German cabinet passes draft law on offshore wind

BERLIN Wed Aug 29, 2012 8:49am EDT

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BERLIN (Reuters) - German Chancellor Angela Merkel's cabinet approved a draft law on Wednesday to accelerate the expansion of offshore windparks, a crucial part of a planned shift to green energy from nuclear.

While Germany is making headway with its renewables targets due to rapid growth in the solar and onshore wind sectors, progress on offshore wind has been slower because of higher than expected costs and questions over liability.

The draft law aims to overcome some of the risks linked to building wind platforms at sea, which has deterred potential investors, by passing some of the cost to consumers.

Originally, grid firms responsible for building cables from the windparks to the mainland were supposed to compensate plant operators for failures in the connections.

Such risks were too great for companies such as Dutch TenneT which has run into major problems with its connections from offshore plants to the German network.

The new law imposes an extra charge on consumers - average households will pay about 10 euros a year, amounting to a total of about 750 million euros.

"The energy switch is a huge, long-term project which demands all our efforts and it cannot be completed without a cost. The new rules ensure there is a fair distribution of the burden," said Economy Minister Philipp Roesler.

The law, due to take effect later this year, also gives more leeway to grid operators such as TenneT and 50Hertz, jointly owned by Belgium's Elia and Australian Industry Funds Management (IFM), to determine connection dates.

Germany's grid agency head Jochen Homann told Reuters sharing liability between the various parties was the only way to secure the investment needed in the offshore branch.

"But even more important is the offshore grid plan, which will give grid operators reliable information on which parks must be connected and when," said Homann.

TARGETS

The proposal is designed to ensure Europe's biggest economy can meet its goal of installing more than 10,000 megawatts (MW) of offshore capacity by 2020, and 25,000 MW by 2030, to replace 20,500 MW in nuclear capacity gone by the end of 2022.

So far only about 550 MW in offshore capacity has been installed, according to Germany's grid agency. However, Homann said the government's goal was still realistic.

Firms have welcomed the new law but say more needs to be done to get the power grid connected to offshore turbines and that the complicated bureaucracy linked to the construction of wind parks needs to be simplified further.

The VKU association of municipal utilities supported the plans which it said provided some security for investors in offshore turbines.

"Lawmakers must, however, make sure that small users are not burdened with extra costs" said the VKU.

The offshore sector has expanded faster in Denmark and Britain but the platforms off Germany are being built further away from the coast and in deeper water, making the upfront financing even greater.

Germany aims to derive at least 35 percent of its power from renewable sources by 2020 from 25 percent, rising to 80 percent by 2050, the bulk of which is due to come from offshore wind.

However, Altmaier has suggested Germany may have to slow down its "green revolution" due to the high costs involved which are being passed on to consumers.

Sources in the renewable sector say the government, worried about a big hike in consumers' electricity bills a year before an election, may retreat on its targets for offshore.

(Additional reporting by Christoph Steitz, Andreas Rinke, Vera Eckert.; Editing by Gareth Jones and William Hardy)

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