Plan to cap wind farm land lease payments sparks controversy, may jeopardise new projects

Shortly before Germany’s parliament is set to debate the government’s draft overhaul of renewable energy legislation, controversy has erupted over a planned cap on land lease payments for wind farms.

While a report commissioned by local utilities says the cap could save billions in costs, the renewable energy industry and banks warn it could jeopardise new wind projects.

Amid its push to lower the costs of the energy transition, the government agreed in July to reform support for renewable energy projects.

The plans also include ending guaranteed payments for new small rooftop solar systems, and cutting compensation for future wind and solar farms in areas with grid bottlenecks – both of which are also controversial.

Land lease payments for onshore wind turbines subsidised under Germany’s renewable energy legislation (EEG) are to be capped at 3.5 percent of a turbine’s annual revenue, according to the plans.

This cap could “contribute significantly to lowering the costs of the energy transition, and provide long-term relief for the federal budget,” the association of municipal utilities (VKU) said.

A report commissioned by the lobby group said a cap at 3.5 percent would reduce support payments by a total of around 13 billion euros by 2045, compared to a scenario where lease payments average 10 percent of revenue. 

A 3.5 percent cap would translate into average payments of around 32,000 euros per turbine each year, VKU said.

Leases have already come down significantly from earlier peaks thanks to reforms by the previous government, which forced Germany’s states to make more land available for wind energy.

The economy ministry acknowledges this, but says there is still significant potential to lower support costs, according to a report in newspaper tageszeitung (taz).

But the cap would increase project uncertainties and add red tape, resulting in higher financing costs, 18 banks warned in an open letter to the ministry.

“This results in additional work in terms of auditing, documentation and monitoring for long-term financing,” the letter said, according to the article. 

The German renewable industry lobby group BEE warned land owners would have no incentive to lease their land below market prices, which it said would endanger future projects.

It also criticised that the cap is meant to apply uniformly across the country, regardless of regional differences in existing lease rates. Wind energy projects dependent on suitable sites and cannot simply be relocated elsewhere, the group argued.

Clean Energy Wire. Reproduced with permission.