Wind Energy Study Series Cleantech Volume 2 Wind Energy October 2009

2Wind Energy Study Series CleanTech Volume 2 Wind Energy October 2009

This work and all of its contents are protected by German copyright law. All rights for contents, diagrams and illustrations contained in this publication are protected by copyright and reserved for DCTI, EuPD Research and 360Design. Unauthorized use of this publication, including duplication, distribution, reproduction, translation, digital storage, and processing in electronic systems is punishable by law. 2Wind Energy I. Preface p. 7

II. Introduction p. 9

III. Wind Energy p. 11

III.1 Mode of Operation and Technology p. 12 Components of a Wind Turbine p. 12 The Conversion of Wind into Energy p. 14 Wind Turbine Design p. 16 Wind Turbine Size Classification p. 18 Technological Developments p. 18

III.2 Applications and Segments p. 22 Small-Scale Wind Turbines p. 22 Large-Scale Wind Turbines p. 24 Onshore Wind Parks p. 26 Offshore Wind Parks p. 28

III.3 Value Chain of the Wind Industry p. 32

III.4 Competitiveness of Wind Energy p. 38 Cost Structure p. 38 Cost Distribution p. 39 Competitiveness p. 40

III.5 Global Market Overview p. 46 Wind Energy by Region p. 46 Top 5 Markets p. 50 USA p. 50 Germany p. 52 Spain p. 54 China p. 56 India p. 58 Future Markets p. 60

III.6 Market Drivers and Hindrances p. 62 VIII. Editorial p. 120 p. 86 p. 90 p. 84 p. 76 p. 82 p. Editorial 89 p. VIII. CleanTech with Drivers Interviews VI. Profiles &Company CleanTech Interviews Driver VI. Abbreviations V.III. Terms of Glossary V.II. Cited Illustrations Cited Works V.I. V. IV Special Contribution p. 70 p. Contribution Special IV

OUTLINE 6 CHAPTER I

Dear Readers,

We are proud to present you with the second The future development of renewable ener- edition of our CleanTech Study Series, which gies strongly depends on the surrounding po- takes a closer look at wind energy and the litical framework, price development of raw development of the wind industry. The posi- materials and public acceptance of alternative tive response and feedback received from our energy sources. first edition on solar energy confirmed strong interest in the CleanTech sector within the While the relocation of wind turbines from economy, politics and society. onshore to offshore may seem like a viable solution, the high costs arising from the The wind industry is one of the leading Clean- complex installation, electricity transport and Tech branches. Moreover, the German wind maintenance slow the development of the industry is highly export-oriented. With an offshore sector, which currently only accounts installed capacity of 24,000 MW by the end of for one percent of global installed wind 2008, Germany currently ranks in first place capacity. in the wind energy field. In 2008, wind accounted for 35 percent of all newly installed The CleanTech Study Series is not only energy capacities across Europe. In the same available in print, but also free of charge year, wind energy in the US was marked by in download form under www.dcti.de. The an increase of 42 percent of total installed study series is only one of many instruments energy capacity. DCTI uses to accelerate public awareness and satisfy the demand for information in this Technological advancements in the wind consistently growing market. During the time industry have taken on an impressive deve- of publication, DCTI also released its annual lopment. While wind turbines in the 1990s “German CleanTech Yearbook 2009.” could only produce a maximum of two MW, modern turbines are capable of producing up to six MW.

Phillipp Wolff, CEO DCTI

For thousands of years, wind energy has European household), thereby reducing global played a crucial role in the development of CO2 emissions by 1,500 million tons per annum civilization. The ancient Egyptians used wind [GWEC: 2008a, P.29]. energy as early as 5000 B.C. to navigate their boats along the Nile River. In 200 B.C. wind- Reaching this goal is not a farfetched idea mills were being used in China to pump water, when one considers that large wind parks are while at the same time, vertical wind turbines not only being constructed in Europe. The were being used to grind wheat in the Middle US and Asian markets, especially China, play East. Wind turbines have accompanied the a crucial role in both the production and development of civilization until the 20th installation of wind turbines. This is of utmost century, where they now play a major role in importance as the conditions of the Kyoto the production of electricity [EERE: 2005]. Protocol can only be met through a state-wide consensus regarding the future role of rene- It was not until the hike in oil prices in the wable energies. Ultimately, wind serves as a 1970s and the accident at the nuclear power strong driver in the renewable energy market. plant in Chernobyl in the 1980s that attention was paid to wind energy, thus spurring its development. Consequently, the following two decades were dedicated to technological advancements in the wind energy sector. The- se developments have led to the construction of wind parks, which in turn provide electricity to thousands of households. Without a doubt, wind energy has established itself as a strong competitor to other conventional energy sources.

Furthermore, wind energy could contribute enormously to the reduction of worldwide CO2 emissions. According to the Global Wind Energy Council (GWEC), by 2020 the total global capacity of installed wind turbines could account for 1,000 gigawatts (GW), which could produce a total of 2,600,000 gigawatt hours (GWh) of electricity per year. This is turn would provide enough electricity for 950 million households (calculation based on the electricity demand for an average

© DCTI 2009 | Volume 2 - Wind Energy 9 ... The wind industry is not immune to the challenges of the renewable energies sector. The production of energy is completely dependent on weather conditions, as wind turbines can only produce energy when there is enough wind available. As wind conditions at sea are stronger and more stable than those on land, the future of wind energy, at least in the case of Europe, lies in offshore wind parks.

However, the offshore wind sector is associated with higher costs, due to the relocation of grid connection cables and a more complex installation process. It is not until these challenges are met and further progress is made that wind energy’s fullest potential can be exhausted. Consequently, future development of the wind industry will depend on political willpower of individual governments, as well as public awareness and acceptance.

10 CHAPTER III III. Wind Energy

Components of a Wind Turbine A wind turbine consists of several different components, the most essential of these being the rotor, which is comprised of a hub and rotor blades, and the nacelle, which shelters and protects the generator and gearbox. The nacelle is situated on the tower, and is able to rotate on a vertical axis. The tower, on the one hand, provides the turbine with the necessary stability and support, while on the other hand houses the grid connection and different control systems. Diagram 1 illustrates the components of a horizontal axis wind turbine. As this is the most common type of wind turbine, this chapter will refrain from focusing on vertical axis wind turbines.

The rotor blades make up the most important component of a wind turbine, as their rotation produces the energy to be converted into electricity. The blades also receive significant attention from a technical standpoint, as current and future advancements aim to reduce noise levels which the rotor blades cause [EWEA: 2009a, P.37]. Although fiberglass, carbon fiber and wood are utilized most, rotor blades can also be produced from materials such as cloth, steel and aluminum [Gipe: 2009, P.4f.]. The rotor blade diameter of the most widespread wind turbines ranges from 50 to 90 meters.

Since wind turbines need to function properly in various climates, they undergo testing in extreme weather conditions, such as temperature fluctuations, sandstorms, strong turbulence and The rotor blade diameter ranges from 50 to 90 wind impact. This testing is of high economic importance, as the turbines are then type-certified meters. to meet the weather conditions of a particular environment. The average onshore wind turbine is type-certified to last 20 years, whereas an offshore wind turbine can last at least 25 years. This difference results from the less turbulent and more consistent wind conditions at sea [EWEA: 2009a, P.38].

Key Facts and Figures • According to the Federal Ministry of Transport, Building and Urban Affairs’ national regulation for the marking and lighting of obstacles for navigation, wind turbines higher than 150 meters are required to have warning lights. At least two warning lights must be visible from each direction, and may not be concealed by idling rotor blades.

12 CHAPTER III III.1. Mode of Operation & Technology Mode of Operation & Technology

< Figure 1: Components of a horizontal axis wind turbine >

Components: The diagram illustrates the main components of a horizontal axis wind turbine.

The Conversion of Wind into Energy There are countless regions across the globe with excellent wind conditions, which therefore have a high potential for wind energy. Especially coastal regions, with wind speeds between four and five meters/second, have excellent potential for the use of wind energy. Furthermore, wind speeds at sea are known to exceed eight meters/second. Diagram 2 illustrates how wind speeds vary across the globe.

The production of wind energy is dependent on the following three factors: the area swept by the rotor blades, the cube of the wind speed and air density, which varies with altitude [WWEA: 2006]. The formula used for calculating wind power is as follows:

P = 0.5 x rho x A x V³

P= Power in watts (W) Rho= Air density in kilograms per cubic meter (kg/m3) A= Area swept by the rotor blades in square meters (m2) V= Wind speed in meters/second

The wind speed’s cube is especially significant, as its doubling causes the wind power to increase by a factor of eight. In general terms this simply implies that the stronger the wind speed at a particular location, the more energy can be produced. Thus, the wind turbine’s location is of utmost importance, as it determines the amount of energy which can be generated.

Although the formula above is used to decipher the power in the wind, it is important to note that the actual power which can be converted into energy is significantly less. The amount of power which can be converted into energy is dependent on the actual efficiency of a given wind turbine. Whereas most wind turbines can extract a maximum of 60 percent of the wind’s power, in reality this figure is around 45 percent [WWEA: 2006].

Moreover, a wind turbine cannot produce energy at a constant rate, as its level of energy production rests solely on persisting wind conditions. It is therefore advisable to utilize other forms of power generation, in order to cover base and peak power loads.

14 CHAPTER III III.1. Mode of Operation & Technology Mode of Operation & Technology

Key Facts and Figures • All forms of energy, whether wind, solar or nuclear power, are integrated into the electricity network. In practice, one can view the electricity network as a large pool, with a high number of fountains (power stations) and drainage holes (consumers) [GWEC: 2008a, P.25]. The main task of the grid operator is to ensure that the water in the pool remains in balance – it should never run out, nor overflow. Consequently, it is the equilibrium in the electricity network which maintains the system’s stability and security. Since the electricity network corresponds with the level of demand, it is common to see the rotor blades of a single wind turbine standing still, while those of the surrounding turbines are rotating.

< Figure 2: Global wind speeds in meter/second >

Wind speeds: Global wind speeds vary depending on location. Highest wind speeds are recorded in coastal and offshore areas.

Wind Turbine Design The modern wind turbine comes in a wide variety of shapes and sizes, from a vertical or horizontal axis, to one, two or three rotor blades. Today the wind industry is dominated by the horizontal axis wind turbine with three rotor blades, which is said to be the most efficient form. Depending on turbine design, horizontal wind turbines usually have a fantail or built-in rotor-reorientation device for when there is a change in wind direction [Gipe: 2009, P.3]. This allows the wind turbine to reach the highest possible energy production level for its given location. Unlike horizontal axis wind turbines, vertical axis wind turbines are less dependent on wind direction for energy production, and are therefore especially suitable for locations where the wind direction is known to change frequently. Nevertheless, vertical axis wind turbines are primarily utilized in the private and domestic sector, as they are not as suitable for the production of large amounts of energy as are modern horizontal axis wind turbines.

A wind turbine’s ability to convert energy in the wind stream is not influenced by the number of rotor blades. While most modern wind turbines have three rotor blades, attempts were made in the early 1980s and 1990s to market wind turbines with one and two rotor blades [EWEA: 2009e, P.66]. However, these wind turbines are seldom seen today due to their lack of popularity. Thus, the standard conventional wind turbine today has three rotor blades. The main difference in the number of rotor blades lies in the cost–benefit ratio. While one blade is more economical than three, three blades are more efficient than one. Furthermore, a wind turbine with three rotor blades runs more smoothly than a turbine with one blade, resulting in a longer lifetime for the turbine.

Heavier small wind turbines have proven to be more durable than larger and lighter ones. In order for a wind turbine to last longer, most conventional wind turbines have a built-in overspeed control, which protects the turbine from damage in a situation with high wind speeds [Gipe: 2009, P.5f.]. Depending on design, wind speed measurement devices are often found on top of the nacelle (see Diagram 1). As soon as the instrument measures wind speeds which are too high, the rotor blades will either automatically switch off, or the nacelle will rotate away from the wind direction in order to prevent damage to the wind turbine.

16 CHAPTER III III.1. Mode of Operation & Technology Mode of Operation & Technology

< Figure 3: Examples of horizontal axis wind turbines >

Horizontal axis turbines Horizontal axis wind turbines are distinguished by the number of rotor blades.

< Figure 4: Examples of vertical axis wind turbines >

Vertical axis turbines Vertical axis wind turbines are available in a wide range of designs. Contrary to horizontal turbines, vertical axis turbines are not dependent on wind direction; the turbine generates electricity regardless from which direction the wind blows.

Wind Turbine Size Classification Over the period of the last century, wind turbine technology has taken on a rapid advancement. This is especially apparent in the large wind turbine class, where commercial turbine size has not only become higher and larger, but has also increased by a factor of 100 in the past 20 years [EWEA: 2009b, P.6].

Wind turbine size is heavily dependent on the diameter of the rotor blades. In general, wind turbines can be categorized into three different size classes: small, medium1 and large wind turbines (see Diagram 5). Small wind turbines can be further categorized into three different subclasses: small household wind turbines, mini and micro wind turbines.

A wind turbine with a rotor blade diameter of more than 50 meters is considered a large wind turbine. Large commercial turbines encompass a total capacity of at least one megawatt (MW), and are utilized mostly in offshore and onshore wind parks. Currently, the largest wind turbine has a total rotor diameter of 127 meters and is rated at a total capacity of six MW [REW: 2009a].

Medium-size wind turbines are primarily found in the agricultural sector, as well as small factories and wind farms. They have an average rotor diameter of 20 to 50 meters, and are rated at an average capacity between 100 kilowatts (kW) and one MW [Gipe: 2009, see Overview].

The largest wind turbine has Small wind turbines have an average rotor diameter between ten and 20 meters, and a capacity a capacity of six MW. of 50 to 100 kW. These are intended for use in the agricultural sector, as well as in small businesses and factories [Gipe: 2009, see Overview].

The rotor diameter of small household wind turbines can range anywhere between three and ten meters, while that of mini wind turbines runs from 1.25 to three meters. Furthermore, micro wind turbines are the smallest of the small size class, and range from 0.5 to 1.25 meters in diameter. Each of the three small wind turbine subcategories is intended predominantly for the household sector [Gipe: 2009, see Overview].

1 The study will not focus on this size class.

18 CHAPTER III III.1. Mode of Operation & Technology Mode of Operation & Technology

< Figure 5: Size classes of wind turbines >

Size classes: In general, wind turbines can be categorized into three different size categories: small, medium- sized and large-scale turbines.

Technological Developments The first wind turbines were constructed using components originally intended for ships and tractors. However, modern wind turbine technology has a wide array of possibilities at its disposal, such as the use of materials and concepts from the aerospace and aeronautical field. Consequent- ly, in the last 20 years, wind turbines have undergone a rapid transformation with regards to size and design. One can especially observe this inclination towards the large wind turbine class (at least 2.5 MW) in the European wind industry. In 2007, the market share of this size class was six percent, as compared to only 0.3 percent at the end of 2003 [EWEA: 2009a, P.41].

The development and construction of larger wind turbines allows for the production of greater amounts of electricity. Wind turbines installed in the 1990s were able to produce up to two MW, generating a maximum annual capacity of five to six million kilowatt hours (kWh). Today, in contrast, wind turbines are able to generate a total capacity of up to six MW, producing an annual 15 – 18 million kWh [KPMG: 2009, P.10].

There is in fact a direct correlation between the efficiency and size class of a wind turbine. The general idea is simple: the higher and bigger the turbine, the more efficient it is. Thus, an additional elevation of the turbine’s nacelle by one meter, can bring an annual increase of 0.5-1 percent in output [EWG: 2008, P.114]. The wind turbine industry can therefore expect a gradual increase in turbine size in future years.

The increase in wind turbine size has led to a higher cost–effectiveness for modern wind turbine projects. In other words, a higher total capacity can be achieved using a lower number of individual turbines, much unlike wind park projects of the past [EWG: 2008, P.114]. With this in mind, further development of wind turbine technology is certain.

According to Frank Nielsen, R&D director of blade manufacturer LM Glasfiber, an improvement in the aerodynamic performance of the rotor blades by three percent, could finance the whole project over the course of the turbine’s lifetime [EWEA: 2008a, P.23]. Besides improving the performance of wind turbines, reducing costs will also play a key role for the future success of the wind industry. For example, rising steel prices can be accommodated through the use of concrete-steel mixtures, as opposed to using pure steel for the construction of turbines.

The development of wind turbines is making rapid Another important change to the technological design of wind turbines will make future trans- progress. port less of a hassle. The rotor blades of the Enercon E – 126, for example, can be split into two parts, making the delivery process of the turbine much easier [EWG: 2008, P.114]. In addition, wind turbine design is being adapted to withstand specific local weather conditions, such as sandstorms in the desert, or extreme temperature differences between summer and winter.

Besides improving wind turbine design, technological advancements in the wind industry are leading to completely new innovations. As the illustration shows, one of the most ambitious ideas is the flying electric generator, originating from the company Sky Wind Power. While it is still undergoing testing, Sky Wind Power plans to have a flying electric generator up and running sometime in 2010. While the rotation of the rotor blades generates electricity, at the same time it provides the necessary lift to keep the device airborne. In case the wind speed dwindles, the rotors will act as a generator, keeping the device in the air [Sky Wind Power: 2009].

Key Facts and Figures • The flying electric generator is expected to operate in heights of 2,000 to 10,000 meters, and encompasses a total capacity of ten MW. In contrast to conventional wind turbines, the flying generator in no way interferes with the landscape, and offers a far less complex installation process [Sky Wind Power: 2009].

20 CHAPTER III III.1. Mode of Operation & Technology Mode of Operation & Technology

Small-Scale Wind Turbines Small wind turbines are generally intended for use in the private and domestic sector. Much like a solar panel, they can be installed on the roof of one’s home, allowing the end consumer to generate and use his own electricity. Thus, small household wind turbines are ideal for off-grid applications in rural and less-developed areas. In fact, if installed at a suitable location, these turbines are capable of producing electricity at competitive prices [Wärmewerk: 2009].

The costs for a small wind turbine vary depending on a number of factors. For example, the costs of an average small wind turbine on the US Market vary between 3,000 and 5,000 US Dollars/kW (2,000 and 3,400 Euro/kW) depending on the total capacity of the turbine. This difference in costs is often dependent on the availability of state incentives, as well as installation and turbine costs [AWEA: 2009b, P.9f.].

In comparison to 2007, the global turnover of the small wind turbine segment rose by 53 percent in 2008. In other words, 37 MW of small wind turbine capacity was sold worldwide, accounting for approximately 19,000 individual turbines. This translates to an average wind turbine capacity of 1.95 kW per turbine sold within this segment in 2008. In monetary terms, the small wind turbine segment accounted for approximately 156 million US Dollars (105 million Euros) in 2008 [REF: The US and UK are the most 2009a]. While small wind turbines are not of central importance in every regional market, this important markets in the small turbine segment. sector is especially significant in the US and Great Britain.

In 2008, the small wind turbine sector in the US grew by 78 percent, as compared to the preceding year. It was also characterized by 17.3 MW worth of newly installed capacity in 2008, although only accounting for a market share of 0.2 percent of the US’ total newly installed wind turbine capacity (8,346 MW) in 2008. For the most part, micro wind turbines, intended for private use, dominate the US market. The trend within the small turbine segment is steadily moving towards larger commercial turbines (21 to 100 kW), thereby allowing the market share of the total installed wind turbine capacity in this segment to gain in significance. All the same, the small turbine sector in the US achieved a turnover of 77 million US Dollars (52 million Euros) in 2008, accounting for 49.4 percent of global turnover [REF: 2009a].

Alongside the US market, the small turbine sector also plays a crucial role in the British market, especially with regards to production and export. In 2008, British producers dominated the small turbine market with a global export share of 50 percent (4.7 MW). Furthermore, new installations are also gaining significance in the British small turbine market. In 2008 alone, 7.24 MW were newly installed, and the total installed capacity of the small turbine sector exceeded the 20 MW mark [REF: 2009a].

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Small wind turbines are also becoming increasingly popular in China. It has been reported that roughly 30 manufacturers are selling models ranging from 0.1 to 20 kW in capacity. By the end of 2006, the total output of these turbines is estimated to have reached 51 MW. These small turbines are mainly installed in rural areas characterized by low electricity demand and poor road access [EWG: 2008, P.115].

Key Facts and Figures • By the end of 2008, the total installed small wind turbine capacity accounted for 80 MW. This calculates to avoiding 76,000 tons of CO2 emissions per year – or taking 13,300 American cars off the road [AWEA: 2009b, P.10].

Large-Scale Wind Turbines Large wind turbines are classified as turbines with a capacity of at least one MW, and whose rotor diameter encompasses at least 50 meters. According to the German Aerospace Center, the modern wind industry barely scrapes the actual potential of wind energy. In comparison to other renewable energy sources, after solar, wind reveals the highest potential to meet global energy demand. However, this is an underestimated statement; as illustrated in Diagram 6, wind energy could provide 200 times the globe’s total energy needs [Erste Bank Research: 2009, P.10]. In order to tap the wind’s fullest potential, the future will see a worldwide increase in the construction of large-scale wind parks, thereby significantly reducing global CO2 emissions.

Apart from the well-established wind turbine markets in Germany and Spain, the US market has also revealed an impressive development in the large commercial turbine sector. In the last year, a mere five states were responsible for 65 percent of US market growth. According to a study by the Heinrich-Böll-Foundation (HBS), Texas installed a total capacity of 2,671 MW in the form of large commercial turbines in 2008 alone. This accounts for 32 percent of total newly installed capacity in the US in 2008. After Texas comes Iowa with 1,600 MW (18.6 percent), and Minnesota with 456 MW (5 percent) of newly installed capacity [HBS: 2009, P.23].

Investment volume of the large commercial turbine sector reflects its growing importance. During the time period between 2007 and 2010, the 15 largest European energy suppliers and independent grid operators announced plans for the construction of wind parks with a capacity totaling over 18,000 MW in the near future.

< Figure 6: Potential of wind energy as compared to other renewable energies>

Wind energy potential: The potential of wind energy has barely been tapped. Wind energy has the potential to cover global energy consumption by a 200-fold.

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In monetary terms, this accounts for an investment volume of more than 25 billion Euros. These plans are becoming increasingly concrete, as the European wind market is expected to grow by more than 9,000 MW by 2010. If this is to be the case, investments should mount up to between ten and 16 billion Euros [EWEA: 2009e, P.286].

Key Facts and Figures • In the US, one MW can provide electricity for about 250 to 300 households on an average day [SECO: 2008]. In Europe, on the other hand, one MW is enough to provide for approximately 1,080 households on an average day [EWEA: 2009f.]. This large difference is due to higher energy consumption in the US, predominately a result of the widespread use of air conditioning and poor building insulation.

• The world’s largest onshore wind park is currently the Roscoe Wind Farm in Roscoe, Texas, in which 627 wind turbines account for a total capacity of 781.5 MW [E.ON: 2009]. The world’s largest offshore wind park is located in Denmark, and is called the Horns Rev 2. The park is comprised of 91 wind turbines, towering 115 meters over the North Sea. Horns Rev 2 covers an area of 35 square kilometers, and totals a capacity of 209 MW [Ministry of Foreign Affairs, Denmark: 2009].

Onshore Wind Parks Today in Europe, one can spot an onshore wind park during almost every car or train ride. In fact, they have become so widespread and grown so much in size that one can even see them from the air during a regional flight. This is largely due to the strong development of wind energy on land since the start of the 1990s. In the time period from 1992 to 2004, the newly installed onshore capacity within the EU grew by an average of 32 percent each year [EWEA: 2009d, P.7].

Repowering For the most part, the development of onshore wind energy is country-specific. In countries such as Germany, where onshore wind energy potential has been maximized, repowering will play a key role in the future of the onshore sector. As seen from a technological standpoint, repowering refers to the replacement of outdated wind turbines with more modern and efficient ones, which are capable of producing a higher output thereby making the most of the wind potential at a given location [KPMG: 2009, P.12]. Repowering is a crucial aspect, considering that the typical wind turbine in 1995 averaged a capacity of only 0.5 MW, whereas in 2007, the standard turbine averaged a total capacity of approximately 2 MW [KPMG: 2009, P.7]. Consequently, the repowering process will play an important role in the future development of the wind industry.

< Figure 7: Repowering in Germany >

Repowering: The construction of onshore turbines will decrease in the future. Instead, offshore turbines will multiply considerably. As offshore technology is still quite new, offshore repowering will not take place before 2020.

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The development of onshore wind power is heavily based on underlying political frameworks and Repowering is the replacement of outdated turbines with conditions. Germany’s leading position in the renewable energy sector is strongly dependent on modern ones. the EEG (German renewable energy law), which offers Feed-In Tariffs (FIT) for energy produced from renewable sources. Besides general incentives for onshore and offshore wind power, repowering also receives an explicit incentive in the form of a bonus payment. In addition to an onshore FIT of 9.2 Eurocent/kWh, the 2009 amendment to the EEG established a repowering bonus of 0.5 Eurocent/kWh. In order to qualify for receiving the FIT repowering bonus, the new turbine should be constructed in the same or surrounding district, and the outdated turbine should be at least ten years old. Furthermore, the new turbine should have at least double – but not more than five times – the capacity of the older turbine [VDMA u. BWE: 2009, P.13].

In Germany, the repowering bonus has established an incentive for replacing outdated turbines with more modern ones. KPMG estimates that without the repowering bonus, approximately 6,000 MW less capacity would be installed in Germany by 2020. However, the success of repowering is not measured by the amount of the incentive. In many German townships, wind turbines are not to exceed a total height of 100 meters, making it significantly more difficult to replace older turbines with modern, usually meaning higher, ones. For this reason, the success of repowering in Germany will strongly depend on an annulment to this height constraint [KPMG: 2009, P.5].

Key Facts and Figures • In the twelve years between 1992 and 2004, newly installed onshore capacity in the EU grew by approximately 32 percent annually [EWEA: 2009d, P.7].

• The German Wind Energy Association (BWE) estimates that the total capacity of onshore wind turbines in Germany could reach 45,000 MW by 2020 [BWE: 2008: P.15].

Offshore Wind Parks Installed wind energy on the open sea, otherwise known as offshore wind energy, currently accounts for only one percent of the globe’s total installed wind energy capacity [EWEA: 2009a, P.61]. Although network expansion presents an especially difficult obstacle for this technology, offshore wind parks prove to be especially effective due to the stronger and more constant wind conditions at sea. This makes the offshore sector a crucial step in the wind industry [WWEA: 2006]. Offshore energy is especially suitable for providing energy to nearby coastal regions, as wind conditions at sea can easily exceed eight meters per second at a height of 60 meters. At an offshore location, this calculates to an additional annual energy output of 40 percent, as compared to an onshore location [Greenpeace: 2001, P.8]. Consequently, according to forecasts by the European Wind Energy Association (EWEA), offshore wind power in the EU could reach 40,000 MW of total installed capacity by 2020 [EWEA: 2008b, P.18].

EWEA reports that in 2008, global installations in the form of offshore capacity exceeded one MW per day; at the end of 2008, the global installed offshore capacity totaled 1,471 MW. Plans for offshore projects totaling over 100 GW are currently underway. Should these projects be carri- ed out, wind energy could account for ten percent of Europe’s energy production, simultaneously avoiding the emission of 200 million tons of CO2 [EWEA: 2009c, P.1]. Unfortunately the financial crisis has slowed the progress of several projects, possibly resulting in slower growth than expected for the offshore segment.

Since offshore wind parks are located up to 20 kilometers out to sea, they cause no noise pollu- Offshore technology currently tion, do not impair the natural appearance of the landscape, and do not cast shadows over resi- only accounts for one percent dential areas. However, in comparison to onshore parks, offshore technology entails much higher of total global capacity. costs. This is a result of the more extreme weather conditions at sea, as well as the more complex installation and transportation process. EWEA estimates the costs for offshore technology to be approximately 50 percent higher than the costs for wind energy on land [EWEA: 2009a, P.62f.].

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The investment costs for an average offshore wind turbine near the coast run at approximately 2,000 Euro/kW. It is important to note that these costs increase the farther away the turbine is installed from the coast [EWEA: 2009e, P.15]. Nevertheless, EWEA expects the average costs for offshore technology to decrease by approximately 15 percent by 2015, [EWEA: 2009e, P.220] due to the effects of economies of scale. A reduction in offshore costs would be especially beneficial for the European wind market, as a lack of free area on land has made offshore wind parks a feasible option for the future.

< Figure 8: Estimated investments in onshore and offshore turbines in the EU >

Onshore investments Offshore investments

Estimated investments: Future investments in the offshore segment will grow considerably. According to EWEA, offshore investments will account for approximately two- thirds of total investments made in the wind industry in 2030.

Key Facts and Figures • In Germany, plans are currently underway for 40 offshore wind parks; of these, 30 are to be installed in the North Sea and ten in the Baltic Sea. The German government has already approved the construction of 22 of these parks. All projects are to be installed beyond 20 kilometers of the coast. Once complete, the offshore parks will have a total capacity of 12,000 MW, which will provide for approximately twelve million households [Spiegel Online: 2009].

• In cooperation with Siemens, the Norwegian company Statoil Hydro has designed the world’s first floating wind turbine. This will allow for the installation of wind parks in water depths of up to 700 meters. Until now, offshore turbines had to be anchored in the sea bottom near the coast. In contrast, the Hywind-Prototyp actually swims in the sea, and is anchored to the sea bottom with three cables [Siemens: 2009].

• Since mid-July 2009, the first German offshore wind park, Alpha Ventus, has been feeding energy into the grid. The park is a pioneer-project involving E.ON Climate and Renewables, EWE and Vattenfall. The project illustrates the increasing number of energy producers both willing to invest in the offshore market, and willing to construct large offshore projects. The park is located 45 kilometers North of the island Borkum, in a water depth of 30 meters. Being the first German offshore wind park, Alpha Ventus serves to gather experience for the future commercial use of offshore technology in Germany [Alpha Ventus: 2009].

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In the last few years the wind industry has been characterized by strong excess demand. In general, a combination of two factors has led to this development. First, a significant number of component manufacturers were not able to keep up with the speed of technological innovation. Consequently, these segments of the value chain were confronted with bottlenecks, which then negatively affected demand. The supply of gearboxes for larger wind turbines was especially affected. Secondly, while there were strong limitations to the supply side, demand was stimulated through a number of promotion schemes.

As a means of coping with this situation, a number of turbine manufacturers such as Suzlon or Gamesa began focusing on a vertical integration of their business strategy by taking over companies from the upstream sector and integrating them into their production processes [EWEA: 2007, P.27ff.].

At the same time, an increasing number of turbine manufactures joined in cooperative projects with downstream market players. Today, there are still a number of reasons why such a long-term cooperation could be positive for both parties. On the one hand, power plant operators have a stronger influence on the workflow of the downstream sector, and can gain experience for future projects as they increasingly cooperate with turbine manufacturers. On the other hand, such cooperation can increase both the planning horizon of wind manufacturers, and the stability of service revenues [Erste Bank Research: 2009, P.17]. Turbine manufacturers are beginning to focus on vertical integration and cooperative Since every stage of the value chain is extremely complex, especially when one considers the projects. strong differences between offshore and onshore technology, it is nearly impossible to depict the value chain of the wind industry with its most influential factors in full. Nevertheless, Diagram 9 illustrates the value chain’s main tendencies and correlations in a simplified manner.

< Figure 9: Value Chain of the Wind Industry >

Value chain: The wind industry’s value chain can be divided into the upstream and downstream sector. German companies are represented in all phases of the upstream and downstream sector of the value chain.

32 CHAPTER III

While raw material suppliers as well as component and turbine manufacturers represent the upstream sector, engineers, project developers and energy utilities represent the downstream sector. The following section will focus on turbine manufacturers and energy suppliers.

Turbine Manufacturers As Diagram 10 illustrates, European manufacturers accounted for the largest market share of the global wind turbine market in 2008. In 2007, approximately 65 percent of global turbine production originated in Europe. Nevertheless, Chinese and Indian market players are also becoming increasingly important (see Top 5 Markets) [Erste Bank Research: 2009, P.17]. The most significant market players in Asia are Suzlon, Goldwind and Sinovel [Emerging Energy Research: 2009]. The following section will take a closer look at the world’s five most significant wind turbine manufacturers.

< Figure 10: Market share of the largest turbine manufacturers in 2008 >

Turbine manufacturers Nearly 60 percent of the global turbine market is allotted to European manufacturers (Vestas, Gamesa, Enercon, Siemens, Acci- ona, Nordex).

Vestas Vestas is the leading company for the production and installation of wind turbines across the globe. In fact, wind energy has been the firm’s most important business division since 1983 [VDMA u. BWE: 2009, P.43]. With headquarters in Denmark, Vestas is active in more than 26 countries, and employs more than 20,000 people worldwide. In 2008, the company acquired a total revenue of 6.3 billion Euros – an increase of approximately 25 percent in comparison to the previous year. Although Vestas is well-positioned in the US and Asia, the strong increase in revenues was mainly a result of the European sales market [Erste Bank Research: 2009, P.18]. According to the American Wind Energy Association (AWEA), the firm has a market share of 13 percent in newly installed capacity in the US [AWEA: 2008b, P.10]. In China, on the other hand, Vestas accounts for eleven percent of new installations [Reuters: 2009a].

GE Energy Following Vestas, GE Energy is the second most important turbine manufacturer. The company is headquartered in Atlanta, USA, and has installed over 10,000 wind turbines across the world [VDMA u. BWE: 2009, p.35]. In 2007, GE Energy made a total turnover of more than four billion Euros [Eclareon: 2008, P.71]. The firm’s domestic US market is its most important sales market; in 2008 it dominated the US market with a share of 43.8 percent in newly installed capacity. Howe- ver, GE Energy’s market share is much lower in other markets. In China, for example, the company accounts for only three percent of the market [Reuters: 2009a].

Gamesa The Spanish firm Gamesa is the second largest European supplier of wind turbines, and was ranked third in total newly installed capacity in 2007. In 2008, the firm’s turnover totaled 3.6 billion Euros, a 27 percent increase in comparison to 2007 [Gamesa: 2009]. Spain accounted for the most important sales market in 2007, with a market share of 33 percent [Erste Bank Research: 2009, P.18]. Gamesa’s position in the Spanish market is supported by a cooperative agreement with the Spanish energy utility Iberdrola Renovables. In 2008, both companies signed a large-scale contract for wind projects totaling 4,500 MW in capacity. The contract, amounting to 6.3 billion Euros, not only provides for the construction of wind turbines in Europe, but also in the US and Mexico. Both firms entered into a joint venture for European projects [IWR: 2008].

34 CHAPTER III

Enercon Enercon, founded in 1984, is headquartered in Germany. Until now, the company has installed more than 14,500 wind turbines mostly in Europe, India and the Pacific Region [Eclareon: 2008, P.71f.], with a capacity totaling over 17,000 MW [Enercon: 2009]. In 2008, the Lower-Saxony-based company generated revenues worth 3.15 billion Euros [Neue Energie: 2009]. The product portfolio of Germany’s most important international turbine manufacturer ranges from middle-sized turbines (333 kW) to large-scale turbines (6 MW) [VDMA u. BWE: 2009, P.28]. According to the German Wind Energy Institute (DEWI), in 2008, Enercon accounted for a total market share of 51.6 percent in the German market, and was the German market leader in terms of total installations.

Suzlon The Indian turbine manufacturer Suzlon is the Asian market leader. In 2008/2009, the company made a turnover of approximately 3.8 billion Euros, thereby clearly dominating the domestic market with a share of more than 50 percent. According to BTM Consult Aps, Suzlon accounted for nine percent of global installed capacity. The company is setting increased focus on the integration of further processes and expansions: This year, the Indian company increased its share in REpower, a German turbine manufacturer, to 73.7 percent. Moreover, the company holds 61.3 percent of the Belgian gearbox manufacturer Hansen [Welt Online: 2009].

Wind Park Operators Diagram 11 illustrates the total installed capacity of the world’s most important wind park operators in 2007. The graph clearly depicts the leading position of Iberdrola and Acciona, which totaled more than 14,000 MW in joint operation in 2007. Besides these two Spanish companies, Florida Power & Light Corporation and the Portuguese EDP Renovables are also important operators [Erste Bank Research: 2009, P.29]. The German energy utilities E.ON and RWE will most likely play a more important role in the future: In 2007, RWE announced plans to expand its division for renewable energies, thereby further developing wind energy. By 2020, renewable energies will constitute 20 percent of RWE’s portfolio. In order to reach this goal, the company plans to invest at least one billion Euros into renewable energies per annum [Tagesspiegel: 2007]. Furthermore, E.ON is also pursuing similar ambitious goals; in the past few years, Germany’s biggest energy utility invested four billion Euros in renewable energies, and plans to invest another four billion Euros by 2012. Renewable energies will constitute up to 36 percent of E.ON’s electricity portfolio by 2030, the largest percentage of which will derive from wind energy [Handelsblatt: 2009].

German energy providers could take on a more significant role in the future.

< Figure 11: Estimated installed wind capacity of the most important wind operators by the end of 2007

Wind operators: In 2007, the Spanish energy utilities Iberdrola and Acciona had more than 14,000 MW of wind energy in operation. Ger- man energy utilities such as E.ON and RWE will most likely become more significant in the future.

36 CHAPTER III

Cost Structure First and foremost it is important to note, that it is not possible to generalize the cost structure of wind turbines. Several factors play a role in the dispersion of turbine costs, such as the type of wind turbine (onshore or offshore), accessibility to the turbine’s location, soil conditions, complex grid connection, etc. [EWEA: 2009a, P.8]. As a general guideline, the investment costs for a wind turbine, including rotor blades, tower and components account for approximately 70 percent of total costs. In general, the investment costs for a wind turbine are relatively high, although costs for the turbine’s operation are very low and independent of fuel costs [EWEA: 2009a, P.8]. In addition, the wind park operator saves costs for CO2 emission permits [EWEA: 2009e, P.16].

Diagram 12 illustrates the percentage share of each wind turbine-related cost. According to several different studies, the costs of an average onshore wind turbine in Europe, with a capacity of two MW, lie at an estimated 1,200 Euro/kW. The costs for an average offshore wind turbine, in contrast, range anywhere between 1,200 and 2,200 Euro/kW [EWEA: 2009a, P.9; EEA: 2009, P.35f.]. The percentage distribution shows that the wind turbine accounts for the largest share of investment costs in onshore technology, whereas the costs are much more evenly distributed in offshore technology. This results in the fact that the costs for the foundation, installation and grid connection of offshore wind turbines, are much higher than those of onshore turbines.

< Figure 12: Cost structure of an average onshore and offshore wind turbine >

Cost Structure: An onshore turbine accounts for the largest share of investment costs. The cost structure of offshore technology is much more balanced due to higher foundation, installation and grid-connection costs.

38 CHAPTER III III.4. Competitiveness of Wind Energy

Furthermore, it becomes clear that cumulated initial investments for offshore wind power can be nearly twice as high as those of onshore. Besides high steel prices, excess demand has also led to high offshore prices, as compared to onshore. However, as of 2010 the entrance of more producers in the offshore industry will result in a price decline [EEA: 2009, P.35]. In addition, higher investment expenses for offshore turbines also result in higher and more consistent revenues, as compared to onshore projects.

Cost Distribution As Diagram 12 depicts, the turbine accounts for the largest share of expenses. Around 50 percent of these expenses are incurred through the costs for raw materials (steel, copper, etc.). The tower, especially, accounts for the largest share of turbine costs, due to the large amount of steel used for its production. Labor costs are also not to be ignored: these account for approximately 30 percent of turbine costs [Erste Bank Research: 2009, P.8].

The high costs of offshore technology in the foundation and installation sector are largely a result of special underground cables and transportation costs. As Diagram 12 illustrates, costs for an offshore turbine’s foundation and installation are clearly higher than those of an onshore turbine.

Wind turbines are either connected to a high or medium voltage grid system, depending on their total output capability. The condition and accessibility of the grid is of central importance. The grid connection costs strongly depend on the local network infrastructure and the capacity of the respective network. In case of a high network load, network expansion costs need to be taken into account. Furthermore, depending on the location of an onshore wind turbine, property and infrastructure costs also play an important role. In this context, costs for the extension of infrastructure, such as the construction of a road for example, account for significant additional expenses. Depending on accessibility, infrastructure costs for onshore turbines lie between one and five percent.

Variable costs for replacement parts, repairs and maintenance, have until now only accounted for a relatively small share of expenses. However, due to the lack of experience, especially with regards to large wind turbines, this share of variable costs is still relatively uncertain over the long-term [EWEA: 2009a, P.44ff.].

As mentioned earlier, a general price decline is expected from 2010 and onwards [GWEC: 2008a, P.37]. According to assessments by turbine manufacturers, an annual price reduction of one to five percent is to be anticipated [EEA: 2009, P.35f.]. The GWEC assumes that the price of onshore turbines will settle around 1,050 Euro/kW in the long-term, [GWEC: 2008a, P.37] representing a price reduction of 12.5 percent of actual average costs.

Competitiveness The demand for energy will continue to escalate in the future. Even today, important political decisions need to be made, as the energy mix in 2030 will be determined predominately by the current newly installed capacity [Goldman Sachs: 2009, P.1]. Several important questions now arise: According to what criteria is the decision to invest in wind energy made? How competitive is wind energy in reality, and which factors influence the competitiveness of wind turbines?

The future competitiveness of wind energy will strongly depend on the price development of raw materials, which comprise a fundamental part of turbine manufacturing.

< Figure 13: Share of various energy forms in the global energy mix >

Global energy mix: Power plants utilizing fossil fuels account for approximately 66 percent of current global installed capacity. Wind energy onlyac- counts for approximately two percent.

40 CHAPTER III III.4. Competitiveness of Wind Energy

Technological advancements and the implementation of new energies will also be decisive factors, as well as the achievement of economies of scale in the production of offshore wind turbines. Furthermore, governmental incentives such as FITs, as well as the development of fuel prices for gas and coal will also play an important role.

Diagram 13 demonstrates that energy plants, which generate electricity by burning fossil fuels, account for approximately 66 percent of today’s installed capacity, while wind energy plants account for only two percent [Goldman Sachs: 2009, P.14]. However, the proportion of currently installed capacity could shift in favor of wind energy in the future. In 2008, the share of wind energy amongst newly installed energy plants rose significantly in both the US and the EU. According to EWEA, wind energy accounted for approximately 35 percent of newly installed European capacity in 2008 [EWEA: 2008b; P.13], while at the same time in the US, wind capacity expanded by 42 percent [AWEA: 2008b, P.5]. Furthermore, in the next decade, the share of wind energy on the Asian continent will grow at a constant rate, making the share of wind energy, in relation to global energy plant capacity, significant. Diagram 14 illustrates the estimated investment costs for wind energy and conventional energy forms – clearly, onshore wind parks are able to compete with coal and nuclear plants [Erste Bank Research: 2009; P.5].

< Figure 14: Investment costs of various energy forms >

Investment costs: Considering the investment costs of onshore turbines, the installations can compete with nearly all other types of power plants, except for gas. However, offshore investment costs are much higher.

Diagram 15 and 16 show the competitiveness of the estimated electricity production costs of wind energy in the year 2007 and 2020 in Europe, as expected by the European Commission. The bars symbolize the margin between the lowest and highest electricity production costs for each type of electricity generation. While in 2007 both onshore and offshore wind parks could not yet compete with conventional energy plants, by 2020, only nuclear energy will be less expensive than wind energy [European Commission: 2008, P.4ff.].

< Figure 15: Estimated electricity production costs in 2007 >

Estimated electricity production costs in 2007: While wind energy was not able to compete with conventional energy sources in terms of electricity production costs in 2007…

42 CHAPTER III III.4. Competitiveness of Wind Energy

This is due to the fact that electricity production costs of conventional energy will increasingly depend on fuel prices, which are deemed to rise even further in the future. If costs for society (resulting from CO2 emissions and the disposal of nuclear waste) were internalized, wind energy would already serve as strong competition to other forms of energy.

< Figure 16: Estimated electricity production costs in 2020 >

Estimated electricity production costs in 2020: ...the competitiveness of wind energy will be much higher in 2020.

The future competitiveness of wind energy will strongly depend on political willpower. In correlation with this, the role of newly installed nuclear energy capacity will be of central importance, as the electricity production costs of nuclear plants will become less expensive in the future, as compared to wind parks. In several countries, such as Great Britain for example, there is clear evidence of a renaissance of nuclear energy plants.

In line with the debate, advocates of atomic energy argue that nuclear energy serves is an essential backup technology until renewable energy is made widely available [Hamburger Abendblatt: 2009]. However, a stronger implementation of nuclear energy could impede the competitiveness of renewable energies and slow their development, in turn serving as a strong endorsement for atomic energy. Furthermore, the climate protection debate often views nuclear energy as “environmentally friendly,” as it is a possible prospect for the reduction of CO2 emissions [Handels- blatt: 2007]. Unfortunately, the risks associated with atomic energy, as well as the costs for the disposal of atomic waste are often ignored; when the risks and expenses related to atomic energy are considered, the competitiveness of nuclear energy, despite lower electricity production costs, becomes relative.

Key Facts and Figures: Eco-Balance of a Wind Turbine • The manufacturing of a wind turbine, with a total capacity of 1.8 MW and a full-time efficiency of 25 percent, emits a total of 906 tons of CO2 [Das Grüne Emissionshaus: 2009]. However, a turbine emits little or no CO2 during the course of its lifespan [Junghans: 2004, P.8]. This means that the turbine, with an average lifespan of 20 years, will make up for the CO2 produced during its production in only 4.4 months. In addition, it is estimated [Das Grüne Emissionshaus: 2009] that by 2020, the rising efficiency and optimization of the manufacturing process will lead to a reduction of CO2 emissions by 20 to 30 percent, as compared to now [Junghans: 2004, P.8].

44 CHAPTER III III.4. Competitiveness of Wind Energy

Wind Energy by Region The global wind industry is growing rapidly in monetary terms and in terms of cumulated capacity. According to DEWI, revenue of the global wind industry totaled 22.1 billion Euros in 2007, and grew by 40 percent as compared to 2006 [VDMA a. BWE: 2009, P.10]. This growth trend continued in 2008, as the World Wind Energy Association (WWEA) estimated the global wind industry’s revenue to have been 40 billion Euros. As compared to 2007, this is an increase of 81 percent [WWEA: 2009, P.4]. With regards to newly installed capacity, the market’s focus is taking on a strong shift towards Asia. Diagram 17 depicts this development for the time period between 2004 and 2008. While the majority of wind turbines in 2004 were predominantly installed in Europe (70 percent market share), distribution of the market share was more balanced in 2008 [WWEA: 2009, P.8f.].

< Figure 17: Estimated percentage of newly installed capacity in world regions >

Source: EuPD Research 2009

70%

60%

50%

40%

30%

20% Percent of newly installed capacity: In 2004, Europe was home to 70 10% percent of global installed capacity. In 2008, on the other hand, 0 the share balanced itself out across Europe, North America and Asia.

46 CHAPTER III III.5. Market Overview – Wind Energy Market Overview – Wind Energy

Europe Europe remains a strong leader in terms of total installed capacity (see Diagram 29). Although The Asian market is expected newly installed capacity has been declining at a constant rate since 2004, Europe is still expected to grow significantly. to remain an important wind energy market in the future – Germany and Spain being the strongest. Furthermore, Italy, France and Great Britain are also gaining in significance, due to their growing installation numbers [GWEC: 2008b, P.30]. According to information by the GWEC, wind energy already plays a decisive role in the expansion of power plants: With a 35 percent share of all newly installed power plants in Europe, wind energy is the strongest energy form, exceeding other conventional energies such as coal, gas and atomic energy [GWEC: 2008b, P.11].

Asia China and India already belong to the world’s top five wind energy markets. In the future, these two Asian markets are expected to grow significantly. Exorbitant growth rates are expected especially in China, having installed a remarkable 6,300 MW in 2008. GWEC expects this sum to double once again in 2009. On account of these rapid growth rates, the newly installed capacity in China is expected to surpass that of the most important European markets – Germany and Spain – in the next few years [GWEC: 2008b, P.9]. However, China is not only promising in terms of total installed capacity; according to the Chinese Renewable Energy Industry Association, numerous companies including Goldwind and Sinovel, have begun exporting their products, since domestic demand has long been met. India has similar, yet more moderate potential than China. Other markets such as South Korea, which is home to several companies along the value chain, shows strong potential as well [WWEA: 2009, P.9f.].

North America Despite the ongoing economic crisis, the North American wind industry is growing rapidly. In 2008, newly installed capacity in the US amounted to 8,350 MW, making the US leader in terms of newly and total installed capacity [GWEC: 2008b, P.8ff.]. The growth rate for 2009 is expected to be more moderate due to lower levels of project financing [GWEC: 2008b, P.56f.]. However, measures introduced by the Obama administration in 2010 could make a strong impact. Canada is also an interesting growth market, with newly installed capacity totaling 526 MW in 2008. However, Canada currently lacks political support for wind energy on a national level [REW: 2008].

Latin America Latin America has high levels of potential for wind energy, which has hardly been tapped until now. In 2008, Brazil was the only country with an installed capacity worth mentioning (94 MW). As Diagram 18 shows, the region’s total installed capacity only accounts for 0.5 percent of total installed capacity across the globe [GWEC: 2008b, P.12]. Nevertheless, wind energy could make a major contribution to the electricity supply in rural areas [WWEA: 2009, P.11].

< Figure 18: Estimated percentage share of total global capacity >

Percent of total capacity by region: Over 50 percent of global installed wind capacity is located in Europe. On the other hand, Africa, Latin America and the Pacific Region account for less than three percent of installations.

48 CHAPTER III III.5. Market Overview – Wind Energy Market Overview – Wind Energy

Africa and MENA (Middle East and North Africa) Similar to Latin America, the wind energy potential in Africa and the MENA region has scarcely been tapped. At the end of 2008, the cumulated capacity in these regions only added up to 669 MW. The most important markets in this region include Egypt (365 MW), Morocco (134 MW) and Iran (85 MW), as ranked by installed capacity in 2008 [GWEC: 2008b, P.13]. Although total installed capacity is relatively low as compared to other continents, promotion schemes and incentives could heavily contribute to the expansion of wind energy in individual African countries. South Africa, for example, implemented a FIT for wind energy in April 2009 [REW: 2009b]. Similarly to Latin America, small decentralized wind turbines could supply energy to the many remote areas.

Australia and Oceania With approximately 80 percent of total installed capacity, Australia is the largest wind market in this region [GWEC: 2008b, P.13]. By the end of 2008, the wind energy capacity installed in Aust- ralia cumulated to 1,306 MW. At first, only a constant growth rate was expected in this region. However, in August 2009, the Australian government established clear framework conditions and set goals for the promotion of renewable energies, which are likely to further stimulate the wind industry (see Future Markets).

Top 5 Markets

USA – 1st Place In 2008, the US wind market took on a rapid growth rate. Subsequently, the US overtook Germa- ny as world market leader in terms of newly and total installed capacity; in total, 8,358 MW were newly installed in 2008 – a 50 percent increase as compared to 2007. In 2008, a total of 25,170 MW of wind capacity were installed across the US. Moreover, wind turbines increasingly compete with other kinds of power plants: In 2008, the newly installed wind capacity represented 42 percent of all newly installed power plants in the US. By the end of 2008, wind energy covered one percent of US electricity supply [GWEC: 2008b, P.56]. However, due to the continuing economic crisis, growth rates will be much more moderate in 2009, as compared to the past few years. According to DEWI, the market is expected to decline by up to 30 percent in comparison to 2008 [DEWI: 2009]. Nevertheless, the wind industry may be able to continue its course of growth in 2010 due to renewable energy subsidies from the US government, which were implemented in 2009.

A moderate growth rate is expected for 2009.

< Figure 19: Development of total installed capacity in the US >

Total capacity: By the end of 2008, the US had installed wind energy worth 25,170 MW of total capacity. The US therefore leads in terms of total installed capacity, and has replaced Germany in first place.

50 CHAPTER III III.5. Market Overview – Wind Energy Market Overview – Wind Energy

Rapid growth rates of the past year have stimulated production within the US. Due to a rise in domestic demand in 2008, 55 out of 70 companies were established within the wind energy branch [GWEC: 2008b, P.57]. This positive development led to the creation of more than 85,000 jobs [REF: 2009b]. The use and expansion of wind energy strongly differentiates from state to state. According to the GWEC, 34 states have installed wind turbines, of which Texas, Iowa, California, Minnesota and Washington have installed the highest capacity [GWEC: 2008b, P.56].

In order to prevent a downturn of the wind industry in the course of the economic crisis, the US government implemented several short-term incentives in 2009. In the US, investments in wind energy projects are supported by Production Tax Credits (PTC). PTCs are tax exemptions amounting to 2.1 US dollar Cent/kWh (1.43 Eurocent/kWh) that are available until the end of 2012. Alter- natively, turbines that begin operation in 2009 or 2010 can take advantage of the Investment Tax Credit (ITC). The ITC is a 30 percent tax exemption of the amount to be invested [AWEA: 2009a]. Moreover, three states have implemented a FIT for wind energy that is either paid by utilities or the state [NREL: 2009, P.7].

< Figure 20: Feed-in tariffs in the US > USA

Incentive Type Feed-in tariff (FIT) provided either on a state or utility level

Compensation State FIT Eurocent/kWh Conditions Washington State-level Until July 2014, max. 8,25- 12,38 annual sum of 1375 €

California Utility-level Duration: 10, 15 or 20 PG&E, 6.75-10.48 years, Project size not to exceed 1.5 MW*

Wisconsin Utility-level Duration: 10 years, Xcel Energy, 4.54 Project size between 20 kW and 1 MW

Particularities A nation-wide FIT has not yet been implemented

* Incentive ends as soon as California reaches a renewable energy capacity of 500 MW.

Sources: NREL 2009, Pacific Gas and Electric Company (PG&E)

Germany- 2nd Place Germany is a well-established wind location with regards to the volume of installations and local industrial production. By the end of 2008, Germany installed a total capacity of 23,903 MW [BWE: 2009, P.10]. At the same time, domestic wind energy generated approximately 40.43 billion kWh [Germany Trade & Invest: 2009, P.3]. Moreover, the added value of German wind turbine and component manufacturers accounted for 7.9 billion Euros in 2008, a 30 percent increase as compared to the previous year. With regards to the service sector, the added value increased to 9.7 billion Euros. The German wind industry represents 25 percent of the global wind market [Germany Tra- de & Invest: 2009, P.3]. The export sector especially grew in significance: According to DEWI, the export ratio of companies producing in Germany accounted for 81 percent in 2008 [DEWI: 2009]. Furthermore, Germany leads in the field of technological innovations. In the year 2008 alone, 40 billion Euros worth of public funds were invested in R&D for wind energy [Germany Trade & Invest: 2009, P.3].

The strength of the German wind industry is reflected in the number of jobs: According to EWEA, the German wind industry has already created a total of 84,000 jobs, of which 38,000 were established within the production segment [Germany Trade & Invest: 2009, P.3].

< Figure 21: Development of total installed capacity in Germany >

Total capacity: By the end of 2008, Germany had installed a total of 23,903 MW in wind energy. Germany therefore ranks in second place in terms of total installed capacity.

52 CHAPTER III III.5. Market Overview – Wind Energy Market Overview – Wind Energy

The continual success of the German wind industry is strongly linked to the framework of the Until now, 84,000 wind-related Renewable Energy Act, which offers FITs for energy generated from wind. jobs have been created in Germany.

The FIT differentiates between onshore and offshore turbines as well as for the repowering of outdated turbines (see Onshore Wind Energy). Diagram 22 depicts the tariffs and particularities that are currently in force:

As far as onshore wind turbines are concerned, the act provides between 5.02 Eurocents/kWh and 9.2 Eurocents/kWh depending on location. However, the FIT is 0.5 Eurocents/kWh higher for repowered turbines. Energy originating from offshore turbines receives a higher FIT: 13 Eurocent/ kWh, with an annual degression of five percent from 2015 onwards [BWE: 2009, P.28].

< Figure 22: Feed-in tariffs in Germany >

Spain – 3rd Place After the US and Germany, Spain is the world’s third largest wind energy market with a cumulated capacity of 16,754 MW. The Spanish market is characterized by stable growth rates, and will most likely reach its target of 20 GW of installed capacity by 2010. The importance of the wind sector also becomes apparent when considering the following figures: As early as 2008, Spanish wind turbines produced 31 terrawatt hours (TWh) of electricity, and covered 11 percent of domestic electricity supply [GWEC: 2008b, P.48].

Spain is also an important site for the production of wind turbines and components: Each year Spanish wind manufacturers export wind products worth 2.5 billion Euros. This success is also reflected in employment figures: In 2008, the wind industry created more than 40,000 jobs [IEA: 2009].

< Figure 23: Development of total installed capacity in Spain >

Total capacity: The capacity installed in Spain in 2008 totaled 16,754 MW, making Spain the second most important European, and third most important global wind market.

54 CHAPTER III III.5. Market Overview – Wind Energy Market Overview – Wind Energy

Besides the obligation of Spanish energy utilities to cover parts of their portfolio by means of Wind energy provides for eleven percent of Spain’s renewable energies, the growth of the Spanish wind energy market is guaranteed by the FIT electricity demand. program. As the graph illustrates, electricity producers may choose between two options: They can either receive a fixed sum or sell the electricity at market price plus an additional predefined bonus. The current tariffs are depicted in Diagram 23. The tariffs are due for an amendment in 2010 [BWE: 2009, P.28ff.].

< Figure 24: Feed-in tariffs in Spain >

China –4th Place China is the most important market for wind energy in Asia. With a total installed capacity of 12,210 MW in 2008, the People’s Republic ranks in fourth place with regards to total installed wind capacity in the world. In the mid-term, China will surpass Germany and Spain. The rapid growth of the Chinese wind energy market is substantiated by the commitment of Chinese energy policy: By 2020, electricity generated by means of renewable energies should cover three percent of domestic demand. Wind energy is crucial in fulfilling this objective [GWEC: 2008b, P.24] and several wind-specific incentive programs such as the “10 GW Size Wind Base Programme” have been established. In line with this program, the Chinese government defined five regions that have great potential for wind parks. In total, 100 GW shall be installed in the Inner Mongolian region, specifically Xinjiang, Gansu, Hebei and Jiangsu by 2020.

Moreover, Bejing is increasing its efforts to promote companies along the wind value chain. For example, Chinese turbine manufacturers receive approximately 60 Euros/kW for the first 50 turbines (with a capacity over one MW) they produce and connect to the grid. Consequently, the By 2020, three percent of incentive adds up to three million Euros for 50 turbines at one MW each. The payment is subject China´s generated electricity to a few conditions; turbines must be tested by the China General Certification, the components is to come from renewable sources. must be made in China and the funds must be shared with component manufacturers.

< Figure 25: Development of total installed capacity in China >

Total capacity: As compared to 2007, China doub- led its total installed wind capacity to 12,210 MW in 2008, making it the wind leader in the Asian market. On a global level, China ranks in fourth place.

56 CHAPTER III III.5. Market Overview – Wind Energy Market Overview – Wind Energy

On the one hand, these conditions lead to bureaucratic processes and reduce the promotion that turbine manufacturers may receive, but on the other hand they guarantee quality standards and the promotion of the entire value chain [GWEC: 2008b, P.26].

Due to the increasing number of Chinese manufacturers, foreign market players may find it increasingly difficult to enter this market.

The Chinese incentive program results in a rapid growing number of Chinese turbine manufacturers [Erste Bank Research: 2009, P.17]. According to information by the GWEC, there are currently 70 manufacturers across China. Momentarily, there are indications that both wind turbine demand and competitive pressure will increase in the future. Even today, Chinese companies export their products to foreign markets, as domestic demand has already been met.

Besides promoting the domestic industry, China also introduced a FIT in July 2009 as a means of supporting the installation of onshore wind turbines. Diagram 26 offers an overview of the four feed-in tariffs that have been implemented according to the wind conditions of a given region: the worse the wind conditions, the higher the tariff. A tariff has yet to be implemented for offshore turbines [Business Green: 2009].

Utilizing the wind’s fullest potential brings many challenges, since China’s windiest regions are mainly located in the sparsely populated northwest. A comprehensive extension of the electricity grid will be necessary in order to take advantage of the region’s wind potential, and to transport electricity to areas with a high population density in Eastern China.

< Figure 26: Feed-in tariffs in China >

India – 5th Place Alongside China, India is another important wind energy market in Asia. By the end of 2008, the Indian wind market totaled a capacity of 9,645 MW, and therefore ranks in fifth place in terms of global installations [GWEC: 2009, P.8ff.]. So far, India’s wind potential has barely been tapped: According to estimations by the Centre for Wind Energy, India’s total wind energy potential cu- mulates to at least 48,500 MW. The Centre for Wind Energy also points out that in reality, India’s actual potential could be twice as high, since estimations do not take technological progress into consideration.

Wind turbine installations are only concentrated in a few regions in India. Most installed wind turbines are located in Tamil Nadu, with a total installed capacity of 4,160 MW. Tamil Nadu accounts for 44 percent of India’s total installed capacity. However, other regions such as Maharashtra, accounting for 20 percent of all Indian wind installations, are also gaining in importance. Similar to China, India is currently strengthening its position as a production hub. Domestic turbine manufacturers such as Suzlon are among the industry’s most important market players.

Turbine installations are concentrated only in a few regions.

< Figure 27: Development of total installed capacity in India >

Total capacity: By the end of 2008, India installed a total of 9,645MW. It is the second most important Asian market, and fifth most important global wind market.

58 CHAPTER III III.5. Market Overview – Wind Energy Market Overview – Wind Energy

This development is also reflected in the current production capacity of manufacturers headquartered in India; the domestic industry currently produces between 3,000 and 3,500 MW per year – more than the domestic market absorbed in 2008 (1,800 MW were newly installed in India in 2008).

Until now, India has not yet implemented a nationwide FIT for renewable energies. However, in September 2009, the Indian Regulatory Authority for Electricity announced a concept for the promotion of wind and solar energy [REW: 2009c]. So far, the construction of wind energy has only been promoted on a regional level. Diagram 28 depicts the regions which promote wind energy more than other forms of energy. Besides FITs, preferential network grid connection and tax exemptions are further incentives implemented by the Indian government [GWEC: 2009, P.12]. In order to stimulate future investments in the wind energy sector, the Indian government must implement clear political framework conditions. In this context, India is currently in the process of assessing the introduction of a nationwide Renewable Portfolio Standard (RPS). An RPS requires energy utilities to cover a certain percentage of electricity by means of renewable energies. As Diagram 28 illustrates, some Indian states have already implemented an RPS policy.

< Figure 28: Feed-in tariffs in India >

Future Markets In the next few years, it will be interesting to see which new markets emerge, and the extent to which the different regions tap their wind potential.

In fact, many regions offer excellent conditions for the utilization of wind energy, but the actual development of a location significantly depends on national incentive programs. For this reason, countries which offer, or plan to offer incentives for wind energy can be seen as promising future markets.

Ultimately, Australia is one of the most promising future markets. Until recently, market experts expected the Australian market to grow at a constant rate. However, in August 2009, the Austra- lian government enacted a new law requiring Australian utilities to pull 20 percent of their electricity supply from renewable sources by 2020. The act will be implemented in 2010 [GWEC: 2008b, P.19]. It is expected that the law will lead to investments worth approximately 15 billion Euros and that the wind industry will benefit the most [Reuters: 2009b].

South Korea is also implementing incentives for the promotion of wind energy. In September 2009, the South Korean government announced that it would decrease import duties for technical components of the renewable energy sector by 50 percent. In doing so, the government makes an effort to stimulate both the installation of renewable energies and the country’s competitiveness [Ecoseed: 2009]. South Africa is considered to be one of the most promising markets since the country has already implemented a FIT for wind energy of 10.4 Euro cents/kWh in April 2009 [REW: 2009b].

In established wind markets such as Germany, the future potential mainly lies within the offshore sector. From 2013 and onwards, the construction of huge offshore wind parks in the North and Baltic Sea will make a considerable contribution to the growth of the German wind energy market. In contrast, onshore wind parks will become less significant.

60 CHAPTER III III.5. Market Overview – Wind Energy Market Overview – Wind Energy

Diagram 29 summarizes the development of the global wind energy market between 2008 and 2013 as expected by the GWEC. Accordingly, Asia is assumed to pass Europe with regards to total installed capacity. Despite the fact that there are several potential wind markets across the globe, this rapid growth rate indicates that the lion’s share is expected in the Chi- nese and Indian markets.

< Figure 29: Estimated development of total installed capacity by world region in 2008 - 2013 >

Future development by region: In 2013, approximately 96 percent of installed capacity will be located in Europe, Asia or North America. According to the GWEC, Asian markets will overtake Europe in terms of total installed capacity.

Future development of the wind industry will be determined by the interaction of different market drivers and hindrances. Depending on the strength of these hindrances or drivers, the wind industry will be able to establish itself as the leading renewable energy source and as a competitive alternative to conventional energy.

Drivers In general, there are two main factors which influence the success of wind energy. First of all, national environmental policies are of superior importance, i.e. mandatory targets and framework conditions. For example, consistent FITs are an important instrument in reducing investment risks, as a wind turbine’s profit can be better calculated. Risk can be reduced even further if energy utilities are bound by law to cover parts of their portfolio by renewable energies. This guarantees investors a certain sales potential and encourages possible investors to invest in this industry [EWG: 2008, P.146f.]. Until now, FITs have proven to be the most effective promotion instrument: In 2008, approximately 52 percent of all newly installed wind turbines across the globe were supported by a FIT [Santander: 2008, P.6]. However, further methods such as tax exemptions are also efficient in attracting investments in the wind industry.

The speed of technological progress also plays an important role in the success of implementing wind energy. In turn, this progress is directly linked to the amount of money available for wind- related R&D. New technologies are able to improve both the cost and efficiency of wind turbines, and thus increase a park’s profitability and competitiveness [EWG: 2008, P.146f.].

Hindrances There are also a number of hindrances that impede the increased implementation of wind energy. Financial and technical hindrances are particularly strong in developing countries. Furthermore, environmental regulations also prevent investments in technology.

For example, poor infrastructure can be seen as a technical hindrance, as it makes the transportation of turbines to their final destination more difficult. Such deficiencies raise upfront costs considerably. Further hindrances which decrease a turbine’s profitability include poor grid quality, voltage fluctuations and difficulties in the grid connection process.

In addition, developing countries have seldom recorded wind conditions, thereby making it nearly impossible to reliably calculate turnover. As a result, a country’s efforts in promoting wind energy may be futile, since technical and economic concerns prevent investments from being made.

62 CHAPTER III III.6. Market Drivers & Hindrances

Moreover, rigorous environmental regulations and drawn out bureaucratic processes can have a negative impact on the rate of return, thereby discouraging investments [World Bank: 2009, P.13f.]. Last but not least, public dismay of wind turbines being placed in close proximity to residential areas can be a problem. In the past, there have been several campaigns and initiatives protesting the disruption of the natural landscape and feared noise pollution.

Strengths and Weaknesses – SWOT Analysis Diagram 30 integrates each of the above-mentioned aspects into a SWOT Analysis, and compares the strengths and weaknesses of the wind industry. In this context, the industry’s future opportunities and risks are deduced.

< Figure 30: SWOT Analysis> Strengths Opportunities

No CO2 emissions Achievement of climate goals through Job creation increasing efficiency and competitiveness High availability of wind More balanced energy mix High growth market Decreasing dependency on fossil fuels Strong dynamic of technological advancements Sinking turbine costs Low external costs Sinking electricity production costs

Weaknesses Risks

(Still) independent of incentive programs Strong cutback on incentive payments Directly dependent on wind conditions Created jobs will be lost Partly complex grid connection and Dependency on fossil fuels installation process Limited number of suitable locations High expenses for energy transportation Public concern Disrupts the natural landscape Noise pollution

Source : EuPD Research 2009

Strengths and Opportunities Wind energy has the potential to make a considerable contribution to the reduction of CO2 emissions and to the achievement of climate protection targets. Moreover, the wind industry has played an important role in the direct and indirect creation of jobs along the entire value chain. The industry is marked by consistent growth and continues to do so even in times of economic crisis. In addition, the industry is dynamic in terms of technological progress. Technological innovations increase both the efficiency of turbines, and the competitiveness of wind energy in comparison to conventional energy sources. The optimized performance of wind turbines will also bring about a reduction in turbine and electricity production costs. Moreover, the installation of wind energy will result in a more balanced energy mix, which will not only help reduce CO2 emissions, but will also reduce the dependency on rare fossil fuels.

Weaknesses and Risks Strong growth of the wind industry is directly linked to governmental incentives that stimulate the construction of new wind turbines. Should subsidies be withheld, the industry will be negatively affected. Technological progress is often accompanied by higher expenses, making newly developed advantages in efficiency relative. The installation of offshore turbines on the open sea is quite complex, and the grid connection is very costly. Furthermore, public concern is also rising. Should these weaknesses be used as arguments against wind energy, the related job loss, higher dependence on fossil fuels and escalated costs of electricity should not be ignored.

64 CHAPTER III III.6. Market Drivers & Hindrances

Outlook & Conclusion When examining global wind markets, one can clearly see the expansion of the Asian market, especially China and India. At this growth rate, they will not only catch up to, but pass the European and North American markets with regards to total installed capacity in the next few years. The GWEC estimates that the Asian continent will account for a higher cumulated capacity than the North American continent this year, and will have caught up to Europe by the year 2013 [GWEC: 2008b, P.17]. However, this scenario strongly depends on the development of offshore wind parks in Europe, as EWEA affirms that offshore parks worth 100 GW are currently being planned in Europe, a few of which are already under construction [EWEA: 2009d, P.8]. A strong and rapid growth of Europe’s offshore segment could prevent Asia from catching up to Europe for another several years.

A similar development is to be expected with regards to the wind industry’s value chain, as an increasing number of Asian companies are establishing themselves in the production of wind turbines and their components. With this in mind, competitive pressures within the value chain differentiate, and entrance barriers will influence the success of start-up companies, depending on which particular stage of the value chain they find themselves. While the production of rotor blades and gearboxes requires many years of experience and significant know-how, the production of towers is characterized by low entrance barriers [Emerging Energy Research: 2009]. Besides rising competitive pressures, the value chain’s upstream sector will continue to move towards vertical integration, whereas the downstream sector will move towards cooperative agreements [Erste Bank Research: 2009, P.17].

Due to rising fuel prices in 2020, the electricity production costs of wind energy will be able to compete with those of nearly all conventional energy forms. In fact, only the electricity production costs of nuclear energy will be lower. Consequently, the future of wind energy indirectly correlates with a potential renaissance of atomic energy. For the most part, low electricity production costs, availability and security of supply, high plant capacity and low levels of CO2 emissions are viewed as advantages of nuclear energy. However, the risk of an atomic accident and the unsettled dispute over the disposal of nuclear waste make up the flipside of the coin.

From past and present experience, one may be certain that wind energy has a strong foothold in the future of global energy generation. The industry’s consistent development is supported by steady growth rates in the wind turbine share of newly installed capacity, as well as the escalating number of investments in the branch, as seen in the ambitious plans to construct 40 offshore wind parks in German waters.

66 CHAPTER III III.7. Outlook & Conclusion

Interview with Johannes Dimas, Senior Manager at Germany Trade & Invest

Germany Trade & Invest is the foreign trade and inward investment promotion agency of the Federal Republic of Germany. The organization advises foreign companies looking to expand their business activities in the German market. It provides information on foreign trade to German companies that seek to enter foreign markets.

Johannes Dimas is Senior Manager at Germany Trade & Invest and responsible for the wind energy industry. With a ten-year career in this field, he has acquired extensive experience in the onshore and offshore sectors.

1. What are the characteristics of the German wind energy market? Germany is Europe’s primary wind energy market and has just surpassed 25,000 MW of installed capacity. The springboard for the positive German market development has been the Renewable Energy Sources Act (EEG). According to the EEG, Germany will boost its share of renewable energy sources in the electricity supply from its current 15 percent level to at least 30 percent by the year 2020. Market surveys, like those of the German Wind Energy Institute (DEWI), show that international companies currently consider Germany to be the most important wind energy market worldwide and - alongside China and the USA – believe this will continue in the future.

2. What are the prospects of the offshore segment? Offshore wind energy plays a major role in achieving the goals of the EEG but also in securing Germany’s position as one of the world’s leading wind energy investment locations. The amendment to the EEG in 2009 has jump-started construction activities with its increased feed-in tariff guaranteed for 20 years and the obligation for transmission system operators to provide ready offshore grid connections. There are a number of activities that signal the continuing progress in the industry. This can be witnessed by the increase of investments in production facilities, the construction of new dedicated installation vessels, and major offshore turbine orders worth billions of Euros. Offshore wind farms open up a vista of possibilities for new investors. A number of offshore industry and service centers have already emerged in locations including Bremer- haven, Cuxhaven, and Rostock to supply German and European demand.

Due to the nature of the prospective large-scale investments, the players involved are also changing. For instance, three of the biggest German energy suppliers are currently constructing the first German offshore wind farm, alpha ventus, as part of a joint project.

70 CHAPTER IV

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At the same time, a new power producer market is emerging, backed by the EEG. Al- located grid connection and fixed tariffs are limiting the price risk of the sales market allowing companies to focus on component purchasing and operational costs.

3. What international market perspectives open up for the industry? Both domestic and foreign markets offer a number of opportunities to wind industry companies producing in Germany. The global wind energy market continued to grow at an increased rate of 29 percent in 2008, according to the World Wind Energy Association (WWEA). Global wind sector turnover reached EUR 40 billion in 2008. Thus, and based on accelerated development and further improved policies, global capacity of more than 1,500,000 MW – equivalent to 12 percent of global electricity consumption - should be possible by the year 2020. In 2008, Europe dominated the global energy market with a share of 54.6 percent of total installed capacity. Thanks to its excellent export conditions, Germany will play a decisive role in meeting the demand for global wind-based power generation. Germany’s geo- graphic location in the center of Europe, and its well rehearsed global export infrastructure, led to a 2008 export quota which represents more than 80 percent of German wind industry output, as reported by the German Wind Energy Association (BWE). Moreover, Germany presents itself as a base for supplying northern European offshore markets due to its central position in Europe with competitive site options and well-established export infrastructure, in particular its harbors and navigable waterways. Companies established in Germany profit from several export-related services like the “Exportinitiative Erneuerbare Energien” (Export Initiative Renewable Energies) as well as our own foreign trade services.

4. What are the characteristics of Germany as a business location for the wind energy industry? The world’s leading wind industry is situated in Germany. Manufacturers and suppliers located in Germany dominate one quarter of the global market for wind power generating equipment. In addition to the top-selling manufacturers, the supplier industry also makes a significant contribution to wind market turnover. Germany’s industry structure offers a number of wind industry market openings for participation in the value chain. Germany’s overall attractiveness as a business location is also documented by its improved ranking in the latest Foreign Direct Investment (FDI) statistics.

5. Are foreign companies able to actually break into such a well developed market? Germany’s strong R&D and engineering environment notwithstanding, the country’s particular market infrastructure - with its dynamic and diversified local supply industry - recommends Germany as a location for product realization and rollout. This is because companies located in Germany are able to scale their share of in-house production very flexibly – i.e. to “make or buy” product components. The manufacturer can adjust its production strategy at will from comprehensive manufacturing to assembling in a lean production line in order to achieve process advantages and cost reductions. Conversely, there are also opportunities to play a part as a supplier within this dynamic market. All investors, regardless of whether they are from Germany or abroad, have access to attractive incentives. While the EEG simultaneously supports energy production and provides investment security, there is a large selection of programs available that are designed to support a wide variety of business activities at different stages of the investment process. These programs range from cash incentives for the reimbursement of direct investment costs to incentives for labor and R&D (see Fig. 1). Some of the most requested services from foreign investors are our services related to incentive programs (see Fig. 2).

6. How should foreign enterprises enter Germany and how do you support them? Germany Trade & Invest supports foreign investors with its free of charge consulting services, helping them to enter the German market and thereby strengthening the entire industry. There are particular steps to take in order to enter the German market through foreign direct investment. All steps are covered by our comprehensive service packages (see Fig. 3). For customer-tailored support at the highest level of quality possible, we are organized in industry divisions with highly experienced professionals for each segment. Our services start at the earliest, strategic stage of business development. In the course of the investment process we assist with location consultancy services, for example, by identifying project-specific location requirements and offering customized site proposals. Because of their local network and regional expertise, the regional development agenci- es are incorporated into this process. These confidential services, along with all required economic data, information about the labor market, incentives programs, the tax & legal framework and related consulting services are provided free of charge. .

72 Offshore Wind Parks – North Sea

North Sea

Boundaries Continental Zone/EEZ Territorial Sea/12 nm Zone CHAPTER IV Offshore Wind Farms In Use Approved Planned Not Approved Special Contribution Cable Connections Approved Planned Under Construction Germany

Types of Incentives in Germany

Investment Incentives Operational Incentives Package + Package

Cash Interest- Public Labor-Related R&D Incentives Incentives Reduced Loans Guarantees Incentives

Investment KfW Loans State Recruitment Grants Grants (National Level)

State Investment Combined State/ Training Development Loans Allowance1 Bank Loans Federal Support

1) only in Eastern Germany Wage Silent/Direct Subsidies Partnership

Fig. 1: Types of Incentives in Germany (Germany Trade & Invest 2009)

Germany Trade & Invest’s Incentives Information and Consulting Services

Month (est.): 2 5 8¹

Strategic Phase Decision Phase Implementation Phase

General Incentives Information Individual Incentives Check Individual Incentives Application

Application Detailed Incentives Incentives Negotiation of of Investment Approval of Incentives Overview Calculation Incentives and Operating Incentives Assessment Incentives

¹ This is an average time frame only. An additional six months should be added in cases where EU Commission incentives approval is required.

Fig. 2: Schedule for Incentives Application (Germany Trade & Invest 2009)

Strategy Evaluation Decision & Investment © DCTI 2009 | Volume 2 - Wind Energy 73 Project Management Assistance

Business opportunity Joint project manage Coordination and Market entry Project partner identi- analysis and market ment with regional support of negotiations strategy support ¿FDWLRQDQGFRQWDFW research development agency with local authorities

Location Services

,GHQWL¿FDWLRQRI Cost factor Organization of Final site SURMHFWVSHFL¿F Site preselection analysis site visits decision support location factors

Support Services

,GHQWL¿FDWLRQRI 3URMHFWUHODWHG¿QDQFLQJ Organization of mee- Assistance with incentive Administrative relevant tax and and incentives consul- tings with legal advisors applications and esta- affairs support legal issues tancy DQG¿QDQFLDOSDUWQHUV blishment procedures Our Investment Project Consultancy Services

perience in identifying the business you create the appropriate financial Germany Trade & locations which best meet their package for your investment and put Invest Helps You specifi c investment criteria. We help you in contact with suitable financial turn your requirements into concrete partners. Incentives specialists pro- Germany Trade & Invest’s teams of investment site proposals; providing vide you with detailed information industry experts will assist you in consulting services to ensure you about available incentives, support setting up your operations in Ger- make the right location decision. We you with the application process, and many. We support your project ma- coordinate site visits, meetings with arrange contacts with local economic Specialnagement activities Contribution from the earliest potential partners, universities, and development corporations. IV. stages of your expansion strategy. other institutes active in the industry. All of our investor-related services We provide you with all of the industry Our team of consultants is at hand are treated with the utmost confi den- information you need – covering Specialto provide you with the Contribution relevant back- tiality and provided free of charge. everything from key markets and ground information on Germany’s tax related supply and application sec- and legal system, industry regulati- tors to the R&D landscape. Foreign ons, and the domestic labor market. companies profi t from our rich ex- Germany Trade & Invest’s experts help

Strategy Evaluation Decision & Investment

Project Management Assistance

Business oppor- Market entry Project partner Joint project Coordination and tunity analysis and strategy support identiﬁ cation management with support of nego- market research and contact regional develop- tiations with local ment agency authorities

Location Consulting /Site Evaluation

Identiﬁ cation of Cost factor Site preselection Organization Final site project-speciﬁ c analysis of site visits decision support location factors

Support Services

Identifi cation of Project-related Organization of Administrative Assistance with relevant tax and fi nancing and incen- meetings with affairs support incentive applica- legal issues tives consultancy legal advisors and tions and establish- fi nancial partners ment procedures

Fig. 3: Consultancy for Direct Investment (Germany Trade & Invest 2009)

10 Industry Overview 2009

74 CHAPTER IV

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76 CHAPTER V

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World Wind Energy Association (WWEA): „World Wind Energy Report 2008.“, Bonn, 02.2009.

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© DCTI 2009 | Volume 2 - Wind Energy 81 Quelle: www.fotolia.de: Offshorepark© Rebel p. 1 www.fotolia.de: Himmel und Felder © beatuerk p. 6/7 Photo: Philipp Wolff © Falko Wenzel p. 7 www.fotolia.de: Windkraftrad © Friedberg p. 8/9 www.fotolia.de: Windkraft © Stephan Leyk p. 10/11 www.fotolia.de: WK2 © DeVIce p. 12 Photo: Solar: bewegtes windrad © amridesign p. 14 Photo: UGE-4K Vertical Axis Wind Turbine © Urban Green Energy p. 16 www.fotolia.de: Natur und Technik © Wolfgang Jargstorff p. 18 Photo: Flying Electric Generator © Ben Shepard p. 20/21 www.fotolia.de: Alternative energy © manfredxy p. 22 www.fotolia.de: windenergie © Reinhard Marscha p. 24 www.fotolia.de: Windpark am Rapsfeld © Wolfgang Jargstorff p. 26 www.fotolia.de: Offshore-Energie-2 © Wolfgang Reiss p. 28 Photo: Offshore-Windpark Lillgrund im Öresund zwischen Malmö und Kopenhagen © Siemens AG p. 30/31 www.fotolia.de: Energie © John p. 32 www.fotolia.de: Windrad © Simon Kraus p. 34 Photo: Strom vom weißen Riesen © Siemens AG p. 36/37 www.fotolia.de: Rotor © Martina Berg p. 38 www.fotolia.de: développement durable © pat31 p. 40 www.fotolia.de: Wind energy plant © Reinhard Marscha p. 42 www.fotolia.de: Windrad-Fluegel © Günter Menzl p. 44/45 www.fotolia.de: europa flaggen © emmi p. 46 www.fotolia.de: Christ Redeemer © Celso Diniz p. 48 www.fotolia.de: Golden Gate Bridge © oscity p. 50 www.fotolia.de: brandenburger tor © Stephen Ruebsam p. 52 Photo: Barcelona © iris mediadesign p. 54 www.fotolia.de: sommerpalast5 © Bithja Isabel Gehrke p. 56 www.fotolia.de: Taj Mahal © Sushi King p. 58 www.fotolia.de: Windkraftrad © Friedberg p. 60 www.fotolia.de: Steine im Weg © digital-fineart p. 62 www.fotolia.de: wind turbines farm © Rafa Irusta p. 64/65 www.fotolia.de: Windrad 454 © Wolfgang Jargstorff p. 66/67 www.fotolia.de: WK2 © DeVIce p. 68/69

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© DCTI 2009 | Volume 2 - Wind Energy 83 Feed-in Tariff (FIT): Electricity suppliers are required to have a certain share of renewable energies in their portfolio. Since the costs of electricity from renewable sources are higher than those of conventional sources, operators (private, public and industrial customers) of renewable energies receive money for feeding renewable electricity into the public grid network.

Network Connection / Grid Connection: A network or grid connection allows end consumers to receive electricity, both renewable and conventional. It also allows consumers to feed their own generated electricity into the grid network.

Offgrid: Offgrid wind turbines are not connected to the grid. The owner of the turbine uses the generated electricity for his own personal use, and does not feed into the grid.

Offshore Wind Park: Offshore wind parks are installed on high seas, up to 20 kilometers from the coast.

Ongrid: Ongrid wind turbines are connected to the grid. The owner of the turbine uses the generated electricity for his own personal use, and is able to feed energy into the grid.

Onshore Wind Park: Onshore wind parks are installed on land.

Renewable Portfolio Standard: A renewable portfolio standard requires electricity suppliers to produce a certain share of their electricity from renewable energy sources.

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Repowering: Repowering refers to the replacement of outdated turbines with newer and more efficient ones. This process is most common amongst onshore turbines, as they were installed during the 1980s.

Peak Load: Peak load is a term used to describe the amount of power needed to supply consumers at a time when demand is the greatest. When energy demand reaches a spike, peak load stations are operated, in order to produce sufficient amounts of electricity at rapid speed. Examples of peak load stations are pumped storage hydro power plants and gas turbine power stations.

Electricity Production Costs: The total costs that an energy producer must spend in order to generate electricity.

Overspeed Control: Each wind turbine has some sort of overspeed control, which causes the turbine to automatically shut itself down in a situation with high wind speeds, protecting the turbine from damage.

Upstream/Downstream: The terms upstream and downstream suggest the direction of the flow of goods. In this context, upstream activities refer to those activities in the value chain which are most distant from the end customer, such as the manufacturing of raw materials, for example. On the contrary, downstream activities refer to those activities in the value chain which are closer to the end consumer, such as the supply of service, for example.

© DCTI 2009 | Volume 2 - Wind Energy 85 AWEA: American Wind Energy Association BWE: German Wind Energy Association DEWI: German Wind Energy Institution EWG: Energy Watch Group EEA: European Environment Agency EEG: Erneuerbare Energien-Gesetz (German renewable energy law) EERE: Energy Efficiency and Renewable Energy Program EWEA: European Wind Energy Association FIT: Feed-in Tariff GPEC: Global Primary Energy Consumption GW: Gigawatt GWh: Gigawatt hour GWEC: Global Wind Energy Council HBS: Heinrich-Böll Foundation IEA: International Energy Agency IWR: German Renewable Energy Industry Institute ITC: Investment Tax Credit kW: Kilowatt kWh: Kilowatt hour MENA: Middle East and North Africa MW: Megawatt NREL: National Renewable Energy Laboratory REF: Renewable Energy Focus REW: Renewable Energy World RPS: Renewable Portfolio Standard SECO: State Energy Conservation Office SWOT: Strengths, Weaknesses, Opportunities and Threats TWh: Terawatt hour WWEA: World Wind Energy Association

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WINDENERGIE

1. What, in your view, distinguishes your company as a driver of CleanTech? CleanTech is an integral part of our Corporate Philosophy. The core goal of our – and by the way in Germany within a shipping company unique – in-house department Research & Innovation is to make the transport of project and heavy-lift cargo at sea more efficient and, thus, environment-friendlier. Therefore, we are working closely with the Centre for Maritime Research in Elsfleth which concentrates companies, science and education on a single site. Concrete results of these efforts are low-resistance surfaces for hulls, cle- aner sources of energy on board or the development of alternative routes for our vessels. In summer 2009 as the first international shipping company we succeeded in transiting the Northeast Passage along the Russian coast from Asia to Europe. By that we could save about 3000 miles and accordingly also a significant amount of fuel and, in conse- quence, emissions per voyage. Also in the use of wind power we consequently step on new paths: Not only that the transport of wind turbines is a well-sought service on the market and ranks among the fields with the highest volume of orders, we are even using the wind itself as additional environment-friendly form of propulsion. Since January 2008 the world’s first merchant vessel new building equipped with a towing kite is sailing on the High Seas. While applied the MV “Beluga SkySails” saves between 15 and 20 percent of fuel and thus harmful emissions, depending on wind conditions.

2. Many view CleanTech as a growth market. Do you share this opinion and what role does wind energy play? CleanTech is a sustainable trend and a call for innovation which we have been following for a long time already. Meanwhile, the consequences of the climate change are percep- tible for everybody in our society. Now it is important to act determinedly and to limit the effects as the initiative “2° - German CEOs for Climate Protection” intends to and in which we cooperate. I clearly see a lot of potential especially for the development of wind power. The new five megawatt installations geared for offshore service are powerful and technically mature generators which efficiently transform wind into electricity. We transported wind turbines for a number of manufacturers for the first time in 2000, since then we are co-experiencing the continuous boom in the market by an ever-rising volume of cargo. Currently, the share of wind turbines among all our shipments is at about ten to 15 percent. We assume that this share will continue to increase during a further recovery of the world economy. In future, the growth is going to take place mainly offshore, an area for which Beluga cooperates with Hochtief Construction AG in a joint venture to develop own vessels which enable the loading, transport and

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installation of wind turbines with a single ship. At www.beluga-hochtief-offshore.de you might obtain more information about these maritime all-rounders from BELUGA HOCHTIEF Offshore.

3. Where do you see synergies in the various areas of CleanTech? The shipping business is ideally suited for the use of different kinds of environment-friendly sources of energy. Currently, we are intensively working on a prototype of such an “environment vessel” which combines preferably as many sources of alternative energy as possible. Perspectively, the application of different forms of propulsion on next generation hybrid vessels may contribute to the promotion and further development of progres- ses achieved in the automotive sector and to integrate them respectively. As examples I would like to name here only the so-called Flettner rotors, SkySails, photovoltaics or fuel cells technology. The aim of these efforts is the construction of a commercially operating vessel using 50 percent less fossil fuels by 2015 which, as a pioneer at sea, will then stand for effective climate protection.

4. What is your growth strategy for the field of CleanTech? We focus on a holistic approach and gather – for example in the Maritime Research Cen- tre Elsfleth – the right people from science and economy on one table. Such a bundling of competencies and resources from the maritime sector aims for an effective promotion of technology and knowledge transfer and, thus, the expansion of our worldwide lead in the niche market project and heavy-lift cargo. With our support for research and development we belong to the pioneers of “green shipping”. We will continue to concentrate our core competencies in sea logistics and generate further growth in this area.

5. How do you rate the political support for the CleanTech industry to date, both within Germany and at European level? What could be optimised in future? The public backing of CleanTech has a long tradition in Germany. We have established a technological lead which, however, might drop away quickly again. Particularly the USA and also China significantly diminished the gap – partly by massive public support – in the area of CleanTech during the last years. Here, we have to keep up in Germany to prevent falling behind. Private engagement for more innovation deserves fast and unbu- reaucratic help, either project-bound or, for example, in form of favourable tax models. Of course, in Germany we have many reasons to be glad that about two-thirds of the expenditures for research and innovation originate from the economic sector.

© DCTI 2009 | Volume 2 - Wind Energy 91 Now, we have to do the next steps to – in addition to enhancing the public funds for education, research and innovation – further increase the readiness within the economic sector for investing resources in research and development and, hence, reach common goals for innovation more efficiently.

6. Do you think that the issue of CleanTech has entered into our social, political and economic consciousness? I think so, yes. On the political agenda in Germany and other countries CleanTech occu- pies a top rank for a long time already. Also in the economic sector the understanding of CleanTech as not obligatorily “expensive” but most of all “efficient” is prevailing. The issue bears a lot of potential as well on the operational side. Numerous studies document that CleanTech enjoys a positive image and is widely accepted also among the people. Today, they face CleanTech almost permanently, from an eco-tax for environmentally harmful technologies to the politically directed “scrapping” of light bulbs.

7. What are important innovations with respect to the compatibility of technical advances and sustainability as well as the growing energy demands of the world population? Where do you see meaningful extensions? Securing energy also for the next generations belongs to the most important issues of mankind. What comes next after we have run out of fossil fuels? Many alternatives might be taken into consideration. However, I am sure that wind power will provide a large part within the energy mix for us also in future. It is now important to consequently develop one of the areas with the highest potential for wind – the open sea – and to fulfil the preconditions to effectively exploit this constantly and vigorously “occurring” resource. Particularly the North Sea offers many chances. Beluga is going to make its contribution by developing new vessels for this purpose.

8. What distinguishes Germany as a location for CleanTech? Germany along with the USA, Denmark or Spain belongs to the strongest users of wind energy. Based on a widely spread acceptance and support for CleanTech in society and the political sector, Germany has developed to a technology leader in reference to Rene- wable Energy. Here, the respective infrastructure of highly qualified engineers, modern production sites as well as the necessary research and educational institutions exists. As a logistics service provider with a special fleet of currently 66 multipurpose heavy-lift project carriers being able to call almost every port in the world and through our international network of own offices we also provide the necessary channels of distribution to all continents.

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9. Which additional country markets do you regard as the „CleanTech drivers“ of the future? Likely these countries which are decisive for the economic development already today. The member states of the European Union rank among them but also the USA or China stand in the same line. Particularly in Asia the change process to environment-friendly technologies goes on.

10. Subject climate protection: Where do you see the challenges for global shipping in the next years? Commercial shipping is an international business, climate change and climate protection as well are international issues. The worldwide merchant fleet belongs to the largest emitters of harmful climate gases, we have to take action on that fact. We need innovative concepts and solutions to face the challenge of reducing the output of CO2 and other harmful emissions within this sector and in the niche market project and heavy-lift shipping in order to reduce the dramatic effects of the global warming process. What can the shipping sector in general, what can ship owners in particular do to improve the global CO2 balance? Measures reducing fuel consumption at sea almost suggest themselves.

11. As a ship owner, what can you do precisely to further improve the climate balance of transports at sea? What we need is a holistic strategy which combines different measures. A minor decrease of the service speed for example may save a relatively high amount of fuel. This effect is known to every driver of a car who cares for moderate average speeds and an adjusted way of driving. The efficiency of the car will increase and fuel consumption goes down. Moreover, as ship builders we can reduce the flow resistance of cargo vessels only by improving the form of the hull and the implementation of a “natural” design. Hence, the vessels need less energy and, thus, are more efficient. An innovative concept titled HAI-TECH, which may improve this result even further, is currently a part of discus- sions within the shipping sector. “Hai” is the German word for “shark” and refers to the special skin structure of these animals. Used as a surface on the vessel’s hull it prevents the growth of algae and reduces the flow resistance.

© DCTI 2009 | Volume 2 - Wind Energy 93 12. A major part of additional capacities for the production of energy will be created in the next years in offshore wind parks away from the coast. How can the logistics sector contribute to benefit from this development? By taking advantage of its core competency and providing a proper infrastructure. As world leading heavy-lift shipping company we have significant know-how in ship-building and the transport of cargo weighing partly more than 1000 tons. In cooperation with our partner HOCHTIEF Beluga develops within a joint venture under the name BELUGA HOCHTIEF Offshore a fleet of new special vessels for the transport, mounting and running of offshore wind turbines. The initially planned four next generation vessels will be able to load, transport and install the generators all in one – a novelty in the sector. The type of vessel we are going to develop and manage enables the installation of the future offshore generators with a height of more than 100 metres and an output of more than five megawatts. Our special vessels are at the same time platforms which can raise their bodies above sea level by the means of extendable legs and can therefore also be used at water depths of more than 50 metres. That will make the installation safer, more efficient and more cost effective. The first special next generation vessel is planned to be ready for use in 2012.

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* Data based on statements of the companies

1. What, in your view, distinguishes your company as a driver of CleanTech? By definition, our innovative sealing solutions for machines used in forestry and agricultural already help protect the environment because they ensure that no harmful materials from inside the machines, such as oil or grease, get into the soil. We‘ve been doing this for more than 50 years! Trelleborg has supplied parts for wind energy plants ever since this technology was first launched. Seals provided by Trelleborg Sealing Solutions contribute to the efficient operation of hydraulic and other systems where all components need to withstand tough conditions.

2. Many view CleanTech as a growth market. Do you share this opinion and what role does wind energy play? I am convinced that renewable energy already offers the world‘s population more opportunities than risks in the medium term. This justifies investment in new technologies. With renewable energy accounting for an increasing market share, it is necessary to reduce maintenance requirements associated with wind turbines, for example, and to increase service life. As a manufacturer of seals we see this as a challenge, especially as many seals are used at decentralised locations, often high up, where maintenance tasks are difficult and costly to carry out. The number of wind turbines will potentially depend on public opinion. Offshore solutions may help remedy this situation. Many cooperation ventures concerning this have been initiated in the last few months. The German Federal Maritime and Hydrographic Agency (BSH) recently announced that 21 wind farm projects comprising a total of 1,497 wind turbines have been approved to date off the North and Baltic Sea coasts. The first wind farm projects to incorporate our sealing solutions have already been completed.

3. Where do you see synergies in the various areas of CleanTech? It‘s all about the energy mix! From mobile biomass power plants to electricity from the desert, wind energy or solar power – we need to leverage every option available to us. Ultimately, marketable solutions will prevail although there is obviously a danger that competition will not really come about due to subsidies.

4. What is your growth strategy for the field of CleanTech? The challenges associated with new energy sources also extend to adapting sealing materials to biological substances which can sometimes be aggressive. Our ability to fulfil these requirements is connected to the fact that Trelleborg Sealing Solutions has consolidated its materials expertise over a number of years now.

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We have no fewer than eight R&D centres around the globe as well as materials labora- tories for virtually all sealing materials.

5. How do you rate the political support for the CleanTech industry to date, both within Germany and at European level? What could be optimised in future? The German federal government‘s objectives at both national and European level are to increase efficiency by 20 percent, reduce CO2 emissions by 20 percent and to achieve a 20 percent share of renewable energy use by 2020. The amendment of the Renewable Ener- gy Act (EEG) has given manufacturers in the mechanical and plant engineering sector a reliable basis on which to plan and has paved the way for further innovation. Howe- ver, where there is light, there is also shadow: the back and forth regarding the quota system for biofuels and shelving the Energy Efficiency Act (EnEfG) slow down or make it impossible for companies to reach decisions. Planning security, reliability and consistency within the political framework are the top priority so that the mechanical and plant engineering sector can play its role fully as a driver of innovation.

6. Do you think that the issue of CleanTech has entered into our social, political and economic consciousness? Yes, consumer demand for renewable energy is rising – not least due to subsidies. Howe- ver, the prospect of double-digit growth in the CleanTech industry over the next ten years is motivating companies to invest in renewable energy sources, particularly in tough economic times. Politicians need to make sure that renewable energy continues to be encouraged, alongside the possible extension of the lifetime of nuclear power stations. If not, we are possibly discarding an opportunity for change that will be difficult to reverse.

7. What distinguishes Germany as a location for CleanTech? Our high-tech setup! This includes high-performing, highly trained staff as well as advanced research and development centres.

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1. In your view, what distinguishes your company as a CleanTech driver? Wind energy itself is a CleanTech driver and already represents the lion‘s share of renewable energy in Germany. As the technological leader among the system manufacturers – especially in the offshore segment – REpower is pursuing the vision of contributing to a reduction of the worldwide price for wind energy to the price level of fossil-fueled power plants by 2012. As early as 2020, electricity from wind energy is slated to be the „price reducer“ in the energy equation. To accomplish this, we are focusing on the quality, innovation and earning power of our wind turbines.

2. CleanTech is regarded as a growing market. Do you share this view and in your opinon, what role does wind energy play? According to industry associations, approximately 280,000 people currently work in the area of renewable energy in Germany and the sector continues to possess enormous growth potential. As I mentioned, wind energy is the most developed form of renewable energy and the one that will be most competitive in the near term. Wind is a domestic energy source, in contrast to solar energy, for example, which is still too expensive and should be meaningfully developed – that is, not in Northern Europe, but rather, in Southern Europe or North Africa, where far more hours of sunshine are available.

Offshore wind energy has especially great potential. Just consider the large offshore wind farms planned along the coast and the new production and logistics centers that have now emerged in harbor cities such as Bremerhaven. A completely new industry is being formed, here – as is also shown by the numerous new university courses and further education programs in the area of wind energy. Just an example: In the last three years, our company has grown from just over 800 employees at the end of 2006 to more than 1,800 employees at present. These numbers illustrate the enormous momen- tum and potential of our sector. And not only is the number of employees increasing. Recent contracts show that trust is growing in the industry, permitting the announce- ment of increasingly larger projects. At the beginning of the year, for example, REpower concluded an agreement with RWE Innogy – the largest master agreement to date in the offshore wind industry – which foresees the delivery of up to 250 wind turbines by 2015. Our powerful turbines are power plants that will make considerable contributions to the CO2-free supply of energy in Germany and throughout Europe.

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3. Where do you see synergies in the various CleanTech fields? In order to guarantee a secure energy supply with regenerative technologies, future systems will rely increasingly on the intelligent networking of wind, solar or biomass power plants. New, partly decentralized storage technologies are also needed in order to provide overall coverage for power generated from renewable energy. Not only the various CleanTech fields, but also vastly different sectors will work together – look at the current example of an energy provider that has formed a technology partnership with a large automobile concern. Energy providers also are placing increasing emphasis on power from renewable sources and are making efforts to reduce CO2 emissions considerably with the construction of CO2-free power plants, for example. Research in this area must be stepped up, however.

4. What is your growth strategy in the area of CleanTech? Our company is pursuing the goal of further establishing ourselves as a manufacturer of premium products among the providers of wind turbines. With our products, we see ourselves as a global solution provider which develops trend-setting technologies for the market. With the introduction of two new turbine types in the last fiscal year – the RE- power 3.XM and the offshore turbine REpower 6M – REpower has proven once again its ability to innovate. Several prototypes of both wind turbines have already been erected for testing purposes in Schleswig-Holstein. An increase in worldwide market share and selective expansion into new markets are further goals. In what is now our third German production facility in Bremerhaven, we have increased our production capacity since 2008. In a joint venture for rotor blade production with PowerBlades GmbH last year, REpower has entered the market as a component manufacturer as well.

5. How do you assess the political support for the CleanTech sector up to now – at national and international level – with respect to the EU, the USA and the rest of the world? What can be optimized in the future? Politics has recognized that renewable energy is an important economic driver. Here in Germany, the Renewable Energy Sources Act has provided well-established support since 2000, which can and should serve as an example for other countries such as the USA and China. In the meantime, however, support systems for regenerative power production have also been established in these countries. Recently, China has offered feed-in compensation for energy supplied by wind power. Hopefully, the Renewable Portfolio

© DCTI 2009 | Volume 2 - Wind Energy 101 Standard will be established in the USA as an increasing number of states are now adopt- ing mandatory targets for the percentage of power obtained from renewable sources. US President Obama has been pushing for the expansion of renewable energy since he first took office. Naturally, regenerative energy production must be self-sufficient in the long-term. But these examples show that politics can significantly contribute to providing start-up assistance, simplifying the approval procedures and pushing forward with the development of CleanTech to the point that it becomes competitive. We are convinced that the support for expansion of the CleanTech sector will also continue with the new administration. CleanTech can no longer be ignored. Not only is it meanwhile an important economic factor, it also contributes to achieving climate objectives, to reducing CO2 emissions significantly and last but not least, to decreasing the imminent dependence on energy imports from foreign countries. And finally, there are politically agreed upon objectives in Germany and in the European Union: renewable energy comprising a 20 percent share of all energy sources by 2020.

6. Do you believe that the subject of CleanTech has entered into the consciousness of society, politics and business? I believe that meanwhile, it has become clear to people all over the world that we need to find solutions in order to combat the threatening consequences of climate change. Specifically for Germany, it certainly can be said that the acceptance of our industry has not only grown in politics and business, but above all, has also grown with the people. This is shown by the increasing number of public wind farms and interest groups that are focused on the expansion of wind energy, for example. In Schleswig-Holstein, many people are already supporting the proposal that community land should be extended for wind farms. Not only have they recognized the ecological potential, but the economic potential of wind energy as well. For a long time now, it has ceased to be a niche technology, but rather, has become an important industry in which companies such as REpower contribute to an environmentally friendly, worldwide supply of energy through techno- logically advanced and powerful products.

7. What are important innovations with respect to the compatibility of technical advances and sustainability as well as the growing energy demands of the world population? Where do you see meaningful extensions? We have sufficient renewable energy sources; now it makes sense to consider the networking of technology and storage of the collected energy. Only if we succeed in finding intelligent solutions for the transport of energy – in Europe, for example, from the windswept coasts in the North and sunny locations in the South, connected to the countries‘ business centers; in North America from the high wind areas of the West and Midwest to the heavy-populated areas of the Atlantic and Pacific coasts – can we meet the increasing demand for energy.

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8. What distinguishes Germany as a CleanTech location? In Germany, regenerative energy has developed to become a significant sector of the economy. With the Renewable Energy Act (EEG 2009), reliable, economic general conditions were established which, meanwhile, serve as an example system for many countries. In addition, Germany is a driver of innovation. Our numerous universities and technical institutions and as a result, our exceptionally qualified engineers, distinguish this location as well.

9. Which additional country markets do you regard as the „CleanTech drivers“ of the future? For the wind energy sector, there are many promising markets. North and South America have vast areas of land that would be suitable for use by onshore wind energy. Additio- nal potential also remains in Europe. The neighboring states of the North and Baltic Seas are also interesting locations for the construction of offshore wind energy, since both seas have comparatively shallow water depths, weak currents and reduced tidal ranges. But also in North America, consideration is being given to the flat coastlines near the populated areas of New Jersey / New York and New England states as well as to the Great Lakes, on which the harbors of large cities such as Chicago and Toronto lie.

10. How will REpower further develop in the growing market of wind energy? The pending projects of our company in Europe, the USA, Canada or China illustrate our growing international involvement. We also want to expand our market share significantly in the area of offshore wind energy. With the production-ready REpower 5M and, after completion of testing, also the REpower 6M – one of the most powerful wind turbines in the world – we have two strong products in our portfolio.

11. In your opinion, what role does offshore wind energy play in achieving the energy and climate objectives in Germany? Offshore wind energy will contribute significantly in achieving these objectives. The high and predominantly constant wind speeds on the open seas contain enormous energy potential which we must utilize. REpower recognized this early on and has focused on the matter of offshore wind energy since being founded in 2001. We are the only company that has already installed multi-megawatt-class wind turbines in deep waters and at greater distances from the coast. Recently, REpower has delivered six 5M turbines for Germany‘s first offshore wind farm, alpha ventus. The test field is located 45 kilometers from Borkum in water depths of around 30 meters. The experience gained from this project is very significant for the development of offshore wind energy and will continue to become an important component of the energy mix in Germany.

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1. What in your opinion marks your company out as a CleanTech pioneer? RWE Innogy bundles the RWE Group’s expertise in renewables and its renewables-based power plants. We plan, construct and run plants that produce regenerative electricity and energy. Our aim is the rapid expansion of renewables-based power generation capacity throughout Europe. Our activities particularly focus on wind power projects in on- and off-shore locations. RWE Innogy is however also looking to expand in the hydroelectric and biomass sectors. At the same time we are promoting the development of future technologies. For instance we plan and operate biogas plants, wave and tidal power plants. We provide support for innovative companies in the start-up or growth phases and offer limited start-up funding. With this broad portfolio focused on the renewables sector and our activities in the field of new technologies we certainly regard ourselves as a CleanTech pioneer.

2. CleanTech is regarded as a growth market. Do you share this opinion and what role do you feel will be played by wind energy? Clean Tech and Green Tech are certainly growth markets. In this instance wind energy is a technology that has already seen considerable development and is well-established. At the same time there remains significant potential for the future, especially in terms of technological development. We are on the brink of being able to exploit off-shore technology commercially, with further advances also being made on-shore with regard to efficiency and scale. By building wind parks RWE Innogy is also making a major contribution to this development.

3. Where do you see synergies in the various CleanTech sectors? A certain element of competition in the renewables sector is giving rise to synergies. This is encouraging more efficient production methods and thus the further development of technologies and the heightening of their performance. If we are able as a result to find the optimum means of linking the advantages of the individual technologies, we will have boosted the potential for synergy enormously. I am particularly thinking in this respect of the challenge of steadying fluctuating feed-ins and/or integrating them into the overall energy network.

4. What’s your growth strategy for the CleanTech sector? We intend to expand our existing portfolio in core areas from its current level of approx. 2050 MW to 4500 MW by 2012.

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Simultaneously we are looking to gain additional experience with new technologies such as solar thermal power plants, e.g. in Andalusia, marine technologies or geothermics, and in future we will concentrate on those CleanTech areas with the most potential. To this end we invest some 1 billion euros every year.

5. How do you rate political support for the CleanTech sector to date – at both a national and international level, i.e. with reference to the EU, USA and the rest of the world? Where is there still room for improvement? Thanks to broad political support concerning the reduction of CO2 emissions and the expansion of renewables, Europe and Germany are certainly at the forefront when it comes to supporting CleanTech. Regardless of the level of political support, however, a global CleanTech market is bound to emerge, which will promote both the production and application of these technologies. Especially in the USA we are currently witnessing much greater political support for CleanTech development.

6. Do you think Clean Tech is now firmly anchored as an issue in the consciousness of the public, politicians and industry? I think many people realise that we need a change in technology to face the challenges of the future. An increase in demand for energy as our natural resources dwindle and the need for climate protection are the main forces driving CleanTech. Among the population as a whole, personal use still needs to be more strongly focused on CleanTech options and energy-efficient behaviour.

7. What are the major innovations when it comes to combining technical advance and sustainability with the growing demand for energy among the world’s population? Where do you see potential for beneficial additions? Crucial is the ongoing development of different technologies. At the same time however it is absolutely vital that we handle existing solutions intelligently and implement the various technologies according to their strengths and weaknesses in those areas where they can achieve optimum results relating to energy yields and sustainability. Sensible and intelligent further development of a balanced energy mix is the solution to this problem. This also includes the current and future use of nuclear energy.

© DCTI 2009 | Volume 2 - Wind Energy 107 8. What makes Germany a suitable CleanTech location? Germany remains an industrial location with excellent primary industry and infrastructure. These are precisely the criteria required for the development of CleanTech. Unfor- tunately people all too often forget that “old” and “new” industry does not represent a contradiction in terms, but that the one naturally follows on from the other.

9. What other national markets do you believe will drive the CleanTech industry in future? On the one hand this will be the job of the conventional industrial nations, which owing to dwindling natural resources and rising energy costs will be forced to modify their production portfolio. The developing countries and emerging markets will also be forced down the same path owing to environmental and resource considerations.

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* Data based on statements of the companies

1. What aspects do you see as defining your company’s status as a clean tech driver? As a developer and producer of wind power systems, Nordex is at the forefront in efforts to address one of the most pressing problems of the 21st century. The global increase in demand for energy cannot go on being satisfied at the expense of ecological and social interests. Economically, sustainability is also playing an increasingly important role. Wind energy already constitutes a clean and competitive alternative to conventional power generation. Nordex is one of the pioneers in wind power and, as one of the top ten producers in this industry, is actively driving the development of the high-growth clean tech market.

2. Clean tech is a growth market. Would you agree and what role do you see wind power as playing? Absolutely; over the past few years, the regenerative energies market has been expanding swiftly. Between 2004 and 2008, Nordex grew by around 50 percent per year. Looking forward, clean tech will continue to achieve significant growth rates. Wind power is particularly inexpensive and already playing a crucial role in the production of clean energy. It figures very predominantly in the balance of regenerative energies and, moving forward over the next few years, will widen its share substantially relative to other forms of regenerative energy such as hydro-electricity as its potential has still hardly been harnessed.

3. In what areas do you think the various clean tech segments can share synergistic benefits? Clean tech covers such aspects as alternative energy, improved energy efficiency, almost completely emission-free mobility and the environmentally sustainable production of goods and services. As these individual areas are directly related to differing degrees, it make sense to engage in concerted efforts to spur their development. One example is the synergistic potential which could be harnessed by means of an intelligent network and the intermeshing of the different sources of energy. A further good example illus- trating how the different clean tech approaches can work together is the automobile industry, which is currently undergoing radical change. Moving forward, automobiles as a mass product are not only to be produced more efficiently in terms of energy input and environmental sustainability but are also to be operated with minimum emissions, for example by using electricity generated from wind power.

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4. What is your growth strategy for CleanTech? We are operating in a very dynamic market, which is why above-average growth constitutes a firm part of our corporate strategy. Strong growth will be achieved via an internal sourcing ratio of around 20 percent. In addition, we have our own structures in nearly all main markets around the world and also have independent subsidiaries in our core regions, namely Europe, Asia and North America. On the product side, we are devoting our efforts to optimizing and enhancing our proven 2.5 megawatt turbines and also developing a wind turbine with a nominal output of around four megawatts.

5. How would you rate the political commitment to the clean tech sector to date - both nationally and at an international level in the EU, the United States and the rest of the world? Where do you see room for improvement in the future? There has been a steady rise in political support for clean tech over the past few years. This is also urgently required as governments in Europe, the United States and China have set decidedly ambitious targets for the future share of regenerative energies in total electricity production and emission reductions. If these targets are to be achieved, steps must be taken to expand the clean tech industry at a swift pace over the coming decade. Strictly regimented emission trading, reliable long-term feed-in rates for electricity produced from regenerative sources of energy and extensive clean tech research are important steps which are necessary to ensure a clean future.

6. Do you think that there is sufficient awareness of clean tech in society as a whole, in the political arena and in the business community? Yes, there is. That said, however, I think that it is crucial to make sure that this subject is not neglected in the face of the current general economic conditions. Otherwise, we will be faced in the near future with the consequences of our failure to focus on this subject and costs which will dwarf those arising from efforts to overcome the current economic crisis. On a positive note, the clean tech industry is increasingly being viewed as a profitable growth driver and creator of new jobs in the future.

7. What are important innovations with respect to the compatibility of technical progress, sustainability and growing global demand for energy? In what ways do you think these aspects complement each other?

As far as climate protection is concerned, the core task is to substantially reduce emissions. Growing mobility can no longer be automatically accompanied by heightened pollu-

© DCTI 2009 | Volume 2 - Wind Energy 111 tion of the environment. In addition, it is particularly important to cover the rising global demand for energy via regenerative sources of energy to a greater extent and to reduce industrial nations’ dependence on conventional forms of energy such as oil and gas at competitive prices. The challenge facing us in the future is to “achieve more with less”.

8. What role does Germany play in CleanTech? Germany can justifiably look back on a long engineering tradition and to this very day sets the standards in technical innovation. We are second to no one in the clean tech segment in particular. At the same time, both the corporate sector and government have realized that, rather than impeding growth and prosperity, clean tech does in fact offer exciting new opportunities. This is reflected in the Renewable Energies Act, for example, which is considered to be a major success and on which many other countries have modeled their own feed-in remuneration systems.

9. What other countries do you see as being future clean tech drivers? Obviously, the two most important markets are the United States and China. Under the new Obama administration, the United States is paying substantially more attention to environmental protection and sustainability and has already taken initial steps to address the failures of the past few decades. The Chinese economy is expanding at a dynamic rate and, looking ahead over the next few years, will require considerably more commo- dities, energy and goods. At the same time, the population is growing quickly and their needs are increasingly following Western consumer standards. However, the change in the global climate affects all countries. Accordingly, the clean tech efforts of individual countries must be supported at the political level by a “supranational declaration of undertaking” such as the Kyoto Protocol, which expires in 2012. In this connection, it will be particularly interesting to see the outcome of the follow-up protocol in Copenhagen, particularly the extent to which the major powers, namely the United States and China, are willing to agree on binding targets.

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* Data based on statements of the companies

1. In your view, what distinguishes your company as a CleanTech driver? Zenergy Power is a superconductor energy technology company. Superconductors are near perfect conductors of electricity. Having no electrical resistance they experience nearly no electrical losses. Therefore superconductors are a key technology for the renewable power generation. Superconductor generators are much more efficient while at the same time they are lighter and smaller than copper based generators. Regarding offshore wind power, the reduction of weight and size is a very important competitive edge. Furthermore superconductors enable technical solutions to reduce energy consumption significantly. Superconductor technology can, for example, halve the energy for heating metals for extrusion.

2. CleanTech is regarded as a growing market. Do you share this view and in your opinon, what role does wind energy play? Given the global warming and the realisation of the economic damages resulting out of it, technologies which are combining the challenges of ecology and economy offer many opportunities. Technical solutions which are not polluting our environment imply long-term investment protection for the companies. Carbon trading is just the first step towards paying for the waste and pollution of natural resources. Research studies, for example the study of McKinsey “Competitive factor Energy,” reveal this; likewise the head of Siemens, Löscher, and the BDI (Voice of the German Industry) warn that Copen- hagen has to be a success. According to Löscher, CleanTech has the potential to be the key technology of the 21st century. It is essential to reduce carbon dioxide emissions sustainably. Wind power is presently – together with solar energy – one of the energy sources enabling prompt “future-proo- fed” power generation because it is technically mature and accepted worldwide.

3. Where do you see synergies in the various CleanTech fields? Increasing renewable power generation facilitates the replacement of fossil fuels with electrical solutions in numerous industrial applications, thereby reducing carbon dioxide emissions significantly. This applies especially to industrial heating which consumes ca. 25% of the primary energy consumption (BWK v. 61 (2009), no. 6). Superconductors will be very important in this context because on the one hand they improve the economics of renewable power generation considerably and on the other hand superconductor fault current limiters stabilise the power grids. Superconducting grid devices, to which also superconducting cables belong, enable modernizing electricity systems with regards to trends such as massive renewables and smart grids with optimized adjustment of production and consumption.

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4. What is your growth strategy in the area of CleanTech? Beside of the commercialisation of our magnetic billet heater – awarded with the German Environmental Award 2009 – Zenergy Power focuses on energy technology. We are developing devices for the stabilisation of power grids, such as fault current limiters for medium and high voltage power grids, as well as – together with our technology partners – generators for wind and hydro power. Concerning hydro energy we focus on the repowering and increasing the efficiency of run-of-river plants with superconductor generators. Concerning wind energy we are developing the superconductor components for an 8-10MW offshore wind turbine. In both fields we are cooperating with the international well known generator company, Converteam. As the Zenergy Group has subsidiaries in Europe, the U.S., and Australia we can easily contact our clients all over the world.

5. How do you assess the political support for the CleanTech sector up to now – at national and international level – with respect to the EU, the USA and the rest of the world? What can be optimized in the future? The awareness of a lack of alternatives for fighting climate change is wide-spread in Ger- many. Therefore Germany plays a major role in the international context. The EEG, a law to support the renewable energy generation with feed-in tariffs, has boosted the renewable energy generation in Germany. But there is a disparity concerning the support of highly energy-efficient technologies. As well the legislation on the emission limits and the energy consumption (Eco design for Energy using products in the EU) has to be further extended similar to the laws concerning catalytic converter and particulate filter for cars.

6. Do you believe that the subject of CleanTech has entered into the consciousness of society, politics and business? The environmental consciousness in society is much more developed than in the economy and politics. However one has to notice that in the last two years a rethinking in the economy took place because of the development of new technologies combining economic and ecologic advantages. For the politics it is sometimes difficult to reasonably model appropriate instruments connecting different points of view. On the international level this is even more complicated.

© DCTI 2009 | Volume 2 - Wind Energy 115 7. What are important innovations with respect to the compatibility of technical advances and sustainability as well as the growing energy demands of the world population? Where do you see meaningful extensions? The increase of energy efficiency and the decrease of energy consumption in the world as well as the move towards power generation without carbon dioxide emissions are the challenges of the 21st century. There is no alternative to the technology transfer to cover the increasing energy demand of the newly industrialized and developing countries. There has to be compensation for companies transferring technology as well as a safeguard against the reproduction without authorisation. Especially small and medium sized companies lack the financial resources to legally pursue such malpractice on an international level.

8. What distinguishes Germany as a CleanTech location? German companies belong among the innovation leaders developing and commercia- lising environmental technologies, especially concerning renewable power generation. Small and medium sized German companies have proven their ability for innovation especially with their developments concerning solar power and wind energy. As in Ger- many the complete supply chain exists, German companies always could offer integrated solutions.

9. Which additional country markets do you regard as the „CleanTech drivers“ of the future? In the future the U.S. will intensify their activities concerning environmental technologies. The new program of the Department of Energy funding investments into energy saving technology is proving that, as well as the new willingness of the U.S. government concerning activities against climate change. As well China focuses increasingly on green technology – not only to sell them on international markets but as well to accommodate the own energy demands (Renewables).

10. How will REpower further develop in the growing market of wind energy? Why are superconductors a key driver for the clean technology sector? Superconductors are nearly perfect electrical conductors as they have no electrical resistance. Furthermore they have a ca. 100x higher current density than copper. So they enable highly efficient as well as small and compact industrial devices. Superconductor applications facilitate reducing use of energy and resources. Superconductor technology enables companies to meet economic and ecologic demands.

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11. In your opinion, what role does offshore wind energy play in achieving the energy and climate objectives in Germany? What are the effects of superconductor technologies on renewable power generation? Due to the physical properties of superconductors it is possible to build the generators for wind and hydro power much smaller and lighter. A conventional 6 MW wind turbine has a diameter of 9 m and a weight of 450 t whereas a superconductor 6 MW generator only has a diameter of 3 m and a weight of 80t. The economic advantage of superconductor generators is evident because size and weight have a direct impact on the costs of building and installation of offshore wind turbines. For example, a conventional 10 MW direct drive wind turbine would have a weight of 700t. It is not possible to transport such a device on normal roads. So wind turbines in such generator power class are only manageable with a gearbox. In offshore wind power a gearbox is undesirable because it also needs maintenance. A 10 MW superconductor generator has a weight of 120t. Therefore the costs for the foundation are significantly lower and there are also fewer expenses for the logistics. That is the way to make wind power profitable without subsidies. The repowering of hydro plants – particularly landmarked run-of-river plants – is much easier with superconductor generators and increases the efficiency considerably.

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