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Reform retains fixed premium tariff

Germany's economy ministry has produced a first, unauthorised draft for amended legislation governing the country's Renewable Energy Feed-In Tariff. Ignoring for the time being the requirements of both Europe's Internal Energy Market and the EU's plans for a single renewables market, the draft maintains the basic principle of the current law. Discussions of a total reform of the REFIT system to bring Germany into line with Europe's aim of a pan-European-and guaranteed-market for renewables were postponed by the environment ministry in September (Windpower Monthly, October 1999).

Under the just released draft for an amended REFIT, utilities will still be obliged to buy renewables power at a premium rate. This, however, will be a kilowatt hour payment fixed by government, instead of a percentage of the declining consumer price of electricity. Furthermore, the cost of the premium will be met by all utilities in Germany, and not just those with wind power plant in their areas.

The premium payments are to be made for a period of 14 years, regardless of when the turbine was brought on-line. For turbines brought into operation before the law takes effect, the 14 year period runs from February 1, 2000. Turbines installed in neighbouring countries are not eligible for REFIT payments and there is no obligation for German utilities to connect them.

The new fixed tariff proposed is a basic rate of DEM 0.165/kWh compared with DEM 0.1652/kWh in 1999 and DEM 0.161/kWh due in 2000 under the present REFIT law arrangements. But the draft includes an as yet undefined cap to the premium. If a turbine produces more than a certain number of kWh per square metre of rotor swept area in any one year, the payment will be reduced; by how much the document does not disclose. The clause is already meeting with protests from the Bundesverband Windenergie (BWE), the German wind energy association.

Pressing issues

The main changes proposed deal with the two most pressing issues facing the economy ministry on the wind front. First, electricity prices in Germany are falling as the benefits of liberalised market competition reach consumers, bringing down the REFIT rate-as this is linked to electricity prices-and threatening the economics of wind projects. Second, utilities in the windy north have been complaining bitterly about having to bear the lion's share of the cost of developing Germany's main renewable energy. They have long called for the cost to be shared equally among all utilities.

The obligation to buy wind power at a premium is still applied to local utilities, but only until renewable energy makes up 2% of their grid supplies. Once this limit is reached, local utilities can apply for compensation for their wind payments to the next utility in the chain of supply, the operators of the high-voltage networks. Under a new mechanism all utilities in Germany will share this cost.

The draft also rules that the costs of grid expansion to allow for connection of new renewables must be shared equally between wind plant developers and the utilities. The grid operator's share of the cost will be included in its standing transmission charges. BWE, however, is still pushing for all grid expansion costs to be met by the grid companies.

Another major change proposed by the draft is a provision allowing utilities to re-sell power bought at the REFIT rate, but not to market it under a green power label. In this way, customers will not be paying for renewable energies twice, first through the REFIT premium payments and second through a green power tariff, which is usually higher than the standard rate.

Intense discussions

The draft of the new law is not the final document, says the BWE's Carlo Reeker. Federal government discussions were continuing at least until the end of November, he says. All four of Germany's wind lobby groups, the WWW, VDMA, BWE and FGW, were also holding intensive discussions on the document in the hope of influencing it before it went further in the legislative process.

Several changes to the details of the existing REFIT law are proposed. Feed-in of renewables to the grid must always be at the lowest suitable voltage level. For renewables plant not located in the supply area of a utility grid company-such as offshore wind turbines-the obligation applies to the utility whose grid is closest to the plant. Any extra transmission and distribution costs, such as for offshore, can be included in the utility's standard charges for use of the grid.

The draft also contains a clause that may take the heat out of a common bone of contention between wind and grid operators-grid connection costs. These will continue to be paid by the turbine operator. But if a third party quotes a cheaper price to carry out the work according to the technical specifications of the utility, this becomes the price of the job, even if the utility carries it out.

Sharing the cost

The compensation due to local utilities for their purchases of renewables power above the 2% limit is proposed as a payment per kilowatt hour that equals 65% of the average kWh payment paid by the receiving utility for renewables power in that calendar year. This 65% figure appears to be one detail still very much in the realms of discussion. If there is no German high-voltage grid in the area of the utility seeking compensation, then the next domestic operator of a high voltage grid is liable.

The operators of the high voltage grid are to be obliged to fairly distribute their renewable power obligations. Each operator has to report by March 31 of each year the amount of electricity for which it had to make premium payments in the previous year. It must also report the share of its total direct or indirect electricity sales represented by this amount.

Operators that had to pay premium payments for more power than the average taken by the other grid operators are entitled to compensation from the others. The aim is for an equal distribution of the cost of renewables. The compensation is calculated as 65% of the average payment per kWh of green electricity bought by the company receiving the compensation. Every grid operator is obliged to open its books to all other high voltage grid operators so that their compensation calculations are fully transparent.

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