New Bill Planned for the Development and Funding of Offshore Wind Energy in Germany

By Christoph Mank, K&L Gates, Berlin

An introduction of bidding processes for determining the amount of funding for the generation of electricity from onshore wind turbines, offshore wind turbines and large photovoltaic systems is planned with an amendment of the German Renewable Energy Act (Erneuerbare-Energien-Gesetz).

The German government sees the transition to bidding processes as being a central instrument for attaining the goals laid down by policy makers regarding the development of the share of renewable energies in the production of electricity. The political goal is to increase the share of renewables in the amount of electricity generated to between 40% and 45% by 2025, between 55% and 60% by 2035 and at least 80% by 2050. In real terms the increase in the contribution of renewable energy to the electricity production in Germany has gone from 25.3% in 2013 to 28% in 2014 and 32.6% in 2015. It is the political will of the current government not to fall below or exceed this established scope for expansion. For this purpose the aim is to fix the tendered quantities at a level that is as accurate as possible on the one hand; on the other hand, a high realisation rate needs to be achieved with regard to the projects awarded in the context of the bidding process.

A further goal of the general introduction of bidding processes for establishing the amount of funding is to limit the funding to a level that is economically essential. In order to ensure that this amount is determined correctly by means of the planned bidding processes, a high level of competition must be achieved for these.

In order to attain the development and cost reduction goals within the scope of funding offshore wind energy development, lawmakers are planning the introduction of an independent law for the development and funding of offshore wind energy as part of the amendment of the German Renewable Energy Act scheduled for this year. Following a transition phase, the new bill will provide for a fundamental change of system beginning in 2025: the draft produced by the Federal Ministry of Economics and Technology (Bundesministerium für Wirtschaft und Energie (BMWi)) favours a central model based on the Danish example (also known as the “Danish Model”). This model makes provisions for a centralised pre-development of those areas where offshore wind turbines are to be set up in future. The key instrument of this central pre-development is an area development plan (Flächenentwicklungsplan) that is being developed by the Federal Maritime and Hydrographic Agency (Bundesamt für Seeschifffahrt und Hydrographie (BSH)) and constitutes the central planning instrument for the future use of offshore wind energy. The transmission system operators are to be involved in the procedure; the BSH must also reach an agreement with the regulatory authority responsible – the Federal Network Agency (Bundesnetzagentur) – and other professional authorities, such as the Federal Agency for Nature Conservation (Bundesamt für Naturschutz), and the federal states situated on the coast.

The areas specified in the area development plan are then to be analysed by the BSH with regard to marine environment, subsoil and wind conditions in order to ensure that all participants of the bidding process are provided with the same information about the area.

As of 2020, an annual bidding process will be carried out by the Federal Network Agency for all offshore wind turbines that are to commence operation after 1 January 2025. According to the current draft, 600 to 900 MW will be put out to tender for each bidding date, but no more than 730 MW per calendar year. Only one market participant who is awarded the contract in the context of the bidding process is permitted to set up wind turbines in the previously analysed area, is entitled to the market premium and may use the offshore transmission lines in order to feed the electricity thus generated into the German power grid.

According to currently applicable rules, the transmission system operator must guarantee the grid connection itself; this is not an integral part of the central public bidding process, but is developed and awarded pursuant to generally applicable rules. However, the prospective locations of converter platforms and connection lines are part of the area development plan.

Due to the long lead times for the planning and approval of offshore wind turbines, the central model described here does not become effective until after a transition phase. As for projects whose commissioning is planned for the period 2021 to 2024, two tender dates are scheduled for 2017 during which a total of 2.5 GW is to be put out to tender. Only very advanced wind farm projects that have, for example, already been granted approval or received planning permission, may participate in these bidding processes. The projects that are expected to qualify for participation have an estimated overall performance of approximately 6 to 7 GW, so that, according to the BMWi, a sufficient level of competition is guaranteed.

The bid award does not generally constitute an exemption from the approval procedure. Following this, a planning permission procedure has to be carried out for the construction and operation of offshore wind turbines. Critics of the draft fear that dividing the planning procedure into an official pre-development of the areas on the one hand and a subsequent planning permission on the other hand may risk causing delays and higher risk premiums. The interest groups concerned are currently submitting their statement to the draft bill.

It remains to be seen whether the law will be passed in its current draft form and whether it will actually guarantee a continuous development as well as the desired cost efficiency.