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Germany edges towards auctions across borders

GERMANY: There are undoubtedly some good reasons for developing cross-border auctions for onshore and offshore wind and other renewable energies.

Brussels…European Commission wants closer cooperatin on energy (pic: Andersen Pecorone)
Brussels…European Commission wants closer cooperatin on energy (pic: Andersen Pecorone)

As pioneers, Germany and Denmark are pressing ahead with a trial run in the photovoltaic sector in 2016.

But adapting national auction rules for renewables support to apply cross-border in two or more countries is tricky and could cause ructions if, for instance, all successful bidders came from one country.

On the upside, cooperating across borders on renewables support can open up better and, as yet, untapped renewables assets in other countries, strengthen synergies and create useful so-called portfolio effects.

If countries increase the geographical spread of renewables installations, less electricity will be fed in at the same place at the same time, reducing stress on networks and market prices.

"This will be beneficial for renewables market integration," said Felix von Blucher, energy policy consultant at Ecofys in a recent webinar.

He argued that small nations with few renewable players could benefit from increased outside competition, and policy and know-how would be transferred when they cooperate.

Ecofys research has revealed that close cooperation between countries can reduce renewables support by 10% when compared with a scenario where each country follows its own renewables-support arrangements.

EU member states "generally welcome" the development of a concrete framework for cross-border participation, albeit on a voluntary basis, according to an analysis of responses to a public consultation on the new European Renewable Energy Directive for the period after 2020.

But the European Commission's upcoming energy package (to include proposals on electricity market design and on revising the Renewable Energy Directive), due on 30 November, may push member states further towards cross-border opening of their renewables support instruments, suggested von Blucher.

Pragmatic approach

From November 2016, Germany's economics ministry is pressing ahead — with no great enthusiasm — with cross-border auction regulation for 5% of new annual German renewables capacity. It aims to have it implemented before the next German general election in September 2017.

The European Commission had required a proportional opening of German renewables support for investments in other EU member states as compensation for the country imposing its renewable energy levy on imported electricity.

"Difficulties include creating a level playing field for cross-border auctions when, for instance, permitting procedures are much more stringent in one country than in another," a spokesman for German wind energy federation BWE said. A pragmatic approach on such distortive effects will be needed, said von Blucher.

An Ecofys cashflow model to assess the influence of various distorting factors found that a 1% higher business tax rate in one country can push the levelised cost of energy up by 0.05% in that country.

There will be no perfectly level playing field and no perfect allocation of costs and benefits, von Blucher predicted. It is more likely, that there will be varying levels of cooperation and custom-made solutions, with regional cooperation rather than EU-wide cooperation in cases where countries have no direct electricity transmission interconnections, he said.

The overall aim is to reduce renewables-support expenditure, but the win/win "must be visible to everyone", he said.

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