European wind developers are set to install 30% less capacity this year than forecast due to coronavirus-related restrictions, WindEurope CEO Giles Dickson told S&P Global Platts Monday.
Projects face delays after 19 of roughly 150 production facilities across Europe suffered interruptions at some point, mainly in Italy and Spain.
"We expect at least 12 GW of new wind capacity to be installed this year," Dickson said.
For now, however, the association is not factoring any of the impacts into its five-year forecast or its 2030 outlook, he said.
In terms of operation, wind accounted for 17% of European electricity in the first quarter and has not been affected by the pandemic.
Further, "we now see most factories reopened," Dickson said.
However, the uncertainty that the coronavirus has created "has added at least 100 basis points to average finance cost," with projects on average 70% debt financed and 30% equity, he said.
In the longer term, falling equipment costs and climate targets would support wind growth, but policy targets were essential "to guarantee a steady stream of orders and demand for turbines," Dickson said.
"That requires firm policy commitments as well as support from a green recovery plan and the European Green Deal."
Financial support from governments would be required despite headline-grabbing subsidy-free wind auctions in the Netherlands and Germany.
"Two-sided Contracts for Difference are the best financial support mechanism," Dickson said.
"They are a good deal for governments, which have to pay when the wholesale power price is lower than the auction price, but payments are capped if they rise. Governments could even break even with such support schemes."
The CEO noted UK Treasury estimates of an extra 20 GW of offshore wind capacity by 2030 only requiring GBP557 million support via CfD auctions.
According to WindEurope, subsidy-free projects based on wholesale power prices face an additional 250 basis points in financing compared to a project backed by a CfD.
The Netherlands is reviewing its offshore wind support scheme, while Denmark, which initially planned to copy the Dutch system, has opted for UK-style CfD support, Dickson said.
Details are yet to be published on Germany's next offshore wind auction in 2021.
Europe's decarbonization targets are only achievable with hydrogen, said Dickson, who favors a green hydrogen pathway using renewable power and electrolysis.
"There are some cost challenges today, but costs will come down with larger electrolyzer projects similar to what we have seen in the wind turbine industry over the past decade," Dickson said.
Moving bulk hydrogen around was also facing challenges, hence emerging projects to link offshore wind landing points with clusters of electrolysers and local industrial hydrogen offtakers.
"Germany has a lot of heavy industry that needs to decarbonize via renewables, with growing interest from the steel, petchems and refinery sectors for wind PPAs," Dickson said.
"They would have said five years ago, renewables are too expensive, but due to the remarkable cost reductions wind has undertaken that has changed. Today they see that wind can provide a relatively stable form of energy -- that is an exciting prospect."
Wind accounted for over 80% of the energy volume for PPAs in Germany, WindEurope data showed.
"The German government's 2030 power demand estimates are more conservative than EU estimates, which we are using as our base case," said Dickson, who anticipates rapid growth for electricity demand from transport and heat sectors this decade.
The CEO noted "very strong interest from oil and gas majors in offshore wind", with Shell and Equinor already investing in the sector.
"They have some natural expertise to offer for offshore works from their existing exploration offshore businesses, they often have assets out there. Decommissioned oil rigs could become substations. These are companies with large balance sheets and that have experience with managing merchant risk associated with such projects," Dickson said.
Europe's vision of 450 GW offshore wind capacity by 2050 required just 3% of maritime space in the northern seas of Europe.
However, 50% of that space was currently out of bounds, lifting development costs and driving a need for cross-border maritime spatial planning.
Dickson predicted that a number of cross-border offshore wind projects would emerge this decade, with Denmark, Germany and the Netherlands working together, while German energy minister Peter Altmaier has called for North Sea cooperation to be a focus of Germany's EU council presidency from June.
On Brexit, Dickson stressed the importance of the UK remaining connected to Europe via the North Sea forum (the UK and Norway are non-EU members) and through coordination of grid investments, auctions "and health and safety regulation for operating in the North Sea."
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