Issue 3&4/2018

An industry in distress

Jörg-Rainer Zimmermann, 22 Aug 18
Government policy has left German wind companies reeling – but the pressure is just as great for the municipalities they operate in. Aurich, in Lower Saxony, has had to impose a budget freeze.

The slump affecting Germany’s wind market has had a devastating impact on production sites across the country. A case in point is Aurich. Ever since turbine manufacturer Enercon opened its doors there in 1984, fortune seemed to be smiling on the East Frisian district town. This year, however, local authorities will have to wave goodbye to 98 percent of their expected revenue – due in large measure to the introduction of auctions for wind power decreed by the Federal Government last year.

“In 2006, there were around 14,000 jobs subject to social security contributions in Aurich. In 2017, the figure was approximately 24,000. We basically have the wind industry to thank for this,” explains Hardwig Kuiper. As chief city councillor, Kuiper is responsible for Aurich’s finances – which are not in good shape right now.

The municipality had been counting on trade tax revenues of EUR 55 million. However, business is not going well for Enercon, and as trade tax is levied in advance on the basis of estimates, refunds are now due for 2017 and 2018. “Accordingly, the municipality’s revenue will fall from an anticipated EUR 55 million to just 1 million,” Kuiper explains. Although the situation is likely to improve somewhat in 2019 after this adjustment, Aurich will probably collect about EUR 65 million less than expected between now and 2021.

This has a knock-on effect for the district, which will have to make do with around EUR 30 million less in the same period. The result: Aurich must now draw up an amended budget and declare a spending freeze. Non-statutory benefits and planned investments will be reviewed for 2018 and the three years thereafter. After the summer break, district authorities will hold intensive discussions on austerity measures.

Auction risks

Many in the region hope for understanding from Berlin. “Auctions were introduced too fast, and mistakes were made. This needs to be addressed,” insists Kuiper, who believes that in addition to the special rules for citizen wind farms and plummeting remuneration, the expansion cap and inadequate electricity grids are central causes of the difficulties market operators are facing.

Kuipers is not alone in his conviction. Even before auctions came into force, countless experts, renewables associations and industry representatives had warned of the risks posed by the new system. Many now feel that their concerns have been vindicated. Enercon blames the introduction of auctions in 2017 for a significant “displacement of supply contracts for wind turbines to international markets” and “substantial market insecurity”.

Even though Enercon still managed to dominate the German market last year with a 38 percent market share, as reported by the industry agency Windenergie an Land, it nevertheless failed to meet its self-imposed targets for new installations, according to the company’s own figures. These challenges are shared by the industry as a whole, with much the same outcome. Before the introduction of the new system, international business accounted for around 50 percent of Enercon’s order book, company spokesman Felix Rehwald explains.

2,000 jobs are gone, says trade union

That share has now risen to almost 70 percent, and the trend is likely to continue. Even so, Enercon has declared its commitment to the domestic market, but calls for “suitable framework conditions such as permits, opportunities for citizens to have their say, rapid grid expansion and political will to prevent further damage.”

Meinhard Geiken, regional manager at trade union IG Metall Küste, is concerned about the effects of this development on Germany’s wind sector and its employees. The union reports that since the start of last year, over 2,000 jobs have been lost and countless companies have shut down factories, including Senvion in Husum, Powerblades in Bremerhaven and Carbon Rotec in Lemwerder.

The ball is now in the policymakers’ court. Comprehensive revisions were due to be made in a “100-day law”. However, except for a single point – the general requirement for projects to hold a permit under the Act on the Prevention of Harmful Effects on the Environment, nothing came of the initiative. Instead, the discussion over special auctions continues, while priority dispatch for renewables hangs in the balance. Against this backdrop, the future of German production sites like Aurich remains uncertain at best.

 

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