IndustryOverview WindEnergy April2010 GTAI

8/8/2019 IndustryOverview WindEnergy April2010 GTAI

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IndustryOverview

The Wind Energy Industryin Germany

Issue 2010/2011


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The Wind Energy Industry in Germany

Total Installed Capacity in the European Union

(EU 27) by the End of 2009 (in megawatt)

Total EU 27: 74,767 MW

Source: EWEA 2010a

A Sustainable Businessin a Stable InvestmentEnvironment

In recent years Germany has setthe express goal of ensuring thatenvironmental protection and eco-nomic growth develop in tandem.

The countrys wind energy industry

is the worlds largest, and it is at theforefront of technological develop-ment. Germanys long mechanicaland electronic engineering traditionis the backbone underpinning itscurrent strong position.

Germanys central position in Europealso makes it an ideal location forthe European onshore markets aswell as for the European offshoremarkets. Excellent investmentopportunities have led wind energycompanies from around the worldto base their operations in Germany.

At present, the growing numberof offshore-related industrial sett-

lements reflects the unparalleled

location economies of Germanyscoastline for the northern Europeanoffshore markets. Attractive govern-ment incentives and a stable invest-ment environment have helped toconsiderably increase the countrysattractiveness to investors.

Spain

Portugal

FranceSwitzerland

United

Kingdom

Netherlands

Belgium

Luxembourg

Italy

Greece

Malta

Cyprus

Poland

Estonia

Latvia

Norway

Belarus

Ukraine

Macedonia

Serbia

Bosnia-

Herzegovina

Croatia

Albania

Turkey

RU

Finland

Czech

Republic

Hungary

Romania

Bulgaria

Denmark

Slovakia

Slovenia

Austria

Ireland

Lithuania

Montenegro

Moldova

Sweden

GERMANY

Russia

1,260 MW

4,051 MW

1,560 MW146 MW

3,535 MW

19,149 MW

4,492 MW

25,777 MW

35 MW

563 MW

2,229 MW

3,465 MW28 MW

91 MW

725 MW

0 MW

0 MW

1,087 MW

192 MW

3 MW

201 MW

995 MW

4,850 MW

14 MW

177 MW

0 MW

142 MW


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The German WindEnergy Industry ata Glance

Germany is home to the worlds lar-gest wind industry, which has de-veloped solidly in 2009 and can callupon an estimated workforce of morethan 85,000 employees (BMU 2010).

As Europes primary wind energymarket, Germany represents over16 percent of globally installed capa-city (WWEA 2010). The German windmarket recorded a year-on-yeargrowth rate of 15 percent in 2009(BWE & VDMA 2010a). By the end of2009, total installed capacity andproduction accounted for 25,777MW (DEWI 2010) and 38 billion kWhrespectively (BWE 2010a).

As such, Germanys wind electricityproduction accounts for a share ofmore than 7.5 percent of gross pow-er consumption (DEWI 2010) and isthe dominant type of renewable elec-tricity production.

Around 60 MW offshore capacity wasinstalled in Germany by the end of2009, and over 90 offshore wind parkproject developments are currentlyin progress. More than 31 offshorewind parks had already received

formal approval by the end of 2009(BSH 2010a).

Significantly high export levels allowabove-average industry participationin global and European development.International wind sector turnoverreached EUR 50 billion in 2009(WWEA 2010). Europe, a key marketfor German products, dominated theglobal energy market in 2009 with ashare of 47.9 percent of total installedcapacity (WWEA 2010).

Installed Wind Turbine Capacity Manufacturer Share in Germany 2009

Source: DEWI 2010

Enercon 60.4%

Vestas 19.5%

REpowerSystems 8.8%

Fuhrlnder 4.9%

Nordex 1.9%Multibrid 1.6%

GE Energy 1.2%

Others 1.9%

Base: 1,917 MW commissioned in 2009

Total Installed Capacity by Continent 2009

Source: WWEA 2010

North America 24.2%

Asia 25.1%

Australia Pacific 1.5%

Latin America 0.9%

Africa 0.5%

Europe 47.9%(Germany 16.2%)

Cumulative Installed Capacity in Germany and Forecast 2010

Source: DEWI, BWE & VDMA 2010 in BWE & VDMA 2010b

AccumulatedinstalledcapacityinMW

30,000

25,000

20,000

15,000

10,000

5,000

02000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010e

6,104

8,754

11,994

14,609

16,62918,415

20,622

22,24723,903

25,777

28,100


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Behind the scenes, major invest-ments to realize the next generationof large scale offshore projectshave already been put in place.

Investments in the region of aroundEUR 45 billion are forecast through2030 mainly driven by offshoreprojects (BMU 2009).

Market studies show that internatio-nal companies consider Germany tobe the current and alongside Chinaand the USA future most impor-tant wind energy market worldwide(DEWI 2008).

The Export MarketBoth domestic and foreign marketsare highly relevant to the industryproducing in Germany. Germanysgeographical location at the heartof Europe, and its well-rehearsedglobal export infrastructure, havehelped create export levels whichrepresent over 80 percent of totalGerman wind industry output(BWE & VDMA 2009).

The Domestic Market

There is a shared political and publicunderstanding regarding the future

development and promotion of windenergy. Germanys ambitious rene-wable energy program set out andimplemented within the frameworkof the Renewable Energy Law (EEG) will increase the share of renewableenergy sources for electricity supplyto at least 30 percent by the year2020 (and continuously increasethat share thereafter). These figuresmight sound ambitious, but Ger-many has consistently exceededset targets in the past.

Growing MarketsIn 2009 offshore wind energy inGermany reached a significantprogress milestone. The now fullyoperational alpha ventus wind farmrepresents along with a numberof nearshore projects the firstGerman deepwater offshore windfarm. The considerable distanceof German offshore projects fromshore and deep waters has requiredappropriate preparation times.

Germany as a WindEnergy BusinessLocation

The Industry

All of the major international tur-bine manufacturers are representedwith production facilities in Germa-

ny. These include, among others,Enercon, Fuhrlnder, GE Energy,Nordex, Multibrid, REpower Sys-tems, Siemens, and Vestas. As wellas these top-selling manufacturers,the supplier industry also made asignificant contribution to the windmarket turnover. The year 2009brought another huge leap forwardin terms of global capacity, withcompanies in Germany first in lineto meet increased global wind-based power generation demand.

Lucrative MarketIn marked contrast to the machin-ery & equipment industry which hasexperienced a significant decreasein sales, the German wind industryenjoyed stable development in 2009.This is one reason why perceptiblymore companies outside the windenergy sector but with the rele-vant technical expertise are tur-ning to wind energy to expand theirbusiness.

Companies from all over the worldare increasingly aware of the con-vincing business arguments whichmake Germany the most lucrativelocation to establish their newwind energy business activities.Germanys unique market structureoffers a number of exciting windindustry market openings for par-ticipation in its dynamic and pros-perous value chain.

Market Opportunities

Nominal Capacity Class Installed in 2009

Source: DEWI 2010

3%2% 4%

12%

55%24%

Basis: 952 commissionedWECs in 2009

2 MW

2.3-2.5 MW

5 MW


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Global Market DevelopmentThe global wind energy market con-tinued to grow at an increased rateof 42.1 percent for new wind turbines in 2009. As a result, total worldwidecapacity reached 159,213 MW ofwhich 38,312 MW was added in 2009alone. Global wind sector turnoverreached EUR 50 billion in 2009, com-pared with EUR 40 billion for theprevious year (WWEA 2010).

The World Wind Energy Association(WWEA) considers internationalinstalled capacity of more than1,900,000 MW to be achievable bythe end of 2020.

Europe is far and away the leaderin terms of current and plannedoffshore installations: 99 percentof all offshore installations are lo-cated in Europe. Northern Euro-pean offshore markets, primarily

the German and UK markets, arethe main focus of activity of a num-ber of companies. Some have al-ready taken up residence on thenorthern German coastline or arecurrently preparing to do so.

Thanks to its excellent export condi-tions, Germany plays and will conti-nue to play a decisive role in meetingglobal and European wind-basedpower generation demand.

The RenewableEnergy Sources Act

A 10-Year Benchmark LawThe springboard for the positiveGerman market development hasbeen the profitability of wind energyas a result of ambitious govern-ment initiatives, and the RenewableEnergy Sources Act (EEG) in par-ticular. Depending on location and

reference yield, the act guaranteesa 20-year feed-in tariff of between9.20 and 5.02 cents (EUR) per kWh

TotalgenerationofelectricityinTWh/a

Wind Energy Development in Germany and Forecast

2005 2007 2010 2020

160

140

120

100

80

60

40

20

0

Source: BEE 2009

80,000

70,000

60,000

50,000

40,000

30,000

20,000

10,000

0

TotalinstalledcapacityinMW

(cumulative)

Onshore installed capacity in MW (cumulative)

Offshore installed capacity in MW (cumulative)Total generation of electricity in TWh/a

for installations commissioned priorto January 1, 2010. The RenewableEnergy Sources Act also providesbonuses of 0.5 cents (EUR) per kWhfor improved network integrationand wind energy facility repoweringrespectively. In the cases of installa-tions commissioned in subsequentcalendar years, the tariffs and bo-nuses shall be reduced degressivelyeach year by one percent.

Offshore wind farms profit fromhigher tariffs. Offshore, the 20-year-long guaranteed Renewable EnergySources Act tariff initial is equiva-lent to 15 cents (EUR) for the first 12years or longer subject to locationand 3.50 cents (EUR) per kWh there-after. The deeper the wind turbinestands and the further from shoreit is located, the longer the higherinitial tariff compensation level ispaid. This tariff has been created to

compensate for the risk and highadvance costs associated with off-shore installation.

The annual percentage degressionfor tariffs and bonuses for electric-ity generated from offshore windinstallations shall be five percentfrom the year 2015 onwards (com-missioning date).

Another major factor which makesoffshore sites especially attractiveis the requirement placed upontransmission system operators toprovide grid connections at sea towhich an offshore site operator candirectly connect.


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Offshore Wind Energy

Opportunities

Offshore wind farms located inGermany or elsewhere in northernEurope open up a vista of possibili-ties for new investors. For example,in turbine and foundation manufac-turing, component supply, offshore

logistics, marine surveying, andengineering as well as in researchand development (R&D).

Germany presents itself as an idealbase for supplying northern Euro-pean offshore markets thanks to itscentral location in Europe, competi-tive site options, readily availableworkforce, and well-establishedinfrastructure (in particular itsharbors).

Planning SecurityChanges to the Renewable EnergySources Act in 2009 have jump-started construction activities thanks to an increased feed-in tariffguaranteed for 20 years and the re-quirement for transmission systemoperators to provide ready offshoregrid connections. These conditionsprovide planning security for off-shore project developers. This isbeing translated into investor confi-dence along the entire supply chain.

Supply Chain OpportunitiesNaturally occurring supply chainbottlenecks provide excellent oppor-tunities for German and foreign in-vestors seeking to enter the market.For instance, in offshore logistics theindustry has taken remedial mea-sures by developing new installationvessels designed solely for windfarm construction. New foundationconcepts have similarly resulted in

innovative integrated approaches tohelp overcome logistical constraints.

Custom-made Production SitesInternational and domestic compa-nies alike are currently setting upproduction facilities and R&D cen-ters in Germany. A number of off-shore industry and service centers

have already emerged in severallocations including Bremerhaven,Cuxhaven, Emden, and Rostock in order to satisfy German andEuropean demand.

With its lengthy coastlines, Germanyoffers numerous custom-madedeveloped sites. This also applies toheavy offshore industries forced toseek out quayside production sitesto optimize inbound and outboundsupply chain management.

Market Entry OptionsThe large-scale nature of futureinvestments means that the cast ofplayers involved is also changing.At the same time, a new indepen-dent power producer (IPP) market,backed by the Renewable EnergySources Act, is emerging. Allocatedgrid connection and fixed tariffs arelimiting the long-term price risk ofthe sales market, allowing compa-

nies to focus on component pur-chasing and operational costs.

On the other hand, onshore suppli-ers and companies outside the windenergy sector can choose to adaptproduction capacities towards off-shore technologies or new capabilitydevelopment. The growing market is

also creating room for new playersto benefit from Germanys welcom-ing economic environment.

The GermanOffshore Market

To achieve the goals of the Renew-able Energy Sources Act, the FederalMinistry for the Environment, NatureConservation and Nuclear Safety(BMU) has calculated a required off-shore wind power capacity of around10,000 MW by 2020 (BMU 2009).

Wind Farm Project DevelopmentsAround 60 MW offshore capacity wasinstalled in Germany by the end of2009. Project developments of over90 offshore wind parks are currentlyin progress. More than 25 offshorewind parks in the German Bight andanother six projects in the Baltic Seareceived formal approval by the end

of 2009.

European Offshore Wind Farms Planned until 2011

5,969 5,369 1,354 1,279 946 770 700 300 105

6,000

5,000

4,000

3,000

2,000

1,000

0

Source: KPMG in BWE & VDMA 2009

Gre

atBritain

Ger

many

Sweden

Netherlands

France

Denmark

N

orway

Ireland

Belgium

TotalinstalledcapacityinMW


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In parallel, the Federal Maritimeand Hydrographic Agency (BSH)approved six offshore wind gridconnections solely in the GermanExclusive Economic Zone (EEZ). Afurther 13 approvals are currentlypending (BSH 2010a).

alpha ventus Wind FarmThe completion of the alpha ventusoffshore wind farm in November

2009 is the current flagship for deep-water offshore wind energy gene-ration in Germany. The project isa joint venture between EWE, E.ON,and Vattenfall. It consists of 12 five-megawatt wind turbines locatednorth of the island of Borkum nextto the FINO 1 research platform atan approximate water depth of 30meters.

Landmark Wind Supply DealRWE Innogy, the renewable ener-

gies unit of German utility RWE AG,announced at the beginning of 2009that it had signed one of the worldslargest wind turbine supply deals(with a potential transaction volumeof around EUR 2 billion). Accordingto the terms of the deal, REpowerwill supply RWE Innogy with up to250 wind turbines for offshore windfarms in Germany and Europe. Thisincludes up to 180 five- and six-megawatt class wind turbines thatwill be used for the construction ofthe Nordsee 1 offshore wind farmnorth of the German island of Juist(REpower Systems 2009). Accordingto the framework agreement, RWEInnogy has already made a firstorder call for the Nordsee Ost off-shore wind farm to be built in theGerman Bight between 2011 and2013 (REpower Systems 2010).

Source: BSH 2010b

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Baltic Sea: Offshore Windfarms

BSH / M5 - 29.03.2010

Geodetic Datum: WGS 84Map Projection: Mercator (54N)

Offshore Windfarms

planned

under construction

approved

in use

denied

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Approved! ! ! ! Planned

Boundaries

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External Data Sources:Ministerium fr lndliche Rume (S-H)Ministerium fr Bau und Arbeit (M-V)Kalmar County (Sweden) P o l a n dP o l a n d

http://www.bsh.de/en/Marine_uses/Industry/CONTIS_maps/index.jsp

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North Sea: Offshore Windfarms

BSH / M5 - 31.03.2010

Geodetic Datum: WGS 84Map Projection: Mercator (54N)

Offshore Windfarms

In Use

Under Construction

Approved

Planned

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External Data Sources:Elsam A/S (Denmark)Rijks Waterstaat (NL)

http://www.bsh.de/en/Marine_uses/Industry/CONTIS_maps/index.jsp

German Offshore Wind Farms


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Grid Connections Cable DemandThe nearest benchmark might beBARD Offshore 1, a 400-megawattwind farm around 90 kilometersnorthwest of Borkum with 80 five-megawatt wind turbines. It is sched-uled to be completed in 2010 usingan installation jack-up developed bythe BARD group itself.

The grid connection has already

been completed by the responsibletransmission grid operator. The200 kilometer long connection isthe worlds longest cable route andthe first ever to use high voltagedirect current transmission technol-ogy (HVDC Light) for an offshorewind farm. In the Baltic Sea, another75 kilometer long offshore three-phase current cable connectionfor the 50 MW Baltic 1 wind farmis currently under construction.

Demand for offshore cables, cablelaying services and special layingequipment is high: whether for high-voltage offshore grid connections,internal park cabling, or onshorecable routes from the coastline tothe next onshore feed-in point.

Moreover, the European Commissionhas allocated over EUR 903 millionto electricity interconnection proj-

ects to improve the integration ofwind power in Europe (EWEA 2010b).Representatives of all EU NorthSea countries and Ireland have alsoissued a joint political declarationto launch a North Seas CountriesOffshore Grid Initiative (BMWi 2010).

European OffshoreMarkets

Beyond the German market move-ments already described, the deliv-ery area for companies located inGermany or planning to locate thereis expanded across all northernEuropean offshore markets.

It is a self-evident fact that not onlythe majority of the producers andtechnical developers are situated inGermany, but also the major pan-European ordering customers. Forinstance, German companies holdthe major share in terms of capacityof offshore wind farms already oper-ating in the UK.

Photo:

alphav

entus

/DOTI2009


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www.gtai.com 9

Research and ProductDevelopment

Germany enjoys a positive internati-onal reputation as a global innovativeforce. Thanks to its outstanding en-gineering capabilities it is also theplace to branch out into new tech-nologies and product divisions.

Germany is home to a number ofengineering companies recognizedas being the brains behind the latestwind power generation develop-ments however they might bebranded. Close cooperation betweenGermanys R&D institutes and equip-ment manufacturers helps maintainan internationally unparalleled com-petitive edge. R&D is considered tobe among the most important areasfor the development of the Germaneconomy.

R&D projects can count on nume-rous forms of financial support.Many programs allocate supportin the form of R&D grants, interest-reduced loans, and special part-nership programs. All investors,regardless of whether they arefrom Germany or abroad, haveaccess to attractive R&D incentives.

Unique R&D

Environment

German agglomeration of public andprivate R&D activities in wind energyutilization is allowing more and moreinternational companies to establishtheir R&D centers in Germany (forexample, GE, Vestas, and Suzlon).Germanys world-class educationsystem and applied science land-scape provides direct access to ahighly qualified and flexible labor

pool to meet wind industry needs.

Offshore WindEnergy R&D

Germanys R&D institutes make upa world-class offshore researchinfrastructure. Thanks to continuedgovernmental support, a number ofmajor projects are currently under-way. Target-oriented R&D activitiesin the offshore wind energy sector

include, for example, the FINO windmeasurement projects and the alphaventus research program (RAVE).

FINOThrough the FINO research projectsbeing conducted on two researchplatforms in the North Sea and aplatform in the Baltic Sea, a compre-hensive series of measurements andinvestigations are being performed.The eventual results are of conside-rable importance for the technical

design of wind projects in the regionand are open to the public.

RAVEResearch at alpha ventus (RAVE)consists of a number of differentresearch projects in connection withthe installation and operation of thealpha ventus wind farm. The overallresearch objective is the reductionof offshore wind energy deploymentcosts in deep water. The correspon-ding projects are undertaken by pri-vate enterprises and public institutes.

Product Realizationand Market Launch

Germanys unique market infra-structure with its dynamic anddiversified local supply industry recommends Germany as an ideallocation for product realization androllout. This is because companies

located in Germany are able to

scale their share of in-house pro-duction very flexibly i.e. to makeor buy product components. Themanufacturer can adjust its pro-duction strategy from comprehen-sive manufacturing to assemblingin a lean production line in orderto achieve process advantages andcost reductions at will. Conversely,there are also opportunities to playa part as a supplier within thisdynamic market.

R&D Framework


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10

Labor Market

Flexible Labor Force

The German wind industry was ableto call upon an estimated workforceof more than 85,000 employees bythe end of 2009 (BMU 2010). Accor-ding to a European Wind Energy As-sociation (EWEA) study conducted

in 2008, the German labor marketrepresents the equivalent of morethan one quarter of all Europeancountries followed by Denmarkand Spain. All other Europeancountries are some considerableway behind (EWEA 2009).

As best witnessed by previous windproject settlements, Germany pro-vides ready access to a reliableworkforce. Moreover, recruitmentservices are actively supported

by government agencies.

Outstanding Quality throughLongstanding ExperienceGermany enjoys a long and success-ful tradition in wind turbine develop-ment and manufacturing. Research-ers, companies and employees alikecontinue to profit from this world-class know-how. The Made in Ger-many quality seal is recognized asa sign of engineering excellence andprecision across the globe.

World-Class Education StandardsGermanys world-class educationsystem ensures that the higheststandards are always met. Eighty-four percent of the German popula-tion have been trained to universityentrance level or possess a recog-nized vocational qualification abovethe OECD average of 67 percent. Thecountrys dual education system unique in combining the benefits of

classroom-based and on-the-job

training over a period of two to threeyears is specifically geared to meetindustry needs. The German Cham-bers of Industry and Commerce(IHK) ensure that exacting standardsare adhered to; guaranteeing thequality of training provided across

the country. Germany provides di-rect access to a highly qualified andflexible labor pool to meet industryneeds whilst ensuring that skilledand unskilled workers are well pre-pared for the workplace.

Competitive Labor CostsHigh productivity rates and steadywage levels make Germany an ex-tremely attractive investment loca-tion. Labor cost increase levels havebeen the lowest in Europe in recentyears. German productivity rates arealmost ten percent greater than theaverage of the EUs 15 core nationaleconomies, and almost one quarterhigher than the OECD average.

Highly flexible working practicessuch as fixed-term contracts, shiftsystems, and 24/7 operating permitscontribute to enhance Germanysinternational competitiveness asa suitable investment location for

internationally active businesses.

Creating InvestmentStability

Sustainable Investment

In economically challenging times,

a safe and attractive investmentlike wind energy proves particularlyattractive to investors. As a compa-ratively low-risk investment, windenergy requires stable policy frame-works with well-designed feed-intariffs and sufficient legal stability.Germany is world renowned for itshighly developed economic, legaland political frameworks which pro-vide investors in all industry sec-tors with the necessary securityfor their business investments.

This is also reflected in the financialsectors position regarding Germanwind energy projects in the recent fi-nancial downturn. Last but not least,the Renewable Energy Sources Act,with its fixed feed-in tariffs, and gridpriority for renewable energies hashelped avert the sorts of financialrestraints felt in other sectors ofindustry.

European Labor Cost Growth 20002008 (yearly average in percent)

Source: Eurostat 2009

Germany

Italy

France

EU27

Netherlands

Spain

UK

Czech Rep.

Poland

Slovak Rep.

0% 1% 2% 3% 4% 5% 6% 7% 8% 9%

2.0%

2.7%

3.4%

3.7%

3.8%

4.6%

4.9%

7.2%

7.5%

8.4%

Investment Climate


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www.gtai.com 11

Sound and Secure Legal FrameworkAccording to the World EconomicForum (WEF), Germany is one ofthe worlds best locations in termsof planning and operating security.Germanys overall attractiveness asa business location is also docu-mented by its improved ranking inthe latest fDi Markets direct invest-ment statistics.

According to the A.T. Kearney For-eign Direct Investment ConfidenceIndex 2010, Germany is the mostattractive FDI destination in Europe.Internationally participating busi-ness executives also conclude thatongoing investment in sustainablebusiness is an absolute imperativefor successful market competitionand shareholder satisfaction.

Open and Transparent MarketsGerman law makes no distinction

between Germans and foreign na-tionals regarding investments, avail-able incentives or the establishmentof companies. The legal frameworkfor foreign direct investment in Ger-many favors the principle of freedomof foreign trade and payment. Thereare no restrictions or barriers tocapital transactions or currencytransfers, real estate purchases,repatriation of profits, or access toforeign exchanges.

Reliable Logistics InfrastructureGermanys infrastructure excellenceis confirmed by a number of recentstudies including the Swiss IMDsWorld Competitiveness Yearbookand various UNCTAD investor sur-veys. The 2009-2010 Global Compe-titiveness Report of the WEF rankedGermany first for infrastructure;singling out Germanys extensiveand efficient infrastructure for high-ly efficient transportation of goods

and passengers for special praise.Accumulated in this score for Ger-

many are high marks for the qualityof roads and air transport, excellent

railroads and port infrastructure,as well as its communications andenergy infrastructure.

In terms of the offshore wind indus-trys unique logistic requirements,Germany offers attractive andpurposefully developed quayside orquayside near sites at competitiveprices ready to serve the demandsof the northern European offshoremarkets.

Internationally CompetitiveTax Conditions

Germany has developed one of themost competitive tax systems in theworld. Significant company taxationreforms made in 2008 have resultedin a decrease of the corporate taxburden by around 25 percent. Theoverall average corporate tax bur-den has sunk to just below 30 per-cent, with a number of federal statesproviding even more competitive taxrates. Standard corporate incometax has also been reduced by tenpercent to just 15 percent on all

corporate taxable earnings.

Germany The Most AttractiveBusiness Location in Europe

The American Chamber of Commerce in Germanys AmCham BusinessBarometer 2010 shows that US firms consider Germany to be the mostattractive business location in Europe in terms of regional investmentfocus for the years ahead.

According to the study, the US companies surveyed indicated the in-creasing significance of high product and process quality in the current

economic climate, while attaching particular value to the traditionalGerman qualities of diligence, reliability, and quality. US firms alsocited the decreasing wage cost differences between Germany andeastern Europe as a further reason for Germanys comparativelyhigher attractivity level, with the cost arguments previously favoringeastern Europe having less and less relevance.

Most Attractive FDI Destinations in Europe Accordingto Corporate Executives

Country European Rank International Rank

Germany 1 5Poland 2 6

UK 3 10

France 4 13

Romania 5 16

Czech Republic 6 17

Source: A.T. Kearney 2010


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Labor-related Incentivesand R&D Project GrantsBefore the location-based invest-ment is being initiated, companiescan receive further subsidies for

building up a workforce or the im-plementation of R&D projects. La-bor-related incentives play a signifi-cant role in reducing the operationalcosts incurred by new businesses.The range of programs offered canbe classified into three main groups:programs focusing on recruitmentsupport, training support, and wagesubsidies respectively.

R&D project funding is made avail-able through a number of differ-ent incentives programs targetedat reducing the operating costs ofR&D projects. Programs operate atthe regional, national, and Euro-pean level and are wholly indepen-dent from investment incentives. Atthe national level, all R&D projectfunding has been concentrated inthe so-called High-Tech-Strategyto push the development of cutting-edge technologies. Substantial an-nual funding budgets are available

for diverse R&D projects.

ness (working capital loans), can helpbridge temporary financial gaps(bridge loans) or finance long-terminvestments (investment loans). Be-sides offers from commercial banks,investors can access publicly sub-sidized loan programs in Germany.

These programs usually offer loansat attractive interest rates in combi-nation with repayment-free start-upyears, in particular for small and me-dium-sized companies. These loansare provided by the state-ownedKfW development bank and alsoby regional development banks.

Cash Incentives forInvestment ProjectsWhen it comes to setting up produc-tion or service facilities, investors

can count on a number of differentpublic funding programs. Theseprograms complement the financingof an investment project. Most im-portant are cash incentives providedin the form of non-repayable grantsapplicable to co-finance investment-related expenditures such as newbuildings, equipment or machinery.In Eastern Germany, investmentgrants are complemented by an in-vestment allowance, which is usuallyallotted in the form of a tax credit

but which can also be provided in theform of a tax-free cash payment.

Financing & Incentivesin Germany

Instruments

In Germany, investment projects canreceive financial assistance througha number of different instruments.These instruments may come fromprivate sources or consist of public

incentives programs available to allcompanies regardless of countryof provenance. They fit the needsof diverse economic activities atdifferent stages of the investmentprocess.

Early-Stage InvestmentProject FinancingTechnologically innovative start-upsin particular have to rely solely onfinancing through equity such as

venture capital (VC). In Germany,appropriate VC partners can befound through the BundesverbandDeutscher Kapitalbeteiligungsge-sellschaften e.V. (BVK GermanPrivate Equity and Venture CapitalAssociation). Special conferencesand events like the Deutsches Ei-genkapitalforum (German EquityForum) provide another opportu-nity for young enterprises to comeinto direct contact with potential VCpartners. Public institutions such as

development banks (publicly ownedand organized banks which existat the national and state level) andpublic VC companies may also offerpartnership programs at this devel-opment stage.

Later-Stage InvestmentProject FinancingDebt financing is a central financingresource and the classic supplementto equity financing in Germany. It isavailable to established companies

with a continuous cash flow. Loanscan be borrowed for day-to-day busi-

Types of Incentives in Germany

1) only in Eastern Germany

CashIncentives

Investment IncentivesPackage

Operational IncentivesPackage

Interest-Reduced Loans

R&D IncentivesLabor-Related

Incentives

InvestmentGrants

KfW Loans(National Level)

InvestmentAllowance1

StateDevelopmentBank Loans

GrantsRecruitment

LoansTrainingSupport

Silent/DirectPartnership

WageSubsidies

+

PublicGuarantees

State

Combined State/Federal


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www.gtai.com 13

Supporting Success

Germany Trade & Invest has a longtradition of providing support to in-vestors in the wind energy industry.This includes companies like Vestas,and GE.

Vestas

Germany Trade & Invest advised Ves-tas when it made a major investmentin the federal state of Brandenburg.The company required a locationfor a factory large enough to housearound 500 workers for the produc-tion of 900 rotor blades annually.The site also had to provide readyaccess to excellent infrastructurein a red-tape-free environment forthe company to take advantage ofits strong export markets in Europe,the US, and Canada.

Vestas chose Lauchhammer locatedbetween Berlin and Dresden as itslocation, with production commenc-ing in May of 2002. Since this initialinvestment, Vestass production hassignificantly increased to levels wellabove the initial capacity of 900 rotorblades per year. The plant has sub-sequently expanded to cover a spaceof more than 201,000 square meters.

Vestas is now using river bargesto transport its blades with onebarge replacing the equivalent of 24truckloads. Thanks to the successof the Lauchhammer plant, Vestashas established further productionfacilities in Germany, including afoundry in Magdeburg and a gene-rator production plant in Lbeck.

GE

Leading wind turbine supplier GEwas the most recent beneficiary ofGermany Trade and Invests free advi-sory services as part of its offshoreexpansion activities. This will resultin investments of EUR 105 millionand create approximately 100 new

jobs in Germany.

A new engineering center in Ham-burg will feature product develop-ment, application engineering andadvanced technologies. GE alsoplans to expand its resources atits existing German wind turbinemanufacturing facility in Salz-bergen, as well as the GE GlobalResearch Center in Munich.

Business Outlook

These success stories are just twoexamples of Germany Trade & Investseffective support services withinthe wind energy industry. Diversebusiness opportunities are availablewithin this dynamic business area.The wind industry has witnessedconsiderable expansion in opera-tions, especially in the offshoresector. The number of new produc-tion facilities and R&D activities inGermany alone demonstrates thevibrant state of wind industry de-velopment.

Success Story

The decision to locate our production facility for Europe in Rostockwas based on three sound arguments: the logistical connection,the job market, and business relations. With its deepwater port andnorth-south as well as east-west motorway connections, Rostockoffers good transport possibilities for our heavy goods to all ourtarget markets. Having a long tradition as a shipbuilding center,the city was furthermore able to provide us with a large numberof qualified specialists.

We also take a positive view of our relationswith the University of Rostock with regard

to promoting the next generation of em-ployees. And finally, the short distancesto many of our component suppliers inMecklenburg-Vorpommern were afurther key aspect.

Thomas Richterich

CEO, Nordex SE


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Our Investment Project Consultancy Services

Germany Trade & InvestHelps You

Germany Trade & Invests teams ofindustry experts will assist you insetting up your operations in Ger-many. We support your project ma-nagement activities from the earlieststages of your expansion strategy.

We provide you with all of the indus-try information you need coveringeverything from key markets andrelated supply and application sec-tors to the R&D landscape. Foreigncompanies profit from our rich ex-

perience in identifying the businesslocations which best meet their spe-cific investment criteria. We helpturn your requirements into concreteinvestment site proposals; providingconsulting services to ensure youmake the right location decision. Wecoordinate site visits, meetings withpotential partners, universities, andother institutes active in the industry.

Our team of consultants is at hand toprovide you with the relevant back-ground information on Germanys taxand legal system, industry regulati-ons, and the domestic labor market.Germany Trade & Invests experts help

you create the appropriate financialpackage for your investment and putyou in contact with suitable financialpartners. Incentives specialists pro-vide you with detailed informationabout available incentives, supportyou with the application process, andarrange contacts with local economicdevelopment corporations.

All of our investor-related services

are treated with the utmost confiden-tiality and provided free of charge.

Complete your project management needs from our range ofinvestment and one-stop project consultancy services.

Project Management Assistance

Coordination andsupport of nego-tiations with localauthorities

Joint projectmanagement withregional develop-ment agency

Project partneridentificationand contact

Market entrystrategy support

Business oppor-tunity analysis andmarket research

Location Consulting /Site Evaluation

Final sitedecision support

Site visitorganization

Site preselectionCost factoranalysis

Identification ofproject-specificlocation factors

Accompanying in-centives applicationand establishmentformalities

Administrativeaffairs support

Organization ofmeetings withlegal advisors andfinancial partners

Project-relatedfinancing and incen-tives consultancy

Identification ofrelevant tax andlegal issues

Support Services

Decision & InvestmentStrategy Evaluation


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ontact

Imprint

PublisherGermany Trade and InvestGesellschaft fr Auenwirtschaftund Standortmarketing mbH

Friedrichstrae 6010117 BerlinGermanyT. +49 (0)30 200 099-555

F. +49 (0)30 200 [email protected]

Chief Executives: Dr. Jrgen Friedrich, Michael Pfeiffer

AuthorJohannes Dimas, Renewable Energies & Resources,Germany Trade & Invest, [email protected]

EditorWilliam MacDougall, Germany Trade & Invest

LayoutGermany Trade & Invest

PrintCDS Chudeck-Druck-Service, Bornheim-Sechtem

SupportPromoted by the Federal Ministry of Economics and Technology and the Federal GovernmentCommissioner for the New Federal States in accordance with a German Parliament resolution.

NotesGermany Trade & Invest, April 2010All market data provided is based on the most current market information available at the time of publication.Germany Trade & Invest accepts no liability for the actuality, accuracy, or completeness of the information provided.

Order Number14196

EndnotesA.T.Kearney 2010. News release 25. Jan. 2010: Corporate FDI Plans on Hold for the Nex t Two Years.BEE 2009. Stromversorgung 2020 - Wege in eine moderne Energiewirtschaft.BMU 2009. Roadmap Energiepolitik 2020.BMU 2010. Bruttobeschftigung durch erneuerbare Energien in Deutschland im Jahr 20 09 (erste Abschtzung, Stand: Mrz 2010).BMWi 2010. Press release 05. Jan. 2010: International co-operation vital if offshore wind power is to be a success: launch of newNorth Seas Countries Offshore Gr id Initiative.BSH 2010a. BSH-Bilanz 2009.BSH 2010b. www.bsh.de.BWE & VDMA 2009. The wind industry in Germany Economic report.BWE & VDMA 2010a. Presseinformation vom 27.01.2010: Jahresbilanz Windenergie 2009.BWE & VDMA 2010b. Deutsche Windindustrie Jahresbilanz 2009 und Ausblick 2010.BWE 2010. Datenblatt 2009 (Stand: 31.12.2009).DEWI 2008. WindEnergy Study 2008 Assessment of the wind energy market until 2017.DEWI 2010. Status der Windenergienutzung in Deutschland 2010 - Stand 31.12.2009.

Eurostat 2009. www.epp.eurostat.ec.europa.eu.EWEA 2009. Wind at Work 2009.EWEA 2010a. Wind in power 2009 European statistics.EWEA 2010b. Press room 04. Mar. 2010: EU money injects new life into electricity interconnection.REpower Systems 2009. Press release 18. Feb. 2009: REpower and RWE Innogy agree major framework agreement for the offshore wind industry.REpower Systems 2010. Press release 01. Feb. 2010: REpower and RWE Innogy sign contract for about 295 MW from offshore wind farm off Helgoland.WWEA 2010. World Wind Energy Report 2009.


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About Us

Germany Trade & Invest is

the foreign trade and inward

investment agency of the

Federal Republic of Germany.

The organization advises andsupports foreign companies

seeking to expand into the

German market, and assists

companies established in

Germany looking to enter

foreign markets.

All inquiries relating to

Germany as a business location

are treated confidentially.

All investment services and

related publications arefree of charge.

www.gtai.com

Germany Trade & InvestFriedrichstrae 6010117 BerlinGermany

T. +49 (0)30 200 099-555F. +49 (0)30 200 [email protected]

Photo:alphaventus/R

Epower2009

About Us

Germany Trade & Invest is

the foreign trade and inward

investment agency of the

Federal Republic of Germany.

The organization advises andsupports foreign companies

seeking to expand into the

German market, and assists

companies established in

Germany looking to enter

foreign markets.

All inquiries relating to

Germany as a business location

are treated confidentially.

All investment services and

related publications arefree of charge.

www.gtai.com

Documents

IndustryOverview WindEnergy April2010 GTAI