Ends for Wind Energy in Europe

February 13th, 2013

Published on Spiegel Online International, by Joel Stonington in Vienna, February 08, 2013.

The debt crisis is finally catching up with wind energy, once a fast-growing sector in Europe. After more than a decade of double-digit growth, austerity, rapidly changing energy policies and skittish investors are putting a damper on the industry. 

It is often the elephant in the room at any conference on renewable energy. Sometimes, it’s mentioned simply as the “s” word and other times it’s not mentioned at all. But subsidies remain crucial, with wind energy still struggling to achieve price parity with coal and natural gas. This week in Vienna, at the European Wind Energy Association’s annual conference, subsidies came up right away.

This time, it was the source of the comments that was unexpected. During the opening keynote, Fatih Birol, the chief economist at the International Energy Agency, proclaimed fossil fuel subsidies to be the “Public Enemy No. 1″ of sustainable energy developments. This, from a man who just eight short years ago was urging “substantial” increases in new oil and gas drilling investments.
His argument was simple. Renewable energies right now are suffering from a dual problem: Governments around the world are slashing aid for clean energy, and massive subsidies propping up the fossil fuel industry are making it impossible to compete with the cheaper energy.

The current global total in fossil fuel subsidies for 2011, according to Birol, was $523 billion. The result was an incentive equivalent to $110 per ton of carbon emitted. In comparison, global subsidies for renewables amounted to what seems like a paltry $88 billion in the same year.

“If we had an ideal world — with no subsidies for nuclear, gas or coal — in that world, onshore wind would do extremely well,” Christian Kjaer, CEO of the European Wind Energy Association, told SPIEGEL ONLINE. “But that’s a utopia.”

Wind Power Still Growing, But for How Long? … //

… Regulatory Uncertainty:

“Who here believes regulatory uncertainty is the main hazard to growth of wind going forward?” asked Thomas Pütter, chairman of Ancora Finance Group, while onstage at the EWEA annual conference. Nearly every hand in the room went up.

In tough economic times, politicians are looking at every little thing to cut. And high energy prices have made renewables a target for politicians looking to score points.

Germany’s current laws allow renewable energy producers to feed electricity into the grid at a fixed, above-market price, called a feed-in tariff. The goal of the law was to encourage investment and help bring the cost of energy from technologies like solar panels and wind farms into fair market competitiveness with coal, nuclear or gas. Renewables in Germany and other countries with feed-in tariffs have boomed, with a corresponding cost to consumers for the subsidies. Across Europe, the battles are loud and bitter on policy issues surrounding energy.

“At times of distress, every form of subsidy comes under pressure,” David Jones, the head of renewable energy for Allianz Capital Partners, told SPIEGEL ONLINE. The group has 42 investments in wind worth €1.3 billion. Jones said that the key for investors such as Allianz is stability in the investments moving forward. He noted that the difference in risk between European countries has grown, with the possibility of making more money in riskier countries and also a higher possibility of losing it.

With wind, the initial capital investment is especially important. And the political uncertainty surrounding subsidies can have a negative knock-on effect. With increased investment risk, the uncertainty can make borrowing money for projects considerably more expensive. This double threat appears likely to push the wind power growth into the doldrums in 2013.

Confidence Crushed: … //

… Trouble in Paris: … //

… Mixed Signals: … //

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