"Berlin is slowing down the switch to renewables"

In the first week of May, the German Environmental Ministry presented its review of the Renewable Energy Act. In an interview with Renewables International, Hermann Albers, president of the German Wind Energy Association (BWE) explains why the proposal could endanger the onshore wind sector.

Renewables International: Mr. Albers, what was the most surprising thing about the report for you?

Hermann Albers: The proposed cuts in feed-in tariffs for onshore wind. Last fall, the German government extended the commissions of the country's nuclear power plants, which turned out to be a mistake, so the government has announced that it would focus on switching to renewables. Wind power will reportedly be the main source. Now, the review suddenly claims that wind energy potential onshore should not be completely tapped and that no stable course is to be provided for onshore wind. If the proposals in the review are adopted, all whole lot of onshore wind farms will not be developed.

For at least the past 12 months, everyone has been saying that this government will promote offshore wind power to the detriment of onshore.

I have no problem with the offshore sector reaching its targets – indeed, the BWE has also specified its growth demands in this sector in writing.

You are speaking of the "foreshortening model" in which feed-in tariffs would be higher in the first few years to speed up the return on investment?

I'm talking about the integration of the "sprinter bonus" of two cents, the postponement of degression, and the foreshortening model. The offshore wind sector might then be able to increase the number of projects and speed up installation. The problem is now that the proposals in the review would stunt the growth of onshore wind.

What is wrong with the proposal that degression [incremental, scheduled cuts in feed-in tariffs, ed.] be increased in light of technical progress? The BWE recently demanded that very thing for solar power, and it is only to be increased for offshore wind power from one percent to two percent. Rate cuts of 0.2 cents per kilowatt-hour annually do not really sound painful. Is this mainly symbolic for you?

No. But the reasons why the solar sector needed to review its cost situation an extra two times within the three-the year review cycle was that photovoltaics had grown from 500 to 7,000 megawatts per year. Clearly, these figures demonstrate how successful and profitable this sector was.

The situation is completely different in the wind sector. Here, we have seen annual installations drop from more than 3,000 to 1,500 megawatts per year. Last year alone, the wind market shrank by 19 percent. Against this backdrop, no one can seriously expect the tremendous potential to be tapped. And let's be honest – anyone who reads the quarterly reports that turbine manufacturers published in the past few weeks can see that nobody is making much money with wind power right now. The industry is obviously not as rosy as some believe.

Is that really just because of the rates paid? In Germany, the main problem seems to be a lack of new sites, which leads to tremendous red tape and time-consuming planning for developers.

We have to make a distinction between theoretical potential and potential that has been made available. The BWE contracted Fraunhofer to conduct a study on onshore wind potential, which found that 200 gigawatts could be installed if only two percent of land in Germany was made available for wind farms. In northern and eastern Germany, we already have areas where two percent of the land is covered by wind farms, and there is public acceptance. In southern Germany, politicians have mainly opposed the growth of wind power. But since Fukushima, they are revisiting the issue. A number of announcements have been made for a new strategy, including by Bavarian Minister President Horst Seehofer and Bavarian Environmental Minister Markus Söder.

Does that make degression less important?

No. Politicians apparently failed to understand that the potential of onshore wind, which has the lowest feed-in tariffs of all, will only be tapped if compensation is stable. This review is counterproductive in that respect. Another problem is the proposal to revoke the system service bonus for new turbines [large wind turbines are required to provide reactive power to stabilize the grid, ed.]. This bonus help stabilize feed-in tariffs. In addition, the limitation on the repowering bonus for wind turbines 14 to 17 years old is another problem.

From talking with project managers, I know that a cut in feed-in tariffs of half percent would mean bankruptcies for a lot of projects in central and southern Germany. This decision would definitely cost us potential and sites on the basis of 8 to 9 cents per kilowatt-hour for onshore wind. At the same time, we seem to be willing to pay 15 to 17 or even 18 cents for offshore wind. That makes the review really surprising.

Does the review really so clearly state that the repowering bonus is to be limited to turbines currently 14 to 17 years old?

It definitely states that turbines installed from 1990 to 1993 and from 1998 to 2002 will no longer be eligible for the bonus, whereas turbines currently only have to be at least 10 years old. And because the strongest growth was posted in the period from 1998 to 2002, we would then be taking out 75 percent of our current capacity. I understood the government's announcement about speeding up repowering last year to mean that they want to use the bonus to promote new investments and technologies. Apparently, the government now wants to forgo fast investments in onshore wind.

So we are left with the market bonus. Grid operators want voluntary direct power sales on the power exchange to replace feed-in tariffs. The bonus would be paid by the state on top of the wholesale power prices when there is great power demand. You believe that this would lead to windfall profits. Wouldn't we simply need to be careful about designing the bonus?

I'd rather focus on the details of the relatively specific model of a combined bonus. Here, we would still be including a bonus for reliable supply. But the review clearly shows that politicians are not taking this proposal seriously.

In light of all the criticism, were renewables associations not as involved in this review as they were in previous reviews of German feed-in tariffs?

We provided the government with our position paper very early on. We conducted a lot of talks all the way up to the top of ministries, such as with Industry Minister Brüderle and Environmental Minister Röttgen. Today, I wonder whether the review has the quality that it should. After all, it is based on a very small pool of data. In particular, rising costs and the increase in interest rates of one percent just over the past 10 weeks do not seem to have been taken into consideration for onshore wind power. I think more attention should have been paid to the risk of further increases in this segment. The review merely mentions that wind turbines have become 20 percent cheaper. As an independent wind investor, I cannot confirm that finding. There has been no such price decrease in Germany.

Do you still think that substantial changes can be made? Or are you skeptical because renewables associations have not been as involved in this review as they were in previous ones?

I know that there are differing opinions within the German government about whether the growth of renewables should be defined mainly in the Renewable Energy Act or in a procedure with more involvement from Parliament. I believe that a lot of people in Berlin would prefer to have the parliament conduct a thorough debate. The parliament may have a better chance than the one of the other ministry of talking with local project developers and looking into specific financial figures. We are confident that proper attention would then be paid to onshore wind power. It is the least expensive source of renewable energy and also has the greatest potential. To top things off, it is also the one that can be ramped up the fastest. The review is basically a knee-jerk response to the phase-out of nuclear power.

At the moment, the German government is working on providing feed-in tariffs that large utilities will mainly benefit from. The general public in Germany felt that large utilities would also be the main benefactors when the commissions of nuclear plants were extended last year. It would be a mistake to repeat that impression.

( Tilman Weber conducted the interview / cm)