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Germany

Germany

Analysis - Germany's wind power dilemma

GERMANY: German offshore wind faces a 6.5GW cap to 2020 if the working group energy proposals prepared for a grand conservative-social democrat coalition government are implemented as set out in a final, if not complete, draft dated 11 November 2013.

Alpha Ventus - Germany's first offshore wind farm
Alpha Ventus - Germany's first offshore wind farm

This will be 35% less than the 10GW set out in Germany's 2010 national renewable energy action plan to 2020 but "is in line with realistic expansion possibilities", the document stated. Beyond 2020, it is assumed an average two projects a year, each with about 400MW, will be commissioned over the period to 2030 to reach 8.9GW in 2023 and around 15GW by 2030.

How many offshore wind investment companies will be keen to stay in the sector to battle for this annual quota is not clear. On top of that, the document says that from about 2018, the level of support will be fixed by tendering procedures "if it can be demonstrated in a pilot project that the aims of Germany's Energiewende can be achieved more cheaply by this method". This appears to apply to all renewables including offshore wind, although the pilot project will be for 400MW of ground-installed photovoltaic.

Still, the numbers will not come as a surprise to the offshore sector since the 6.5GW by 2020 and 8.9GW by 2023 appear to match the more conservative of two scenarios in a recent offshore wind cost-reduction study by consultancies Prognos and Fichtner that was released by the German Offshore Wind Energy Foundation in August 2013.

This concluded that average German offshore wind-energy generation costs over a 20-year operating period are currently EUR 128-142/MWh (2012 prices) and can be reduced by 32-39% within the next decade depending on scenario.

Scenario 1 assumed 9GW of offshore wind in Germany in 2023, as well as 20GW across Europe, while the more bullish scenario 2 with the higher cost-cutting potential assumed 14GW in Germany and 40GW in Europe bythe same date .

The coalition policy document left a blank space for adding measures to be implemented in the short term to enable offshore wind investment decisions to be taken. At the moment, the industry urgently needs clarity on issues that include support rates per kilowatt hour for the period beyond 2017. But the draft for a swift and thorough reform of the Renewable Energy Act will not be due until Easter 2014, to be passed in summer 2014, the energy working group document said.

The document reveals that fixed expansion corridors are planned for other renewables, including onshore wind, but says cost estimates will be made before these are defined.

The energy working group's document plans to reduce feed-in tariffs, especially for very good wind sites, and adjust the so-called reference yield model — used to calculate when the higher feed-in payment rate should drop to a basic rate — so that "countrywide, the good locations can continue to be used economically". The onshore wind sector itself has in the past indicated that a feed-in tariff reduction at very good wind sites is possible.

The document says that all wind and renewables plants with more than 5MW should be obliged to sell their electricity in the wholesale market under the market premium mechanism. New wind and other plants may also have to accept that up to 5% of their annual output is curtailed without compensation if this reduces the costs of transmission network expansion and helps to avoid negative wholesale electricity prices.

A proposal is also being considered as to whether very large renewables generators, including onshore and offshore wind farms, should be required to guarantee a share of their output as "base load" by entering into contracts with electricity-storage suppliers, industry consumers that can shed demand if required, or fossil-fired power stations. At the same time, renewables generation should continue to have priority access to the electricity system, the paper says.

It also stresses that renewables support needs to be integrated into the European internal market for energy. But it is not taking any chances. The document stresses that German electricity demand should be covered at all times by generation capacity in Germany itself.

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