Renewable Energy Auctions

Germany began auctioning off renewable energy projects in 2017, a fundamental shift from its previous policy of feed-in tariffs. Citizen cooperatives can also bid on projects, but are at a competitive disadvantage to corporations, who are now the chief owners bigger projects such as of offshore wind farms.

Germany began holding auctions for renewable energy, rather than subsidizing projects with feed-in tariffs, in 2017. Previously, subsidies were determined by the German Renewable Energy Act (EEG).

At first glance, it seems like auctions are a good policy tool. Proponents argue that small projects of 750k or less are still eligible for feed-in tariffs, so auctions are a way of getting big renewable projects done more cheaply and quickly. Indeed, prices have hit record lows: solar PV was sold for 43 euros per megawatt hour in 2018, and some bidders for offshore wind accepted wholesale rates (they will not be given any subsidies). Nevertheless, these prices refer to rates that are sometimes years in the future, not current prices. And in fact, it is possible that once nuclear power goes offline for good in 2022, wholesale rates will once again climb.

In 2018 a new type of auction was tried for the first time: a technology-neutral auction, with onshore wind and solar PV pitted against each other. The goal was that both would compete on an equal footing, but wind was at a clear disadvantage – solar bids won the day, but at higher prices than previous (technology-specific) auctions. Solar and wind associations were displeased with the results, as was the economy minister, who commented that the Energiewende needs a mix of technologies to succeed.

Critique of auctions

Auctions have been criticized for putting limits on renewable energy – only a certain amount of megawatts are up for grabs. In addition, auctions have changed Germany’s previously community energy-oriented system – power is moving from the hands of citizens to the energy utilities.

In Germany’s first auction for onshore wind in 2017, newspapers reported that over 90 percent of the bids went to “community projects.” Under the law, community projects were listed as “non-competitive bidders,” meaning they could build their projects at the strike price from the auction. They received this protected status because it would be otherwise too difficult to compete with utilities, who can spread lost revenue from losing bids across multiple projects, whereas communities usually pursue only a few local projects. The compromise reached allowed community projects to place non-competitive bids without having all their construction and environmental permits granted; the permit process can be expensive, and a losing bid could cost a six-figure sum. However, following complaints that some of the “community projects” were actually developers who had organized groups, the process was revised again.

Now, “community projects” must be for projects of six or fewer wind turbines, with a maximum 18 megawatt capacity. In addition, the “community” must consist of at least ten people, more than half of whom have lived where the wind farm will be constructed for over a year. In addition, the voting rights must be shared equally between members: nobody can have more than 10 percent of the vote.