Germany Starts Work on Auction Rules Designed to Curb Solar Boom

  • Government seeks system to cover 80% of new installations
  • Industry, lawmakers concerned about damage to clean energy

Germany’s lawmakers are about to start work on legislation aimed at controlling growth in renewable energy installations, an effort to cap the spiraling cost of subsidies that consumers pay through their bills.

The rules, which the government seeks to enact by the middle of the year, would apply to 80 percent of new solar, wind and biomass installations, according to Rainer Baake, deputy economy and energy minister and the chief architect of the legislation.

The law would bring to an end a 17-year era of guaranteed fixed payments for power from new plants, which made Germany into the world’s biggest market for solar energy in the last decade. The so-called feed-in tariffs were replicated in dozens of countries, creating a boom in installations almost everywhere they were enacted.

Under the new system, the government will “relent control over prices and gain control over capacity growth” by auctioning off the right to sell power from renewable plants, Baake told reporters in Berlin on Wednesday.

As well as weaning off the industry off of fixed subsidies, the legislation aims to push down the production costs of clean power and to create “fair access” for both small and big developers, said Baake.

Lawmaker Concern

The bill faces a rocky road in the lower chamber, where lawmakers are concerned the measures will go too far to squelch growth. Clean-power subsidies were introduced at the start of the century, and subsequent amendments that focused on tariff adjustments won wide backing from lawmakers. The proposed system has drawn concerns from the wind power industry and farmers. Lawmakers from Chancellor Angela Merkel’s Christian Democratic Union along with state premiers also are critical.

CDU lawmakers say that the new targets are too generous and point to signs that the power grid is creaking with a surge of new electricity from renewable plants.

Renewable power supplied a third of all electricity in Germany last year. The ruling coalition of the CDU and the Social Democrats have pledged to cap that share at 45 percent by 2025. They anticipate power consumption to grow as consumers switch to electric cars and power-to-heat becomes a factor in heating buildings.

Auctions will kick off in 2017. Some 500 megawatt of solar power will be sold annually. Offshore wind auctions target total growth in new capacity of about 3.2 gigawatt by 2020 from 3.3 GW today. Annual auctions for onshore wind will vary between 2 gigawatts and 2.9 gigawatts, depending on the scale of offshore developments, according to Baake.

Before it's here, it's on the Bloomberg Terminal.