Another wind auction in Germany remains undersubscribed; substantial price increases are evidently not enough

Another auction to support the construction of onshore wind farms has been held in Germany, the third so far this year. Nothing has changed significantly compared with previous rounds, and even halving the auction volume was not enough to fill it. Germany still lacks new wind farm projects, which have to contend with demanding permitting processes. With competition still absent, the awarded guaranteed prices remain close to the price caps. At the beginning of last month, Germany held its third auction this year, in which onshore wind farm developers can secure minimum guaranteed prices. Unlike other countries, Germany still routinely uses one-sided contracts for difference in its auctions. In this case, power plant operators are guaranteed a minimum sale price. If day-ahead market prices are lower than the auction price, operators are compensated for the difference. If market prices exceed the auction price, however, operators keep the additional revenue. Germany was due to hold a total of four auction rounds for onshore wind this year, each offering a total of 3.2 GW of installed capacity. However, a severe shortage of new projects has led to a gradual reduction in the volume put up for auction. While the first round this year offered 3210 MW, the volume was cut to 2866 MW in the second round, and to just under 1667 MW in the most recent round.

Halving the auction volume still failed to create competition

Even halving the originally planned volume was not enough to fill the auction. According to Germany's network regulator, developers submitted 142 bids for the August auction, representing a total installed capacity of 1436 MW. The regulator had to reject one bid, however, so 141 projects with an installed capacity of 1433 MW ultimately secured support. The latest round therefore awarded 85% of the capacity on offer. Prices offered were not significantly different from those in previous rounds, ranging from 60 to 73.5 EUR/MWh, which is also the price cap set for this type of auction for this year. Since bids at the maximum price dominated the auction, the weighted average of the awarded guaranteed prices reached 73.2 EUR/MWh, comparable to the 73.4 EUR/MWh recorded in each of the previous two rounds. Germany had hoped that raising the price caps for this year's auctions would attract more participants. In wind power auctions, however, the desired effect has yet to materialise. The first innovative auction of the year, in which renewable energy sources compete for support alongside energy storage, fared even worse. In that case, just one bid was submitted.

Strong competition may not be enough to bring prices down significantly

Unlike wind power auctions, standalone auctions for ground-mounted solar projects are nowhere near as short of projects. Projects with a total installed capacity of around three times the auction volume were even submitted for the second round this year. Despite strong competition, however, prices did not fall significantly. While awarded prices averaged 70.3 EUR/MWh in the first round this year after the cap was raised, the weighted average fell to 64.7 EUR/MWh in the second round, a decline of less than a tenth.