Vattenfall's plans to expand in Germany
Germany’s issues with its grid capacity have not made the country less attractive to wind companies. Swedish utility Vattenfall’s strategy is a good example of that.
This week, the company has announced a partnership with German developer Abo Wind, to help it install up to 200MW of onshore wind by 2020 from its current 13.9MW. It has also called Germany “the most advanced and interesting ‘transformation lab’ in Europe”, as the country is transforming its energy transition to a system which heavily relies on renewables, investing in particular on wind energy – and Vattenfall hopes to profit.
But this transition comes with challenges. The German grid has not been able to keep up with the fast growth in renewables and wind in particular. On very windy days, wind farms in north Germany produce more energy than the system can support.
Because of the inefficiency of its grid though, Germany is in the situation that its excess wind power is not being used by individuals and businesses in the south of the country. To address these grid issues, the network regulator Bundesnetzagentur has recently confirmed plans to limit onshore wind's growth in northern Germany to 902MW annually.
This follows from the Renewable Energy Act, which will see new auctions for onshore wind capacity, limiting annual expansion to 2.8GW until 2019.
Despite all that, Vattenfall’s interest in Germany has not diminished. It is not new to the German energy market, although historically it has been involved in fossil fuels rather than renewables. Vattenfall expects its partnership with Abo Wind to help drive this change.
In the last quarter of 2016, the Swedish utility completed the sale of all its lignite assets in Germany, which amounted to SEK 15bn (€1.6bn), to a Czech consortium, and announced plans to invest €3bn into the “Energiewende” – the German energy transition – in the next few years. This deal with Abo is the first part of that strategy.
Vattenfall has set an ambition to become the greenest utility in the world by 2050, and Germany has a renewable energy target of 60% by 2050. The utility is likely to struggle to achieve the former target – it is a crowded market, after all – but the latter changes will help to support it.
Ultimately, Vattenfall’s deal with Abo is not only of a strong business relationship, but also a renewed commitment by Vattenfall to Germany.