German government is happy with PV auctions
Two weeks ago, the German Energy Ministry published its official review of the first three rounds of pilot auctions for ground-mounted PV. It is already clear that the policy will be expanded – the shortcomings of the auctions are not even mentioned. Craig Morris investigates.
In its first review of the three pilot PV auctions (PDF in German), the German Energy Ministry says “only minor changes to the process” are needed “for simplification.” The news is not surprising, but it has upset proponents of community energy projects.
Parliamentary elections are coming up next year in Germany, and parliamentarians are already working on an update to the 2004 EEG (Renewable Energy Sources Act). According to recent newspaper reports (in German), two traditional critics of renewables – Michael Fuchs and Georg Nüßlein, both members of Parliament and of Merkel’s Party the Christian Democratic Union – have written the German cabinet, warning (see our previous report) that Germany could have 55 percent renewable electricity in 2025, far above the official target range of 40-45 percent. The two politicians also say that they have been told “off the record” that two major grid expansion projects will not be completed on schedule and will therefore not be available by 2025.
At the behest of Brussels, member states are to switch from feed-in tariffs to auctions for projects larger than six megawatts in general or 18 megawatts for wind power. The Commission also stipulates (below, the official wording from the EU) that this policy switch must not be carried through if the pilot auctions produce one of the following outcomes:
(a) Member States demonstrate that only one or a very limited number of projects or sites could be eligible; or
(b) Member States demonstrate that a competitive bidding process would lead to higher support levels (for example to avoid strategic bidding); or
(c) Member States demonstrate that a competitive bidding process would result in low project realisation rates (avoid underbidding).
In understanding the German Energy Ministry’s official review, we have to keep those requirements in mind. The EU Commission (and hence, the German government) is explicitly not concerned about auctions producing a large number of losing bids (which waste the time and money of bidders, especially small ones that cannot afford to lose the only project they may attempt). The Energy Ministry therefore continues to spin the roughly 75 percent loser rate in the previous three pilot auctions as a sign of “great interest” and “competition” in the German PV market.
The review points out that auction prices fell from one round to the next, and takes this outcome as “an indication of the efficiency of auctions.” It specifically points out that the prices were “below feed-in tariffs from the EEG 2014” – without pointing out that feed-in tariffs only apply when arrays go into production. It is unclear whether any of the auctioned systems have gone into operation, although the first winners were announced last April. A comparison of the auction price and feed-in tariffs at the time these projects are actually completed would show smaller difference.
Caption: Survey results showing when PV auction winners plan to complete their projects. Source: BMWi (German Energy Ministry)
In a telephone survey, Germany’s Network Agency asked winners when they planned to complete their projects. At least 20 arrays should already be in operation according to the responses, but the auction rules stipulate that the winners have 24 months to finish, so they do not have to build until 2017. The survey at least shows that the winners do not plan to sit out the entire timeframe in order to wait for lower equipment prices; “the survey shows that auctions have not slowed down the project development,” the review states – even though we don’t know this yet: no project had been completed as of “the beginning of December.” However, two years is an unnecessarily long time allowance for PV projects that already have building permits. Construction itself only takes a few months.
The main complaint, however, is that the renewables sector, which community projects have dominated up to now, is currently being handed back to conventional energy companies. One official goal is therefore protecting Akteursvielfalt (the diversity of market players), though no real definition is given, so this target cannot be missed. The official review praises the auctions for producing winning bids “from all types of legal forms,” including a GbR, a common company type for freelancers and small enterprises. One GbR was awarded a contract in the second auction, and “natural persons and cooperatives” also won contracts in the third round – a handful of grassroots winners out of the 57 contracts awarded and around 420 bids placed. Energy cooperative groups thus mainly contend that few of their members bother to participate in the auctions (text in German).
Regardless of these concerns, the government aims to extend auctions to the wind sector as well. Proponents of onshore community wind farms are worried that their commitment will be stifled – and they wonder what lessons can be drawn from the PV auction for the wind sector.