IN-DEPTH: How has the attractiveness of wind power projects increased in Germany?
The new regulations give project developers more security with regards to the commercial viability of their projects, especially with regards to feed‐in contracts with the transmission grid operators.
Late last year, it was acknowledged that the amendment to the Renewable Energy Sources Act (EEG) provides the right framework conditions for continuing the success story of wind energy in Germany.
The new EEG advances the very successful German Federal Strategy of supporting renewables to the next level, optimising its effectiveness and efficiency while retaining its proven basic structure, says Sebastian Styrnol, Project Manager/Engineer, Projekt GmbH.
“The changes made to the EEG, especially the increases in the feed‐in tariffs have been made necessary by the rapid increase of prices for raw materials as well as high interest rates at time of the drafting of the amendment. The prices for raw materials of wind turbines like copper and steel, which makes up more than 80% of a wind turbine, have skyrocketed over the period since the inauguration of the 2004 amendment of the EEG. Copper prices had increased threefold from 2000 to 2007; steel prices doubled in the period from 2004 to 2007,” said Styrnol, who is scheduled to speak during European Wind Farm Site Selection Summit to be held on 1-2 April in Hamburg.
He added, according to an expert’s report presented by the German Federal Ministry in 2007, an economically viable operation of wind turbines would have only been possible in few select areas of Germany with sufficient wind resources. Based on the report these would have been sites with wind speeds well in excess of 6.3 m/s at 60 m hub height, which primarily is the case in the areas in the very north‐western part of Germany already being used extensively by wind power.
Styrnol elaborated on key items which have been changed with regards to wind power in particular and referred to following:
- First of all, the initial feed‐in tariff for new wind turbines has been increased from 7.87 ct/kWh (decreased value for 2009) to 9.20 ct/kWh. The yearly decrease of the feed‐in tariff has been reduced to 1.0 % (previously 2.0 %). The basic feed‐in tariff has been set at 5.02 ct/kWh.
- Secondly, the new EEG offers two bonuses: a repowering bonus and a bonus for improved grid compatibility.
・ The repowering bonus grants an additional 0.50 ct/kWh on top of the initial feed‐in tariff if the new wind turbine: 1. irrevocably replaces one or more old turbines, 2. is located in the same or a neighbouring community, 3. replaces a turbine installed at least 10 years ago and 4. at least doubles, but at most quin‐tuples the turbine capacity.
・ The bonus for improved grid compatibility grants an additional 0.50 ct/kWh for new turbines fulfilling certain requirements concerning grid compatibility. Moreover a bonus of 0.70 ct/kWh is granted for 5 years for old turbines if they are be‐ing refitted to fulfil the grid compatibility requirements prior to 31 December 2010.
[Both bonuses can be claimed at the same time; e.g. if I were to repower a turbine in 2009 with a new turbine fulfilling the criteria to be eligible for the bonus for improved grid compatibility, I would receive a feed‐in tariff of 10.20 ct/kWh initially (9.20 ct initial feed‐in tariff + 0.50 ct repowering bonus + 0.50 ct bonus for improved grid compatibility)].
Moreover, the new EEG offers a number of legal advancements clarifying the situation for wind farm operators comprising the relation between the transmission grid operator and the wind farm operator and concerning grid capacity management.
Furthermore, there are now more specific regulations concerning the obligation of transmission grid operators to increase and optimise the transmission grid capacity combined with the right of those willing to feed wind power into the grid to demand liquidated dam‐ages in case of neglect of duty on behalf of the transmission grid operator.
Also included now are more specific regulations concerning the direct sale of power to the market. The wind farm operator now may exit or enter the regime of the EEG on a monthly basis as well as sell only portions of the power directly and the rest under the EEG regime.
Finally, the new EEG increases the initial feed‐in tariff for offshore wind turbines to 13 ct/kWh and offers an additional “sprinter bonus” for offshore wind turbines going into operation prior to 31 December 2015. The feed‐in tariff is not subject to a reduction till 2015 after which the feed‐in tariff will decrease by an annual 5% down to the basic feed‐in tariff of 3.50 ct/kWh.
The new EEG primarily increases the attractiveness of wind power projects in Germany due to the increased feed‐in tariffs allowing for an average increase in IRR by about 4.5 %. Additionally, the new regulations give project developers more security with regards to the commercial viability of their projects, especially with regards to feed‐in contracts with the transmission grid operators.
Initial feed‐in tariff for wind turbines going into operation in 2009 is 9.20 ct/kWh
Providing info on German amended tariff system and the long‐term effect it will have on the onshore and offshore wind farms, Styrnol said the initial feed‐in tariff for wind turbines going into operation in 2009 is 9.20 ct/kWh; decreasing by 1% every year.
“The initial feed‐in tariff is being paid for at least five years after which the basic tariff is being paid for the remainder of the operational life time of the turbine. The period, in which the initial feed‐in tariff is being paid, extends by two months for every 0.75 % of the refer‐ence energy yield which the turbine energy yield is above the reference energy yield,” said Styrnol.
“Concerning offshore, the initial feed‐in tariff as per the new EEG is 13 ct/kWh. For all offshore wind farms going into operation prior to 01 January 2016, an additional “sprinter bonus” of 2 ct/kWh is being paid. The initial feed‐in tariff is being paid for at least 12 years, after which the basic tariff of 3.5 ct/kWh is being paid. For offshore wind farms installed in a coastal distance of at least 12 nautical miles and a water depth of at least 20 meters, the initial feed‐in tariff period extends by 0.5 months for every full nautical mile coastal distance in excess of 12 nautical miles as well as by 1.7 months for every additional full meter water depth. These clauses have been put into the law to support offshore wind farms with larger coastal distances and water depths as it is the case with many German offshore projects.”
“The amended feed‐in tariff system for offshore wind farm projects ensures commercial viability of the German offshore wind farms. With the previous 8.92 ct/kWh the investment return expec‐tations of financing institutions could not be met anymore, especially in the light of severely in‐creased prices for raw materials and energy. With 15 ct/kWh for the first offshore wind farms there will be a good commercial basis with which also to establish the logistical, technical and commercial foundation for a German offshore wind energy industry, whose synergy effects might support projects coming into operation at a later stage,” said Styrnol.
European Wind Farm Site Selection Summit
Sebastian Styrnol, Project Manager/Engineer, Projekt GmbH is scheduled to speak during European Wind Farm Site Selection Summit, which is scheduled to take place on 1-2 April in Hamburg this year.