How Germany reached one-cent solar through bad policy

Renewables International

The second round of auctions for photovoltaics apparently produced the lowest bids in history worldwide – so low that they could not be built. Bidders are gaming the system.

On Friday, Berlin-based PV Magazine reported (in German) on the findings of the Greens in a parliamentary query. By German law, the political opposition has the right to demand information from the governing coalition.

This time, the question focused on the diversity of winners; there is concern that auctions will lead to a small number of winners on a market that has been quite diverse up to now. But the query revealed something even more disturbing.

The lowest bid came in at 1.0 cents per kilowatt-hour; the highest, at 10.98 cents. In the first round of auctions, bidders who were awarded contracts were locked in at the rate they offered. But in this round, the highest winning bid applies to everyone (the policy is called “uniform pricing”). So the party that bid 1.0 cents could easily get nine cents, for instance.

PV Magazine quotes German lawyer Margarete von Oppen complaining that “uniform pricing is practically an invitation to speculate, and that is what we got in the second round of auctions.”

It should be noted, however, that the extremely low bid is not necessarily one of the winners. Indeed, Undersecretary Rainer Sontowski is also quoted saying that artificially low bids clearly intended to win the contract “are to be avoided.” Nonetheless, this low bid is merely the extreme; it will be hard to know, for instance, whether a bid that looks suspiciously low – say, 8.0 cents – is legitimate or gaming.

As for the diversity of winners, the Citizen Energy Alliance (BBEN) also announced last week that none of the winners are community projects (in the sense of “Bürgernergie”); specifically, no cooperatives or natural persons were awarded a contract. BEEN vice-chairman René Mono says that auctions clearly “push back small market players” (report in German). No community projects won in the first round either.

The winners and the uniform price will not be announced until the beginning of September. The deadline for a security deposit is due on 1 September. Bidders who cannot produce the deposit by the deadline will be disqualified and replaced by other bidders in the queue.

Source: Renewables International. Reproduced with permission.