Germany

Germany

Germany prepares to change fixed tariffs wind law

Germany's federal economy ministry expects to have the blueprint for an amended renewable energy feed-in law ready before the end of the year. It appears to be heading for a fixed tariff for wind power to be paid by the utilities, but only for a limited period of time, or for a limited amount of electricity. By putting the law onto a legislative fast track for change, the German government is responding to pressure from utilities and from the European Commission for a speedy reform of the Electricity Feed Law, which sets Germany's Renewable Energy Feed-In Tariff (REFIT). The REFIT forms the basis of the largest market in the world for wind power. Germany is expected to add 1000 MW of new wind capacity this year.

Discussions on whether Germany, like the Netherlands and Denmark, should rule for a minimum percentage of renewables in the supply mix, achievable through trade in renewable energy certificates, have been postponed by the ministry. Neither will it keep to its original schedule of first producing a report on the workings of the REFIT before amending the law.

Germany is under pressure from the European Commission to change the REFIT structure because the fixed price system is blocking the way for an internal market for renewables in Europe. Such a market, the aim of which is to greatly increase the use of renewables by allowing cross border trade of green electricity, would dovetail with the rules of Europe's Internal Energy Market, to which all countries must comply. Announcing the German government's intentions at last month's wind energy trade fair at Husum in northern Germany (page 35), the economy ministry's Alfred Feuerborn stressed that both the Berlin government and the Commission agree that renewables must continue to grow and any changes to the law will be designed to meet this aim.

There are two major areas of the current system up for change, says Feuerborn. The first is an amendment of the premium payment system under which the price paid for wind power each year is set at 90% of the average price paid by German consumers for their electricity two years previously. In the future, the price paid for wind power may no longer be linked to the consumer price of electricity. A fixed price can still be considered, says Feuerborn, but this will only be for a limited volume of power.

The second proposal for change is to do with the 5% limit on the amount of wind power which a utility is obliged to buy into its supply portfolio under the REFIT law. A regional utility reaching the limit can pass the obligation onto its parent, which again can refuse to buy wind power once its 5% limit is reached. Feuerborn indicates that at least the second 5% limit will be abolished and the obligation for paying the premium REFIT payments will be spread across all companies operating the high voltage grid systems, and not just the utilities which have wind plant in their supply regions. "This is more complicated than it may seem," he notes.

Feuerborn adds that the proposals at European level for a "quota system," under which the electricity supply mix must include a fixed quota of renewables "is a very attractive approach," and should not be dismissed as a hidden ceiling for renewables. "But for us, we haven't got that far. We do, however, need to amend the REFIT, and in view of the requirement for speed, we see no alternative but to do this first."

Wind lobby proposal

The wind lobby agrees that the current system for fixing price is now outdated. With average power prices in Germany falling rapidly as a result of electricity market liberalisation, wind plant operators are facing a sharp fall in income. The German wind industry association, Bundesverband Windenergie (BWE), is proposing either a price of DEM 0.19/kWh, or a tariff corresponding to 75% of the average domestic price of power, both of these for a limited amount of power or for a period of at least five years. Beyond that, the price proposed is DEM 0.14/kWh or 55% of the average price of domestic power until the turbine is decommissioned. The price of power for domestic consumption is higher than the overall average price of power in Germany.

The amount of power eligible for the higher rate would be twelve times the annual energy output of a turbine type at a particular reference location, says BWE. As an example it quotes a site with wind speeds of 5 m/s at a height of 30 metres. The annual energy output would be calculated from the turbine's capacity curve, measured according to international standards. Turbines at sites with lower wind speeds would thus receive the higher rate over a longer period than those at better wind speed sites.

A special arrangement is suggested for turbines in operation before the REFIT amendment. These would receive the higher payment for the agreed amount of power, plus for a further period equal to half the time between commissioning date and the date the law comes into force. Offshore wind plant should receive the higher rate of payment for ten years, the BWE suggests.

The ministry will discuss this and other proposals, says Feuerborn, adding that the aim is for economic operation of wind turbines.

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