Photovoltaics - latest developments in Germany

PrintMailRate-it

Solar power is currently cheap as never before. This opens up huge opportunities, not only for own consumption, but also for PPAs.  This means that in many new scenarios, EEG remuneration is no longer the best source of revenue, but only serves to effectively hedge buyer risks. This thus creates opportunities for project developers and investors to implement or acquire further projects. Bifacial and Floating PV additionally contribute to the growing potential of projects. In view of the still existing 52 GW funding ceiling, the currently still positive situation should be taken advantage of in terms of financing and hedging..


Not many things can epitomise the energy transition as much as photovoltaics (PV). PV has already witnessed many dramas and success stories ever since the EEG was enacted in 2000. The rise and the collapse of the German and European PV industry, accompanied by severe cost reductions, have been causing much commotion in the market right from the start. Recently, the abolition of the European import customs has led to further reductions in investment costs and thus energy generation costs, making solar power even more competitive. Due to the favourable market conditions, the increase in PV capacities in the last months of 2018 was close to the target corridor set in the EEG1.

 

Contradictory signals from Berlin and Brussels

The adoption of the Act amending the Renewable Energy Sources Act, the Combined Heat and Power Act, the Energy Industry Act and other provisions of energy law (“Collective Energy Act”) in mid December 2018 has strongly worsened the mood in the German PV industry. The cuts in incentives for residential electricity and for building-mounted PV power plants with a capacity of between 40 kWp and 750 kWp2 are thwarting the trend described above and show that PV is apparently not one of the focal points of the energy policy in Berlin's politics.


The special auctions adopted at the same time have improved the situation in terms of numbers, but the PV was deprived of the foundations to show its real strength, which lies in the implementation of small-scale and decentralised power plants.


By contrast, a positive signal came from the EU when the package of measures "Clean energy for all Europeans - unlocking Europe's growth potential" was adopted at the same time. One of the EU’s targets fixed there is a binding renewable energy target of at least 32 % to be reached by 2030. The package also prohibits imposing levies, surcharges or fees on unsubsidised electricity generated in power plants of less than 30 kWp for own consumption, which should give a significant boost to the decentralised generation of energy for own consumption in the commercial sector3

 

 

PV power plants are even more profitable despite cuts

Despite all contradictory political signals, the PV market still has a lot of potential. On the one hand, it can be said that in the segment where the funding will gradually be reduced to 8.9 ct/kWh by April 2019, roof-top installations are indeed profitable, especially as regards the generation of energy for own consumption.

 

Figure 1: Presentation of how the system of production for own consumption works for roof-top solar installations

 

Equally attractive remains the construction of smaller-scale rooftop solar systems and greenfield plants with a capacity of up to 750 kWp, especially within the 110m range along motorways and railway lines. Assuming conservative premises and a favourably located grid connection point, it is currently possible to achieve total returns on capital of above 5.0 % for greenfield and rooftop solar installations with a capacity of up to 750 kWp. Given the current interest rate situation, PV projects of this size are still lucrative and should be taken into account when considering investments.

 

The path to successful PV projects leads through a thorough current state analysis and a suitable project design.

Because the use of electricity generated in the PV power plant for own consumption is currently most profitable, a first step in any project should be to determine the customer and to analyse its load curve for the amount of electricity to be purchased. By comparing the results of such an analysis with the output of a PV power plant, the optimum performance of the PV power plant can be determined, depending on the target value. At this point, analysed should be also the possibilities of including other energy generation technologies such as block-type thermal power stations (BTTP) or heat pumps or the use of battery systems to reduce the power price through so-called "peak shaving". One of the challenges involved in the direct supply of various final consumers is the metering, which innovative companies however now tackle using digital solutions.


Furthermore, sites with access to conversion areas or areas in the aforementioned 110-metre corridor along motorways and railways, which are suitable for the installation of greenfield systems, are potentially valuable locations for new projects. Dual use areas may also be considered, where synergistic effects between solar power generation and e-mobility can be created, e.g. with solar carports.

 

PPAs and lease as attractive models

If areas in the direct vicinity of electricity consumers are not large enough or not suitable for the planned production of electricity for own consumption, it is also possible to secure one’s electricity sales via a corporate PPA (Power Purchase Agreement). Under such long-term contracts, electricity generated in a specific power generation system geographically distant from the final consumer (in this case a PV power plant) can be marketed (in contrast to merchant PPAs where the electricity is included in the balancing group by the trader). In this way, the electricity price can be secured in the long term for the operator and the consumer, and part of the purchased electricity can be supplied at lower prices and more sustainably. Such power purchase agreements are still relatively rarely used in Germany, but in many parts of the world they have already become a standard tool for regulating the relationships between electricity producers and consumers.
Especially for companies that do not want to get involved with the generation of energy for own consumption, not only the conclusion of a PPA but also lease is a very attractive option. This option enables the consumer or the owner of the site area to achieve profits or savings without any significant additional costs.


Since mixed forms of the models mentioned above are often the optimum and, in particular, PPAs entail uncertainties for both parties to the contract, we recommend obtaining professional advice. Especially in tailor-made solutions, not only the legal advice, but also an efficient use of resources and the management of processes and business structures involving several stakeholders and shareholders, as well as the metering concept, are an important step towards success.


______________________________________________________

1   Working Group on Renewable Energy Statistics; Monthly Report on the Development of Renewable Power Generation and Capacity in Germany – version as of 13/12/2018; 2018; website accessed on 3/1/2019: https://www.umweltbundesamt.de/sites/default/files/medien/372/dokumente/agee-stat_monatsbericht_12-2018.pdf

2 Clearingstelle EEG, KWKG [“Combined Heat and Power Act”]; Energiesammelgesetz [“Collective Energy Act”]; website accessed on 3/1/2019: http://www.clearingstelle-eeg-kwkg.de/eeg2017/aenderung7/material

3 European Commission: Clean energy for all Europeans; 2018; website accessed on 3/1/2019: https://ec.europa.eu/energy/en/topics/energy-strategy-and-energy-union/clean-energy-all-europeans

 

 Newsletter

Contact

Contact Person Picture

Kai Imolauer

Partner

+49 911 9193 3606
+49 911 9193 3549

Send inquiry

 How we can help!

 Events

 Online marketplace for renewable energy-projects

RENEREX_220-breite.jpg

 E-Book Corporate PPA

E-Book Corporate PPA.jpg
We use cookies to personalise the website and offer you the greatest added value. They are, among other purposes, used to analyse visitor usage in order to improve the website for you. By using this website, you agree to their use. Further information can be found in our data privacy statement.
Deutschland Weltweit Search Menu