By 2017, Germany aims to do away with feed-in tariffs and switch to reverse auctions. A new study by the German Institute for Future Energy Systems (IZES) compares the two policies in a study (PDF in German) published in May. Craig Morris starts an overview of the discussion with the presentation of the background today.

PV growth in Germany has surprised most observers. (Photo by Andrewglaser, CC BY-SA 3.0)

The German success story with renewables is the result of a policy; the technology is the same everywhere. If you are not familiar with feed-in tariffs, see our presentation here. Basically, a fixed rate high enough to provide a modest return of around six percent is paid per kilowatt-hour of renewable electricity sold to the grid, and green power must be purchased even if conventional power plants have to ramp down.

The option being proposed is “reverse auctions,” which go by a number of names: requests for proposals (especially in the US), calls for tenders (in the EU), and bidding processes. In an auction, things are sold to the highest bidder; in a reverse auction, the roles of buyers and sellers are reversed, and the buyer takes the lowest bid from the seller.

In Germany, the cost of the energy transition has become a major issue – particularly for small and medium sized enterprises. They are the ones that bear the brunt of the cost burden, with energy-intensive industry being largely exempt from the renewables surcharge.

Another issue that has not been as openly addressed is the installation rates of various technologies. Up to now, everyone can simply build whatever they get permits and funding for. The result has been a boom in solar out of proportion to the growth rate of wind in particular. One goal of Germany’s current energy policy reform is to ensure a better coordination of the expansion of renewables while controlling the costs and an improved management of distributive renewable energy generation with the rest of the power system, particularly fossil fuels..

Most scenarios, such as the official Leitstudie (essentially, the roadmap for the Energiewende – you can find the German document here), have far more wind power capacity installed relative to PV. For instance, the Leitstudie of 2011 (the most recent one) has 51 GW of onshore wind and 32 GW of offshore, a total of 83 GW – compared to only 67 GW of PV by 2050. At present, however, we have slightly more PV than wind installed.

PV can grow much faster than wind in particular for several reasons:

• often, no special permits are required – for instance, none are needed for most buildings;
• wind farms require measurements of wind velocities roughly 100 meters above ground, requiring specialist knowledge, whereas for PV you only need to know where south is and whether your array would be shaded; and
• a single wind turbine (the smallest wind farm possible) can easily cost more than 1 million euros, enough to install nearly a megawatt of PV in Germany, a pretty big solar project – so the threshold to get involved in PV is very low relative to wind power.

Under the current bill expected to become law in August, Germany would have 2.5 GW of onshore wind added each year along with 0.8 GW of offshore wind. In addition, 0.1 GW of biomass could be built. The annual target for PV is also 2.5 GW, but that target is perhaps less important than the absolute limit of 52 GW for solar feed-in tariffs; though this target has not yet been specified as law, it is also expected to be reached several years before the end of this decade.

In other words, by 2017 reverse auctions are to replace feed-in tariffs, partly at the behest of Brussels. In my next post, I discuss what the IZES study says about the matter.

Craig Morris (@PPchef) is the lead author of German Energy Transition. He directs Petite Planète and writes every workday for Renewables International.