German Minister Declares Pilot Solar Auctions A “Complete Success”

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Germany piloted a new system for setting the price paid for electricity from ground-mounted photovoltaic arrays in 2015. Instead of receiving a government-set feed-in tariff, interested parties bid in three solar auctions for a share of 500 MW of capacity.

On Wednesday, Germany’s federal minister for economic affairs and energy, Sigmar Gabriel, declared the pilot auctions a “complete success,” noting they had been “received well by market participants.” He also said he wanted to transfer other renewables to the bidding process. Under the country’s Renewable Energy Act 2014, the new system should be the norm from 2017.

However, the new process, which was introduced in part under pressure from the EU Commission, was initially met with criticism.

Craig Morris highlighted that the winners have 24 months to finish winning projects despite experience showing that ground-mounted arrays can be completed in just a few months. This means that while winners have secured a price that reflects the current market, they can “sit back and wait for 18 months as global PV prices continue to erode.”

Indeed the prices per kWh secured through the first two of the three auctions (€0.0917 on average and €0.0849 respectively) were in fact higher than the feed-in tariff would likely have been in two years’ time, which Morris puts at €0.0843.

Nevertheless, German policymakers are now free to distance themselves from these prices by pointing to market forces.

As fellow CleanTechnica writer Karl-Friedrich Lenz noted after the first auction, “the correct comparison would be to compare the result of the auction to whatever the market pays for projects finished two years from now, not to compare with projects already finished at today’s cost.”

Interestingly, the third auction went on to set a price of €0.0800 – just under what the feed-in tariff would likely have been in two years. However, under the latter two auctions the highest successful bid will be paid to all successful parties – not the price they actually submitted. This led to increased strategic behavior with extremely low bids being made, sometimes for less than €0.01 /kWh. Thus it remains to be seen whether these arrays actually materialize or successful bidders pay the fine of up to five percent of the investment sum for not realizing a project.

Nevertheless, a questionnaire carried out by the German Federal Network Agency found that 75 percent of the operators intend to realize their projects and the majority within the first year. The government report on the pilot auctions notes that should the actual implementation rate prove “unsatisfactory” in 2016, the level of fines or the volume put to tender must be reconsidered.

The minister’s upbeat comments are also incongruent with BNEF’s reporting of a dramatic slow-down in investment in renewables in Germany in 2015: “Germany invested $10.6bn, down 42% [on 2014] on a move to less generous support for solar and, in wind, uncertainty about how a new auction system will work from 2017.”

Stay tuned.

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