Govt’s proposed grid reform could significantly increase wind energy subsidy costs – environment agency

The German government’s proposed changes for connecting renewables to the grid could increase wind energy subsidies by up to 40 billion euros, according to an analysis from the Federal Environment Agency (UBA) seen by energy and climate news service Tagesspiegel Background. 

Economy minister Katherina Reiche from the governing Christian Democrats (CDU) party has proposed adding a “redispatch clause” to Germany’s energy industry law. The clause is intended to stop renewable projects from overloading the grid in areas at risk, by only connecting new projects if the developers agree to waive compensation for grid curtailments for ten years. 

The clause would apply in areas where more than three percent of renewable energy was curtailed in the previous year. An analysis from green energy consultancy Enervis said that this could affect more than 45 percent of planned wind energy projects, wrote Tagesspiegel. 

However, UBA warned that the redispatch clause is “not an expedient measure” because it would deter many projects from entering tenders for government support. Less competition would result in higher average winning bids, leading to a higher market premium for wind operators and greater payouts over the 20-year period.

More and more wind farms, solar parks and battery projects in Germany are queuing for grid connections, while a growing number of existing renewable plants need to be paid to switch off during periods of peak generation. In response, the government is working on plans to cut costs with a “grid connection package”. The reforms could strip renewables of their privileged grid access – a cornerstone of the country’s energy transition that has long provided investment security. While researchers agree Germany must better integrate renewables with grid expansion, many doubt the proposed reforms are the right solution.