New services can help firms in patchy Europe


September 23, 2016

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On Tuesday, WindEnergy Hamburg is due to start in Germany.

With 30,000 attendees expected over four days, there are a few things we can be sure of: shoes will be worn out, drinks will be consumed, and branded gifts will be purloined for children back home. And, amid all of that, deals will be done too.

The big challenge for wind businesses in Europe is how to adapt and thrive in a market that can best be described as patchy. While those in the industry will rightly use the scale of the conference as evidence of how far wind has come in the last decade, from a niche concern to a fully-fledged ‘industry’, we hope this will come with a healthy dose of reality. Firms need to be smart to survive.

One trend we expect to see over the next two years is the rise of the ‘one stop shop’, as firms with development and manufacturing experience expand the number of services they are offering. This will be driven by slow growth in European wind and the increasing presence of investors who don’t want to ‘get their hands dirty’. We have seen Vestas going down this route, and others will too.

We need only look at a few statistics to see why this is necessary. European wind is far from flawless. In 2015, onshore wind farms totalling 9.8GW were built in the European Union, with an additional 3GW offshore. The market grew by 9.9%.

But that 9.8GW was concentrated in only a handful of nations. Almost 38% of it – or 3.7GW – was in Germany, as developers rushed to complete onshore wind schemes before the move to competitive feed-in tariffs auctions. This figure is set to drop.

Another 10% of that 9.8GW – or 1.3GW – was in Poland, but new policies in Poland are due to drive that down to nearly nothing.

And we also saw 1GW completed onshore in France and 975MW in the UK, although most of that was offshore. The European Union may be second to China for annual installations, but Europe should still be concerned about its lack of ‘strength in depth’.

This shows the huge differences between the policies and regulations across various EU nations. And, over the last couple of years, that patchy growth in Europe has forced more businesses to expand in emerging markets as they seek to gain market share.

But, as competition increases in emerging markets, we expect to see more of these companies more aggressively seeking to grow market share in Europe.

With more financial investors entering the sector, this gives an opportunity for firms with practical experience to offer additional services in asset management and operations. Many investors want returns without getting involved actually running the projects.

More manufacturers and developers will also look to invest in other types of technology that can set themselves apart, like storage, as they seek to broaden their expertise and offer a wider range of services. Moves like this will turn more firms into ‘one stop shops’.

There are other ways to deal with uneven growth in Europe.

More developers will seek out power purchase agreements with corporates to make wind projects make sense financially without government support; will invest in research to drive down the levelized cost of wind energy so that wind power looks like better compared to other sources; and will seek out ways that they can support the rollout of electric vehicles. All of this makes sense.

And it is vital for those in wind to keep making the case to hostile governments that they should embrace the sector. WindEnergy Hamburg gives firms one chance to do this. But, even so, Europe will always have a mix of governments with different policies. That will always be an issue, but manufacturers and developers that can expand their services will be better placed to deal with it.

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