Germany Puts Brake on Renewable Energy Expansion

Germany Puts Brake on Renewable Energy ExpansionQuick rise of renewables resulted in power glut that hit conventional generators

FRANKFURT—German lawmakers on Friday voted to limit the expansion of renewable power, in response to concerns that the country’s efforts to promote green energy has resulted in too much too soon.

A new law will require generators of renewable energy to submit bids on a restricted number of projects as of 2017, replacing a system that allowed an unlimited number of projects to go forward at guaranteed prices, called feed-in tariffs. Under the new system, prices will be proposed by bidders.

“The shift from feed-in tariffs to tenders is a trend we are seeing across Europe,” Giles Dickson, chief executive of the European Wind Energy Association said.

The move puts a brake on Germany’s aggressive drive to shift to renewables from conventional and nuclear energy, which gained speed after Japan’s Fukushima nuclear accident in 2011. The quick rise of renewables has resulted in a power glut that drastically cut wholesale electricity prices and hit conventional generators hard, since renewables are given priority on Germany’s power grids.

The new capacity limits are aimed at slowing the tide of renewable energy flooding the market, giving the expansion of grid infrastructure time to catch up.

“It’s a paradigm shift; whoever makes the best offer will be awarded the project,” Michael Fuchs, a lawmaker in Chancellor Angela Merkel’s Christian Democratic Union party said ahead of the vote.

Annual additions to onshore wind capacity will be capped at 2,800 megawatts, including the replacement of existing turbines. Offshore wind auctions will fluctuate from year to year, and expansion in solar energy and biogas capacity will also be limited.

Germany accounted for 44% of all wind installations last year, installing a total of 6,000 megawatts.

“Lawmakers must find a way to ensure that power generated in northern Germany from renewables such as onshore and offshore wind can be transferred to the power-hungry south,” Mr. Dickson said.

Addressing parliament on Friday, economics and energy minister Sigmar Gabriel told lawmakers that renewable energy needs to be competitive.

Many German politicians supported the move because it should preserve employment at traditional suppliers, but critics have said the law would threaten Germany’s pledges to cut greenhouse gases.

“Today’s reform above all serves to safeguard fossil fuels and throttle the pace of the energy transformation,” said Hermann Falk, Head of the German Renewable Energy Association.

Germany produces 33% of its power from renewable energy now and targets 45% by 2025. Friday’s law makes the 45% target a maximum amount.

“No one in the world understands why…the German government wants to slow expansion domestically,” when solar and wind power are becoming cheaper, Mr. Falk said.

With the exception of Denmark, German households pay the highest per-unit electricity rate in Europe, at 29.5 cents per kilowatt-hour, according to Eurostat data. Electricity rates include a government surcharge on renewable energy that was instituted to finance its energy transformation.

German lawmakers expect that surcharge to rise, to between 7.3 cents to 7.5 cents per kilowatt-hour, up from 6.35 cents now. Under the new law, large industrial energy users will remain exempt from the charge if they spend 17% or more of gross sales on energy. Companies that spend at least 14% on energy will need to pay a maximum 20% of the surcharge.


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