German solar power growth to reach 2.5GW target this year or next

04 April 2018 05:28 Source:ICIS

LONDON (ICIS)--German solar power capacity growth is expected to pick up further and reach the 2.5GW annual expansion target either this year or next.

“They will reach the target. Maybe not this year, but next year they will,” said Bengt Longva, analyst at consultancy Nena.

The target could even be hit as soon as this year, according to Bruno Burger, expert at the Fraunhofer ISE solar energy research institute.

Therefore, traders can expect lower peaks-baseload ratios at the German wholesale electricity market looking ahead compared to those seen over the last few years.

Solar power output mostly occurs in peakload hours which deliver from 08:00-20:00 on working days.

Reasons for slowdown

Germany’s solar power expansion rate has been volatile. Installed capacity jumped by 7.6GW in 2012, but growth then slowed to 1.2GW by 2014 as Germany introduced subsidy degression dependent on capacity growth. Based on a formula set in law, solar subsidies declined gradually until the fourth quarter of 2015, when capacity growth was too low to trigger any additional degression.

In 2016, Germany decided to shift subsidies for solar installations above 750kW from a guaranteed payment model to competitive tenders.

It held pilot solar tenders in spring 2015 and in September of the same year. This was the only financing mechanism for ground-mounted solar plants. The timing contributed to the expansion slowdown since the solar plants successful at tender have two years to become operational.

Recovery reasons

As tendered solar capacity has started to come online, expansion quickened to 2.3GW in 2017.

Also, the tendered volume has increased from around 500MW annually in 2015-16 to 600MW in 2017.

Most German solar capacity that comes online is from small installations that continue receiving guaranteed subsidies.

In summer 2017, Germany approved an additional subsidy scheme, covering residential solar panels in buildings occupied by tenants which produced electricity for self-consumption, with a 500MW annual cap. This has also contributed to expectations of an increase in the solar expansion rate.

New coalition

Solar expansion could even exceed the 2.5GW target, albeit on a temporary basis, very soon as the new governing coalition aims to auction 4GW of solar capacity on top of regular tenders in the near-term.

It cannot be taken for granted though that the additional capacity will be tendered, according to Burger.

The coalition treaty said additional solar and wind power capacity will be tendered provided the German grid can accommodate this.

According to a study Fraunhofer ISE published last month, newly built German solar and onshore wind plants in good locations are by now cheaper than new fossil fuel fired plants as renewable energy technologies are developing.

However, high renewables capacity creates challenges for grid stability, hence the condition in the published coalition agreement. laura.raus@icis.com

By Laura Raus