Market Status: Germany - New rules may boost industry after poor year

GERMANY: The outlook for German wind power in 2011 is influenced by an upcoming revision of the Renewable Energy Act, due to take effect at the beginning of 2012.

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If the conservative-liberal coalition government puts forward plans to cut the feed-in tariff (FIT) or introduce other changes disadvantageous to wind, there may be a rush to advance projects for completion this year.

The German wind energy association, Bundesverband Windenergie (BWE), is optimistic that the German federal government will not introduce substantial changes for wind energy and, on that basis, it predicts new installations this year of about 1,500MW onshore and 300MW offshore, totalling 1,800MW.

Under current legislation, the wind FIT rates, which are payable for 20 years after commissioning, decrease by 1% a year. The payment rate falls from EUR0.0911/kWh for projects commissioned in 2010 to EUR0.0902/kWh for projects commissioned this year.

The potential effect of a sudden regulatory change was dramatically demonstrated in the solar power sector in 2010, when solar photovoltaic installations soared to 2.1GW in June prior to a sharp cut in FITs in July. Over the previous five months, installations had averaged 349MW a month. Solar expansion vastly outpaced new wind capacity, amounting to about 7GW of photovoltaic installations for the whole year, to total about 17GW.

This largely unanticipated solar boom has resulted in criticism - not only of the photovoltaic sector but renewables generally. The cost of FITs for solar and other renewables is rolled over to customers. The sudden increase in photovoltaic plants has contributed to a 72% rise in the renewables levy, from EUR0.020/kWh to EUR0.035/kWh. A household using 3.5MWh of electricity a year will pay EUR124 in 2011 to support renewable energies, compared with EUR72 in 2010.

Market share of new onshore installations

Even though electricity consumers could mitigate the increase by switching to a cheaper supplier - and although renewables lower the price of power on the German electricity exchange by several billions of euros a year - there are concerns that the renewables levy increase may weaken public support for renewable power generation.

BWE stresses the need for continuity in renewables policy to ensure steady and predictable annual growth. The wind energy FIT with its annual decrease should be maintained. Bonuses available to promote repowering, system services and offshore wind need to be extended for several more years to allow more time for their intended effect to take place, it says.

BWE also recommends the introduction of an optional market premium to encourage wind operators to market their power outside the FIT system. In January, just 375MW of wind plants were doing this, representing 2% of total installed wind capacity. Yet, as the amount of renewables-generated electricity grows, the importance of developing and gaining experience in methods of marketing power from variable generation, such as wind and solar, is increasingly acknowledged.

With installations failing to meet forecasts of 1.9GW and wind generation lower than in 2009 and 2008 despite more turbines in the ground, 2010 was a disappointing year for Germany's wind sector.

Total capacity reached 27.1GW in 2010, with nearly 1.5GW of new capacity commissioned - down 24% on the 1.9GW installed in 2009. The number of turbines turning in Germany reached 21,578, an increase of 725 after adjusting for repowering projects - 116 old turbines with a total 56MW were dismantled to be replaced with 80 turbines with a total 183MW.

Of the new installations, just 20MW were commissioned offshore, raising Germany's offshore total to 92MW.

Germany's flagship turbine producer, Enercon, accounted for 918MW, or well over half of the new capacity, last year. Vestas followed with a 15% share at 226.5MW and Repower Systems just topped the 10% mark with 160MW - all of them onshore, according to Germany's wind energy institute, Deutsches Windenergie-Institut.

The modest increase in installations was accompanied by a second year of poor wind levels. Just 37.5TWh of electricity was produced, compared with 38.6TWh in 2009 and 40.6TWh in 2008, according to provisional figures from statistics organisation Arbeitsgruppe Erneuerbare Energien-Statistik.

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