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BERLIN/FRANKFURT (Reuters) - Germany approved 807 megawatts (MW) of capacity at onshore wind parks on Friday, saying the price at which it awarded the projects came below expectations in a sign that competition in the industry will lead to lower prices for consumers.
The projects were approved at an average price requiring a subsidy of 5.71 euro cents per kilowatt hour (kWh) of power, the economy ministry said, representing a price reduction of 20 percent on previous prices.
The results are keenly watched by turbine manufacturers, project developers and utilities after recent offshore wind park auctions included bids for zero subsidy projects for the middle of next decade as the industry cuts costs.
This is the first auction for onshore wind under the latest changes to the renewable feed-in tariff law (EEG 2017).
Rather than guaranteeing a fixed price for 20 years, only those operators that can generate electricity from wind at the lowest cost and passed to consumers via their electricity bills, are given a construction license within a fixed capacity.
The energy regulator, the Bundesnetzagentur, said 70 projects were picked from 256 bidders with a joint volume of 2,137 MW, including three from utility Innogy.
President Jochen Homann said there was a "satisfactorily high level of competition" and "a high quality of bidding."
He also noted that 93 percent of the winners of allocations were citizens' co-operatives, that band together to build turbines and share profits, and were given more favorable terms for execution than big commercial players in order to stimulate acceptance by, and benefits to, local communities.
Wind energy accounts for over half of Germany's renewable production in its long-term shift away from reliance on fossil fuels, that it wants to have largely in place by mid-century.
Two further rounds for onshore wind are planned later this year to reach a total capacity volume of 2,500 MW, the annual expansion rate targeted by the government.
"The sector has to face tougher conditions, that's certain," said Klaus Bader, head of energy at lawyers Norton Rose Fulbright's Munich office, adding either developers' margins, turbine prices, operational or financing costs should come down, or investors would need to accept lower returns.
Reporting by Markus Wacket and Vera Eckert; Writing by Joseph Nasr, editing by David Evans; Editing by Paul Carrel and David Evans