Clash over wind tariff in Germany -- Minister retains price pressure

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Germany's federal environment minister, Sigmar Gabriel, clashed head on with the country's national wind energy association last month over a forthcoming adjustment of the price rate for wind power, due to be made in a scheduled amendment to the renewable energy law. At issue is the annual decrease, stipulated in the law, of the so-called "feed-in" rate for wind power, which settles the long term power purchase price for new projects coming on line. Gabriel publicly referred to calls by the Bundesverband Windenergie (BWE) to suspend the decrease as an "off-track adventure" and "outside the market economy," during his appearance at the Husum Wind trade fair in northern Germany.

Instead of suspending the decrease requirement, the intention of which is to apply pressure on the wind turbine industry to steadily reduce prices, Gabriel proposes a halving of the rate of the decrease to 1% each year. "But we will do no more. We must retain an incentive" to improve efficiency, he stressed, also rejecting the notion of linking the feed-in rate to price indices or the inflation rate.

BWE is alarmed by Gabriel's stance and hopes to convince parliament of its case before the amendment is drawn up. Taking inflation into account, the wind industry has been struggling with an effective annual 3.5% payment decrease in recent years, argues BWE president Hermann Albers. On top of that, wind turbine prices have risen, just as the price of conventional power plant, because of steep increases in the cost of copper and steel, points out BWE's Ralf Bischof. Some plans for new coal power stations are being shelved due to a 30% increase in costs since the start of the year, he says.

The detrimental effect on the German wind sector of a purchase rate that falls each year coupled with rising technology prices is already apparent says BWE. A 25% drop in German wind installations during the first half of 2007 "has demonstrated a distinct loss in attractiveness of the home market." It is the wrong signal if the German government's goal of a 20% contribution of renewables to energy supply in 2020 is to be achieved, says Albers. The goal requires renewables to supply 35% of electricity needs, of which wind will need to supply 70%.

Need to speed up

To reach this target, incentives are required to ensure around 45 GW of onshore wind capacity and 10 GW offshore by 2020. "We need installations of about three gigawatts a year over the next few years, rising to four to five gigawatts a year over the 2011-2020 period, say Albers. This year only 1.7 GW of new wind capacity is expected. "We need to accelerate," Albers says.

While the BWE does not specifying a time period for suspension of the annual payment decrease, the state government of windy Schleswig-Holstein will launch an Upper House initiative at federal parliamentary level proposing the suspension apply from 2008-2016 -- and push for immediate implementation rather than waiting for the renewable energy act amendment to take effect at the start of 2009. Even without the annual payment decrease, inflation will still apply pressure on the industry to become more efficient, says Albers. And as conventional power prices rise, the divide between wind and conventional power "will continue to close."

Although at loggerheads on the legislated payment decrease, Gabriel and the wind lobby agree on other matters. Gabriel says wind energy feed-in management must not place wind at a disadvantage to conventional power stations. He also favours a higher incentive for replacing old turbines with fewer larger and more efficient machines and improving the power purchase conditions for offshore wind energy. The wind lobby hopes its demand for an increase in offshore payment to EUR 0.14/kWh, bringing Germany into line with international rates for offshore wind power, will emerge from the renewable energy law amendment.

To speed urgently needed transmission network expansion and overcome local opposition to new cable routes, Gabriel has teamed up with Christian Wulff, premier of Lower Saxony, on a proposal to be presented this month on adjusting state-level site permitting procedures to allow underground cables to be used near built-up areas.

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