ENERGY SHIFT

Death by 1,000 Subsidy Cuts

wind
Ill winds are blowing through the renewable sector:
  • Why it matters

    Why it matters

    Small renewable energy producers, such as wind collectives, play a key role in Germany’s transition to green power, and supply much of the country’s electricity.

  • Facts

    Facts

    • Under Germany’s energy transition plans, it wants 80% of electricity to be supplied from renewable sources by 2050.
    • Total subsidies for renewable energy recently reached €25.7 billion ($28 billion) per year.
    • About 12 percent of electricity consumption in Germany is supplied by onshore wind-power facilities.
  • Audio

    Audio

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For months, Hermann Albers has exhorted and even begged the German government to give up planned changes in the way it subsidizes wind energy.

As head of the German Wind Energy Association, Mr. Albers fears if current rules are changed, energy from onshore wind farms — the least expensive form of renewable energy — will be severely compromised.

For now the wind-power industry is actually flourishing. Windmills with an overall output of 3,540 megawatts were put into operation last year, according to the market-research company Deutsche Windgard. The only year with more new installations was 2014.

On German coastlines and inland, almost 26,000 windmills provide some 20 million households with green energy. About 12 percent of gross electricity consumption in Germany is generated by onshore wind-power facilities. The industry employs more than 130,000 and had revenues of €11.8 billion ($12.9 billion) in 2014.

Total subsidies for renewable energy recently reached €25.7 billion per year.

Since Germany embarked on its ambitious transition to renewable energies, the wind-power business has been a self-priming pump. To help the transition, every kilowatt-hour of wind energy was subsidized by the state. Taxpayers now pay about 8.9 cents per kilowatt-hour, guaranteed for 20 years.

But costs have ballooned: Total subsidies for renewable energy recently reached €25.7 billion per year.

So the federal economics ministry is working to revise the fixed payment system for green electricity. Sigmar Gabriel, the economics minister, prescribes “more market and less state” support.

Under one proposal, subsidies for renewable energies would not be specified by law from 2017. Instead they would be determined by competitive bidding: Plant operators that offered to take lower subsidies per kilowatt-hour would be awarded contracts.

Mr. Gabriel is also considering capping the construction of onshore wind-power plants at a maximum of 2,500 megawatts per year.

Mr. Albers, the wind industry lobbyist, says that the target is far too low, and that smaller wind-energy providers would be threatened. He adds that constant changes to the Renewable Energies Law are making it difficult for project planners to evaluate risks.

“The debate about possible corridors among calls for bids is exacerbating this situation,” he said.

 

Wind Energy in Germany-01

 

Up to now, Mr. Albers said Germany’s energy transition has mostly been pushed forward by privately owned wind farms, municipalities, energy cooperatives and small- and mid-sized companies. Without them, he said, the market could end up dominated by a few big companies. Under the proposed changes, energy providers worth billions and public utility companies would have a clear advantage because of their size.

Mr. Albers’ concerns are not unfounded, said Dirk Briese, managing director of the market-research company Windresearch. He expects 2016 to be another good year for the German wind-power industry, primarily because companies are hurrying “to complete their projects by December 31 in order to profit from the old conditions for subsidies.”

Starting in 2017, Mr. Briese expects a downturn in construction of new facilities. The planned calls for bidding will be expensive, he said, and “increased competition will push smaller protagonists out of the market.”

If that happens, the German government would clearly miss one of its fundamental targets in the energy transition — preserving a market with many players.

 

Franz Hubik covers renewable energy for Handelsblatt. To contact the author: hubik@handelsblatt.com

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