BDEW Proposal for Auctioning Support for Freestanding Solar Power Plants under the EEG

The Federal Association of the Energy and Water Industry (BDEW) has presented a proposal for auctioning financial support for freestanding solar power plants under the recently revised Renewable Energy Sources Act (EEG 2014), which aims for easy implementation, equal participation and greatest possible diversity of participants as well as cost-efficiency.

1. Background Information

The EEG 2014 mandates that financial support for renewable energy sources and mine gas and its specific amount shall be determined through auctions by 2017 at the latest (see Section 2 para. 5 sent. 2 and Section 55 EEG). This is to make financial support more market-oriented and cost-efficient and to meet the requirements of the EU Guidelines on State aid for environmental protection and energy 2014-2020. Experience with auctions shall be gained in pilot projects with freestanding solar power plants, the auctions for which will be organised by the Federal Network Agency in accordance with an ordinance regulating the matter (see Section 88 EEG 2014). The Federal Ministry for Economic Affairs and Energy (BMWi) has submitted the key points of the ordinance for consultation. Auctions shall start in 2015.

2. BDEW Proposal

Sufficient competition was crucial for the success of the auctions, only then auctioning would lead to cost-efficiency effects, BDEW points out. The recommendations therefore focus in particular  on strengthening competition.

Important aspects of the BDEW recommendations are the following.

a) Auction Design and Price Determination

BDEW advocates in favor of a simple, easily comprehensible and transparent auction design and recommends uniform-price auctions. In this regard BDEW differs from the BMWi key point paper that proposes pay-as-bid auctions as a simple way of price determination. While in a pay-as-bid auction, prices paid to winning suppliers are based on their actual bids, under uniform-price auctions, all suppliers receive the same market-clearing price, set at the offer price of the most expensive supplier chosen to provide supply.

b) Restrictions for Land on Which Pilot Projects Can be Carried Out

In view of the restrictions that exist pursuant to Section 51 para. 1 no. 3 EEG 2014 with regard to the land on which freestanding solar power plants may be set up, BMWi asked stakeholders in the key point paper for their opinion.

BDEW recommends to repeal the restrictions in order to increase competition. The restrictions were incorporated in 2010 in view of a PV boom that had gotten out of hand, but were no longer necessary as the EEG 2014 provided for a growth target for solar power (of 2,500 MW net, see Section 3 no. 1 EEG 2014), BDEW says.

c) Participants

In line with the BMWi key point paper, BDEW wants to secure diversity of participants. The association wants to rule out financial capacity as the only decisive factor. To this end it recommends that the specific advantages of small and middle-sized companies and cooperatives are considered in a pre-qualification process. Under the BDEW procedure participants can chose from three options that differ with respect to the material requirements for participation, security deposits and bid bonds.

d) Penalities

The BDEW proposal also contains penalties if plants for which bids were successful are not completed in time or not commissioned at all. Besides it includes the right to return or transfer the right to receive financial support awarded in an auction. In the key point paper BMWi had expressed reservations with regard to a transferability.

e) General Remark

One had to bear in mind that the experience gained with the pilot projects for freestanding solar plants could not be directly applied to other renewable energy sources, e.g. onshore wind power, due to their particularities, BDEW pointed out, recommending an accompanying evaluation of the pilot projects. This aspect was also highlighted in the BMWi key point paper.

Source: BDEW

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