Direct marketing of green power
In Germany, generators of renewable power can receive set feed-in tariffs for each kilowatt-hour sold to the grid – or they can "directly market" their power, i.e. sell it to a buyer. They will only do the latter if the price offered is higher than the feed-in tariff. This option is increasingly being utilized, thereby raising the cost of power for consumers – and demonstrating that feed-in tariffs are the cheaper option.
A growing number of turbines owners are opting to directly market their green power instead of receiving the feed-in tariff. In February, roughly half of installed capacity will be sold directly, bringing the amount of green power capacity traded up to 17 gigawatts – a fourth more than in January.
More than 90 percent of the power marketed directly – some 15.4 gigawatts – will come from onshore wind turbines. Germany currently has an onshore capacity of around 28 gigawatts, so 55 percent of that capacity will be sold directly according to the latest data collated by transit grid operators.
Power from biomass units will make up six percent (one gigawatt) of that amount, with hydro coming in at two percent (0.35 gigawatts) and PV at only 0.5 percent (0.01 gigawatts). Each month, power generators can decide whether they want to sell their power directly or receive feed-in tariffs, but the decision has to be reported to the transit grid operator in advance. A report for the German government found that direct marketing raises the cost of power for consumers by 200 million euros a year.
As Robert Busch, head of the German Association of New Energy Suppliers (BNE), explains, the option of direct marketing was launched to allow power producers to move from a payment system with prices set by the government into a system where prices are set by the market. But current legislation still has a few shortcomings. "For instance, the management bonus is currently too high at 1.2 cents per kilowatt-hour, which leads to unnecessarily high added costs," Busch says. As he puts it, the government should reduce that figure "so that such technical mistakes do not put this necessary switch from subsidies towards a market in a bad light."
Green power trading firm Naturstrom agrees, arguing that the new bonus provides the wrong incentives for wind power. The firm's head Oliver Hummel argues that "higher bonus would have made much more sense for biomass and hydropower." After all, the management bonus varies greatly from one energy source to another. While wind turbines receive 1.2 cents per kilowatt-hour this year (dropping only to 0.7 cents by 2015), a mere 0.3 cents – falling to 0.28 cents – is paid for hydropower, biomass, and geothermal. By opting to trade their power on the market, power producers do not run any risk; if the exchange price plus the management bonus exceeds the feed-in tariffs, they get to keep the difference, but the if the former falls below the latter they receive compensation up to the level of the feed-in tariff in the following month.
The figures for direct marketing in January already caused some commotion because there was so much wind power. Hildegard Müller, head of German industry association BDEW, says that the policy was designed for the marketing of 40 percent of the green power produced, and the figure was nearly exactly that in January at 43 percent. Now that more than half of all wind power is sold directly, the discussion will probably heat up even further.
Sylvia Pilarsky-Grosch, vice president of the German Wind Energy Association, defends the higher payments: "If politicians want to make good on their word by providing direct marketing incentives, it has to provide an attractive business model so that the largest possible number of providers get on board."(Niels Hendrik Petersen / Craig Morris)
