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Germany

Germany

Purchase rates raised in Germany -- Free market sale now an option

Germany's amended renewable energy law, which raises the mandated rates paid for both offshore and onshore wind power production across the country, should bring new life to a market which is seeing its worst year in a decade. Just 1650 MW is expected to be installed this year, just half the volume built in the German market's peak year in 2002. The amendment to the law was passed by parliament on June 6 as one element of the government's drive to see at least 30% of Germany's electricity come from renewables by 2020.

The revised law, however, will not come into force until the start of this year. As a result, new projects scheduled to start production of clean electricity this year are not likely to come online until 2009, when the higher purchase prices will be applicable for the entire operational life of the wind plant. It is a situation regretted by the national renewable energy association, Bundesverband Erneuerbare Energien (BEE).

Wind projects going on line in 2009 will get EUR 0.092/kWh for at least five years of the guaranteed payment period of 20 years compared with just EUR 0.0803/kWh paid for projects on line in 2008. The artificial halt to the market is likely to create further logistical problems for turbine suppliers and others. Until now, there has been a traditional end-of-year dash to get turbines in the ground before payment rates drop by 2% for new plant at the start of each year. The extraordinary payment hike in 2009 will halt the dash in 2008, replacing it with an early 2009 rush. In 2010, an annual reduction will then kick in again, but of just 1% rather than 2%.

Any planned repowering of existing wind plant with new machines is also likely to be delayed until next year. To encourage the replacement of old technology on good sites with state-of-the-art wind turbines, repowered plant will be eligible for an additional EUR 0.005/kWh for at least the first five years of operation. Replaced turbines must be at least ten years old and be situated in the same or neighbouring rural districts. From 2009, new turbines equipped with sophisticated voltage and frequency control so they can provide grid support services will also get a EUR 0.005/kWh perk for at least the first five years, as a contribution to the additional expense involved. Existing turbines can retrofit with the necessary equipment to receive the bonus. A similar incentive system has proved successful in Spain for improving the ability of wind turbines to support the grid.

To speed offshore developments, wind turbines installed at sea are to receive EUR 0.15/kWh for the first 12 years of the 20-year guaranteed payment period if they are commissioned before 2015. Beyond that, the payment for new offshore plant online drops to EUR 0.13/kWh and will decrease by 5% a year for new plant in each subsequent year.

Curtailment compensation

Beyond better purchase prices, the revised law also provides for better management of wind generation on the power system, including utility dispatch control of wind generation to ensure network stability and security of supply. Owners of wind plant, however, must be financially compensated for any generation curtailments by the network operator. "We are pleased that an efficient method has been built into the law to increase the incentive for a swift expansion of the networks," says Hermann Albers, president of Bundesverband Windenergie (BWE), the German wind energy association. The network operators are also "expressly obliged" to expand and optimise their networks for the uptake of wind power, says BWE.

A novel aspect of the amended law is introduction of direct marketing of electricity generated by wind and other renewables. Wind plant owners can switch month by month between selling their output directly into the market at commercial rates, or accepting the purchase prices mandated by government. "There is now a real option for direct marketing of wind power," according to BWE.

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