There is a lot of uncertainty about the year ahead. The combined severity of the crises facing the world is matched only by their complexity.
The COVID-19 pandemic and Russian war on Ukraine are causing extreme climate change, geopolitical fallout, geoeconomic turbulence, and inflation.
It is quite certain that “permacrisis,” “the word of the year 2022,” according to the Collins English Dictionary, will also happen in 2023.
But there is a silver lining. As the world moves to transform its energy systems, a new path may open—one that leads away from day-to-day crisis management and into a new era of sustainable economic opportunity.
Wind Energy and the Global Energy Transition
Although almost all previous energy transitions were from fossil fuels, the energy transition of the 21st century may leave the fossil fuel era behind. This could lead to a renewable energy region where more economic growth creates more jobs without sacrificing the health of our planet.
Whether it is the US Anti-Inflation Act, Europe’s REPOWEREU plan, or China’s In the Five-Year Plan, government initiatives are triggering the fastest expansion of renewable energy generation in most parts of the world.
The International Energy Agency (IEA) expects that renewable energy sources will grow at an unprecedented rate until 2027. As a result of the global energy crisis, the IEA predicts that “the world will add as much renewable energy in the next five years as it did in the last 20 years.” This is good news, of course.
The good news is that global wind energy capacity will almost double by 2027, according to the IEA. But there is one major obstacle to this expectation: the framework conditions of both the past and the present.
In particular, wind turbine manufacturers are hindered by policies that weaken the possibility of a sustainable business model.
Framework conditions weaken wind generators.
The damage happened years ago. Long-term permitting processes have contributed to the fact that renewable energy targets do not match reality.
In Germany, for example, the volume of the onshore wind energy market has fallen sharply since 2017. There has been little or no increase in offshore capacity in recent years. As a result, suppliers closed, skilled people moved to other industries, and thousands of jobs were lost.
Across Europe, a cumulative 80 gigawatts (GW) of wind energy projects are currently stalled at various stages of permitting; compared to the 190 GW in use, the scale of the problem becomes clear. Those additional GW could have eased Europe’s energy crisis.
Considering this, it would be reasonable to assume that the “unprecedented growth of renewable energies” proposed by the IEA will go along with an updated framework, namely: an auction with quality criteria; specific plans for network expansion; simplified and accelerated licensing; and transparent market volumes to bridge the gap between policy goals and actual installation permits. But that’s simply not the case, and we’re only a few years away from the planned, unparalleled facility improvements that equipment manufacturers must prepare for today.
Manufacturers are currently not getting the orders that would bring the huge investment needed in the wind industry.
This includes investments in suppliers of key components and raw materials, port infrastructure, and the entire value chain. Despite the installation targets set by governments, there is no planning certainty at the beginning of 2023.
In other words, while the entire wind industry now needs to invest to meet ambitious installation targets, manufacturers, especially with the latest cutting-edge turbine technologies, are struggling financially.
Wind turbine manufacturers Vestas in Denmark, General Electric in the United States, Nordex in Germany, and Siemens Gamesa in Spain had a cumulative loss of 5.6 billion euros as of 2021. In 2023, wind energy producers will continue to raise the prices of energy, goods, and transport. The supply chain disruptions are only exacerbated by Russia’s war of aggression against Ukraine.
Aligning policies for an efficient wind energy supply chain
People define the framework. We can change them. If we are to achieve the IEA’s wind energy projections for 2027 and beyond, we need wind farms, both onshore and offshore, and we need the right conditions for the entire supply chain now, in 2023. These conditions include:
- In addition to prices, auction plan quality criteria.
- Specific plans for network extensions.
- Simple and fast license applicable to both new and ongoing projects.
- Transparent and stable long-term market volumes to finally bridge the gap between political goals and actual installation permits.
- Global trade agreements that ensure raw materials at reasonable prices;
- Cooperation between countries and regions;
- Expand funding to enable new manufacturing capabilities and technological development.
Wind energy has enormous strategic importance. This is necessary if we are to contain climate change and enable a new era of sustainable economic growth.
We must rapidly expand wind power to foster a future beyond the “permacrisis”—one that leaves behind the stable, healthy, and prosperous planet that future generations deserve.