Photovoltaic and wind plants: competition is supposed to fix it

Author: Dr. Klaus Hassmann, Spokesman Cluster Energy Technology

In2015, the first tenders for ground-mounted photovoltaic plants started. In 2016, onshore wind plants followed, in 2017 wind offshore plants and the first combined tender PV/wind onshore. The article attempts to draw a representative balance for the four tender types. The information comes from publications of the Federal Network Agency, the Ministry of the Environment and the Ministry of Economics, as well as the trade journal energie&management.

The program initially adopted by the federal government for photovoltaics (PV) has the motto "Promoting solar power more efficiently". The aim was and is to make the expansion targets for renewable energies more predictable and more cost-effective compared to the EEG in the competition for subsidies. In February 2015, the Federal Network Agency - which is responsible for handling the process - launched the first PV open-space tender. This test run was promising, which is why the program was expanded to include other renewable energy technologies such as wind. There are no restrictions on participation. Not only municipal utilities, project developers or private individuals can participate but also citizen energy initiatives and energy cooperatives.

For an evaluation, the following results are important from the author's point of view:

• Tendered volume, MW
• Submitted volume, MW/number of projects
• Approved volume, MW/number of projects
• Maximum allowed value, cts/kWh
• Average volume-weighted award value, cts/kWh
• Lowest/highest bid value with award, cts/kWh

PV onshore        

Table 1: Results of the 9 tender rounds 2015 to 2017 

The following trends are striking: The tenders were significantly oversubscribed; the cts/kWh of the award values are continuously falling.

The annual tender volume of 410 to 600 MW is still significantly below the total annual addition (incl. roof systems) of 1524 MW in 2016; the installed capacity of roof systems (still) significantly exceeds that of ground-mounted systems. The scenario of the grid development plan with the highest expansion targets is based on an expansion of PV to 55 GW by 2025. In 2016, a rounded 41 GW of PV capacity was in operation. On average, this results in an annual PV addition of approx. 1500 MW in the 9 years until 2025; PV is therefore within the target corridor. The decision on how to proceed with the tenders is in the hands of the new federal government. Based on the tender results, a maximum value of 6.5 cts/kWh (previously 8.91) is to apply to PV in the EEG in the future; whether it will be possible to earn money with PV without a surcharge at all, and if so, by when, is one of the exciting questions. We will report on this in the article update.

Onshore wind

Inspired by the promising results for PV, tenders were also launched for onshore wind energy from May 2017.

Table 2: Results of the four tender rounds 2017/2018

The following trends are striking: Tenders were very significantly oversubscribed except for the 2018 value. The surcharge values did not fall continuously, were initially significantly, 2/2018 however only slightly below PV; the 2/2018 value rose again by approx. 1 ct/kWh compared to 11/2017, which is surprising. Not an indication that the market is maturing, or is it? The lowest bid was submitted in 11/2017 and was 2.32 cts/kWh; a small project with no impact on the statistics. 

The annual tender volume in 2017 of 2,800 MW is below the annual addition of ca 4,200 MW in 2016.The maximum addition of wind onshore until 2025 in the grid development plan is 63.8 GW.In 2016, ca 45 GW of capacity was in operation. This results in a rounded annual addition of 2100 MW in the 9 years until 2025. Thus, the 2017 tender value of in total 2800 MW is above the target corridor.

 Based on the results from the 4 tender rounds, a maximum value of 5.7 cts/kWh (previously 7.0) should apply in the EEG for onshore wind in the future; onshore wind appears closer to a subsidy-free market participation compared to PV (which has caught up); whether it succeeds in the next few years? We will follow.

Wind offshore 

Table 3: Results of  2017/2018 bidding rounds

The first round offshore brought surprises that even those familiar with the matter did not expect - the average award value was a low 0.44 cts/kWh; even projects with 0 ct/kWh were included. Only wind farms in the North Sea were approved in Round 1. For those who expected an even lower median award value in the second tender compared to the first and/or a further increase in 0 ct/kWh plants, the results were rather disappointing. In the case of zero-cent plants, there was only one more; the significant increase in the surcharge value for 6 wind farms this time compared to 4 the first time also came as a surprise to many. Observers saw the reasons in a preference for the Baltic Sea in the tender; for the suppliers a chance for higher award values? After tender 2, 800 MW of existing connections to the electrical grid at sea are still available, 650 MW of which can be used in the short term. The BMWI announced a new amendment for offshore wind.

The annual tender volume in 2017 and 2018 of 1550 MW is significantly higher than the annual addition of about 810 MW in 2016. The maximum addition of wind offshore until 2025 in the grid development plan is 10.5 GW. In 2016, approx. 4 GW of capacity were in operation. This results in a rounded annual addition of 700 MW in the 9 years until 2025. This means that the 2017 tender value of 1,550 MW in total is well above the target corridor. Presumably, one wanted to give this technology some "drive".

Combined tender PV and wind on land

Table 4: Results of the tender with pilot character 12/2017

The surprise: all awards went to PV; the median award value was slightly lower than that in the last PV-only open space tender.

Most awards are spatially located in distribution grid expansion areas. Of the bids with surcharge, 5 with over 31 MW were located on arable land and grassland in disadvantaged areas of Bavaria and 3 with over 17 MW in Baden-Württemberg. No compensation was considered for less productive sites. The operators of the wind projects also had to provide evidence of approval under the Federal Immission Control Act. Observers attribute the high bid values for wind to this, among other things.

This procedure has the negative "touch" mentioned at the beginning. As a conclusion of this one-sided result one can find in the Internet the recommendation of PV as well as of wind interest representatives to do in the future without this combined tender. One of the reasons given for this rejection is that both PV and wind are needed for the success of the energy transition. It will be interesting to see how politicians react to this.