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Europe approves auction scheme for renewable sources in Germany

Staff Writer | December 21, 2016
The European Commission has found amendments to the German renewable energy scheme to be in line with EU state aid rules.
Germany renewable
Green energy   Support will mainly be granted through auctions
As of 2017 support will mainly be granted through auctions. This will promote the steady deployment of renewable energy whilst maintaining competition in the German energy market.

Margrethe Vestager, Commissioner in charge of competition, said: "Competitive bidding processes support the deployment of renewable energy whilst keeping electricity costs at bay for consumers.

The amendments to the German EEG law we approved today make sure that one of the largest renewable support schemes in the EU will be based on auctions.

The decision allows Germany to organise separate auctions for different renewable energy technologies to keep its electricity grid stable, and commits Germany to test alternative auction designs for the future through pilot projects."

In July 2016, Germany notified amendments to the German Law on support to the production of renewable electricity (EEG 2017) for assessment under EU state aid rules, in particular the 2014 State aid Guidelines for energy and environment.

The amendments aim to generalise the use of auctions for selecting renewable electricity producers eligible for aid. Currently, auctions are only used in a pilot phase for solar installations on the ground.

As from January 2017, auctions will be organised to select offshore wind installations, onshore wind installations above 750 kW, solar installations above 750 kW and biomass and biogas installations above 150 kW.

Each auction will be limited to a specific technology. Biomass and biogas will participate in the same tender including new and existing installations.

Germany has demonstrated that specific auctions for each technology would ensure a more cost-efficient result than a bidding process in which all or several technologies compete, in view of the specific conditions present in the German electricity market.

In particular, Germany has shown that there are grid instability and integration issues present within the German electricity market.

These result from the rapid deployment of renewable energies combined with the closure of nuclear plants and delays in grid deployment ha. It therefore plans to take targeted actions to address these issues.

Such actions could only be implemented effectively, if auctions for offshore wind, onshore wind and solar energy are kept separate. In line with the Guidelines, Germany is therefore entitled to organise specific auctions for each technology.

At the same time, Germany committed to test alternative designs in which auctions would incorporate grid integration costs or tender for a specific electricity quality (stable production or flexible production for instance).

The Commission welcomes these innovative pilot tenders as they will enable Germany to gain experience with other tender designs.

As already provided in the EEG 2014 for pilot auctions, the auctions to be organised under the EEG 2017 will be opened for up to 5% of the auctioned capacity to installations located in Member States who have concluded a cooperation agreement with Germany. Germany organized the first cross-border tender with Denmark in November 2016.

Other technologies supported under the EEG 2017 (hydropower, geothermal and installations using sewage gas) will continue to be eligible for feed-in tariffs (for installations up to 100 kW) and market premiums defined in the EEG 2017 in line with the Commission's 2014 Guidelines on state aid for environmental protection and energy.

This is because there are not enough potential projects for those technologies to enable the organisation of competitive bidding processes.


 

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