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Rising offshore wind electricity capacity to 'crash' German power prices at night, says analyst

10 Dec 2012 18:07:48 | edem

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German offshore wind power capacity is forecast to rise strongly over the next five years, despite the ongoing issue of the cost of grid connection, which has caused some projects to be delayed. The main impact on wholesale power prices could be seen during times of low demand, such as at night, analysts agree.

Offshore wind power is a pillar of Germany's strategy to increase renewable power generation, because it would allow steadier full load generation compared with onshore wind. Capacity is forecast to increase to about 8GW from around 220MW currently installed

The test wind park Alpha Ventus, located 60km off the German coast, achieved 4,500 full load hours in 2011, more than the expected 3,900. The 60MW park supplied about 267GWh that year.

But analysts dismissed claims that offshore wind power could provide baseload capacity, even if they are running 4,500 hours of full load a year.

The main impact on wholesale power prices will be at times of low demand, particularly at night when the wind is stronger, UBS analyst Per Lekander told ICIS on Friday. The impact of offshore wind power generation would be felt the strongest "at night on a winter weekend", he said. Wind power generation is traditionally strongest in winter.

As a general rule, if wind power generation reached 30% of the required demand capacity, then "prices will crash", Lekander said.

But as offshore wind power generation is greatest at night, the impact on power plant profitability should not be as detrimental as that of solar power, Lekander said. Additional peak-time solar generation has undermined gas-fired plant profitability in particular (see EDEM 13 November 2012).

Grid uncertainty

The German government passed a bill last month including measures to break the investment deadlock in offshore wind power installations (see EDEM 29 November 2012). The bill was hailed as a "milestone" by the economy ministry, enabling grid operators to pass on the cost of grid connection delays to end-users. But critics were quick to point out that this would not be enough to address the lack of financing for transmission system operator (TSO) TenneT, which was struggling to meet the cost of connections.

According to data from developer Windreich, only five of the planned projects have a guaranteed connection date and nine have no expected completion date, which means they cannot claim compensation for any delays.

EnBW is the latest operator to delay development, having put its Hohe See project on hold in November (see EDEM 14 November 2012).

"We think the amendment is basically going in the right direction," EnBW said in an emailed statement, "but we are still concerned that the regulation is not sufficient for Hohe See's situation. The question about a date when the grid connection will be delivered remains open."

In a statement responding to the passing of the bill, transmission system operator TenneT said: "In the end, investors will decide about the success of the liability regulation."

Near-term capacity growth

It remains to be seen whether TenneT will be able to finance a potential additional sum of €15bn (see EDEM 17 August 2012) on top of the €6bn it has already invested, but a number of grid connections are expected to be ready next year in time for the next wave of wind parks.

Three to four more wind parks with a combined capacity of between 700MW and 1.1GW could be fully operational by next winter.

Annual capacity could grow exponentially, with potentially 870MW added in 2014, 1.6GW in 2015 and 2.1GW in 2016.

This capacity will come online successively, with turbines starting to supply power to the grid as soon as they are erected.

For example, the first turbines for the 400MW Global Tech 1 wind farm are expected to be installed in February, depending on the weather, a spokeswoman for the project said on Thursday.

In some cases, delays in grid connection can be avoided by laying interim cable to existing grid connections, as is the case with Global Tech 1.

Global Tech 1 will supply the Ruhr, a major industrial area and home to about 5.1 million people, through an existing land power line. MD

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