RENEWABLES COSTS

Vattenfall Explodes Offshore Wind Power Pricing

  • Why it matters

    Why it matters

    Germany is a leader in wind-power generation, but its place is under threat from a fixed-price subsidy system, which also imposes high prices on industry and consumers.

  • Facts

    Facts

    • German wind-power projects are still generally granted not on the basis of the lowest bid, but of a standard fixed price per kilowatt-hour.
    • In other countries, market-based tendering processes are the norm, which has sharply driven down the costs of wind-power generation.
    • Last week, Vattenfall won a major Danish offshore contract with an all-time low bid price of €0.0499 per kilowatt hour of electricity generated.
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    Audio

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Windenergie
Germany's position as leader in wind-power generation could be under threat. Source: Julian Stratenschulte / DPA

German business groups are increasingly vocal in opposing the country’s renewable energy structure, which heavily subsidizes suppliers, substantially pushing up the price of electricity for business and private consumers.

The latest focus of criticism of the country’s Renewable Energy Law, or EEG, is Kriegers Flak, a massive offshore wind field stretching across the Baltic Sea from Germany to Denmark and into Sweden. Projects in the area allows for direct comparison between prices in Germany and elsewhere. This week Vattenfall won a tender for the Danish part of the scheme, bidding just €0.0499 per kilowatt-hour (around $0.054), an all-time low price. But on the German side of the project — where prices are guaranteed and tendering still very limited — the government is locked into long-term contracts paying suppliers up to €0.194.

The German government has recognized this problem, and announced a new bidding system early this year. But the planned phase-in of market-based tendering will be slow. Industry bodies complain that this saddles German business with high energy prices for the foreseeable future.

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