Germany: Government seeks industry guidance on auctions

"Please tell us your views, we need your expertise", Uwe Beckmayer, parliamentary state secretary of the German federal economy ministry, appealed to the wind industry gathered at the opening of the Husum Wind 2015 event in September. He was calling for input to the ongoing consultation on competitive tendering to set the support rate for wind energy from 2017. Beckmayer stressed the importance of designing auction rules that will maintain the current diversity of players in the German wind sector.

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Even before auctioning begins, the wind sector faces a challenge it will not be able to overcome unless the government takes action, warned Hermann Albers, president of German wind-energy association BWE.

Onshore wind support will fall by 4.8% in 2016 and again in 2017 through the new rules introduced in the Renewables Energy Act 2014. Combined with other changes the act introduces, onshore wind may have to cope with a 10-15% fall in support in 2016 and an overall 30% drop in support from 2017, Albers warned. "It's not possible to cope with such a drastic reduction in onshore wind support in such a short period," he stressed.

The potential impact of the upcoming auction mechanism was widely discussed during the September event in Germany. Current proposals would rule out most wind projects in southern Germany from ever winning an auction, said wind developer Juwi. Yet a broad geographical spread of onshore wind energy would reduce the need for both balancing power - used to ensure stable operation of the transmission networks - and electricity storage, said Fred Jung, board director at the company.

Others fear the government may lower the auction volume in the early years of the new mechanism to compensate for exceeding the government's target growth rate of roughly 2.5GW per year in 2015 and 2016.

Some 3.5GW is expected for 2015, 2.7GW in 2016 and 2.3GW in 2017 in an onshore "reference" scenario presented by market-research specialist Wind:Research. But others expect up to 4GW in both 2015 and 2016, as projects are pulled forward for installation before auctions are introduced.

Lender's warnings

The annual auction volume should not fall below a net 2.5GW a year to ensure the supply chain is not endangered, stressed the Bremer Landesbank just before the Husum trade fair. The bank claims to lead the field in financing German onshore wind projects, with a market share of 15% in the first half of 2015.

The bank is also concerned about the government's reluctance to consider exempting wind farms of up to six turbines from the auction rules, although this is an option acceptable under EU guidelines on energy and environment state aid.

"The auction rules will increase financial risks for small wind parks - large investors threaten to dominate the market," the bank warned. It called on the government "not to make the same mistakes as in the photovoltaic and biomass sectors and almost completely eliminate all investment incentives".

Ironically, medium-sized wind developers such as Juwi and Energiekontor see opportunities in assisting small wind developers to manage the auction needs.

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