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In focus - Renewable Energy

Funding for the expansion of renewable energy sources: national and European auctions

Introduction

PV ground-mounted system; source: BMWi/Holger Vonderlind

© BMWi/Holger Vonderlind

Under the 2017 Renewable Energy Sources Act, the level of subsidies for electricity from renewable energy has since 1 January 2017 been determined via auctions rather than the previous system of funding rates prescribed by law. This is because renewables have matured and are now fit enough to compete on the market. The auctions ensure that renewable energy is expanded on a continuous, controlled and cost-efficient basis. The legislation aims to maintain the high level of market-player diversity that has characterised the energy transition. For this reason, the law gives the first-ever definition of a "citizens’ energy company" and provides for these to participate in the auctions on simplified terms. Small and medium-sized installations are exempted from the auctions.

Solar installations

In Germany, grid-connected photovoltaic installations contribute significantly to the electricity supply and receive funding under the Renewable Energy Sources Act. On 12 December 2016, the Federal Network Agency launched the first auction for solar installations under the new rules of the 2017 Renewable Energy Sources Act. According to these rules, the level of funding awarded to ground-mounted PV installations and large roof-top PV installations with an output exceeding 750 kilowatts (kW) is stipulated by competitive auction. Investors submitted their bids to the Federal Network Agency from 1 January to 1 February 2017. Solar installations with an output lower than 750 kW will remain entitled to funding at rates set by the state. For further information on competitive auctions, please click here.

The rules for the auctions draw on the experience gained with the pilot auctions for ground-mounted PV installations from 2015 and 2016.

To learn more about “Solar Eneregy”, visit the Economic Affairs Ministry's renewable energies information portal (in German).

Offshore wind energy

The aim of the Federal Government is to increase the installed capacity of offshore wind energy installations to a total of 15 gigawatts between 2021 and 2030. To achieve this goal in a cost-efficient way, the government uses auctions to establish the fees for offshore wind-powered installations. The basis for this is the Offshore Wind Energy Act (PDF, 246KB), which entered into force on 1 January 2017. At the same time, it ensures dovetailing between site planning, regional planning, approval of installations, funding under the Renewable Energy Sources Act, and grid connection, and this will improve the system and render it more cost-effective.

On 14 November 2016, the Federal Ministry for Economic Affairs and Energy concluded the hearing of the Länder and associations on the draft schedule of fees for offshore wind auctions. (StromBGebV, PDF: 50 KB) (in German).Where the author has given permission for publication of his comment, the comments have been published (in German) (comments of 9 November 2016, PDF: 142 KB). The ordinance entered into force on 4 January 2017. It serves to levy fees on bidders who take part in the offshore wind auctions of the Federal Network Agency during the transitional period of the Offshore Wind Energy Act.

The Federal Network Agency launched the first auction round for offshore wind energy installations on 30 January 2017. Bids could be submitted to the Federal Network Agency until 3 April 2017. The next deadline for bids is 1 April 2018.

To learn more about “Offshore Wind Energy”, visit the Economic Affairs Ministry's renewable energies information portal (in German).

Onshore wind-powered installations

The use of onshore wind energy is gaining in importance as one of the most cost-efficient sectors for the expansion of renewable energies. The further expansion of onshore wind energy is determined not only by the change in the funding available under the Renewable Energy Sources Act (EEG), but also by the limited areas available for the expansion of onshore wind energy. Repowering is a strategy to develop onshore wind energy: many old, smaller wind power plants can be replaced by modern, more powerful systems, especially in good locations. In principle, it is mandatory to conduct an auction for plants with an installed capacity of at least 750 kW. Pilot installations intended to test innovative technologies are exempt from this rule.

On 8 March 2017, the Federal Network Agency held the first auction for wind-powered installations under the new rules of the 2017 Renewable Energy Sources Act. Bids for onshore wind-powered installations could be submitted until 2 May 2017. The volume of this auctioning round is 800 MW. Further auctions are planned for 1 August and 1 November 2017, with 1,000 MW each.

Altogether, 256 bids for projects with a combined volume of 2,137 megawatts were submitted; the actual volume up for auction was for a capacity of 800 megawatts. The lowest bid to be accepted was for 5.25 cents / kWh, the highest was 5.78 cents / kWh. The average winning bid was 5.71 ct/kWh. Citizens’ energy initiatives received 93 per cent of all awards. Further auctions are planned for 1 August and 1 November 2017, with a total of 1,000 megawatts up for auction in each round.

To learn more about “Onshore Wind Energy”, visit the Economic Affairs Ministry's renewable energies information portal (in German).

Biomass Installations

The Bundesnetzagentur has launched an initial round of auctions for biomass installations. The deadline for bids was 1 September 2017. The combined capacity of the 33 bids submitted for the 122,446 kilowatts being auctioned was 40,912 kilowatts. Of these bids, 24 were successful. Their combined capacity is 27,551 kilowatts. Twenty of the successful bids were made for existing installations.

The process was open for new installations with a capacity of more than 150 kW. Unlike with other renewables technologies, the bidding process was also open for existing installations (including those with a capacity of less than 150 kW), provided that they were not eligible for more than eight years of funding under the previous regime. This has meant that there was a possibility for existing installations to receive follow-up funding for ten years. However, these installations only qualify if they meet the same flexibility requirements that apply for new installations.

The average electricity price at which bids were successful was 14.30 cents/kWh. It was 14.81 cents/kWh for new installations and 14.16 cents/kWh for existing installations.

Future rounds of auctions will be held on an annual basis, with 1 September being the deadline for bids.

To learn more about "Biomass", visit the Economic Affairs Ministry's renewable energies information portal (in German).

Detailed information on the auctions and outcomes can be found (in German) at: www.erneuerbare-energien.de.

Joint auctions for onshore wind and solar installations

In a pilot project, joint auctions for onshore wind and solar installations will be held in the years from 2018 to 2020. As a basis for this, the Federal Cabinet adopted a draft ordinance on the introduction of auctions for CHP plants and for the introduction of joint auctions for onshore wind and solar installations on 17 May 2017.

The aim of the joint auctions is to test the way in which the cross-technology auctions work, look at their effects, and evaluate final funding awards, particularly compared to those granted as part of technology-specific auctions. The running of a pilot project does not necessarily mean that cross-technology auctions will be held beyond 2020.The total volume of installed capacity being auctioned in joint auctions is 400 megawatts per year. This is divided up equally into two rounds of bidding, with bid deadlines of 1 April and 1 November.

On 11 April 2017, the Federal Ministry for Economic Affairs and Energy launched the hearing of the Länder and associations regarding the draft regulation on the joint auctions for onshore wind and solar installations (PDF: 359 KB). Comments could be submitted by 24 April 2017 and will be published on the website of the Federal Ministry for Economic Affairs and Energy with the author’s permission.

Detailed information on the joint auctions (in German) can be found here (PDF: 67 KB).

In order to anchor the energy transition internationally, some of the auctions under the 2017 Renewable Energy Sources Act are also opened for installations located in other Member States. From 2017, 5% of new renewables capacity to be installed each year are to be opened up to installations in other European Member States (around 300 megawatts per year). The cross-border auctions will take place in addition to the national auctions.

The legal basis for the pilot scheme was the Cross-Border Renewable Energy Ordinance (GEEV), which previously only applied to solar installations and which is now to be extended to cross-border auctions for onshore wind energy installations. Also, there is an additional model to shape the sliding market premium in cross-border auctions. The Federal Ministry for Economic Affairs and Energy has therefore launched a hearing of the Länder and associations on the revision of the ordinance. Comments could be submitted until Monday, 22 May 2017. Provided that the authors have agreed to publication, their comments are available (in German) here. Further information on the revision (in German) can be found in the accompanying document.

The revision of the ordinance implements the requirements imposed by the European Commission in the state aid approval procedure for the 2017 Renewable Energy Sources Act. The aim of the cross-border auctions is greater regional cooperation, particularly with Germany’s “electricity neighbours”. The cooperation should clearly signal that Germany’s energy transition needs to be rooted within a European approach.

Prerequisites

Section 5 (3) of the 2017 Renewable Energy Sources Act set out three conditions for funding renewable electricity from other countries:

  • Germany and its partner country must conclude an agreement under international law within the meaning of the cooperation mechanisms laid down in the Renewable Energy Directive.
  • The cooperation is based on the principle of reciprocity. This means that when Germany opens up its auctions to foreign bidders, the partner country will also open up its auctions to German bidders.
  • The electricity from installations that have been awarded funding must lead to a tangible impact on the German electricity market ("actual import" of electricity).

Pilot cooperation with Denmark

In the fourth quarter of 2016, Denmark and Germany launched pilot auctions for ground-mounted photovoltaic (PV) installations. PV installations located both in Germany and in Denmark were able to submit bids in this first European cross-border auction. In Germany, the Federal Network Agency carried out the open auction for a total of 50 megawatts (MW). This encountered considerable interest in both countries. Five projects located in Denmark won after an intensive competition process.

The Danish Energy Agency announced the result of the Danish auction in December 2016. A total of 20 MW was auctioned; installations located in Germany could bid for funding for 2.4 MW. However, since no bids were made for installations in Germany, all contracts were awarded to installations in Denmark.

Further cross-border auctions are planned subject to a successful conclusion of the negotiations with the partner country. Also, these cross-border auctions are to be extended to include the possibility to cooperate on onshore wind energy projects. A relevant amendment to the Cross-border Renewable Energy Ordinance is planned for the first half of 2017.

Further information

  • 19/05/2017 - Press release - Conventional Energy Sources

    Press release: State Secretary Baake: “Citizens’ energy” wins first onshore wind auction

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  • 15/05/2017 - Press release - Renewable Energy

    Press release: State Secretary Baake: "Excellent outcomes on ground-mounted PV installations – renewables auctions are proving extremely successful"

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  • 28/04/2016 - Press release - European and International Energy Policy

    Press release: Economic Affairs Ministry launches hearing of Länder and associations on the Cross-Border Renewable Energy Ordinance

    Open detail view
  • 21/03/2016 - Press release - Renewable Energy

    Press release: Federal Ministry for Economic Affairs and Energy presents its key points on opening up pilot auctions for ground-mounted PV installations to bidders from other European Member States

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