ANALYSIS: Upsides for German RE

The coalition contract of what most probably will be Germany’s government for the next four years has some hardship in store for the renewables sector, and industry and green groups are complaining loudly.

But two things should not be overlooked. Firstly, it could have been far worse. And secondly, Chancellor Angela Merkel’s likely incoming government has given the rough outline of a policy that allows Germany’s Energiewende to plough ahead with reasonable stability, albeit at a slightly slower pace.

Yes, what has long been Europe’s biggest market for renewables for the first time will have a cap imposed on its expansion – the share of RE will be limited to 45% of electricity output by 2025.

But Merkel’s Christian Democrats (CDU) had pushed for a lower cap. And a jump from a green-power share of 25% now to 45% in little more than ten years isn’t all that bad.

And yes, the country’s 2020 offshore wind ambition is cut to 6.5GW, from the 10GW previously targeted. But the industry hadn’t really expected to be able to install more than 7GW anyway, and it also got the two-year extension of the current, favourable “compression model” for offshore feed-in tariffs (FITs) it had demanded.

Finally, yes, onshore FITs will be cut. But mostly at strong-wind coastal locations, where they may indeed have been a bit on the high side.

Merkel said the new government wants to grant privileges to good wind sites over “not-so-good locations", and the coalition contract hasn’t made it very clear down to which wind speeds it will still grant adequate support.

But according to the reading of Andreas von Bobart, GE’s general manager for renewable energy in Germany, there is a “fair chance that low wind sites will be promoted and still be feasible".

GE, other manufacturers and developers for some time now have been eying Germany’s inland moderate- and low-wind sites with increasing interest.

And it shouldn’t be forgotten that there was serious concern before the late September elections that the Free Democratic Party (FDP), Merkel’s previous coalition partner, could have prevailed in its campaign to scrap Germany’s successful FIT system altogether. Wisely, German voters kicked the FDP out of parliament.

If the Social Democrats in an early December inner-party referendum approve the coalition contract and Merkel gets her third term, her new government still has to clarify some points that cause nervousness in the industry, such as the exact level of FITs for new onshore wind parks.

It should also reform Germany’s distorted electricity wholesale market that currently renders coal and gas-fired power plants unviable, although they still are needed as back-up capacity for renewables. The country also needs to try harder to find storage solutions for renewables.

But all in all, the coalition contract gives the renewables industry the perspective of four more years of a stable and quite sizeable market at the heart of Europe, something missing for example in the US, where the industry still suffers from the stop-and-go effects of PTC-related hiccoughs.