December 14, 2012

Key offshore wind liability law is passed by German Bundestag

Germany’s Bundestag, the lower house of parliament, on Thursday approved a law intended to jump-start the country’s stalled offshore wind industry, with the upper house Bundesrat now the only remaining obstacle.

The Bundesrat is expected to vote on the law on 14 December, with industry sources optimistic that it will pass.

Only several weeks ago it was unclear whether parliament would have time for the law before the end of the year, and its passage would end a challenging 2012 for the German offshore wind industry on a high note.

The most important part of the law is a provision capping the liability on transmission system operators (TSOs) in the event of delayed or damaged offshore grid links, which observers believe will finally allow pension funds, insurance companies and other institutional investors to begin pumping capital into the sector.

Critically, the Bundestag lowered the top damages TSOs – principally TenneT – would be eligible for to €17.5m ($22.7m), down from the €100m figure included in earlier drafts. However, TSOs would be on the hook for as much as €110m in the event of being found “grossly negligent”.

The bill also allows TSOs a wider scope for flexibility in linking up offshore wind farms, with advanced projects able to patch into other offshore transmission clusters than the ones they were originally assigned to in order to minimise delays.

“The most important thing is that there’s now a law on the table with a solution for the liability issue, so there can be no more excuses from TenneT saying it can’t find an investor to help finance the offshore grid,” an industry source tells Recharge.

“There are still some potential downsides to the law from the perspective of developers, but they are mostly minor issues that could be repaired at a later date."

Windreich, which is developing a number of early projects, says the law will “facilitate” discussions with investors.

Some of the outstanding issues may be addressed as part of the Offshore Grid Development Plan under consultation, which will be formally presented next spring and enter force in late 2013 or early 2014. That plan will form the basis for the future timetable of German offshore grid connections.

One key concern of industry is that the so-called “compression model” option that has been offered to developers since 2011 is meant to be phased out in 2017.

The compression model allows developers to receive a higher feed-in tariff early in the life of their project, before reverting to a lower-than-normal figure later on. Nearly all developers had banked on taking that option.

But given the multi-year delays for many grid projects, a number of early developments are unlikely to meet the 2017 cut-off.

Separately, the European Commission has reportedly taken up an investigation into whether Germany’s flagship renewable-energy law violates trade law – looking specifically at the exemption of energy-intensive industries from paying for clean-energy subsidies.

The UK this week announced it will offer similar exemptions to industry.

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