Germany is the world’s fourth-largest economy and Europe’s industrial powerhouse. It has some of the most ambitious climate targets in the world. Following a landmark 2021 court ruling, the country committed to net-zero emissions by 2045. Then, after elections in September 2021, the new Social Democrat-led government announced that the power sector would be 85% renewable by 2030: a massive shift for a country that remains by far Europe’s biggest burner of coal.
However, in February 2022, the Hamburg-based multinational Nordex – one of the world’s biggest manufacturers of wind turbines – announced it would shut its only German blade factory, in Rostock, in June, impacting around 600 employees. The company will continue to manufacture blades in a facility in Spain, but the Rostock factory will now only manufacture nacelles, hubs and drive trains. “We must optimise our global production and sourcing processes in order to ensure profitable production and to secure the Nordex Group’s competitiveness,” said José Luis Blanco, Nordex Group CEO.
The trailblazing climate pledges and closure of the turbine factory seem to contradict each other. How did we end up here?
On a practical level, the Rostock factory only produced blades for turbines with a 149m maximum diameter, which limits its capabilities in a market where the trend is for turbines to get bigger and bigger.
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New investment could have increased its manufacturing capacity, however, and it is notable that the Nordex closure is not unique. “With the decision to close the plant, Nordex has followed an industry trend,” company spokesperson Felix Losada told Energy Monitor. “The production in Rostock is the last remaining blade production in Germany.
“In order to survive in global competition, we must make our global production and procurement structure as efficient as possible,” he added. “Nordex Group will be adjusting this to future market developments and political frameworks.”
The implication is that Germany has not offered optimum conditions for wind turbine manufacturers in recent years. Much of this comes down to failed politics. “Previous German governments have sadly failed to see the German energy turnaround (or ‘Energiewende’) as the chance it represents,” explains Wolfram Axthelm, CEO of Bundesverband WindEnergie (BWE), the trade association for the German wind industry.
For a time, policies such as feed-in-tariffs and EU-led national renewable energy targets ensured a landscape favourable to wind and solar development, and deployment soared.
“But as the years before 2020 approached and there was suddenly more uncertainty as to what would come after, we saw a dent in renewables deployment,” says Karsten Neuhoff, head of climate policy at the German Institute for Economic Research (DIW Berlin).
Another key hurdle for German wind power has been the slow and complicated permitting process that new developments must pass through. “Just to give you an example, you have to gain different permission for each motorway bridge that lorries carrying blades pass under as they travel from factory to construction site,” explains Dennis Rendschmidt, managing director at VDMA Power Systems, a group representing power and heat generation equipment manufacturers and suppliers in Germany.
BWE’s Axthelm calls the processes “overly bureaucratic and costly”. It can take six years to get a single turbine approved for deployment. Other issues in the approval of new wind farms include the little space designated for new developments, also because of concerns over wildlife and interference with military zones.
With weaker policy signals and wind developments held up by permitting issues, there has been a drop in orders for new turbines, says Rendschmidt. “Maintaining manufacturing capacity is all about having orders in your books,” he says. “[Then] you can think about reinvesting in a factory – but to do that you need to get the nitty gritty policy decisions right to make sure deployment in the long term is happening.”
A spokesperson for Siemens Gamesa, a leading manufacturer of wind turbines in Germany, says wind capacity was not added at the pace required to sustain a domestic European industry. “As a result, there was a reduction of jobs in the industry rather than a necessary uptake, and also a loss of suppliers in the value chain,” she told Energy Monitor.
Another key risk for German manufacturers is that, as new sites are auctioned off to generators, price is the only metric they assess. “What would be great to see would be a certain level playing field in auctions, where the higher environmental and labour standards in Europe can be taken into account,” says Rendschmidt. Otherwise it is increasingly likely cheap imports will out-manoeuvre local products.
Fears for the economy
If the landscape around wind deployment does not change soon, there could be a real risk to domestic industry. “We are at a critical point right now because we have already had a slowdown over the past two or three years," says Rendschmidt. "If things suddenly pick up now, it will still take a year or two for there to be an impact on order books.”
A further serious industrial headwind has emerged in recent months in the form of the war in Ukraine. Stronger renewables targets should help the industry in the long term, but the world’s biggest wind turbine manufacturer, Vestas, swung to an operating loss in the first quarter of 2022, which it blamed on disrupted supply chains and soaring inflation.
The fear for the industry is that, if the government does not offer more support, the same thing that happened with Germany’s solar manufacturing could happen to the country’s wind industry.
Germany was a solar powerhouse in the early 21st century. The country’s Renewable Energy Act, introduced in the year 2000, introduced feed-in tariffs that allowed it to deploy generously subsidised solar capacity faster than anywhere else in the world. German companies ascended to global leadership in solar technology – before the rise of China as a solar export powerhouse out-priced and outmanoeuvred the pioneers. The number of German jobs in the solar industry collapsed from 62,000 to 20,000 in the space of eight years. German power customers were now essentially subsidising Chinese solar manufacturers.
The European Commission has said that, in the context of growing international security fears and enhanced renewable targets under REPowerEU, it will do “whatever it takes” to rebuild domestic European solar manufacturing.
If Germany does not turn around its renewables industry, there are fears the country's planned coal power phase-out may endanger security of supply. “The sluggish expansion of renewable energies and the necessary infrastructure in the past years have posed risks to the domestic economy,” says Frank Peter, deputy executive director of Berlin-based think tank Agora Energiewende. “To make sure that parts of the value chain of energy-intensive materials like aluminium, pig iron and chemicals can be kept, cheap green electricity is fundamental.”
A turnaround on its way
It is not all doom and gloom, however. Germany’s renewables industry remains the strongest in Europe, with more solar and wind manufacturing sites than any other country in the bloc. Data from WindEurope shows that, in 2020, Germany had 82 of the 217 wind manufacturing sites in the EU, while SolarPower Europe’s solar manufacturing map shows the country currently has 53 of the 138 solar manufacturing sites.
The wind industry represents approximately 300,000 EU jobs, and has a turnover of €60bn. While Asia now produces around 92% of the world’s photovoltaic panels, there are early signs of a turnaround in the solar industry. The latest market report from SolarPower Europe finds that Europe has a “a vibrant and growing R&D and solar manufacturing scene”. In Germany, manufacturer Meyer Burger opened a 400MW factory for high-efficiency heterojunction solar cells in 2021, while Enel opened a separate 200MW factory in Italy in 2020. Enel has more recently announced a grant from the EU that will see it expand the factory to 3GW.
Within Germany, the new coalition government, which includes both Social Democrats and the Greens, has shown a clear intention of giving the renewables industry the support it needs to grow. The government has unveiled an 'Easter Package' and announced a 'Summer Package' to accelerate expansion. The former includes a new Renewable Energies Act (‘Erneuerbare-Energien-Gesetz’, or EEG), which makes explicit that the German Energiewende should take precedence over other – potentially conflicting – policies, and should help overcome many of the long-term permitting issues. The tender volume for new wind auctions would be increased and the mandatory free space around radar stations for aviation would be more than halved from 15km to just 6km.
The summer package is expected to include laws dealing with increased space for renewables, says Axthelm, and should bear out the political promise of increasing land available for onshore wind to 2% of the country's total surface area. Axthelm also expects that repowering – extending the life of existing wind and solar farms – will be made easier.
Felix Losada, from Nordex, says the company “very much welcomes” these new political goals, which have been accelerated in recent months by the war in Ukraine and the subsequent drive for energy independence.
DIW Berlin’s Neuhoff adds that the designation of more land for renewables should give both generators and manufacturers much more certainty over their business prospects, and encourage them to boost capacity. “I think [we are] coming out of the tunnel we were in,” he says. ”The planning regimes are improving and a lot more sites are available for projects.”
The industry seems to be responding to the new investment landscape with enthusiasm. Germany’s latest onshore wind auction was the second in a row which was oversubscribed, following a number of years where the opposite was true due to lengthy permitting.
“Germany has turned the corner on onshore wind," says Giles Dickson, WindEurope CEO. "Two consecutive auctions [were] fully subscribed. Permitting volumes [were] more than double what they were just a few years ago." The German government "wants a massive further build-out of wind and has a clear plan to simplify the permitting to deliver it".
But is it enough?
There remain concerns that what has been announced is not enough to deliver an energy transition at the pace required.
“The new federal government is doing a pretty good job in terms of ambitions and targets,” says VDMA’s Rendschmidt. “The question now is whether they will deliver on them.” It remains to be seen whether regional governments take up the federal government's recommendations to the full extent. Even at a federal level, there remain serious concerns over whether permitting will be accelerated sufficiently, with significant outstanding blockages over protected bird species as well as military radar, says BWE’s Axthelm.
“The legislative action currently under way is supporting faster build-out,” the Siemens Gamesa spokesperson told Energy Monitor. “But the whole wind industry continues to struggle, as volume in the markets is still missing despite raised targets in Europe, while at the same time raw material prices increase and supply chain disruptions lead to delays.” Permitting delays can worsen these pricing issues, as prices can significantly increase in the five or more years since an auction is won and build-out begins.
With the new legislative programme set to be implemented this year, for Peter at Agora Energiewende, the big issue is the pace of change. “Time is running out for the industrial players in Germany to kick-start the transformation to achieve 2030 reduction targets and climate-neutral production by 2045,” he says.
However, even if some of the more granular policy instruments remain ineffective, the political will for change – turbocharged by Green coalition partners and security concerns over Ukraine – is certainly there, and this counts for something.
“There is so much more emphasis now on both green policy and resilient supply chains in both Germany and Europe than there was even five years ago,” says DIW Berlin’s Neuhoff. “There is also a clear avenue to popular political success that sees net zero pursued with green jobs and investment in Europe, and this makes me optimistic that policymakers will seek to do what it takes to achieve net zero based on domestic supply chains where possible.”