Energy reform in Germany is chancellor Angela Merkel’s flagship policy, but is the pace of the country’s green revolution too fast for the public? Simon Jones investigates
The German government has passed legislation designed to end a deadlock between plant investors and grid operators over huge delays in connecting offshore windfarms to the grid. The legal uncertainty about offshore wind liability could have stranded major investments at sea and posed a further threat to chancellor Angela Merkel’s energy revolution – already hit by immense technical problems and spiralling costs.
Under the measure, windfarm operators that suffer a connection delay of more than 11 days will be able to claim up to 90 per cent of the feed-in tariff they would have received under Germany’s renewable energy law (or EEG). German consumers face higher bills to fund this compensation, which will be paid by transmission system operators. The average power customer looks set to pay another ¤50 (£30) next year on top of the extra ¤150 a year they already have to pay under the EEG.
Fair distribution of costs
End-user liability has been capped at ¤0.25/kWh after protests – including an official complaint from the ministry of consumer protection – about a more open-ended commitment in earlier drafts. “The new rules ensure there is a fair distribution of the cost burden,” says economics minister Philipp Roesler. Critics claim that industry and other heavy energy users have been shielded from the Bill’s financial impact, just as they were with the EEG. German supplier Vattenfall Europe has warned that green energy targets will drive power bills up 30 per cent by 2020.
Germany’s four transmission operators will have to submit an annual offshore grid development plan to regulator BNetzA. Last November, Tennet sparked the current crisis when it informed the economics ministry that it could not finance grid investments of ¤15 billion needed to harvest Baltic and North Sea wind energy.
The Dutch operator owns most of the network across north Germany. It is crucial that the former Eon grid be expanded if the government’s ambitious 25GW target for installed offshore wind capacity by 2030 is to be met. Instead, Tennet said it was unable to go beyond the already agreed ¤6 billion of spending over the next decade for 5GW of connections.
The Dutch government has ruled out putting more public money into Tennet. It wants the transmission company to find more private funding for specific projects – a demand repeated by the Dutch economics minister at a meeting with Roesler last month.
Roesler sees financial support for the Dutch company from German state development bank KfW as “very much a last resort”. He also opposes calls for a state-owned offshore transmission firm to co-ordinate future connection of Baltic and North Sea windfarms. Instead, he predicts the current Bill will foster further private sector partnership with the Dutch firm.
With liability now shifted on to end-users, Tennet also expects to sign a further deal shortly with Mitsubushi. However, some potential private investors face a separate regulatory headache from European Union unbundling laws that block investments in both generation and grid assets.
Tennet still faces component shortages for the high-voltage direct current infrastructure used to connect North Sea windfarms. The North Sea is Germany’s major source of offshore wind, but the distance of most of the plants from the shore rules out using alternating current connections. There are also production bottlenecks for the huge amounts of cabling needed to connect plants up to 200km offshore. Strict environmental safeguards have also slowed work and increased costs. RWE abandoned an approved site off Helgoland when it was revealed to be a habitat for loons.
Stopgap measure
Environment minister Peter Altmaier insists that public financial constraints will require much greater use of private funding and “innovative financial instruments” as Germany’s energy revolution goes forward. He concedes that the current Bill is only a stopgap before there are more fundamental changes to Germany’s EEG. With customer bills (already the second highest in Europe) rising faster than expected under generous EEG subsidies, Altmaier aims to slow Germany’s green revolution to keep the public onside. However, any reform is unlikely before elections due in autumn 2013.
Energy reform is chancellor Merkel’s flagship policy. Altmaier calls it “the greatest identity-shaping project of a generation, comparable in importance to the country’s reunification”. With work due to start on half a dozen major offshore projects this year, he insists that “the energy about-turn is irreversible”. Merkel must hope that these adjustments to her hastily-announced windpower offensive, expected to become law later this year, can avert a costly fiasco without losing her the election.
This article first appeared in Utility Week’s print edition of 14th September 2012.
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