Germany’s Abolishment of Re-powering Bonus Will Seriously Affect the Second-Hand Wind Turbine Market
Changes to Germany’s EEG (Renewable Sources Energy Act- Erneuerbare-Energien-Gesetz – EEG), due to come in on 1 August this year, are going to have a significant and deleterious effect on the second-hand wind turbine business.
In Germany, like many other countries electricity from renewable sources is supported through a Government feed-in tariff.
Let’s look at the not-so-good of affects the abolishment of the so-called ‘Re-powering Bonus’ will have:
It is (or soon was) no secret that the majority of used & second-hand wind turbines of sizes between 50kW – 1,5mW (or of late even larger sized turbines) were relatively easily sourced from Germany if one is well connected in the wind industry. The simple explanation for this un-proportional high ratio of second hand & used wind turbines coming from Germany was because of Germany’s ‘ultra’ attractive repowering bonus incentive scheme which had been put in place as part of the EEG Act a number of years ago and was introduced as an incentive for owners or operators of older and smaller sized wind turbines to take down and replace their older technology and smaller sized wind turbines with newer technology and substantially higher outputs and higher productivity wind turbines.
From the very start of the introduction of the German repowering bonus, an immediate impact on the second hand & used wind turbine could be noticed with large numbers of turbines being taken down and offered for sale through the used turbines market. This re-powering incentive payment is going to stop at the end of this year and that will have a significant impact on the availability and consequently the market value and average sales price of used wind turbines.
The re-powering bonus in Germany will not be renewed and this will have a deleterious effect on the second-hand wind turbine business. So after 2014, there will be no cash incentive for any owner of an older turbine from Germany which has fully recouped its initial cost of investment, to upgrade to newer and more efficient wind turbines or to transfer the re-powering bonus rights to a wind farm developer.
With the continued and increasing demand for used wind turbines in the size of 50kW – 500kW coming from countries such as Italy, England, Scotland, Wales and Northern Ireland and the predicted decrease of the number of used wind turbines being made available from the major supply source Germany, will for certain fall victim to the No. 1 Free Market Economy Rule: SUPPLY vs. DEMAND …is what dictates a price. The demand is high and the supply will be low, so prices for used wind turbines will skyrocket through the roof.
This hasn’t as yet provoked the debate it should have done and many prospective buyers from Italy, England, Scotland, Wales or Northern Ireland are still believing to be able to source a low priced wind turbine once they have successfully obtained their building permits and grid connection agreements.
Think about it. The abolishment of the Repowering Bonus which was up to €100,000 EUR will encourage wind farm operators or small-scale private single wind turbine owners to keep their old and less efficient wind turbines going until they finally give up the ghost or as long as the revenue generated doesn’t significantly fall below the cost for upkeep and maintenance. It means that the major source GERMANY for the supply of second-hand wind turbines to the market will drastically dry up by the end of this year 2014. Due to the uncertainty that owners of older turbines will be able to meet the end of year deadline, we have already noticed a drastic fall of available turbines being offered from Germany and turbines that will eventually still come onto the market for sale will most likely be unworthy, over-priced and very run down and worn out turbines of the like we keep seeing coming from countries such as Denmark or Holland where such incentive never existed and owners only ever offer their turbines for sale until they are technically at the end of their lives and in need of a costly total overhaul refurbishment.
Until recently, 8 out of 10 second-hand wind turbines come from Germany. We predict that this ratio will most likely be reversed numbers in the very near future i.e. only 2 or 3 out of 10 used wind turbines will come from Germany and the rest from other countries which the number of supply is unlikely to rise at all. This is not conjecture- this is already the situation in the United States where there is no re-powering bonus. There is virtually no second-hand wind turbine market for US-based turbines and turbines are usually “run into the ground” and operated until they are good only for the scrap-yard.
All this at a time when the demand for used wind turbines is increasing dramatically, especially as previously mentioned from countries like Italy and the UK including Northern Ireland. The result, of this approved amendment by the German Parliament, will be that the availability of second-hand wind turbines will decrease dramatically and of course, the prices they can fetch will go through the roof. This is just simple supply and demand economics. The demand is high and the supply will be low, so prices for used wind turbines will skyrocket through the roof.
Here at MWPS the uncertainty is already fuelling increased bids for second-hand turbines and “gazumping” (offering more than the asking price over and well above lower bids).
If you are thinking of buying a second-hand turbine, the message is ‘BUY NOW’, before the supply tails off to virtually nothing and prices for 50kW – 500kW turbines will rise astronomically.
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