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How Germany Hammers Down Renewable Energy Costs: QuickTake Q&A

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Germany’s pioneering turn toward clean energy is approaching another milestone with a new round of auctions for wind power expected to push the price of electricity from renewables to record lows. Rules for tenders in the next contest were implemented to bring wind and solar growth under control after capacity outpaced the German grid’s ability to absorb new flows of power and burdened consumers with higher costs. The auctions will test whether Europe’s industrial engine, which still produces more power from coal than renewables, can achieve its climate commitments.

By putting fixed annual volumes of clean power out to bid, Chancellor Angela Merkel’s government is trying to ease costs on German consumers who’ve been footing the bill for the green transition in their electric bills. Previously, incentives were awarded through feed-in tariffs, which granted all developers with qualifying projects a fixed electricity price. Auctions force companies to bid lower prices than their competitors in order to build capacity. The new system also gives government more control over the pace of renewable expansion -- a change likely to be welcomed by some German neighbors overloaded with intermittent energy flows.