sou · GWB313d2 · 2009-01-01 00:00:00 — Table 3-2 and Table 3-3, on the following page, show the rapid de- velopment of renewable generation over the past 15 years in more detail. By 2007 has installed the largest amount of wind power world-wide (about of the world capacity) as well as photovoltaic (about of world capacity). , a town of 200,000 people in the , for instance, has almost as much solar photovoltaic (PV) power installed as the whole of . Table 3-3: Development of renewable electricity production by source from 1990 to 2006TPF40FPT Similar to the other countries, the German Chapter of this report will concentrate on the issues related to wind power but will also include experience related to network connection/integration learned from other renewable energy technologies. 40TP PT ibid. presently consists of four transmission system operator (TSOs) which own and operate the high voltage network within their respective regions. The four TSOs are: The regional responsibility of each TSO is shown in Figure 3-1. The different renewable technologies are not equally distributed within the German power system. power, for instance, is mainly in- stalled in the windy areas along the coast. , about of the German wind capacity is installed within E.ons region, in area, in RWEs and only in EnBWs area. Figure 3-2: and its TSOs. has around 700 operators of distribution networks and 50 operators of regional networks, see Figure 3-3.TPF41FPT The companies range from very small network operators for small towns to area net- work operators covering a number of districts. Figure 3-3: Schematic geographic representation of German distribution com- panies. Each small color dot representing a distribution company. Source: VDN () The network companies have a mixed ownership, but most of them are municipal companies. They used to have their own power genera- tion (mainly local CHP) and sold the generated power, mainly within the local communities. Nowadays they are unbundled (accounting- wise), so typically a local network company, generator and retailer are still municipal. The deregulation in , however, has increased the number of mergers in the network sector; hence the number of local network companies has decreased from around 900 to around 700 in the past years. 3.1.3Relevant Legislations for Renewable Energy The following legislations impact the development of renewable energy in : Renewable Energy Sources Act (2004)TPF42FPT: In the first version of the Renewable Energy Sources Act (RES) was put into force by the German parliament, the Bundestag. The Bundestag amended it again on 1 2004 with the Act Revising the Legislation on Renewable Energy Sources in the Electricity Sector. Another update of the RES Act is scheduled for early 2009. The Renewable Energy Source Act replaced the Electricity Feed Act,TPF43FPT which was in place from 1991 to 2000. In principle the Electricity Feed Act started the development of wind power in by granting priority to wind power by forcing ope- rators of power grids to give priority to electricity fed-in by re- newable energies into the grid and to pay a defined, fixed power purchase prices (feed-in tariff) for this. The entry into force of the Renewable Energy Sources Act in the year 2000 has extended this principle to biomass, photovoltaics and geothermal energy. The amendment of the Renewable Energy Act (EEG) from 1 2004 continued with the basic principle – i.e. compul- sory and priority connections of plants generating electricity from renewable energy sources, as well as compulsory and priority purchase and transmission of, and payment for such electricity; but several new articles reinforce consumer protection and aim 42TP PT Erneuerbare-Energien-Gesetz (EEG), in German: eeg_2004/gesamt.pdf English: 43TP PT Also often translated as Electricity Input Act of 1990 (Stromeinspeisungsgesetz). at increasing transparency and reducing the costs inherent to the system. One of these regulations, for example, provides for a public register of plants generating electricity from renewable sources. Also renewable power generation has, in principle, gained the legal right to be connected to the power system, i.e. no sepa- rate agreement or contract between a network operator and an operator of a renewable energy plant is required anymore. National Energy Act: This regulation of the electricity system in prior to start of the liberalization process was based on the National Energy Act of 1935TPF44FPT. The central aim of this law was the of a cost-efficient and safe energy distri- bution. In 1998, two years after the EU Directive regarding deregula- tion was passed, introduced the National Energy Act 1998TPF45FPT. The Energy Act defined the legal and regulatory basic principles of the German electricity supply system, hence this Act sets the framework for all non-renewable energy sources. This framework can be summarized as followed: -complete liberalization of all segments of the electricity sector. -access to the transport network had been regulated by the negotiated access through association agreements between energy producers and industrial consumers (without a special regulatory agency); -unbundling of production and supply segments from the net- work segment through separation of accounts. With the National Electricity Act of 1998 also the regulation of the electricity network was given over to the network companies. The network companies used so called associations´ agreements to regulate network access and tariffs. The associations agree- ments, however, caused many legal conflicts concerning the entry to the transmission network for new power producers. In 2003, demanded an effective control concerning the regulation of the network access, transmission tariffs and demanded a participation of the Federal States in its regulation which was achieved through the National Energy Act of 2005. With the implementation of the regulated access, the 44TP PT Energiewirtschaftsgesetz von 1935 / EnWG 1935. 45TP PT Energiewirtschaftsgesetz von 1998. legal unbundling was fixed and a regulatory agency (Bundes- netzagentur) was determined. Since 2005, the new regulatory agencies have been re- sponsible for regulating and unbundling of the electricity and gas transport segments. One regulatory agency at federal level (Bundesnetzagentur) is part of the Federal nomics and works under its supervision. Additionally, on the level of the Federal States, the respective regulatory agencies are part of the Ministries of Economics of the Federal States (Landes- regulierungsbehörden). The regulator on level are responsible for regulating network companies with less than 100,000 electricity or gas (incl. end ), but the Federal States may delegate responsibility to the Bundesnetz- agentur. However, even today questions remain about the detailed tasks of the regulatory agency, i.e. which areas fall within its respon- sibility. In addition, as the regulatory agency is still in its start- up phase, it currently focuses on certain key tasks and puts very low emphasis on issues related to the Renewable Energy Sources Act such as network upgrade or connection policy related to the RES. Energy Act states that the German government has to develop four additional regulations, which replace issues formerly mainly defined in the associations´agreements. Three of the four have already been implemented. Access OrdinanceTPF46FPT: It defines the general methods of how network companies should measure, document and calculate the actual power flow in the different networks as well as the needed balancing services. This method includes specific regulations of how to include imbalances caused by renewable energies connected to the grid under the RES Act. Charges OrdinanceTPF47FPT: It sets the general approach of how to define network charges for transmitting power and how to calculate imbalances between scheduled power deli- very and actual delivery. 46TP PT Verordnung über den Zugang zu Elektrizitätsversorgungsnetzen, or Strom-Netzzugangs- verordnung or StromNZV from 25.07.2005, textonly/content/Lehre/Vorlesungen/NEMIII/downloads/StromNZV.pdf 47TP PT Verordnung über die Entgelte für den Zugang zu Elektrizitätsversorgungsnetzen, or StromNEV from 25.07.2005, see content/Lehre/Vorlesungen/NEMIII/downloads/StromNEV.pdf (in German). Electricity Network Connection OrdinanceTPF48FPT: It defines the legal requirements for network companies to connect , i.e. end user, to the distribution network and the corresponding responsibilities such as metering and costs. The ordinance does not apply to generation sources defined in the RES Act. Finally, the only missing additional regulation is related to the defi- nition of the network tariffs. The German government has suggested to introduce – instead of a cost plus regulation scheme – an incentive regulation scheme starting from January 2009. So far, the German government has only formulated a first draft of this regulation defining the incentive regulation.TPF49FPT Infrastructure LawTPF50FPT: The law is supposed to speed up infra- structure projects including railway project, motorways and con- nections to offshore wind farms. It reformulates certain paragraphs in a number of other laws, including the National Energy Act. In principle the law follows approaches that are similar to those used in and are under development in the UK, i.e. TSOs are obliged to cover the cost of connecting offshore wind farms to the grid between the offshore substation and the nearest transmission line. This also means that connections to offshore wind farms can be shared by a number of projects, avoiding a situation where each development consortium tries to arrange its own link. Since many farms are planned for a distance of more than 20 kilometres off the coast, grid connection represents a substantial part of their capital cost. CHP LawTPF51FPT: The Co-generation Act follows a similar approach as the RES Act, i.e. it guarantees priority grid connection. How- ever, it only provides a bonus payment for the electricity produced, which varies according to the type of CHP-installation and decreases over the years. The bonus payment is different for different generation and de- creased from 1.53 c/kWh p.a. in 2002 to 0.97 c/kWh in 2006 for 48TP PT Verordnung ubre Allgemeine Bedingungen für den Netzanschluss und dessen Nutzung für die Elektrizitätsversorgung in Niederspannung-Niederspannungsanschlussverordung- NAV, , see NL.pdf (in German). 49TP PT von-rechtsvorschriften-auf-dem-gebiet-der-energieregulierung,property=pdf,bereich= bmwi,sprache=de,rwb=true.pdf 50TP PT Gesetz zur für Infrastrukturvorhaben vom 9. Dezember 2006, see (in German). 51TP PT Kraft-Wärme-Kopplungsgesetz vom 19. März 2002; see bundesrecht/kwkg_2002/gesamt.pdf (in German). existing CHP-plants, it is 5.11 c/kWh for new small installations up to if continuous operation had started by the end of 2005. Fuel cell plants again have a different bonus payment. See Section 3.2 for comparison to RES Act. The German regulator, the Bundesnetzagentur, is responsible for regulating and authorizing network companies, including approving network tariffs. Today, the German network companies are regulated on the basis of an ex-ante cost plus approach, i.e. the network com- panies have to present all relevant costs to the network regulation authorities and suggest a network tariff based on the costs and a certain profit. The regulator must either approve the suggested tariffs or can propose lower tariffs. The procedure is based on an ex-ante system, for instance, the costs that occurred in 2006 are the basis for the network tariffs in 2008. Conflicts between the regulatory agency and the network company regarding tariff setting can go all the way to courts. Starting in 2009, network tariffs will not be regulated any more on cost basis, but on the basis of an incentive regulation (based on a price-/revenue-cap regulation). The cost-plus approach means that network upgrading costs, for example due to renewable energy installation, can be fully recovered by the network company as the additional costs will directly result in higher network tariffs. As the development of wind power is mainly concentrated in the costal areas, this potential could result in higher distribution network tariffs in areas with very large amounts of wind energy or other renewable energy. This point was discussed with the German regulator, VDN (the German network association) and the German wind energy asso- ciation, and none of these three parties considered this an important issue.TPF52FPT The reason for this might be that the required network up- grades are rather limited so far, due to the rather oversized network in former . Typically, network upgrades are required in regional networks and in actual distribution networks, so the additional costs are distributed over a large number of . Nevertheless, VDN pointed out that occasionally network com- panies complain about significant investment costs, resulting in higher 52TP PT Based on a phone discussion with VDN in 2007. network tariffs.TPF53FPT However, these are typically individual cases that are not important enough for all network companies to lobby for a different approach. However, with the introduction of an incentive- based regulation approach this will change and VDN already has pointed out that the new regulation approach has to specially include the specifics of network upgrades caused by renewable energy ex- pansion. In addition, the Bundesnetzagentur commented that higher net- work tariffs due to network upgrades are not considered an important aspect as public complaints are very limited.TPF54FPT The situation is different for the network connection of offshore wind farms. According to the infrastructure law, the four TSOs are obliged to build and operate the connection between the offshore wind farm and the nearest transmission line onshore. As only the two TSOs are affected by the law, i.e. E.on and Transmission, the additional investment costs would lead to signi- ficant differences in network tariffs between those two and the remaining two TSOs. , the infrastructure law (§ 4) requires that the TSOs share the cost proportional to its , i.e. each electricity customer in is supposed to pay a similar share of the network connections of the offshore wind farms. 3.1.5Development of the Sector in In , the development of wind power started as an indepen- dent development of small and medium-sized companies as the large utilities were initially not allowed to own wind power. Even though this was changed later, still today more than of all wind power installed is owned by private individuals, small companies and other independent power producers. Until a few years ago, mainly privat German investors financed wind power projects in ; today many wind farms are owned by international investors. The installation of wind farms took mainly place in form of single wind turbines or clusters of wind turbines, only in the last 2–3 years larger wind farms (up to around 100 MW) have been developed. , almost the entire wind farm capacity installed in is connected to the distribution or regional network. 53TP PT According to the VDN, those complains focused on Northern in the late 1990, later the impacted network companies were mainly in Eastern and today network companies in South start to complain due to increase number of PV installations. 54TP PT Based on a phone discussion with, the Bundesnetzagentur in 2007. In the beginning of the German wind power development, most of the installations were along the costal lines, later wind power moved more and more inland. Figure 3-4 shows the regional distri- bution of wind power in in 2006. Figure 3-4: Regional distribution of wind power in ; in blue total in- stalled capacity; in red capacity added 2006. Status end of 2006TPF55FPT 55TP PT Source: Figure 3-5 shows the potential regional share of wind power in relation to the net electrical energy consumption of the different States in . It can be seen that wind power plays an important role in the electricity supply, particularly in the areas but also in some inland states. Figure 3-5: Shares of the potential annual energy yield of the net electrical energy consumption for the Federal States of . Status end of 2006TPF56FPT 56TP PT Source: Today the wind power industry is an important economic factor in . In 2004, around 64,000 people worked in the German wind sector (57,000 in the bio-energy sector, and another 36,000 in the sectors of solar energy, hydropower, and geothermal energy, so totally 157,000 positions in the renewable energy sector).TPF57FPT About half of all employees are involved in the production and operation of systems and the other half are employed by suppliers or upstream economic sectors like engine construction and electrical device manufacturers, but also including the steel industry as well as company-specific services and the insurance industry. 3.1.6Future Plans and Possible Barriers for the Further Development of The annually installed wind power in has dropped from around 3,247 MW in 2002 to about 2,100 MW in 2006. The current predictions for installation of onshore wind power foresee a drop of the annually installed wind power to around 1500 MW. Reasons for this are:TPF58FPT Limited number of areas that could be used for additional wind power installations; The most economic locations are already utilized, it becomes difficult to find economic locations; Larger turbine heights, which probably would make some locations economic for wind power installations, are more and more limited by codes; The annual decrease of the feed-in tariff makes it even more diffi- cult to find economic locations; at the same time turbine prices are increasing due to higher raw material costs (e.g. steel) and new requirements outlined in grid codes; Network companies have not been able to upgrade the power systems as fast as wind power was growing, hence more and more congestions in the power system slow down the development of wind power. to the congestions, curtailment of wind power 57TP PT Renewable Energy: Employment Effects, Federal Ministry for the Environment, Nature Con- servation and Nuclear Safety (BMU), see allgemein/application/pdf/employment_effects_061211.pdf 58TP PT der-aenderungen-langfassung,property=pdf,bereich=bmwi,sprache=de,rwb=true.pdf can now be used by network companies to reduce bottlenecks, hence wind farm operators face for the first time the risk of not being able to feed its power generation into the grid, which increases the economic risks for the wind farm operator; Repowering, i.e. replacement of old wind turbines with more efficient new wind turbines, often faces similar obstacles i.e. limited network capacity and codes which limit the possibility to install larger turbines; Figure 3-6 shows a forecast by wind power capacity until 2030. The main source of growth here is offshore power generation and that onshore installa- tion will remain quite . Which projects will ultimately be implemented is just as vague at the moment as the effects that re- powering will have, i.e. the replacement of existing generators by more powerful onshore units. Figure 3-6: Forecast for the development of wind power in . Earlier estimates assumed that by 2010 a few thousand MW of off- shore wind power will be installed in German water, but so far any project has been built. The first larger offshore project (60 MW) is scheduled for construction in 2008. The early estimates influenced the price setting of the feed-in tariff for offshore wind farms, i.e. the feed-in tariff was set quite high for the years up to 2010 to allow the development of first offshore demonstration pro- jects, see also Table 3-4. After 2010, the offshore wind technology was assumed to be well established, hence the feed-in tariff drops significantly in the following years. As the development of demon- stration projects has happened, the German government is discussing to significantly increase the feed-in tariff for offshore wind farms for the years after 2010 for the next update of the RES Act planned for 2008.TPF59FPT According to newspaper reports, the first draft of the 2009 version of the RES Act is aiming at a feed-in tariff of 14 c/kWh for the first years to finally kick-off offshore wind power in . The feed-in tariff will drop to 6.9 c/kWh after a few years. The reason for the slow development of offshore wind farms in are: high initial investment costs due to long distance to shore (~100 km) and large water depth for suitable locations; econo- mics of the projects very uncertain particularly due to rising wind turbine prices; Long, complicated and costly permitting process. Nevertheless, so far around 10 projects have been approved for which would lead to around 3,000 MW (in the first phase). Additional projects currently applying for a permit could add another 13,000 MW.TPF60FPT connection issues and responsibility for a connec- tion to shore was long an open issue. This has changed now with the introduction of the Infrastructure law, see Section 3.1.3. 59TP PT The first government documents related to 2009 RES Act formulate a renewable energy target in the electricity sector of for 2020 and for 2030. 60TP PT See also . 3.2Payment Scheme for Renewable Energy Sources Since 1991, electricity produced from renewable energy has been reimbursed via a so called fixed feed-in tariffs, i.e. a Government defined nationally fixed minimum purchase price for renewable energy. In , the Electricity Feed Act, which had been in force since 1991, was replaced by the Renewable Energy Sources Act (RES). The Bundestag amended it again on 1 2004 with the Act Revising the Legislation on Renewable Energy Sources in the Electricity Sector. Another update of the RES Act is sche- duled for early 2009. In the 1990s additional reimbursement, i.e. in addition to Electricity Feed Act payments, could be obtained by joining select projects within the framework of its 250MW of program. In some cases, the states also granted investment cost subsidies, i.e. using certain wind turbine prototypes in a wind project. This meant that in the early 1990s it was often possible to combine subsidy schemes at the national and state level. The feed-in tariff plus additional subsidies added up to a kilowatt hour reimbursement of 18.31 c/kWh for wind power in 1991. Considering an average feed- in reimbursement of 7.44 c/kWh for onshore wind power in 2006, this represents a drop in the reimbursement of wind power of over Renewable Energy Sources Act (2004) For onshore wind power, an initial rate of 8.36 c/kWh has been set for a minimum of five years for wind turbines which come into operation in 2006. Subsequently, dependent on the specific wind resources on site, the feed-in compensation will be reduced to 5.28 c/kWh. This reduction will come into effect at sites with very high yields at the end of the fifth operating year whilst the higher price will remain in force at other sites. This means that over the 20 years, dependent on site quality, there will be an average feed-in compensation of between 5.07 and 8.36 c/kWh. The minimum tariffs decrease, in accordance with the Renewable Energy Sources Act, by a nominal annually for newly operational systems. There- by a system which becomes operational in 2007 will have an initial 61TP PT FCre%20Engl.pdf rate of 8.19 c/kWh, which will be reduced to 5.17 c/kWh after 5 years if they have reached of the reference yield at the plan- ned site. The reference yield is the power production in kWh that a certain wind turbine will produce at a typical inland location with an average wind speed of at 30 meters above ground in 5 years. The reference yield is defined for each wind turbine type available in and varying with hub height.