Think tank: Germany must give greater support to offshore wind power

Offshore wind power is set to be one of the pillars of Germany’s energy transition, alongside other renewable sources. Interest in sites off the German coast has been relatively strong in recent years, with developers now required to pay the state for sites. Recent experience in other countries, where planned offshore wind farm projects have been cancelled, could make German policymakers hesitant. German think tank Agora Energiewende has now, according to Clean Energy Wire, put forward several proposals to support the development of offshore wind power in Germany.

Germany has set fairly ambitious plans for developing renewable energy, including offshore wind farms. By the end of this decade alone, the country is expected to have at least 30 GW of installed capacity from these sources. At the end of last year, however, installed capacity at German offshore wind farms stood at 8.5 GW.

A fee instead of a guaranteed price

After the first few auction rounds showed strong developer interest in sites off the German coast, the rules changed. Instead of competing for support in auctions, developers have been competing since last year to offer the highest payment.

Winning an auction then gives the developer the right to build and operate the project in return for financial compensation from the state and transmission system operators. Winning also secures the right to grid connection capacity for the wind farm. In Germany, transmission system operators usually arrange the construction of offshore wind farm connection lines, with the costs subsequently paid by electricity consumers.

But the current state of the offshore wind sector casts a shadow over the success of recent auction rounds. Rising construction costs led to the cancellation of several projects last year, including a project in UK waters and two large wind farms off the US coast. Similarly, rising costs combined with a low price cap meant that no bids were submitted in a UK auction. Investors say some governments around the world are now agreeing to increase prices originally set through auctions.

Agora: German government should respond

According to German think tank Agora Energiewende, the German government has several options for supporting the development of offshore wind power. One would be to improve financing programmes for manufacturing capacity through the state development bank. The government could also increase annual auction volumes after 2030 to 5-6 GW from the currently planned 4 GW. Higher volumes should give companies in the supply chain greater certainty, enabling them to invest in manufacturing capacity.

Developers could also pay 15% of their auction bid during the first 12 months after winning a site, rather than 10%. According to the think tank, this could increase the likelihood that they will ultimately complete their projects. A 5% fee could also be introduced to fund investment in storage and transport capacity at ports.

The think tank also says new regulations are needed to allow sites to be quickly reassigned if planned projects are cancelled.

“To eliminate delays, it is now important to strengthen supply chains for offshore wind farms and secure investment. This will enable faster development, helping us meet our targets while building key industries for climate neutrality,” Simon Müller, director of Agora Energiewende Deutschland, said according to Clean Energy Wire.