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Germany

Germany

German move on quotas

Small scale combined heat and power (CHP) stations are, like wind turbine operators, becoming a "stranded costs" victim of energy market liberalisation. Like wind, payment for CHP output is linked to the price of electricity. The government, however, stepped forward last month with a DEM 1 billion rescue package for CHP containing a subsidy worth up to DEM 0.06/kWh. This article covers two reasons why the subsidy package is significant for wind.

Wind turbine operators are not the only independent power producers hit by falling electricity prices in Germany. Small scale combined heat and power (CHP) stations are also becoming a "stranded costs" victim of energy market liberalisation. Like wind, payment for CHP output is linked to the price of electricity.

The government, however, stepped forward last month with a DEM 1 billion rescue package for CHP containing a subsidy worth up to DEM 0.06/kWh. Significantly for wind, the government says the CHP subsidy package must be seen in relation to the "planned reform" of the Renewable Energy Feed-In Tariff (REFIT), under which utilities buy wind power at a fixed rate. Wind's current DEM 1 billion budget-the sum the utilities say they fork out in subsidies each year under the REFIT-will be "significantly increased" according to the CHP regulation.

Also significant for wind is talk of imposing a binding minimum quota for the amount of CHP in a utility's power portfolio. The minimum quota approach is being advocated by the European Commission for all renewable energies, but the German wind lobby is fighting against the concept, preferring a continuation of its current support system based on subsidised prices. The CHP lobby, however, says the CHP price subsidy just agreed by government will only help dying CHP plant "die in peace." It is keen to see a minimum quota to stimulate a CHP market of the future.

According to a political source associated with the Green Party who is close to the issue, the aim of the CHP quota is to maintain and expand CHP's market share. It is difficult to introduce a quota for renewables, the source says, because of the REFIT's success: so many independent power producers benefit from it that the government cannot easily dispense with it.

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