Germany mulls RE FIT cuts, caps

The German election will have a deep impact on renewables

The outline plan heralds months of horse-trading

German energy minister Sigmar Gabriel is considering steep cuts to support for onshore wind as well as a cap on its expansion, new hardship for PV, and the introduction of tenders for large renewable projects from 2017 onwards.

Although lacking in detail, the proposals – contained in outline reforms of Germany’s Renewable Energies Act (EEG) – were immediately criticised by the country’s renewables industry as well as state premiers from Gabriel’s own Social Democratic Party (SPD).

That means there is likely to be months of horse-trading before the reforms are brought before parliament in April. The plans will be discussed at a cabinet meeting of Germany’s recently-formed Coalition government on Wednesday and Thursday.

In the outline paper seen by Recharge, Gabriel suggests cuts to support for onshore wind from 2015 of between 10% and 20% from 2013 levels at strong-wind locations, to reduce what is perceived as “excessive support”.

Feed-in tariffs (FITs) for new onshore wind parks in Germany currently average close to €0.09 ($0.12) per kilowatt hour.

On top of that, the paper envisages a yearly cap of 2.5GW to new onshore wind capacity beyond which support will fall faster – similar to the annual limit already existing for PV that was introduced in 2012.

Torsten Albig, the SPD-state premier of the northern state of Schleswig-Holstein, criticised the limits to onshore wind as “macroeconomic nonsense. That renders the Energiewende unnecessarily expensive and creates considerable insecurity,” he said, according to the Süddeutsche Zeitung newspaper today.

Coastal Schleswig-Holstein has among the strongest winds in Germany and would be particularly hit by cuts in support to high-wind locations.

For PV, Gabriel proposes a 2.5GW cap, apparently stricter than the current 2.5GW-3.5GW government-set expansion corridor, after which degression gets steeper.

However, it is unclear from the outline whether the 2.5GW refers to a new upper cap, or to the lower end of the expansion corridor between 2.5GW-3.5GW that already exists.

The minister also wants to force owners of renewable installations above a certain size  that are used for self-consumption to also pay a surcharge currently only levied on electricity that is bought from the grid.

The measure may especially affect PV, as hundreds of thousands of Germans have solar installations on their roofs and companies increasingly install modules on their facilities to lower energy bills.

Carsten Körnig, general manager of the solar sector association BSW Solar, warns such a measure would impede businesses and private homes from participating in the Energiewende – Germany’s turnaround from nuclear to renewables – and asks the government to do the EEG reform without that measure.

“The Energiewende for everyone is in danger,” Körnig claimed.

“This would destroy the profitability of many new PV installations, scare off numerous investors, and make the solar market collapse further.”

The BSW today sent an open letter to Chancellor Angela Merkel, urging her to abstain from imposing the renewables surcharge on self-consumption.

Self-consumption is lowering energy costs and lessening the dependence on support mechanism, the BSW argues. Slapping the surcharge on it would actually increase the costs of the Energiewende, the letter says.

The outline for a reform also lines out a cap of Germany’s overall renewables expansion to 45% by 2025, and to 60% by 2035, as already suggested in the coalition contract between the SPD and Chancellor Angela Merkel’s Christian Democrats (CSU) and her Bavarian allies, the Christian Social Union (CSU).

It further introduces a new 6.5GW target for offshore wind for 2020. After that year, the government is considering arranging the further build-out of offshore wind via tenders, eying the construction of only two offshore plants per year between 2020 and 2030.

From 2017 on, Gabriel’s outline proposal foresees tenders for a total of 400MW in ground-based PV arrays a year, in a test that could be extended to other RE technologies later if successful.

The BEE criticised the idea, saying “experiences with tender models abroad have been mostly negative.”

The group also rejected the idea contained in the proposals to create capacity markets for fossil energies in the mid-term.

“That creates excess capacities that indirectly will increase the EEG-surcharge again,” the BEE’s Falk says.

If approved by the cabinet and both houses of parliament, the EEG reform would come into force on August 1, 2014, but additional cuts to RE support would only start next year to safeguard planning security.

Nevertheless, that is not enough time for projects already in the planning phase to adapt to the lower support levels and leads to insecurity in the sector, engineering industry association VDMA Power Systems claims.

The group also says it isn’t clear whether a cut to offshore wind FITs of €0.01 per kWh each year in 2018 and 2019 outlined in Gabriel’s proposal would affect companies opting for the so-called “compression model” of offshore FITs, or not.

The incoming government earlier had said that it will extend the model for two more years, until the end of 2019. Under the “compression model,” developers and operators can opt to receive a higher FIT of €0.19 per kWh during the first eight years of operation, helping to meet elevated upfront investment costs.

NOTE: Update adds further reaction

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