German government proposal "real threat" to offshore wind

Ministries agree on measures to cut renewables support

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Offshore wind development in Germany could be seriously harmed under environment and economy ministers' proposals to reduce government support for renewables.

A joint paper issued yesterday aims to cut the cost of expanding renewable energy generation as part of the country's move towards the so-called Energiewende, that is the transformation of the electricity supply towards greater reliance on renewables.

The paper was released ahead of a meeting today with energy and environment ministers from the 16 federal Länder. The heads of Germany's Länder have recently expressed their support for offshore wind, despite its high cost.

Under the new proposals, all new renewable plant commissioned from 1st August 2013 would only be eligible for the market value of the electricity it generates, in the first five months after commissioning. This is around €0.0426/kWh at present - a mere 20% of the current feed-in tariff rate for offshore wind of €0.19/kWh paid for eight years. A tariff of €0.15/kWh for 12 years is also available, but the higher rate was introduced to satisfy the desire of investing banks to see a higher portion of debt paid back early on in a project's lifetime.

From the sixth month onwards, new plant larger than 150kW would have to participate in "direct marketing". This presumably refers to the "market premium" mechanism launched at the start of 2012 which is linked to, but separate from, the feed-in tariff system. The paper says the so-called "management premium" for covering trading costs - which currently makes the mechanism attractive - is to be abolished.

The current feed-in tariff rate is to be reduced by a one-off 4%, further lowering the financial rewards for new offshore wind projects. This move "would completely alter the economic basis for all offshore wind projects in construction or planning, and would have wide-reaching consequences for existing loan arrangements. It would effectively cause a stop to expansion," said Germany's wind energy association Bundesverband Windenergie.

The ministers are also proposing a freeze of the renewables levy at its 2013 level of €0.05277/kWh in 2014. It should only increase by an annual 2.5% after that.

The proposals are meant to take effect from 1st August 2013. The Upper House representing the 16 federal Länder, with a Social Democrat/Green Party majority, can block  progress until after federal elections in September 2013.


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