July 3, 2018 / 4:04 PM / in 15 days

German engineering group warns of drop in new wind power projects

FRANKFURT (Reuters) - A drop in the number of new German wind power projects coming on stream in 2019 and the early 2020s could make it harder to achieve economies of scale and hit investment, according to the country’s VDMA mechanical engineering group.

That in turn could jeopardize Germany’s target of producing 65 percent of power from renewable sources by 2030, which is expected to require 20 gigawatts (GW) of total offshore wind capacity, four times the current number, VDMA said.

Policymakers have recently shifted the industry away from fixed feed-in tariffs towards auctions for new building permits, hitting the profitability of wind power companies.

VDMA believes the transition may have been too drastic, leading to a slowdown in new projects already this year.

“The build-out will have a serious dent in 2019 for onshore and a complete stalling of offshore projects in 2020 and 2021, while other European countries have a steady order pipeline,” said Matthias Zelinger, head of VDMA’s Power Systems unit, naming the Netherlands, Denmark and Britain as more supportive of their wind industries.

“This could erode the competitiveness of Germany as a reference market for component manufacturers,” he said in an interview, adding competition was shaping up in China and the United States.

The unit groups a few dozen companies involved in supplying power-generating industries, including leading names in wind Siemens Gamesa, Nordex and Senvion, MHI Vestas and General Electric.

While two thirds of the unit’s turnover comes from exports, Zelinger said it was important - as for the car industry - for the technology to thrive near where the equipment is produced.

Industry figures show 5.6 GW of capacity were added in the onshore German wind industry last year, while that figure could fall to 3-4 GW in 2018 and 2.8 GW in 2019. Offshore wind construction in Germany’s North and Baltic Seas last year came in at 1.25 GW while, from this year, only 2.3 GW are under construction up to 2020.

Permits after that are optional, and for more capacity to emerge policymakers must build grids and phase out old thermal plants, VDMA said.

In the short term, Zelinger said the government should award 500-600 megawatts (MW) more onshore wind capacity in 2018/19 and add 1 GW to offshore auction volumes, and consider a price floor for carbon pollution rights.

Reporting by Vera Eckert: Editing by Mark Potter

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