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Germany

Germany

Renewables lobby feels safe and sound -- Germany's election mess

Initial claims that wind power might become the only winner in the tied German general election faded rapidly once it became clear that the Green party was not likely to be swapping sides and holding the balance of power in an unholy alliance with the Conservative CDU/CSU coalition parties and their favoured partner, the liberal FDP. Until the election, the Green party was the minority partner in a government led by Gerhard Schroder's Social Democratic Party (SDP) and was represented by the environment minister Jürgen Trittin. An enthusiastic and indefatigable champion of wind power, Trittin is a fierce defender of Germany's renewable energy law and its mandated purchase prices for green power.

Where the likely departure from government of Trittin and the Green party leaves wind in the German political scene was no more clear a week after the September 18 election day than who would form the country's new government. But the concept of a grand CDU/CSU/SDP coalition was taking shape about as fast as a potential marriage of the Green party with the Conservative and Liberal parties was falling apart.

Acceptance of the liberal market policies of the Conservatives and particularly the Liberals was too much to ask of Green party leaders. "It's not just a matter of [the CDU/CSU/FDP] making a few concessions to the Greens on nuclear power," Katrin Göring-Eckardt, chairman of the Greens parliamentary fraction, told the press.

A blessing

For wind power and the other renewables, the lack of a clear election winner is widely greeted as a blessing in disguise. If a strong CDU/CSU/FDP government had emerged, it may have posed a serious threat to the renewable energy law and its command-and-control approach to a market for green power. Towards the end of the election campaign, however, the CDU expressed its intention to wait for a planned review of the workings of the law at the end of 2007 before making any adjustments to it.

"We have a chance to engage in serious factual discussions with whatever government emerges," said Peter Ahmels from the federal wind association in the week after the election. The need for parties to get along in a coalition will require them to get down to details and fully understand the reasons behind Germany's rising electricity prices. "We can stress the benefits of repowering old wind stations with new turbines, not only as one of the best ways to reduce the price of wind generated power, but also resulting in fewer, better turbines, an improved landscape and better network integration," added the association's Hermann Albers.

Its executive director, Ralph Bischof, underlined that rises in oil and gas prices were eroding the difference between the cost of wind power and base load power traded at the German energy exchange. Wind could become fully competitive well before 2015, the year in which it is projected to no longer need support. Payment for electricity from wind stations built several years ago at prime sites will soon drop to EUR 0.052/kWh, added Albers, which is close to the generation costs of new fossil fuel stations.

Bischof underlined the renewable energy sector's aim of integrating into the market "bit by bit," and claimed that the current renewable energy law "provides room for market flexibility."

Offshore

Most importantly, the wind association hopes for a political answer from the next government on how to get offshore wind development moving in Germany. "This could be an investment grant for offshore as is provided in the UK," says Bischof, or a higher purchase price than currently set by government.

Another solution, favoured by Fritz Vahrenholt, head of wind turbine manufacturer Repower Systems, is for the electricity network companies to carry the cost of cable connection to shore in return for a concession to generator companies to run their nuclear plant for longer than foreseen in Germany's nuclear phase-out law. As a former politician, Vahrenholt has close contacts to the political hothouse in Berlin.

Meantime, while political parties jostle to create the final government line-up, it is business as usual for German wind power. With more investors looking to buy wind projects than projects in the making, Germany has become a seller's market for wind project developers. "Return on equity is under pressure: it's absolutely a sellers' market -- too much money and too little in the way of deals. So wind park developers, your time has come. Enjoy it. Take a good look around to see how much you can get for your projects," is the advice of Mortimer Menzel of Augusta & Co Merchant Bankers.

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