Storm in wind power, test for the energy transition

At a time when the sector must invest massively to meet expected demand, the surge in interest rates and material costs is catching up, to the point of leading it to suspend projects... and slow down the energy transition.

As climate scientists urge action by 2030 to avoid the worst effects of global warming, commissioning of wind projects around the world fell by 15% in 2022, according to BloombergNEF.

In offshore, Europe, a pioneer, installed 2023 gigawatts (GW) of capacity in the first half of 2,1, which now reaches a total of 32 GW, according to WindEurope. But to achieve the 120 GW targeted in 2030, it would have to install on average the equivalent of 11 GW per year, underlines the professional association.

But the clouds are gathering. First the surge in interest rates: in onshore wind power, the cost of borrowing today represents "8-10 euros/MWh on a price of 60-65 euros !” underlines Michel Gioria, from France Renouvelables. These infrastructures require significant initial investments, financed by loans, he recalls.

“Relaunch investments”

Added to this is inflation in raw materials: steel, aluminum, composite materials, etc.

The average price of an onshore wind turbine increased from 2,4 million euros in January 2021 to 3,2 million, according to France Renouvelables.

In the offshore, several projects, won before costs soared, have been suspended, such as the Trollvind of the Norwegian Equinor. Ditto for the Swedish Vattenfall and its Norfolk Boreas (1,4 GW) in the British North Sea, when the disappointments of the Danish Orsted in its American projects caused it to suffer depreciation and a stock market collapse.

This context also affects the five European turbine manufacturers, who for years have struggled to get out of the red.

The Danish Vestas, long the world leader before being dethroned by the Chinese Goldwind, suffered another loss in the 2nd quarter. Orders are up 8% over one year, but the manufacturer, which employs 29.000 people worldwide, says it is cautious for the future in the face of geopolitical uncertainties, inflation and the slowness of authorization processes.

Warning shot at the beginning of September: a British call for tenders in the offshore sector found no candidate, with London not offering a price considered sufficiently profitable.

“We will need support measures and a review of auction mechanisms to relaunch investments in offshore wind,” underlines Rystad Energy.

"Countries, like France, have indexation measures. But Great Britain's refusal threatens its leading position," estimates WindEurope, for whom indexing would make offshore wind power "certainly slightly more expensive, but it would always remain less expensive than most other energies and more stable than fossil resources.

"Unfair competition"

For the sector, this crisis comes at a pivotal moment, where it must build turbine and cable factories and equip itself with specialized vessels to be able to meet the ambitions of decarbonization of electricity.

Already, tensions are appearing in supply. Thus the Noirmoutier park had to order foundations from China, due to a lack of available European manufacturers.

Present in Europe in onshore wind power, China is still not very present in offshore, but it has already supplied the first Italian wind farm in 2022.

“The future of our low-carbon technology industry must be built in Europe,” said the President of the European Commission Ursula von der Leyen, promising future measures for wind power in mid-September.

“The sustainability of the wind industry in Europe is at stake, if there is no change of direction from States, in a few years it could be wiped out,” replies the political director of WindEurope Pierre Tardieu.

The sector is asking for investment support, also for networks, port infrastructure and a component against “unfair competition”. He demands that the price factor, which represents 70% of the rating in the marine sector, and even more in the land sector, makes room for other criteria (CSR, local content, etc.). Without forgetting the acceleration of authorizations, always a major obstacle with, depending on the sector, some 80 GW of blocked projects ready to be deployed on the continent.