On 24 October, the EU published the long-awaited Wind Power Action Plan (WPAP), a list of 15 measures grouped into 6 areas aimed at helping Europe’s wind supply chain because, in the EU’s own words, “The EU cannot double the pace of wind energy deployment without a healthy, sustainable and competitive wind supply chain“. The urgent task now is to translate this high-level document into concrete measures that will take effect in the short term.
Expectations were very high and although official industry reactions were very positive, with Windeurope calling it a “game changer” and the Spanish wind association AEE calling it a “major endorsement”, the reality on the ground in the industry is that it left everyone rather dissapointed, largely because they were expecting something different, something more concrete and directly applicable.
What WPAP is (and what it is not)
It is important to understand that the WPAP is a set of guidelines for member states to implement concrete actions in that direction. It is not a new legislative package, nor is it binding, nor does it even define specific measures. The document itself specifies that “the wind power action plan builds on the actions already taken by the Commission and includes additional actions to address the identified challenges“.
In this article we will not go into the analysis of the 15 proposed actions, but as can be seen in the summary table, they are very focused on 3 aspects:
- Accelerating permitting processes
- Improving the design of auctions
- Access to finance
Here is the link to the full document for those who wish to read it in more detail.
Therefore, the key question now is what measures each member state will take and, more importantly, how fast it will be able to take these measures. As the document itself specifies “the Commission calls on Member States and the industry to endorse this action plan and implement the actions according to their respective roles”.
In fact, the latest WPAP action talks about the “EU Wind Charter“, a document that is intended to be a list of commitments that member states and industry members will be able to sign on a voluntary basis. In a very summarised way, these could be the next steps we look at:
- Each member state is preparing its proposals to be incorporated into the EU Wind Charter. In the case of Spain, the first meeting between MITECO and AEE was held on 27 October and comments and suggestions are currently being collected from the sector (such as the Enercluster working day to provide comments on the first draft) to be incorporated in order to have a proposal to be sent to the EU in January 2024.
- The EU will publish the “EU Wind charter”. The aim was to do this before the end of 2023 but we are already going to 2024. The EU is supposed to consolidate the actions proposed by the states into a single document.
- Member states will sign up to the wind charter. On a voluntary basis there will be states that sign up to the wind charter, thereby committing themselves to implement the actions. It is not clear how binding this commitment is (I suspect it is not very binding) but what seems clear is that the actions will have to be within the current legislative framework. In other words, no one should expect new laws specific to this.
- Companies and stakeholders from the sector will be able to join in. In addition to wind energy stakeholders, it is intended to involve the financial sector, which will be key for financing issues.
- The EU will monitor and assist compliance. There is supposed to be monitoring although there are no details on how this will be implemented.
In short, the speed and depth of action will depend entirely on the will of each state. The EU only provides the framework and guidelines but leaves the work to the states. This has its disadvantages, such as the possible imbalance between states, but it has a great advantage: it avoids slow European bureaucracy.
Ideas for the EU Wind Charter
Although a draft of the Wind Charter is already being worked on, we would like to do our modest bit by launching some ideas that could be implemented in the short term. In fact, almost everything has already been invented and it would be enough to look at what is already working (and very well by the way) of the IRA in the USA and also at the interesting proposal launched by the European solar association ESIA to improve auctions.
- Creation of the “Made in Europe” label
If we want to associate advantages to equipment manufactured in Europe, we must define what qualifies as manufactured in Europe and what does not. This would be similar to what is implemented in the IRA and would define what percentage of the cost of the wind turbine must be manufactured in Europe to qualify for this label.
The details of percentages would have to be through, but I think it would be necessary to ensure compliance by major sub-systems: tower, blades, nacelle and BoP. In this way, we ensure that the major components are European.
Clearly such measures have complexities associated with them, such as how to define how low in the supply chain to go to ensure local content, but these are details that can be worked out at a later stage.
- Monotechnology auctions
This is an aspect long demanded by the sector. Given that the production profiles (and therefore the value of each MWh) are quite different between wind and solar, it does not make much sense to put them in competition. Moreover, this would ensure diversification of generation.
- Auction advantages for developers who commit to purchasing equipment “Made in Europe”.
In fact, ESIA advocates exclusive auctions for projects with local content, but I don’t think this is necessary if the advantages are sufficiently attractive. Some advantages could be
- A bonus in the awarded tariff (IRA style) that would compensate for the likely higher price of European equipment compared to Chinese equipment. Here it is very interesting to read the article in PV Magazine on the ESIA proposal, which quantifies what the cost would be in the case of solar and compares it with other existing subsidies such as those for agriculture.
- More years of PPA
- Higher annual update rate of the tariff
- Advantages in the processing of projects with equipment “Made in Europe”.
- A “fast track” can be established for projects with local content so that they are given preference in permitting and are guaranteed shorter resolution times than at present.
- The required guarantees could also be reduced (or increased for non “Made in Europe” projects).
- A quota of projects with local content could even be considered, to be met by Autonomous Regions or developers (like the RPS in the USA).
- Auctions with pre-qualification criteria
This is one of the aspects most worked on in both the ESIA proposal and WindEurope. The idea is to apply criteria for cybersecurity, working conditions, circularity and environmental sustainability. The important thing is that they do not involve extra costs for the project but simply reflect European standards so that any non-European manufacturer must comply with them. In the ESIA proposal there is a list of aspects that could be pre-qualification criteria.
- Access to soft or preferential funding for “Made in Europe” projects
This is important in order to be able to compete with Chinese manufacturers who have virtually free state funding.
- Encouraging electrification
As we saw in last month’s article, at a time when demand is not growing and endangering the financial viability of renewable projects, it is important to take measures to increase electrification. For example, the replacement of gas boilers with heat pumps could be subsidised as it would increase electricity demand at times when wind is the main source of generation.
- Financial incentive for projects “Made in Europe”.
Not only projects participating in auctions but any other project, even if it goes to market or by private PPA, that may enjoy an extra fee for local content. This is important because a lot of focus is being put on auctions but lately it is not exactly the preferred channel for developers to obtain a tariff so if we want to cover more market, we will have to take into account projects with private PPAs and those that go directly to pool.
In short, the “Made in Europe” label must be created with clear criteria to ensure that a large part of the manufacturing remains in Europe and to associate a series of advantages with this seal that will make any developer want to buy local equipment, as their business case will be better with them than with non-European manufactured equipment.