German parliament passes cable liability law

New offshore levy adds to consumer energy bills

Germany’s parliament today passed a law establishing new liability arrangements for marine cables linking offshore wind farms to the onshore network. The new rules are designed to ensure that recent, damaging delays to the development of Germany’s offshore wind programme are overcome quickly.

The rules govern both the situation when a cable is not installed punctually, leaving a new offshore project stranded, and allocation of liability if an export cable suffers unexpected failure.

German transmission system operator (TSO) for the North Sea region, TenneT, is particularly pleased that once the law takes effect its liability in cases of minor negligence will amount to just €17.5m. Sums as high as €100m were earlier mooted.

TenneT expects the new rules to allow it to attract much-needed new investment. "The new arrangement will hopefully reduce the hurdle for investor capital in offshore connections," commented TenneT board member, Lex Hartman.

For German electricity consumers the new law, which has yet to be rubberstamped by the Upper House, means a 1% increase in electricity prices via a new offshore wind charge of €0.0025/kWh.

The overall annual cost of the offshore wind levy will amount to considerably more than €650m, but Germany's federal network agency, Bundesnetzagentur, is concerned it is set too low, since damages of €1.6bn are due to arise by 2014 resulting from already-delayed cable connections.

The opposition Green Party argues that instead of creating a new consumer levy, the federal government should shoulder the risk via its support bank, KfW, in an arrangement that would allow KfW to set off any damages by taking shares in relevant TSOs.

The offshore levy comes on top of a number of other consumer charges, including the renewables levy, the cogeneration levy supporting combined heat and power generation, and the network usage levy to cover sums not paid by parts of German industry that are exempt from network usage fees.

For a household using around 3,500 kWh per year, the offshore wind levy amounts to €8.75/per year. Industrial consumers with annual consumption exceeding 1GWh will pay lower levy rates beyond the 1GWh.

In a tilt at other German offshore wind developers, particularly major energy companies, mid-sized wind developer Windreich has questioned the need for the offshore levy. It claims it is the only offshore developer not burdening the public with offshore levy costs due to late completion of transmission cables. "There is growing resistance to further price increases, and Windreich sees itself clearly positioned on the side of consumers," said the company.

Halts to offshore wind projects of the sort announced by other offshore players, such as Dong, RWE and EnBW, are negative for the sector as a whole, argues Willi Balz, Windreich's owner. "The projects that Windreich has developed, Global Tech 1, Deutsche Bucht and MEG1, are running precisely to plan, also with respect to cable links to the onshore network. Windreich has proved once more that with precise and forward-looking planning offshore wind parks can be installed even in deep waters far from the coast in areas with the best wind conditions without additional cost to the consumer."

The new law also requires creation of a federal offshore network plan, to be updated annually, also alters allocation of offshore wind operators’ rights to cable connections to shore.