Downward pressure on German prices -- Amendments to law agreed

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Germany's premium rate of pay for wind power will fall by 36% over the next decade under the country's amended Renewable Energy Law, passed at the beginning of April. From EUR 0.0822/kWh for new wind plant today, the average rate drops to EUR 0.0787/kWh once the law comes into force, expected to be June 1. By 2015 it will have dropped to EUR 0.0505/kWh for new wind power stations, according to the Bundesverband Windenergie, the federal wind association.

Association director Peter Ahmels says the rate is now half what it was in the early 1990s. Wind's rapid cost decline, he says, is why the conventional energy sector has fought so hard against the renewables law. "It fears the speed of wind's innovation," says Ahmels. Energy spokesman for the Social Democrats, Marco Bülow, points out that the extra cost of renewable energy in Germany is less than the EUR 1 a month for a video recorder on standby, while the costs avoided by use of clean power save households about EUR 5 a month.

The fixed wind rates are being squeezed on several fronts. While allowing for inflation, the law cuts 2% each year off the tariff for new installations (table); under the current law the annual reduction is 1.5%. It also reduces by 12% the period for which wind plant are eligible for a higher tariff in the first years of operation. The shortened period replaces a previous proposal that would have excluded all low wind sites from a viable return on investment (Windpower Monthly, December 2003).


Conditions for offshore wind have been improved. A higher rate of EUR 0.091/kWh for offshore generation will be paid for at least 12 years, rather than the nine years stipulated today, with the period extended as projects go further from land and into deeper waters.

The offshore rates apply to all projects commissioned by the close of 2010. Under current law, offshore plant had to be commissioned by 2006 to qualify for similar rates. The annual 2% decrease in rates for new offshore plant does not now kick in until 2008.

Grid access

The new law also contains rules that clarify grid connection and renewables electricity uptake arrangements and include a voluntary mechanism for wind output management to aid the balancing of supply and demand. Wind continues to be classified as priority power and grid operators are required to upgrade the wires where necessary for connection of new wind plant, as long as the cost is presumed "economically reasonable." If connection is refused due to lack of further grid capacity, evidence to support the refusal must be provided within four weeks. Charges for connecting wind plant must become transparent, rules the law.

A new way of spreading the costs of balancing supply and demand in areas of high penetrations of wind power to all power consumers is included among the amendments. While network operators today only pass green power down the wires after the peaks and troughs of wind output have been "smoothed" into a "base-load band" through the use of balancing power, the new law says balancing mechanisms must be employed by all operators, not just those in areas of high wind penetration. This shifts the burden of providing balancing power more equitably across all network operators.

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