Germany moves to contain costs, maintain renewables growth

Chancellor Angela Merkel’s cabinet last week backed changes to Germany’s clean-energy law to try to slow gains in power prices and reduce dependence on fossil fuels.

The bill aims to contain the costs of the German energy transition – or Energiewende – by controlling renewables growth, enhancing market integration and broadening the base of consumers paying for the process. It will now be discussed by both houses of the German parliament and – if all goes to plan – go into force on 1 August 2014.

One of the most debated provisions of the new bill was the cost-sharing issue and the EEG surcharge discounts granted to energy-intensive industries. If no changes are made, all consumers will be required to pay at least 15% of the surcharge.

The country’s renewable power targets are not changed under the EEG reform. The target shares of renewables in total consumption remain at 40-45% in 2025 and 55%-60% in 2035. Nevertheless, the reforms have raised concerns about whether the original targets are still achievable.

Bloomberg New Energy Finance analysis suggests that the measures included in the draft would not jeopardise Germany’s ambitious 2020 targets of 35% renewables in the electricity mix. The 2025 and 2035 targets also seem realistic. Even if annual solar and wind capacity growth drops by an average of 2GW per year after 2020, compared to an average expected growth of 5.5GW per year in 2018-20, the targets will be met. More details can be found in Bloomberg New Energy Finance’s Analyst Reaction The EEG reform – new means to achieve old ends?

Elsewhere in Europe, Spain is also considering revisions to its renewable support system. Bloomberg BNA reported last week that Spain’s National Markets and Competition Commission, or CNMC, said the renewable energy sector could lose EUR 1.7bn ($2.4bn) this year because of changes to government compensation.

Spain is in the midst of a complex overhaul of the national electricity system that retroactively cuts previously committed government subsidies for renewable energy production. Instead, producers are to be remunerated in accordance with what the government calls ‘reasonable returns’ on investment.

In a 140-page report, CNMC tried to determine the potential effects of the government’s forthcoming order on compensation for electricity producers using renewables, cogeneration and waste. “The CNMC estimates the new compensation benchmarks would reduce regulated revenues for the lot of affected installations by EUR 1.7bn euros in 2014,” the regulator said in a statement on 8 April.

In manufacturing news, JA Solar Holdings, the world’s third-biggest solar-cell maker, said last week it is considering building a factory in the US or another country to bypass trade sanctions. The Shanghai-based company would join other Chinese solar-panel makers, including ReneSola and China Sunergy in looking to manufacture abroad, as trade disputes threaten exports. The US in 2012 imposed anti-dumping duties of as much as 250% on solar cells from China and anti-subsidy penalties of about 15%.

JA Solar also revealed more positive business news, stating that first-quarter shipments will be higher than the company’s earlier forecast. Shipments for the quarter will exceed 620MW, higher than a March forecast of 580MW to 610MW, it said in a statement. JA Solar’s upward revision contrasts with competitors Trina Solar and Yingli Green Energy, which said last week that first-quarter shipments would be lower than expected.