Germany to slightly lower price caps in PV auctions, leave wind unchanged

Next year, Germany will make a slight adjustment to the maximum prices at which renewable energy developers can compete in auctions. Since 2023, the country has raised price caps because auctions had long suffered from a shortage of projects. The caps for photovoltaics will fall slightly, while those for wind will remain unchanged. The regulator has not yet published new maximum prices for biomass. Even after the reduction, however, the price caps remain above the levels Germany had originally envisaged for this point in time.

For many years, auctions have been Germany’s primary mechanism for supporting new renewable energy sources. Developers of solar, wind, biomass and other sources compete for operating support. In Germany, this support is one-sided, meaning operators are guaranteed a minimum selling price. When wholesale electricity prices exceed the prices secured in the auctions, operators keep the additional revenue. Conversely, when wholesale prices are lower, they are compensated for the difference.

For many years, German auctions suffered from a shortage of projects, and they routinely failed to award all the capacity on offer. The situation is beginning to turn around in recent rounds, with auctions instead attracting record volumes of bids. The increase in price caps, which rose by 25% in 2023, has played a key role in this revival of interest. The country’s regulator needed the cooperation of German lawmakers to take this step, as the legislation then in force allowed annual increases of only 10%.

The regulator did not raise price caps only for wind farms. At the beginning of last year, it also raised price caps in auctions for ground-mounted photovoltaics, also by 25%. The cap for rooftop solar was raised at the end of 2022. In spring 2023, the regulator then raised price caps for innovative auctions as well, in which renewable energy sources with short-term storage compete.

Wind caps stay unchanged, while solar caps fall slightly

From next year, maximum prices in German auctions will be adjusted again. In auctions for ground-mounted photovoltaics, developers will newly compete for guaranteed prices of up to 68 EUR/MWh, while the maximum for rooftop photovoltaics will be 104 EUR/MWh. The maximum price for rooftop photovoltaics will therefore fall by just one euro compared with this year, while that for ground-mounted installations will drop by just under six euros. According to the regulator, this adjustment also reflects the expected development of the costs of building these installations.

Price caps in auctions for onshore wind farms, however, will remain unchanged. Despite renewed investor interest and record volumes of bids in recent auctions, prices are not falling. According to the German regulator, the forecast for wind farm construction costs remains stable, so lowering the price cap could negatively affect participation in auctions.

According to the regulator, adjusting the maximum bid prices for 2025, including keeping the increased caps for wind, is essential. Otherwise, the price caps would revert to the lower levels set by law, which could once again lead to a shortage of projects and reduced competition in auctions.

The regulator has not yet published the new maximum prices for biomass and biomethane auctions. However, in their case too, an adjustment or at least the retention of the increased caps can be expected.