The EU's new support package for the struggling wind industry, to be announced Oct. 24, will focus on measures including auction design and permitting in a bid to counter suboptimal growth, supply chain stress and the potential threat of cheaper suppliers from China.

Contrary to solar, where costs are falling rapidly amid an oversupply of panel imports from China, European wind is still facing rising costs, with the supply chain firmly in Western hands but struggling to turn a profit.

Sector association WindEurope sees the biggest potential of the upcoming EU package in ushering through changes to auction systems, a spokesperson told S&P Global Commodity Insights.

On permitting, WindEurope noted some "very positive developments in Germany where a high number of permits was granted in 2023 already." Slow permitting, often due to local opposition to massive new wind turbines, was the main reason for wind's slowdown before the 2022 energy crisis.

WindEurope previously said some 80 GW of European projects were stuck in permitting, leading to underutilization of Europe's manufacturing capacity.

Both the European Commission and some national governments brought in fast-track measures during the energy crisis to reduce permitting times, which often are longer than five years.

"Germany has been quick in implementing the emergency measures. We are leaning on other countries to do the same," WindEurope spokesperson Christoph Zipf said.

State guarantees

Another focus is the proposal by German Energy Minister Robert Habeck to offer state guarantees to turbine manufacturers until orders are back at the required level.

WindEurope sees a number of risks associated with such measures but notes that there are currently some underutilized capacities in onshore wind manufacturing, while some manufacturers have asked for state guarantees to help increase their turbine output.

Cheaper imports from China, the driver for lower solar component prices, is another risk Europe may want to avoid.

A short hike on material costs during the pandemic lifted projects' capital expenditure costs, with the higher cost of financing and labor also significant factors.

The major European turbine-makers — Vestas Wind Systems A/S, Siemens Energy AG unit Siemens Gamesa Renewable Energy SA and Nordex SE — have all been forced to raise their sales prices in recent quarters amid the inflationary environment.

Market leader Vestas' average selling price for onshore turbines hit €1.15 million/MW in the fourth quarter of 2022 compared with €710,000/MW two years earlier.

"I would be lying to say last year wasn't ... really tough," Morten Dyrholm, global senior vice president at Vestas, said at the BNEF Summit in London on Oct. 11. "We had to just get prices up. There was no other choice."

Dyrholm added that the cost of raw materials is starting to stabilize while transport costs are also coming down, suggesting the turbine market might be "through the worst" of the volatility. The third quarter will also see Vestas post its highest quarterly order intake in two years — 4,044 MW across 11 countries, according to a preliminary analysis — after a period of subdued sales activity due to the higher prices.

Turbine costs have come down slightly from their 2022 highs. While Vestas has yet to reveal its average price for the third quarter, Germany's Nordex said its average price had fallen to €790,000/MW compared with €890,000/MW in the second quarter and €910,000/MW a year ago.

Still, the turbine-makers have yet to prove to the market that they can once again turn a profit. All three companies recorded negative profit margins in the second quarter, with third-quarter earnings set to be unveiled in November.

"That means that prices will be higher, at least for a significant period of time. That's just how it is," Dyrholm said.

Wind power prices

EU member states had 188 GW of onshore wind installed by the end of 2022 as well as 16 GW offshore, WindEurope data shows. Wind generated some 400 TWh, or almost 17% of the bloc's electricity, in 2022.

Some 98 GW new capacity is forecast to come online in the EU over the next five years, of which 78% will be onshore, according to WindEurope's latest annual forecast.

Across both onshore and offshore, the EU aims for 420 GW by 2030, which would require a massive ramp-up from around 2026 when any new policy measure could start to be felt on the ground.

Market instruments, from auctions to two-way contracts for difference or power purchase agreements (PPAs), will be the main tools to incentivize new projects.

"We want to move away from price-only auctions and toward auctions that award the wider societal value of wind energy," WindEurope's Zipf said, adding that the European Commission might make nonprice criteria a more prominent feature of wind auctions.

German onshore wind capture prices averaged €73.93/MWh in the third quarter, according to the Platts Renewable Energy Price Explorer.

The Platts Pexapark index for a standard 10-year onshore wind PPA in Germany was pegged at €61.61/MWh on Oct. 17.

Analysts at Commodity Insights estimate break-even levels for a 10-year onshore wind PPA in Germany starting in 2025 at around €79.70/MWh to recover new-build costs, operating costs and financing costs, according to a report published in July, indicating little scope for PPAs for new onshore wind.

S&P Global Commodity Insights reporter Andreas Franke produces content for distribution on Platts Connect. Platts is an offering of S&P Global Commodity Insights. S&P Global Commodity Insights is a division of S&P Global Inc.

S&P Global Commodity Insights produces content for distribution on S&P Capital IQ Pro.