Purchase price hike means wind power goes to waste -- Wind turbine owners in Germany hedge their bets and hold off on grid connection

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Wind power developers in Germany have held off connecting at least 200 MW of installed new wind power capacity-and may have delayed construction of many more megawatts-until January 1 this year when the country's amended renewable energy law came into force, raising the long term power purchase rate by EUR 0.01/kWh. All wind turbines that start feeding power to the grid in 2009 qualify for the increased rate, which utilities are legally required to pay wind power producers in Germany.

Early warnings last year that the government's approach to introducing the higher rate was likely to result in a large volume of wasted green energy in autumn 2008, leading to higher carbon emissions, went unheeded. "Significant investment will be deferred, wasting many kilowatt hours of green electricity," warned Hermann Albers from Germany's national wind association, the Bundesverband Windenergie (BWE), back in June.

A combined capacity of 1665 MW was installed in Germany last year, almost exactly the same as the 1667 MW in 2007. Data on turbine installations is collected for installed megawatt, when the crane leaves the site, rather than connected megawatt. "We believe owners of some 200 MW of the 1665 MW may have put off commissioning into 2009," says the BWE's Ralf Bischof.

The figure may be higher. Vattenfall Europe Transmission, the network operator covering all of eastern Germany, has so far only registered 221 MW of wind power connected to its grid in 2008, even though installations in the region reached 798 MW. Vattenfall cautions, however, that the full overview for 2008 will not be known for some months yet. In 2007, it connected 614 MW to its network, only 47 MW less than the total 661 MW reported by the industry as installed in its area that year.

Mixed views

The situation could have been much worse, says Johannes Schiel of the power engineering group of Germany's influential mechanical engineering association, the Verband Deutscher Maschinen und Anlagenbau (VDMA). "There are indications that some operators thought about delaying installations into 2009 but that most then reconsidered and stuck to their original schedule," he believes.

If the higher payment rate had been introduced in summer 2008, when the cornerstones of the new law were decided, the government would not have seen such inadvertent waste, says Schiel. He believes delaying the payment increase to the beginning of 2009 took some of the "drive" out of project development. Nevertheless, the new installations in 2008 were higher than the 1400-1600 MW that had been expected earlier in the year and demonstrate that the German market has stabilised, Schiel says.

Some commercial wind project developers insist it was unnecessary for owners to hold off connection of their turbines to secure a fair profit. Experienced veterans of the industry, Jüwi and WPD, chose not to postpone commissioning, saying their projects were economically viable at the 2008 payment rate. "We had few installations at the end of the year and to postpone projects from the autumn made no sense in view of agreed delivery dates, booked crane availability and other logistical factors," says Jüwi's Christian Hinsch. From WPD, Christian Schnibbe adds: "As the largest developer in Germany, we didn't want to open ourselves to accusations of profiteering." WPD installed 120 MW in 2008.

Weighing risk

Staying offline to boost profit entails risk. Germany's renewable energy law defines commissioning as the placing in service of a plant for the first time after a technical state of operational readiness has been reached. The suspicion shared by PricewaterhouseCoopers, among others, is that some wind plant operators achieved readiness at the end of 2008, but waited until 2009 to put them in service.

Wind farm operators enjoy a degree of latitude in interpreting the regulation, since the law does not precisely define "placing in service" nor "technical state of operational readiness." On the other hand, it does require grid network operators to connect renewable plant to the grid without delay.

"In legal terms, deciding when a turbine is commissioned is a controversial matter. The critical point seems to be once a connection to the network exists," says Bischof. "The BWE legal committee recommends that if a turbine is not to be considered commissioned, do not make a grid connection since otherwise the decision likely falls into the hands of the network operator."

Another issue is manufacturer warrantees on turbines. "If a turbine is left standing for weeks, guarantee issues arise," says Bischof. "It's not good for a turbine to stand unused for any length of time, especially at the beginning of service." Of particular concern is the risk of damage to gearbox bearings and generators. BWE believes that most of its members resisted the temptation of greater profit to avoid putting their machine warrantees at risk. "After consultation with their legal advisors, many project developers decided to commission their projects in 2008 as originally planned," says BWE's Dieter Fries.

The new rates pay EUR 0.092/kWh for at least five years, compared with EUR 0.0803/kWh in 2008, before being reduced in steps over the next 15 years, depending on the productivity of the site. With rates up and turbine prices falling, healthy market growth is now anticipated, in part due to projects held over from 2008. Schiel anticipates some 2 GW of new capacity in 2009 and perhaps even more in 2010, depending on whether the wind lobby is successful in its efforts to get stringent rules on turbine height and turbine distance to dwellings relaxed. Total installed wind power capacity in Germany was 23.9 GW at the end of last year, says BWE.

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