Germany to double down on wind, solar amid wider energy policy review

Germany is to double down on its renewable energy policy while reviewing coal and nuclear closure plans in response to the heightened threat to Russian gas supplies, according to draft legislation seen by S&P Global Commodity Insights.

The so-called Easter package includes a reform of the renewable energy (EEG) and offshore wind laws, raising wind and solar capacity to an 80% share in the power mix by 2030.

This would require at least a doubling of annual production to 572 TWh, the draft said.

"The new target in the EEG is to make Germany's power system almost completely based on renewable energy by 2035," it said.

Under the current law (2021), the 2030 target share was 65%, while the 100% renewables only envisaged "before 2050."

Near-term, however, the focus was on security of supply with the ministry reviewing closure dates for nuclear, coal and lignite generation.

For nuclear, extended operation for the country's three remaining power plants beyond Dec. 2022 was up for debate if difficult to achieve, energy minister Robert Habeck said Feb. 28.

German reactor operators EnBW and PreussenElectra initially noted challenges in reversing long-established phase out plans but later said that if requested by government they would work towards helping to keep reactors online.

Similar statements were made by coal operators Steag and RWE as well as state leaders of lignite mining regions in the East with regard to returning or delaying closure of coal plants.

German year-ahead power prices rose around 20% over the past fortnight amid the escalation of the Russia conflict trading March 3 around Eur160/MWh amid unprecedented intra-day volatility, EEX exchange data show.

Generation costs for gas plant for the front quarter spiraled above Eur300/MWh March 2 as gas prices soared, S&P Global data showed.

The spread between Q4 2022 and Q1 2023 baseload power widened from around Eur8/MWh Feb.25 to almost Eur50/MWh March 3, exchange data showed.

Annual solar, wind tender volumes

The EEG draft lays out plans to more than triple solar capacity to 200 GW by 2030 via tenders and improved support for smaller projects.

Annual solar growth is to be ramped up to 20 GW from 2028 to 2035 with mandatory roof-top solar on some new buildings.

The capacity floor in tenders is to be raised to 1 MW from 0.3 MW for commercial roof-top and from 0.75 MW for ground-mounted solar PV projects.

For onshore wind, annual tender volumes are to be lifted to 10 GW from 2027 to 2035, aimed at more than doubling current capacity to 110 GW.

Smaller wind developments of so-called citizen projects may not need to compete in the tenders for support contracts with a 18 MW cap for wind and 6 MW for solar projects.

The government also plans a specific onshore wind law in the summer to help unblock growth that stalled due to spatial planning laws, distance of wind turbines to housing and other permitting issues.

For offshore wind, the draft law plans to bring in Contracts for Difference type support contracts for tenders designed and boosted to lift the 2030 target from 20 GW to 30 GW.

For 2023 to 2026 offshore wind tenders were to be boosted to around 5-7 GW from a planned 4 GW capacity for the period.

From 2027, some 4 GW will be tendered each year.

Authorities are already working on making more offshore acreage available for development.

In total, the EEG draft assumes 572 TWh of renewables electricity required by 2030 to achieve the 80% target share.

German wind and solar have generated more electricity so far this year than coal, lignite and gas combined mainly due to record wind speeds in February, TSO data show.

Wind capacity growth however has stalled over recent years due to permitting issues, growing local opposition to onshore projects and the delayed grid expansion to transmit offshore wind into demand centers in Southern Germany.

The new government plans to fast-track permitting for infrastructure projects especially if national security and security of supply is impacted to be included in the planned legislation.

Base case 155 GW solar

Platts Analytics' base case assumes solar capacity will rise to 155 GW by 2030, onshore wind to 95 GW and offshore wind to 26 GW.

"This is a significant acceleration in capacity growth vs current levels but below the new government target given the short lead to 2030," Platts Analytics Sabrina Kernbichler said.

The speed of expansion depended on how successful efforts were in lowering administrative hurdles, she said.

Germany's new 2035 target to exit fossil-fired generation also required a faster ramp up in hydrogen volumes, Kernbichler said.

April 6 target

The ministry (BMWK) was not able to comment on the draft laws, which were in consultation between government departments.

The ministry aimed for an April 6 passage through cabinet, the draft said.

Fast-track regulation to end the green energy levy (EEG Umlage) from July 2022 was due to pass cabinet March 9.

The levy has financed Germany's 120-GW of installed wind and solar capacity over the par 20 years via end-consumer bills.

Due to the sharp rises in wholesale power prices the amount to be financed for existing and new capacity has shrunk and can be financed directly via the federal budget in future.

S&P Global assessed Guarantees of Origin for EU wind 2023 and EU solar 2023 at Eur2.40/MWh.