Germany - Market reform and end of nuclear aid steady growth

GERMANY: Stable growth in both onshore and offshore wind is expected in 2012 due to the support set out in Germany's renewable-energy law last year. The country could add another 2GW in 2012, of which 200MW is likely to be offshore, according to a cautious forecast by the German wind energy association, Bundesverband Windenergie.

A radical change of course in bringing wind power to market looks likely in 2012, causing alarm bells to ring within the renewable-energy sector. Many energy companies combine renewables capacity - mainly onshore wind - into portfolios for trading on the wholesale electricity markets.

In December, the country's main electricity exchange, Epex Spot, added the option of 15-minute trading slots to the existing one-hour periods. This gives welcome flexibility in taking account of forecasting inaccuracies for wind energy output when trading power.

Less welcome, however, was the introduction of a "market premium" system at the beginning of this year. The conservative/liberal government hopes this will encourage renewables operators to market their electricity directly rather than passing it to the four transmission system operators who are then responsible for marketing the power.

But this will add to the cost of renewables support since operators will not switch to the market premium system unless they can be relatively certain that the feed-in payment rate can at least be matched.

In January, a massive 12GW of onshore wind and 48MW of offshore wind were signed up to use the market premium option instead of the standard guaranteed feed-in tariff mechanism. Critics of the premium, including the Green Party, argue that it merely changes the method of bringing renewables to market and adds to consumer bills, without tackling the real issue of improving integration on to the system.

The unexpectedly strong interest suggests that the market premium mechanism generates windfall profits, according to a study the Green Party commissioned from the Institute for Future Energy Systems. The study recommended that a management premium to cover the trading costs should be substantially reduced.

Wind generation in 2011 gave the country a taste of what is to come as onshore and offshore output grows over the coming years. Onshore wind output reached 47TWh - or around 8% of total German electricity generation of 612TWh in 2011 - compared with 38TWh in 2010, according to German energy and water federation BDEW and the German working group for renewables statistics. In December alone, onshore wind generated 8TWh - equivalent to nearly half the output of hydro power for the whole year. January 2012 was a similarly windy month.

Although the networks remained stable, the transmission system operators reported that they had to curtail energy more frequently from both conventional power stations and wind farms to maintain network stability. While the highest voltage networks already have smart communications technology, energy regulator the Bundesnetzagentur recommended in January that the lower voltage networks - to which most wind farms are connected - should be equipped with intelligent controls to allow faster and more efficient reaction when transmission overloads are threatening.

Last year was good for German wind in other ways. Onshore wind is profiting from widespread new regional planning efforts to expand the areas specifically earmarked for wind development, with even the previously pro-nuclear southern states of Bavaria and Baden-Wurttemberg examining the potential for wind in a more positive light.

The change of heart is a consequence of the Fukushima nuclear disaster in Japan, followed by the closure of 8.4GW of old nuclear capacity in Germany and the government's changes to energy laws that set the country firmly on course to replace the fossil fuel and nuclear dominated energy supply with renewables.

German offshore wind is more problematic than onshore, still requiring almost twice as much support per kilowatt hour as wind generation on land. The sector is battling to overcome a range of problems from securing finance for projects, which can be up to around 400MW each, to delays in bringing offshore cable connections to shore.

Growth in 2011 was on a similar scale as in previous years. Around 1.98GW of wind was connected onshore and 30MW offshore, compared to 1.4GW onshore and 108MW offshore in 2010. Germany ended the year with a total capacity of just over 29GW.

The year saw a gradual continuation of repowering projects. Some 123MW from 170 turbines was replaced by 95 turbines with a capacity of 238MW. Progress has been slower than hoped due in part to the complications of local planning when the old turbines are sited in areas that are not earmarked for wind energy use and cannot be replaced at the same location.

Accompanying ownership wrangles can also be difficult to unravel since many old wind projects are owned by local farmers or groups of local individuals in so-called people's wind farms. Private individuals own around 50% of onshore wind.

Last year also saw a trend for higher-than-traditional installation rates in the less windy southern states. The south-western inland state of Rhineland-Palatinate clocked up 258MW of new capacity. Bavaria in the deep south also put in an unexpected performance, adding 165MW and also making it into the top five states in wind additions last year. This was due in part to turbines being installed on higher towers.