Copyright 2002 by Wilson Rickerson. All rights reserved.
This paper is an introduction for English speakers to Germany’s successful wind energy policies. The author, Wilson Rickerson, worked as an intern at the Bundesverband WindEnergie (BWE), or German Wind Energy Association, in Berlin in 2002. He currently lives and works in New York City. For more information, contact firstname.lastname@example.org.
Rickerson’s article can be downloaded at German Renewable Energy Feed In Tariffs Policy Overview (doc).
The European Market
In terms of both market growth and technological progress, the global wind industry is developing at a pace that rivals that of information technology. Wind turbine technology has advanced dramatically in the last 20 years and modern turbines have 45 times the rated power of their predecessors from the 80s. Larger turbines, increased efficiency, falling costs, and versatile turbine designs have led to improved economies that have driven the rapid increase of wind energy use worldwide. In the four years between 1997 and 2001, global installed capacity more than tripled from 7,700 MW to 25,000 MW. The majority of new wind development has been concentrated in the environmentally-driven markets of Europe, where 70%, or 17,500 MW, had been installed by 2001. Market studies have shown that wind development in Europe shows no signs of slowing. Even as traditionally strong markets like Denmark have stagnated, Europe’s installed base has experienced a 173% growth over the last four years and important new markets (France, Poland, Turkey, Italy) continue to build momentum [1 & 3].
Though national renewable energy strategies may vary, there is explicit support for renewable energy sources (RES) at the European level where Kyoto targets, energy security worries, and job creation are increasingly guiding energy policy. In the early 90s, the European Commission encouraged renewable energy use through the ALTENER program and by participating in the Madrid Declaration (1994). The ALTENER program, which ran from 1992 to 2002, supported renewable energy use through studies, information dissemination and targeted actions that facilitated renewable energy market penetration. The European Commission recently proposed a 215 million € follow-on program with an expanded mandate, “Intelligent Energy for Europe.”
At the Madrid Declaration, European Commission representatives joined members of the renewable energy community in calling for 15% RES penetration by 2010. Though the European Parliament echoed this target, the European Commission set a more conservative target of 12% in the White Paper on Renewable Energy Sources in 1997. The White Paper, and the resulting Community Strategy and Action Plan, have been favorably received by the wind industry, but the pervading opinion is that the White Paper’s specific target for wind power is far too conservative. The White Paper is based on the TERES II report, whose estimate of wind energy’s penetration is roughly half of that published by the European Wind Energy Association (EWEA). With an average growth of 35% in the top 10 markets over the last four years, however, the global wind market is already a year ahead of the schedule published in EWEA’s plan for 10% wind energy penetration by 2020. As a result, the EWEA released a revised prediction of 12% by 2020 this summer [9 & 10].
Wind energy, the cheapest and fastest growing of the renewable technologies, has been the frontrunner of the RES sector. Wind energy’s successes have had a significant impact on the dialogue about future energy supply. It is likely that many of the policy lessons garnered from the wind industry’s development will be applied to other renewable technologies in the near future. The European Parliament’s 2001 “Directive on the promotion of electricity produced from renewable energy sources in the internal electricity market” states the need for national targets and implies the need for a harmonized European RES support scheme. Such a policy would be formulated through a European Commission study that would evaluate existing national policies. Since the largest wind energy market in Europe and the world is Germany, it is likely that the German support structures could eventually be considered as a model for the rest of Europe .
The German Market
The 8,750 MW of wind capacity installed in Germany by the end of 2001 represented one third of the world’s total. After a record-breaking year in 2000, in which 1,663 MW were brought online, many expected the German market to approach saturation. Pessimists were disappointed in 2001, however, as records were again shattered by the addition of 2,659 MW of newly installed power representing a growth rate of over 60%. What is surprising about Germany’s success is that its wind resource is relatively low compared to that of other nations in Europe. While few wind resource areas in Germany have winds above 7.5 m/s, few sites in Great Britain have wind speeds below that amount. Also, the constraints of Germany’s population density makes wind development more expensive than in spacious nations like the United States. Nevertheless, Germany developed its windy coastline at the beginning of the 90s and then pushed inland to develop sites with lower wind regimes as the decade progressed. The result is that Germany, with 4.5% of the US land area and a fraction of its wind resource, currently has more than double the US installed capacity. This capacity currently meets 3.5% of Germany’s national electricity need, with that figure rising as high as 25% in Bundesländer such as Schleswig-Holstein .
On the surface, Germany’s success is partially due to the technological advantage it derived from its relatively late start. When California and Denmark were developing their best sites in the 80s, average turbine size was 55 kW. When Germany began to develop wind energy in the early 90s, it benefited from the rapid increases in turbine size and was able to install larger and more efficient turbines from the outset. As an illustration of this, Germany and Denmark had the same number of turbines installed by 1995, but Germany had 1,132 MW of installed power, while Denmark only had 630 MW. Though this may help Germany’s raw numbers, Germany’s success is primarily attributable to a decade of progressive and targeted legislation .
Germany’s boom lagged about ten years behind the initial wind energy rush in California. In the 1970s and 80s, the US aggressively pursued renewable energy development in response to the oil crises which followed the 1973 Yom Kippur War and the fall of the Shah of Iran in 1979. Wind energy boomed in the state of California as Governor Jerry Brown augmented the federal tax credit with state incentives. California’s wind energy laboratory encouraged an international industry as European manufacturers supplied 50% of the US turbines. By the mid-80s, however, oil prices had fallen, the dollar had weakened, the tax credit had ended, a conservative governor had been elected in California, and the market had gone into decline. The contraction of the Californian market took many European manufacturers down with it as lenders lost confidence and firms faced shrinking credit.
German manufacturers were not as bruised by California as Danish manufacturers were, since the German wind industry was still in its infancy at the time. One factor contributing to Germany’s delayed start was the German response to the oil crises. While California focused on developing alternative energy technologies, Germany’s energy strategy focused on its 20 nuclear reactors, 13 of which were built between 1979 and 1989. A second factor was the powerful conventional energy oligopoly that controlled both generation and transmission nationwide. The oligopoly used its control to effectively block wind energy development. By the late 80s, however, a growing environmental movement began to affect the energy debate in the German Bundestag and the energy policy of the Federal Government.
The first wind energy program in Germany was the “100 MW Program,” launched in 1989 by the Ministry for Research & Technology. Though the program was initially intended as a market introduction mechanism for wind energy, it was determined that the Ministry for Research could not legally sponsor the program without a research component. Thus, wind turbines in the program were paid a subsidy of 8 Pfennige (0.04 €) per kilowatt-hour and were obliged to report their turbines’ performance. Data from these turbines was then compiled by the Institut für Solare Energieversorgungstechnik (ISET) and published as a yearly annual report. The program proved successful from the outset and was quickly increased to the “250 MW” program a year after its inception. Though the subsidy was reduced to 6 Pfennige (0.03 €) in 1991, the program met with success until it ended in 1996 after 350 MW had been installed. ISET continues to collect information on turbine performance, and the unintentional research component has turned out to be a valuable resource for developers, planners and manufacturers.
Soon after the introduction of the “250 MW program,” a coalition of parties in opposition to Kohl’s conservative CDU government, pushed the Stromeinspeisungsgesetz or “Electricity Feed-in Law” (EFL) through the German Bundestag in 1990. The EFL ignited the German wind industry by guaranteeing grid connection and a Renewable Energy Feed-In Tariff (REFIT) to RES generators. Under the law, hydropower, landfill gas, sewage gas and biomass producers were guaranteed at least 80% of the retail consumer price for the electricity they produced. Wind and solar producers, meanwhile, were given a 90% price guarantee. The EFL surprised many policy makers with its significant and sustained effects on the wind industry and on the German economy. Wind quickly became Germany’s fastest growing energy source and the industry continued to expand even during economic downturns. In combination with the 250 MW program, low interest wind turbine loans from semi-public banks, and various state level incentive programs, the EFL propelled the German wind industry to 2100 MW in 1997 – a 420-fold increase over the 5 MW installed a decade earlier [14 & 17].
The EFL-driven boom created approximately 40,000 new jobs – an impressive figure for an energy source that contributes such a small fraction to the national energy supply. By comparison, the nuclear industry supplies 30% of Germany’s energy but employs only 38,000 people. Wind energy’s job creation effect per megawatt of installed power in Germany is therefore approximately 10 times greater than that of nuclear energy’s. Furthermore, wind energy has created jobs in sectors which are critical to the development of the German economy. Most new wind jobs are created in the SME sectors and in regions that are rural or economically less developed. Former East German Bundesländer like Brandenburg and Sachsen-Anhalt, with 326 MW and 302 MW respectively, have attracted much-needed jobs and income through wind energy development .
The German government encouraged rural development with a 1996 change in Paragraph 35 of the Building Code. Under German zoning laws, only certain structures may be planned and erected in the remote countryside. With the change in the Building Code, wind turbines were included among these permitted structures. Evidence now has to be given as to why turbines should not be permitted, rather than the other way around. This reversal significantly streamlined the planning and approval process for wind development across Germany. A second significant result of the code change was that cities and communities were obliged to identify local wind resource areas. A recent German Wind Energy Institute survey, conducted through the BWE regional associations, revealed that between 80% and 95% of the communities in the northern Länder have identified their local wind resource [2 & 12].
Germany’s most recent commitment to renewable energy development is the Renewable Energy Law (REL) of April 2000. With the REL, the German Bundestag reaffirmed its support of REFIT schemes and tailored them to better reflect plant operational costs. While the EFL provided for a straightforward premium price for wind energy, the REL has an incentive structure that is differentiated according to plant location. The REL guarantees wind turbines a premium price of 0.09 € per kilowatt-hour for the first five years of operation. After 5 years, the site quality is evaluated against a predefined standard of performance. If site yield is at least 150% of the standard, then the guaranteed price for that site drops to 0.06 € per kilowatt-hour. For sites with yields less than 150% of the standard, the 0.09 € rate is prolonged by two months for every 0.75% that the yield is under 150% of the standard. Weaker sites are thus compensated at a rate that ensures cost-effective operation, while windier sites are not over compensated. This mechanism provides an incentive for inland site development since weaker wind regimes command the higher compensation rate for longer periods of time. Furthermore, the higher rates mean that developers can more easily secure credit for inland sites that were previously difficult to finance. The result of this law, in conjunction with the Building Code change, is that almost all of the identified inland sites in Germany have either been developed, are under development, or are in the planning stages [5 & 11].
The REFIT mechanisms of the REL and EFL have proved to be the most successful support structures in Europe and have far out-performed other schemes. For several years, it appeared that the principal debate over support policies in Europe was between fixed price systems, like Germany’s REL, and politically established quota systems like Britain’s Non-Fossil Fuel Obligation (NFFO). Under the NFFO, a fixed amount of non-fossil fuel capacity (including nuclear) was tendered for development on a competitive basis. The goal was to encourage the development of non-fossil fuels while driving down costs. The result, however, has more often been sluggish or stagnant markets. Quota systems have several inherent problems. First, the politically determined capacity amount prevents natural market development. Second, contracts are awarded at one or two year intervals, creating market discontinuities that make it difficult for small firms and cooperatives to participate. Third, usually only large-scale projects in prime locations are pursued as a result of the price pressures. The result is that the British market has been dominated by large firms competing to cluster large wind farms in a limited number of sites [6 & 16].
German wind development, by contrast, has been characterized by geographically dispersed wind farms of various sizes, developed by small enterprises and cooperatives. At present, 90% of the turbines in Germany are owned by private citizens and more than 200,000 people are involved in cooperative programs. The large-scale involvement of small-scale investors in Germany has contributed to broad public support for wind energy projects and has significantly reduced the “not in my backyard” problem that has been encountered in Britain .
The most convincing proof of fixed price systems’ advantages over quota systems can be seen through a comparison of installed capacities. Three nations with fixed price systems, Germany, Denmark and Spain, installed 1,568 MW, 313 MW and 391 MW respectively in 1999. Great Britain, Ireland and France, meanwhile, installed 20 MW, 0 MW and 3 MW respectively using the quota system in the same year. The obvious lesson from these figures was reinforced a year later when Denmark moved to a quota system and France switched to fixed prices. From 2000 to 2001, Denmark’s new installations have slowed from 603 MW to 115MW, while France’s installations have nearly doubled from 63 MW to 115 MW .
Prospects for the Future
The success of the German policies has meant that Germany’s inland wind market is approaching saturation. As stated previously, land use limitations and population density will be the limiting factors in future development. Though there may be some sites still unidentified by less enthusiastic communities in the south of the country, most of the inland sites will soon be developed. In total, an additional 5,000 MW of onshore capacity is expected over the next few years .
One answer to the expected saturation is an emerging trend called “repowering,” in which older turbines are replaced by larger modern models. When Germany first began to exploit its wind resource in the early 90s, small turbines were installed in coastal regions. As a result, old and comparatively less productive turbines now occupy much of Germany’s best wind real estate. The current plan to repower these sites with megawatt-class turbines would double the installed capacity while cutting the number of turbines in half. Repowering is already an attractive option to many operators because of the increasing O&M costs associated with aging turbines. The REL further encourages repowering through an incentive that encourages new turbine installation. Under the REL, new plants receive the higher premium price for a full five years, while older plants receive a reduced premium based on their operating life. With this incentive in place, the current short term prediction of additional capacity from repowering is 1,500 megawatts by 2010.
A second answer to the expected saturation is the development of offshore wind locations. The potential for sea-based wind development is enormous. There is abundant space, even when shipping lanes are taken into account, and water-based turbine transport represents an opportunity for considerable logistical improvement over the constraints of ground transport. Furthermore, offshore wind farms would allow for higher tip speed ratios, and thus higher energy yield, than those permitted on land since mechanical noise would be less of an issue at remote sea locations. Most importantly, the offshore wind resource is vast and the wind conditions are ideal compared to onshore: annual average wind speed is higher, the lower surface roughness causes lower ambient turbulence, the air is more dense at sea-level, capacity factors are higher (35% offshore vs. 23% onshore), and the exploitable regional offshore resource could theoretically exceed Europe’s current electricity need .
While the advantages of offshore wind energy are clear, the environmental challenges posed by sea-based development will require innovative technologies, comprehensive maintenance strategies, and careful economic planning. Investment costs for offshore projects, for example, will be 75% to 95% higher than those onshore. Though prices will fall through economies of scale, and higher investment costs will be compensated by higher energy yields, the expense of offshore projects will still be a barrier. It has been estimated that offshore wind farms must be at least 100 MW in size in order to be economically feasible. As a result of this prediction, giant 3 to 5 MW turbines with rotor diameters of 100m to 120 m are currently in development.
In order to jumpstart the market, Germany has made offshore development a top priority through the REL. While the higher fixed price window is only five years for new onshore projects, it is extended to nine years for offshore projects. In response to this incentive, plans have already been developed for gigawatt-sized farms at sites up to 100 km from shore and in water depths up to 30 m. If current trends continue, the installed offshore capacity will amount to 20,000 to 25,000 MW by 2030 and will meet 15% of Germany’s national electricity need.
Though repowering and offshore development are significant market trends, they will not prevent a German market slowdown in the short term. As can be seen in Figure I, the market is expected to peak in 2003 before declining steadily until 2009. After 2009, repowering and offshore development should begin to make significant contributions to annual installed capacity. A period of stagnation in Germany, however, will not cripple the global market as California’s collapse did in the 80s. The world market is far more diverse and international than it was two decades ago. Europe has committed to moving towards a sustainable energy supply for environmental reasons, while massive markets in the developing world (China, India, Brazil) are beginning to view wind development as a solution to their energy supply problems. Furthermore, an array of decentralized wind energy applications, such as hydrogen production, water desalinization and wind-diesel systems, are expected to be major growth areas for the wind industry in the longer term .
Figure I: Projection of annual wind power growth in Germany in both the onshore and offshore sectors; including repowering 
This encouraging outlook for the global wind industry also bodes well for Germany. German manufacturers are well positioned domestically in the turbine and turbine component markets and a DEWI study has shown that they have steadily been increasing their export share. In 2001, for example, 517 MW of capacity from German firms was installed internationally and exports represented 20% of German sales. These figures represent, respectively, a 120% and 37% increase from 2000. If German firms can aggressively pursue export markets, it may well help to smooth the transition from onshore to offshore development .
Whatever the course of the next several years, the fact remains that Germany’s renewable energy polices and wind energy market of the last decade have had a definitive impact on the global energy debate. Rapid progress towards a renewable energy supply has been achieved on a national level by the world’s fifth largest energy consumer, thus translating the theoretical ideal of a more sustainable energy supply into concrete targets.
Wilson Rickerson, email@example.com.
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(2) DEWI, “Stand und Aktuelle Aussichten der Windenergienutzung in Deutschland 1999” from “Wissen Windenergie – Einblicke und Ausblicke CD-Rom” Osnabrück, Germany: Bundesverband WindEnergie e.V., 2002
(3) DEWI, “Projection of World Wide Energy Use” from “Wind Energy – Insights & Outlook CD-Rom” Osnabrück, Germany: Bundesverband WindEnergie e.V., 2002
(4) Directive of the European Parliament and of the Council on the promotion of electricity produced from renewable energy sources in the internal electricity market, August 2001 at http://www.wind-energie.de/englischer-teil/english.htm
(5) Erneuerbare Energie Gesetz, German Bundestag, 2000
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(10) EWEA Wind Force 10, London: The Beacon Press, 1999
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(14) Stromeinspeisungsgesetz, German Bundestag, 1991
(15) Twele, Jochen “Windenergie – Technik & Repowering” Berlin: BWE Berlin, 2002
(16) Wagner, Andreas “The Winds of Change in Europe – A European framework for a dynamic and continuing growth of wind power” at http://www.wind-energie.de/englischer-teil/english.htm
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