East German developer UKA Umweltgerechte Kraftanlagen won 30MW in self-owned projects in Germany’s 1GW second onshore wind auction in August, and another 660MW as service provider for wind projects won by so-called citizens' energy groups. The latter are exempt from providing a noise-emissions permit before bidding and have additional time to build their projects.

UKA managing director Gernot Gauglitz tells Bernd Radowitz why the company has changed its business model to include developing projects by grass-roots groups, easing industry fears that many of the community wind farms may never get a permit or not be built.

How do you support these citizens’ energy projects?

For citizens’ energy, we are the partner of the operating company. For them we are service provider, carry out the licensing process and later the installation of the wind park.

There is concern in the wind industry that the pending permits for citizens’ energy could become a problem and that some may not be granted. Is that a real danger?

Of course there are no guarantees that you will always get a permit in each licensing process. But it would be economically senseless to win a bid, provide bid collateral and then just let it expire. Therefore we assume that we will get a permit for the projects for which we won a bid.

The legislator was aware of this risk and has explicitly allowed that if something goes wrong during the licensing procedure, another project can be built at a different location in the same district.

We looked at it from that point of view, and expect that almost a complete 100% of our projects will be built within the deadline foreseen by the legislator.

Why do you think there are these concerns among wind OEMs?

The interests of politics and the wind sector diverge. Politics has laid down two things – "we want a volume cap" and "we want prices to fall strongly". Both are connected, of course. In our sector, we rather don’t want a volume cap and we want adequate prices.

This natural conflict has come to light now – as, by the way, it has worldwide in tendering systems where there is a tight offer – that prices fall, and that only those competitors who have planned with the most economical machine and the best sites can build their projects.

De facto in Germany is happening what is standard globally. All over the world projects with the best wind, the cheapest grid access and the most economical wind turbine prevail.

That had not been the case in Germany so far. Instead almost every wind turbine – no matter how economical or not – was erected. We now have a shift in paradigm.

You have won a large volume at the German tender. How do you plan to develop the projects from the onshore auction and build them on time?

UKA currently is still only doing business in the German market. Since mid-2016 we have also had a US unit.

But 90% of our staff is exclusively working for the German wind market. Many of the projects that we have won now are projects that had been in development by us for years, and for which in part the licensing process is well advanced. ... A licensing process in general takes about a year, sometimes also half a year, in the case where the licensing process has already been initiated.

If you start an entire licensing process from scratch, it takes between 12 and 16 months. Considering these timelines, UKA has about three years to receive all permits – as you see there is enough buffer – and then another year to erect the turbines.

So it should be no problem to build the projects within the four-year-deadline and commission them.

How does your cooperation with citizens’ energy work?

When you develop a project, you usually need land owners to put it into practice. You need sites, you need agricultural cooperatives for access roads. So you have a large number of involved parties with an interest that the project gets built.

Of those, several have come to us and asked ‘what do you think about developing projects jointly in the future? Obviously, it is only citizens’ cooperatives that win bids’.

So we replied: ‘we have thought about it, and this is the concept we can offer you. Do you want to put it into practice together?’

It has been noted that in the first auction [in May] citizens’ cooperatives almost completely prevailed. Logically you then had to consider whether you have a realistic chance against the citizens wind cooperatives if bidding with [projects with] a normal permit, given the diverging conditions of competition.

For ourselves, we have answered the question by saying: ‘no, with a normal permit you only have a chance with very, very few good locations.’ Therefore we told ourselves that we need to face the market as it is, and add this [providing services for citizens’ energy] to our range of services.

So far, we have never worked for third parties, we have only agreed to start being a service provider since the second auction round.

So you hadn’t won anything in the first auction in May?

We bid with more than 100MW in the first round, but didn’t win. After analysing the results, we drew the conclusion that we need to partner with citizens’ energy cooperatives or have no chance in the competition.

UKA has received the highest volume of winning bids [as service provider for citizens’ energy] in the second auction. Apparently, we were the most pessimistic as far as [energy] prices are concerned and have calculated accordingly.

The reason we have calculated with these kinds of prices was our US experience during the past year. We have observed the auction results and price development there, and came to the conclusion that the German market will [develop] in a similar way to the US.