What do rising energy prices mean for the wind business?Due to the war Russia started in Ukraine, the world is facing several challenges. Besides the obvious humanitarian crisis in Ukraine, the most prominent challenge is the energy crisis. The rising cost of energy causes an inflation rate for our day-to-day spending in many parts of the world that we have not seen for decades. The main reason for this rise is the seemingly ever-increasing price of gas. At the time of writing, the gas price was at least € 280 per megawatt hour compared with less than € 30 per megawatt hour a year ago. As I wrote in my note for our March/April 2022 issue, Putin is (most likely) also using the gas deliveries to European countries as a political instrument. Because the gas and electricity prices are coupled, the electricity price has also seen a sharp increase. The European Commission has already suggested decoupling these prices since electricity is being generated more and more by other sources, like renewable energy, which is less dependent on gas prices. As I have said before, renewable energy might be a way out of this energy crisis, and it looks like governments are thinking along these lines as well.
In the USA, President Biden has signed the Inflation Reduction Act. For the US wind energy industry, the Act is the starting point for a period of regulatory certainty. The tax credits in the Inflation Reduction Act will accelerate renewables in the USA for the next decade. In the past, production tax credit uncertainty has created a ‘stop and go’ situation for US renewables, which this Act should help resolve. The Act includes $ 369 billion in climate and energy provisions that will change how Americans get energy and shape the country’s climate and industrial policies for decades. Its climate measures include billions of dollars to expand wind and solar power production, bringing electric vehicles within the financial reach of more Americans.
Also, in Europe, governments are announcing plans to support the renewable energy industry. Currently, France gets around 20% of its electricity from renewable sources (including 8% from wind energy) but it needs to increase this share to meet its climate goals while reinforcing energy security. The war in Ukraine and disruptions in its conventional (nuclear) electricity generation fleet are putting France’s energy system under stress. The French government has taken steps to maximise renewable electricity generation as part of the solution. The French government estimates that 5–6GW of wind projects and 6–7GW of solar projects may not go ahead because of the current economic environment. The government has therefore announced several emergency measures to boost renewable electricity generation ahead of the winter. Among them is the possibility for new wind and solar farms to sell their electricity directly on the market for 18 months before locking in their contracts for difference and the possibility for projects that have already won an auction to increase their capacity by up to 40% before completion. The government also plans to factor the evolution of raw material costs into contracts for difference.
Other (European) countries, like Germany, the Netherlands and the UK, are working on similar plans to face this situation, but no details had been announced at the time of writing.
I am sure that by the time we all meet in Hamburg again for WindEnergy Hamburg more details will be known. I’d like to propose that we meet in person in Hamburg to discuss what the current situation means for the wind energy industry.
Enjoy reading and I hope to see many of you in Hamburg!
Floris Siteur
Publisher/Editor in Chief
Publisher/Editor in Chief
