Analysis: German renewables law 'could have been worse'

GERMANY: Months of protests accompanied by a stream of suggestions for improvements from the German wind and renewables sector has resulted in a draft renewables law that could have been worse.

Protests have accompanied the passage of the renewables law
Protests have accompanied the passage of the renewables law

At least that was the opinion of some German wind figures. "Intelligence has won over lobbying", commented Hans-Dieter Kettwig, managing director of major German turbine builder Enercon on 10 April. "Wind energy expansion can continue, even if a faster pace of growth could have been achieved," said Alexander Koffka of wind developer ABO Wind.

The draft law rubberstamped by the cabinet in early April contains last-minute changes that have defused several critical points present in earlier versions. Its progress through the lower and upper houses of parliament over the coming months towards planned implementation on 1 August may encompass further tweaking of details.

As matters stand, the onshore wind support rate for new projects  is to be cut from roughly EUR 0.09/kWh now — not including the so-called management premium to cover costs of electricity trading (EUR 0.005/kWh in 2014) — to EUR 0.089/kWh including the management premium (which drops to EUR 0.004/kWh in 2015).

This rate applies for the first five years of the 20-year support period, after that either falling immediately to EUR 0.0495/kWh for the remaining 15 years for turbines at very good wind sites or dropping later depending on how the turbine's output compares with that of a "reference" turbine. The arrangements have been made less harsh than originally planned to allow economic wind farm operation at inland sites, although they still tend to favour strong wind sites in the windy north, according to experts.

The wind sector is continually challenged as onshore rates will fall by 0.4% every quarter for new plants, which is slightly more than the current 1.5% reduction per year. The decrease is to be stepped up or reduced, after a delay of five months, if installations in a complete 12 month period exceed or drop below the target corridor of 2.4-2.5GW per year. Assuming the law is implemented in August, the speeded decrease (or increase) would kick in on 1 January 2016 at the earliest.

Offshore wind is to receive either EUR 0.0194/kWh for the first eight years (compressed model) or EUR 0.154/kWh (standard model) for the first 12 years — the management premium of Eur 0.004 being priced in. The periods are extended depending on aspects such as distance to shore and water depth before dropping to a basic rate of EUR 0.039/kWh.

The compressed model rate will drop by EUR 0.01/kWh in 2018 befotre the model expires at end-2019. The standard rate falls by only EUR 0.005/kWh in 2018, to ensure this currently less popular model is not made even less attractive. This model will, however, then have a EUR 0.01/kWh decrease in 2020 followed by a EUR 0.005/kWh decrease per year in 2021 and later years.

All new onshore and offshore turbines installed from August 2014 will only be allowed to use the "direct marketing" system, under which operators either sell the wind-generated electricity into the wholesale market themselves or clinch power purchase agreements with direct marketing aggregators that do the job for them. If the "direct marketer" goes out of business for any reason, the electricity is then taken by a transmission system operator to market, but for only 80% of the standard direct marketing market premium support being paid.

Operators can, however, market their power without support, which could be attractive for " green" power products where the "greenness" has a market value.

Wind farms commissioned before 1 August 2014 can choose between the feed-in tariff and direct marketing, with the management premium added, on condition that they have been equipped to allow remote control of output by the beginning of 2015. Older wind farms may be prompted to return to the feed-in tariff system from direct marketing because this additional investment may not make economic sense.

Concern in the wind sector is perhaps strongest over the plan that by 2017 at the latest the amount  of financial support will be established by competitive tendering procedures. "This is too early, the ministries have no clear concept," warned Sylvia Pilarsky-Grosch, outgoing German wind energy association president. She handed the baton to Hermann Albers, a previous president from 2007 to 2013 who was voted into office in April.

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