WIND + SUN = POWER: Trends and developments in the electricity sector

published on 30 April 2024

The following article provides a brief overview of the news in the context of the electricity sector with a focus on photovoltaics (PV) and onshore wind in Germany (as of April 19, 2024). It provides a detailed overview of the trends on the electricity market and developments in the Federal Network Agency tenders. In addition, the currently discussed political reforms „Solar Package” and „Net Zero Industry Act” as well as the „Power Plant Strategy” are discussed.

Overview of the electricity market

The average spot market price as well as the market value of solar and the market value of onshore wind are showing a downward trend. The following figure shows the development of these parameters for the period from 2023 to today. According to the transmission system operators, the average spot market price in March 2024 was 6.47 ct/kWh, the market value of onshore wind was 5.538 ct/kWh and the market value of solar was 4.965 ct/kWh. The last time the market value of solar was below 5 ct/kWh was in May 2021. The average spot market price for April 2024 is 5.802 ct/kWh (as of April 22, 2024). The trend described above is therefore continuing and it is clear to see that the energy crisis is hardly having any impact on the electricity market. A further reduction in the market value of solar is to be expected in the future, particularly due to the increased expansion of PV (cannibalization effect).

Overview of Federal Network Agency tenders

in the context of the RE tenders, the Federal Network Agency also announced in March 2024 that the maximum value for 2024 would be 9.18 ct/kWh, as in the previous year. Without this new determination by the Federal Network Agency, a maximum value of 7.28 ct/kWh would have applied this year. The Federal Network Agency also published the results of the two tendering rounds on February 1. The tendering round for solar installations in the 2nd segment (installations on buildings or noise barriers) was significantly oversubscribed. With a tender volume of 263,236 kW, a permissible bid volume of 354,640 kW was submitted. The average, volume-weighted award value was 8.92 ct/kWh. In total, bids between 6.90 ct/kWh and 9.48 ct/kWh were awarded. The average, volume-weighted award value has fallen continuously over the last four tender rounds. In the tendering round a year ago (February 2023), this was still 10.87 ct/kWh. The other February tender round concerned onshore wind generation technology. This was significantly undersubscribed. With a tender volume of 2,486,319 kW, a volume of eligible bids amounting to 1,795,380 kW was submitted.

The average volume-weighted award value was 7.34 ct/kWh and thus at a similar level to previous tendering rounds. The maximum value was 7.35 ct/kWh. Due to an imminent signing, the Federal Network Agency reduced the tendered volume for the wind onshore bidding date on May 1, 2024 to 2,795,480 kW (instead of 4,093,587 kW).

Overview of political reforms and strategies in the context of renewable energies / electricity sector
After much discussion, the traffic light parliamentary groups agreed on Solar Package 1 on April 15, 2024. Solar Package 1 contains a series of measures designed to accelerate the expansion of PV and reduce bureaucracy. Among other things, the draft amendment stipulates that ground-mounted PV systems with an installed capacity of up to 50 MW (currently 20 MW) are eligible for funding under the EEG. In a joint letter dated April 17, 2024, energy industry associations asked the minister presidents of the federal states and the state ministers for energy to „[...] advocate to the Bundestag that Solar Package 1 be passed in the [...] session week starting April 22 in the Bundestag [...] and to ensure that a resolution is possible in the plenary session of the Bundestag on April 26.” The background to the associations' request to waive the deadline is to enable the conversion of existing wind energy zones into acceleration zones as part of the requirements of the EU's Renewable Energy Directive (RED III).

The much-discussed resilience bonus is not part of the solar package. As part of the press release on the agreement of the solar package, Matthias Miersch, deputy chairman of the SPD parliamentary group, made the following statement: „We call on the German government [...] to swiftly implement the Net Zero Industry Act and, in particular, to strengthen the domestic solar industry.” The Net Zero Industry Act (NZIA) was introduced by the European Commission in March 2023 and aims to expand the EU production of technologies (including PV and wind energy) that are important in the context of decarbonization. The EU wants to produce 40 % of its annual demand for transformation technologies itself by 2030. The NZIA also stipulates that non-price-related criteria should also be taken into account in auctions for renewable energy technologies. On February 6, 2024, the Council and the European Parliament reached a provisional agreement, meaning that the NZIA must now be finally adopted by both parties.

In addition, Federal Chancellor Olaf Scholz, Economics Minister Robert Habeck and Finance Minister Christian Lindner agreed on key aspects of a power plant strategy on February 5, 2024. The aim of this strategy is to ensure security of supply even at times when there is little solar and wind energy. In detail, it was agreed that „[...] new power plant capacities of up to 4 x 2.5 GW as H2-ready gas-fired power plants should be put out to tender in the short term as part of the power plant strategy [...]”. The complete conversion to hydrogen is to take place between 2035 and 2040. Furthermore, concepts for a capacity mechanism are to be developed. These should be „operational” by 2028 at the latest.

In summary, the momentum is increasing strongly, particularly in the context of Solar Package 1. This aims to adopt various regulations that are relevant to the construction of PV systems. Regulatory framework conditions for future PV projects may therefore change as a result of the solar package, but also due to the upcoming EU electricity market reform and adjustments to the electricity market design. An update on the development of the electricity sector will follow in the next issue of RE|news.