Europe and the United States risk missing their ambitious wind power installation targets as soaring costs, supply chain delays, and low electricity prices at auctions hamper development and lead to a cancelation of offshore wind projects.
Government targets were very ambitious even before the perfect storm in the wind power industry this year. Now, those targets could be out of reach if policies and auction schemes don't change, analysts and industry officials say.
The wind power industry is growing in both the U.S. and Europe, but it's currently off track to meet the 2030 capacity targets, undermining the clean energy and emission-reduction goals.
The issues are most evident in the offshore wind industry, which saw several major setbacks this summer-auctions in the U.S. and the UK were a flop, Big Oil scooped all the acreage in a German tender, and a large UK project was canceled due to surging costs and challenging market conditions pressuring new developments. Meanwhile, developers in the U.S. are seeking looser requirements for tax credits to make projects economically feasible.
In the EU, the European Parliament has recently endorsed much higher binding renewable energy targets by 2030, raising the targeted share of renewable energy in the EU's energy consumption to 42.5% by 2030, up from a current target of 32%. The wind industry alone needs to double the current capacity to meet these targets. Related: California Allows Early Move To Winter-Blend Gasoline As Prices Top $6
But the EU risks missing its wind power capacity installation targets and losing the supply chain to competition in traditionally low-cost Chinese manufacturing. Moreover, inflation, higher interest rates, and supply chain issues have made materials and products more expensive, raising the costs of already approved projects.
So the European Commission is set to propose in October a European Wind Power package to help get the bloc's flailing wind industry back on the track of growth to help accelerate its decarbonization targets, European Commission President Ursula von der Leyen said in the 2023 State of the Union Address. The Commission pledges to fast-track permitting even more, improve the auction systems across the EU, and focus on skills, access to finance, and stable supply chains.
In the U.S., the Inflation Reduction Act is spurring clean energy project development, but the wind industry is looking to the Biden Administration to ease the requirements for subsidy eligibility for offshore wind, alleging that the current rules under the IRA make many investments uneconomical.
Orsted, for example, warned in August that it could face up to $2.3 billion (16 billion Danish crowns) of impairments on its U.S. project portfolio due to supply chain delays, higher interest rates, and the possible inability to qualify for additional tax credits beyond 30%.
In a sign of the struggling offshore wind industry, the latest lease sale, the first-ever such sale in the Gulf of Mexico, was a flop last month, attracting just one bid-from Germany's RWE. Out of three areas up for lease, two did not receive any bids.
RWE's chief executive Markus Krebber wrote in a LinkedIn post last month that with the challenge in the offshore wind industry "Happening at a time when the entire offshore industry has to scale up to achieve expansion targets, this quickly calls into question the achievement of climate protection goals."
"In a nutshell: we need a framework that allows for more investment certainty for both manufacturers and developers," Krebber added.
Ben Backwell, CEO of the Global Wind Energy Council, also sees the current pace of global wind power development as insufficient to meet the 2030 targets.
"We certainly see a big gap between the renewables and wind targets for 2030 and the path we are on right now," Backwell told Reuters this week.
"We are growing but nowhere near fast enough."
By Tsvetana Paraskova for Oilprice.com
Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. More
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