Markets - 23/September/2019

Germany feels its way to competitive green electricity market

Germany is exploring the potential of PPAs to provide revenue to owners of wind farms and photovoltaic installations after state support expires in the coming years

Germany has long been considered an energy transition leader, but the reality is more complicated as the country falls behind in meeting its EU renewable energy targets. Turning to commercial power purchase agreements as an option for selling renewables generation in addition to Germany’s traditional controlled markets could help get wind and solar development moving briskly again, but significant hurdles remain

Little growth: Development of renewable energy in Germany is not keeping pace with the country’s commitment to deliver on EU climate targets by reducing carbon emissions

Market stimulation: Power purchase agreements (PPAs) for direct sales of renewable energy to commercial enterprises could boost the market for solar and wind, but there are legal barriers; for energy intensive industries, remaining with fossil fuels is often cheaper than transitioning to clean power

Key quote: Germany now needs to turn its attention to making sure the owners of new wind farms can sell their generation through PPAs

The development of renewable sources of energy in Germany is not sufficient for the country to meet national and EU emissions reduction targets. The slow growth of wind and solar is bad for the climate, as it means continued reliance on fossil fuels, and bad for the economy as the country could be liable for fines of billions of euros under EU law.

Auctions of contracts for onshore wind support in 2019 under Germany’s controlled wind market were undersubscribed and the project installation rate plummeted to 287 megawatts (MW) in the first half of 2019, 87% down on the same period in 2018 which already represented a severe wind market contraction. Growth in the solar fleet was healthier in 2018, with three gigawatts (GW) added, pushing up total capacity to 45.3 GW. Under the 2017 German renewable energy act, however, support for solar will cease when 52 GW of production capacity is reached, unless the law is amended.

Corporate power purchase agreements (PPAs) for renewables, signed between customers and energy generators, including independent power producers (IPPs), are routine in the US, Scandinavia and other countries. PPAs with IPPs also give utilities an extra option to expand their renewables portfolios in addition to building renewables projects off their balance sheet, for example. Industrial or commercial companies could, in theory, secure future supplies of green electricity through PPAs, reducing their carbon footprint in the process and improving their environmental image.

Try FORESIGHT - 30 days for €29

Already a subscriber?


Comments are closed.

Related articles

Enforce EU competition law to end dirty power plant support

By enforcing its competition laws, the European Commission can genuinely lead the clean energy transition, says Sara Bell from Tempus Energy

Read more

Cities get creative on climate financing

Energy Cities, a European association of local authorities, estimates a city will need between €1 billion and €3 billion to reach net zero emissions by 2050

Read more

Climate change is a social issue

Sustainable energy for all

Climate change is a social issue

Read more

The transition jigsaw: Part 1 – The role of government

Enshrine stability and predictability in law to ramp up investment

Read more

The transition jigsaw – Part 2: The role for business and investors

Companies and finance providers need legislative frameworks that move everybody in the same direction at the same speed, but they can, and should, do much more themselves to fight climate change

Read more

The transition jigsaw – Part 3: Citizens, civil society and the courts

Citizen activism is working to force change that is beneficial for all

Read more

Learning by example

Benefits of energy efficient renovation of public buildings

Read more