Economic Robustness of the OnShore German Wind Energy Industry under Deep Uncertainty

Abstract

Germany aims to compose 65 % of its electricity mix with renewable energy by
2030. Thus, it relies on onshore wind energy as a source. This industry has experienced a significant turmoil from 2017 to 2019 as the newly installed capacity dropped by 80 % within these two years. The public discussion sees an increase in lawsuits caused by low public acceptance as the reason for this behaviour. Action is demanded in form of a simplification of the permitting process of the wind energy projects and an increase in public support mainly by involvement of the community adjacent to the planned wind park or increased distance between projects and habitants. Even though these are noble requests, calling public acceptance as the only reason for the decrease in installed capacity does not seem plausible. Interestingly, 2017 coincides with the adoption of a new subsidization scheme which includes a bidding process. Since wind energy projects are private investment projects, their finances are key to success. The aim of this study is to gain understanding about the reasons of the slump and develop an alternative hypothesis. A literature review summarizes the legal, political, social, and technological landscape for onshore wind energy. A detailed synthesis of public acceptance literature is performed and understanding of the financial dependencies and influences related to wind energy projects is gained. To support the reasoning, a model is constructed which simulates the income and expenses of wind energy projects. A participation in the bidding process is simulated including a detailed calculation of interest rates, an approximation of the impact of an increasing wind turbine population and an estimation of the development of the turbine maintenance sector. The findings of this study are threefold. First, it summarizes in detail all financial aspects of onshore
wind energy projects. As a result, it is concluded that the maximum bid is set too low and the subsidization scheme is not adapted to the financial needs of a project. As a consequence, not enough sites are built even though they could technically be available, resulting in the slump. Secondly, with the current constrains of the bidding process, the onshore wind energy sector will remain in a slump and the 2030 goal set by the German government cannot be reached as projected technological advancements have a small effect. The slump also forces the wind energy sector into a recession. Since any scenario of technological development cannot be relied on to counteract the slump, an adjustment of the subsidization scheme is needed. The most effective way to reach the objectives
is to increase the maximum bid. Thirdly, it is argued that the public acceptance
would have limited to no effect on the situation. The German government has three options. Either, (I) the maximum bid is raised or (II) reversed to the old subsidization both implying higher costs than desired or (III) other renewable energy sources have to be supported and the onshore wind energy sector will undergo major restructuring including possible job losses.