German association calls for cap on land rents for wind farms, which are raising project costs

The development of renewable energy sources, particularly large wind and solar farms, requires significant areas of land. Rising land prices and rental costs are therefore making new projects more expensive, and consequently driving up the cost of the electricity they generate. One German industry association has called for a cap on land rents for wind turbines. However, such a measure does not appear very likely to be implemented.

Germany has faced a significant shortage of new wind power projects in recent years. The complete lack of competition has long led to situations in which developers routinely secure prices in the country’s auctions at the maximum level they are allowed to bid. In addition to lengthy permitting procedures, rising costs for land on which to build these facilities are evidently another complication.

Although no official statistics are available, industry voices have raised concerns about a sharp increase in costs. According to Clean Energy Wire, just a few years ago wind turbine operators spent around a tenth of their annual revenues on rent. Now, however, cases are emerging in which rental costs account for 30 or even 50% of annual revenues, according to the German newspaper Tageszeitung. The German Wind Energy Association (BWE) is therefore proposing a cap on rents.

Opinions on the issue are divided

Opinions differ on whether such a step would even be possible. The Ministry for Economic Affairs and Climate Action, which is also responsible for energy, is reportedly sceptical, according to the website. A ministry spokesperson said the government could not use the design of auctions for wind power projects to intervene in private-sector lease agreements. Lawyer Thorsten Müller, by contrast, said setting a maximum rent as a requirement for taking part in an auction should be legally feasible.

Public institutions that manage German forests, which offer wind power potential in the country’s hilly areas, also appear to be pushing rents up. Under their duty to manage assets prudently, they must lease land at the highest possible prices to maximise revenue. Wind industry representatives are therefore concerned that, without a change, further growth in Germany’s wind energy sector could be put at risk.

"Rapidly rising land rents could become an obstacle to the transformation of the energy sector," said Jürgen Quentin of the Agency for Wind and Solar Energy.