The German industry is stagnating under the current expansion target
The offshore wind industry, which has been growing for years, currently has almost 24,500 full-time employees in Germany and a total of 9 billion euros of revenue last year. This is the result of a comprehensive analysis in the new wind:research study of more than 3,000 market participants across the entire wind industry (onshore and offshore), all value creation stages and regions. The distribution of the ultimately approx. 800 market participants, who are currently active in offshore wind energy, shows surprising emphases in the south and west: for example, Baden-Wuerttemberg dominates in R&D as well as in engineering and North Rhine-Westphalia in the components area. While maintaining the current expansion target is threatening to cause a loss of more than 8,000 jobs in the industry, increasing the expansion target will increase the number of employees by up to 10,000.
Current analysis of value creation in the offshore wind sector
In the past ten years, offshore wind energy has grown strongly in Germany and has also led to high value creation with high investments. This shows clearly in both the variety of different market participants and in the number of jobs. In 2011, the market research institute wind:research, which has been operating independently in the market for many years, created a study together with PwC that for the first time comprehensively analysed market participants, employment, overall value creation, and in particular their regional distribution in Germany. Now wind:research has again analysed the value creation and employment of the offshore wind industry in Germany based on the current situation. In addition to the regional distribution – which is specified by federal states and distribution across the different stages of value creation – the focus lies on the future development of the industry.
In the German offshore wind energy industry in 2018, almost 800 market participants with around 24,500 employees generated more than 9 billion euros of revenue. Following major advances in recent years the industry is currently at a crossroads. It is stagnating on the basis of the recently set political conditions, such as the changes to the EEG in 2014 and 2017. Limiting the expansion will have a decisive influence on the further development after 2019 and thus also on the development of market participants as well as their number of employees and revenue – across all stages of the value chain.
Distribution of market participants with surprising priorities
The value creation, both in terms of employee numbers and revenue, is distributed across Germany: there is a high level of employment in Baden-Wuerttemberg (R&D, engineering) and North Rhine-Westphalia (components), while the areas of transport, assembly, project development as well as O&M traditionally are strongly represented in the North of Germany. In contrast, (plant) components are also manufactured in many Western and Southern German locations. Striking is the high proportion of Southern federal states in the area of engineering as well as R&D. The area of financing traditionally focuses on the Frankfurt am Main region (see fig. 1). Many market participants from Northern Germany (e.g. turbine or foundation production) depend on companies from the engineering or supplier industry (e.g. steel construction, gears, etc.), whose regional focus lies in Southern Germany.
Expansion target decisive for the value creation of German offshore wind energy
Of the approx. 1,000 market participants in 2011, just under 800 are still active due to the consolidation. If the current expansion target is not raised, a reduction in the number of employees from around 24,500 (2018) to around 16,000 (2035) has to be expected. The expansion of offshore wind energy in Germany to reach the climate protection targets of the German Federal Government by 2030 (65% target) can generate up to 10,000 additional jobs. Particularly in the scenario “Power-to-X”, in which the dependency of network expansion declines due to the use of new storage technologies and Power-to-X-capacity amongst other causes, the number of employees increases to more than 35,000.
Other countries, such as the United Kingdom and the Netherlands, are actively promoting the expansion of offshore wind energy and are developing industry and value creation. Therefore, a change in the current framework conditions in Germany is necessary in order to avoid falling behind and to maintain or expand its own value creation (market participants, revenue and employment).
With wind:research, a brand of trend:research – one of the leading German market research institutes in the energy industry – the institute’s competences and experiences in the offshore wind sector are bundled in an own branch office in Bremerhaven, Germany. wind:researchfocuses on analysing potentials in the growth market of onshore and offshore wind energy.
As a specialist for the German energy sector trend:research has known the market for renewable energies for years. wind:research therefore possesses current and comprehensive information on technology trends, relevant laws, market and competition as well as strategies of existing and new competitors.
In the study, three scenarios are modelled in which various expansion targets are defined as an essential factor:
In the scenario “EEG 2017” an expansion gap from 2020 to 2022 as well as a reduced expansion in the coming decade lead to a continuous decline of employment. Even though the decline will be softened by the increasing value creation in operation, service and maintenance with the existing offshore wind farms, a loss of almost 10,000 jobs until 2035 compared to 2018 is a clear indication for an overall declining value creation. Due to the low investment volume (few new offshore wind energy farms) a decline of the revenue until 2025 is to be expected. The revenue then only increases minimally until 2035.
In the scenario “65%-Target“ the increase of the expansion target up to 30 GW leads to an expansion of employment, which will be only noticeable starting 2025 due to the delayed impact of investments in and planning of new offshore wind farms. Starting from this date 8,000 new jobs will be generated overall to be able to manage production and installation of further projects. This concerns manufacturing and supplying incl R&D and the connected project development and consulting services. After engineering market participants in installation, assembly and logistics benefit. Investments in new, larger plants will then be followed by a significant increase in revenue to around 10 billion euros a year.
The “Power-to-X“ scenario assesses an incline in employment a bit earlier which is needed to reach 40 GW until 2035. The uncertain linear continuation of the expansion curve will decline with the upcoming trend of sector coupling and the use of new storage technologies. As a result the employment can be increased up to over 35,000. Due to the O&M of the – compared to the other scenarios – additional plants as well as the commencing decommissioning after 2030 an increase of revenue by 7 billion Euro until 2035 is possible.