The German Renewable Energy Act is reformed every legislature period. The last reform was adopted in 2014 after a long struggle. The compression model was extended, however, a competitive procedure for determining subsidy amounts is now required from 2017. The expansion targets for offshore wind power underwent painful cuts.
Since then - especially in 2015 - there has been an impressive expansion of offshore wind energy. The cracks seemed to have been repaired. There have been intensive discussions in the industry as to how this situation can be maintained and how the tendering model might be designed in order to ensure continuous expansion while, at the same time, preserving the diversity of the sector. Companies and organizations have been proactive and constructive from the very beginning. For example, they funded a study by the consulting firm Pöyry that outlines in detail the options for a tendering model for offshore wind energy.
The German Federal Ministry for Economic Affairs and Energy sits on the other side of the negotiating table. It drafted a reformed Renewable Energy Act, including the first ever wind energy at sea act, which is aimed at summarizing key provisions on technical design, tender, certification, construction and operation in one law.
The offshore industry has been waiting a long time for this draft bill. On the 1st of March, the draft bill was leaked. The basic problem of the Ministry’s draft of the Renewable Energy Act and the wind energy at sea act remains due to the "World Formula". Its introduction means that the system's control function previously carried out via the mini-expansion corridor of an average of only 800 MW per year will be replaced by a highly complex instrument that appears to be impractical. The progressive reduction of expansion amounts harms economic and industrial prospects. We remain adamant: There must be at least 900 MW per year.
To quote another example: The "double single tender" of 1.25GW on 1st March 2017 and on 1st December 2017 respectively for commissioning between 2021 and 2024 is inadequate in terms of volume and too tight in terms of timing. As became clear from the PV tenders in 2015, the modalities of the tenders most probably need readjusting.
The price level and the technology on the tender date are only fixed too far in the future for two rounds of tenders; intended economies of scale and technological progress cannot be achieved in full. The risk of market consolidation in the value-added chain is acute because firms that do not get a chance in the two tenders scheduled for 2017 or that receive no orders from projects with surcharges may leave the market. The consequences are less market impact in the bidder segment and therefore less cost-reduction potential.
The draft bill has other weaknesses: Investments by developers will be devalued by the introduction of the central model and the proposed last-call option, called "Eintrittsrecht" (right of subrogation) in the bill, is no substitute for proper compensation. It is also unclear how the Federal Maritime and Hydrographic Agency (BSH) can successfully nationalize and centralize land development with a core staff of just 36! In addition, regulations for the Baltic Sea coast are unclear and the required collateral is excessively high with no factual basis and almost impossible for medium-sized companies to raise.
However, the biggest problem is still grid connection. The legislation requires a new grid connection system in the North Sea in 2021, 2022, 2023 and 2024 respectively. How the company TenneT can be made to start work on the first new grid connection system later this year - and this has to happen immediately with a lead time of 60 months - remains the central problem that must be solved in order to prevent cracks reappearing.