The latest data on wind turbine orders in Europe in 2022 paints an ‘extremely worrying’ picture, the Association says, with total orders for new wind turbines in 2022 falling by 47% compared to 2021. The European Union (EU) saw only 9 GW worth of new turbine orders, despite needing to build 30 GW of new wind farms a year under new energy and climate security targets. Several offshore wind farms were expected to reach financial close last year, but final investment decisions were delayed due to inflation, market interventions and uncertainty about future revenues, according to WindEurope’s most recent report.

Inflation in commodity prices and other input costs have raised the price of wind turbines by up to 40% over the last two years, but the prospective revenues of those planning to build wind farms have not kept pace with this, suggests the analysis. Many governments index the prices paid for wind energy (usually determined in auctions), but not enough, and the long time-lag between developers deciding their auction bids and their turbine suppliers actually procuring their components doesn’t help either, the report adds.

Unhelpful interventions in electricity markets by different national governments have compounded the inflation challenge. Investors understand the need to support families and businesses. However, the fact that governments have been able to deviate from the EU’s emergency €180/MWh revenue cap on generators and set different caps for different technologies has created ‘real confusion and uncertainty’, the report says. Investor confidence was further hit when some governments started ignoring the principle that revenue caps should only apply to actual realised income – and that it should factor in hedging and power purchase agreements (PPAs). The slowdown in wind investments was especially pronounced in 2H2022, when uncertainty around the emergency measures started to take hold.

WindEurope CEO Giles Dickson says: ‘Last year’s market interventions have made Europe less attractive for renewables investors than the US, Australia and elsewhere. They impacted the business case for renewable energy projects across Europe. The figures for wind turbine orders in 2022 should ring an alarm bell. Europe’s energy and climate targets are at risk if the EU fails to ensure an attractive investment environment for renewables.’

Europe’s wind and other clean energy supply chains need to invest in new manufacturing and logistics in order to become competitive and to build up the capacity needed to produce the volumes of low carbon equipment needed for the EU Green Deal, notes the WindEurope report. Investment tax credits will help – it’s what the US offers in its Inflation Reduction Act. So will ‘Net-Zero Industry Academies’ to skill the clean tech workers of the future. Existing EU funds can also play a key role in de-risking and leveraging the private investments needed in new factories and in Europe’s port, transport and other infrastructure.

Dickson continues: ‘The EU needs to set up the mechanisms and get the money moving asap. Clean energy industries are debating now where they should invest and need clear signals now if it’s going to be Europe.’

In March, the EU Commission will table its proposal for a revision of the EU electricity market design to enable electricity consumers to benefit from the low costs of renewable power. ‘Europe must avoid reversing 20 years of European energy market integration overnight,’ warns the report. ‘The market design should leverage the potential of CfDs and PPAs and leave space for investors to access some market revenue so they can meet their PPA obligations. It must avoid forcing CfDs [Contracts for Difference] retrospectively onto existing assets, or onto new assets.’