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

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

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​Published on 5th December 2024​

The article series ‘WIND + SUN = POWER’ provides an overview of the latest news in the context of the electricity sector with a focus on photovoltaics (PV) and onshore wind in Germany (as of 16 October 2024). The following first provides an overview of the current expansion of renewable energies, the development of electricity prices and the results of the current EEG Federal Network Agency tenders. It then focuses on news, measures and reforms in the context of the transformation towards a climate-neutral electricity market s​​ystem.1
 

Development of renewable energy expansion​

According to Energy Charts, the amount of renewable electricity generated from January to June 2024 reached a new record of approx. 137 TWh. This corresponds to a 65% share of net public electricity generation (previous year: 128 TWh or 57%). 

Wind energy continues to be the technology that generates the most electricity (1st half of 2024: 73 TWh; 1st half of 2023: 67 TWh). Photovoltaic systems generated 30 TWh in the first half of 2024 (1st half of 2023: 28 TWh). Overall, net public electricity generation totalled 210 TWh in the period under review (1st half of 2023: 222 TWh). PV expansion is also continuing. After a total of 15.3 GW of installed capacity was added in 2023, there was a net addition of almost 8 GW in the first half of 2024. However, while a net capacity of around 1.4 GW was added each month until July 2024, according to the Federal Network Agency's renewable energy statistics, the additions averaged ‘only’ 0.9 GW in the months of August and September.

Total PV capacity at the end of September 2024 is 94.5 GW. Wind expansion, on the other hand, is progressing moderately. A net capacity of 0.9 GW was added in the first half of the year. Total onshore wind capacity at the end of September 2024 was 62.6 GW. 2
​​​​

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 continue to show a downward trend following the electricity price peak (partly as a result of the Russian war of aggression in Ukraine) (see figure). The market value of solar in particular remains at a low level (also in comparison to the average spot market price). In September 2024, the average spot market price was 7.831 ct/kWh, the market value of onshore wind was 6.266 ct/kWh and the market value of solar was 4.512 ct/kWh.3

Entwicklung des Strommarktpreises
Development of spot market price, market value and number of negative hours
Similar to the last edition of the article series, the figure has been supplemented by the hours with negative prices categorised according to the time of occurrence. In the summer months of this year in particular, there was an increase in the number of hours with negative prices (in the period between 8 a.m. and 7 p.m.). The high was in July 2024 with a number of 81 hours.[1] According to Energy Charts, a new record was also set in July with 9.3 GWh of PV electricity generated (in relation to net public electricity generation).4 It can be assumed that further records will be set in this context due to the further planned PV expansion, which will have an impact on the market value of solar (cannibalisation effect).


Overview of Federal Network Agency tenders

The following table shows the results of the last EEG tendering rounds for the technologies ground-mounted solar, rooftop solar, onshore wind and innovation.

​
​Solar open space
​Rooftop solar
​Wind Onshore
​Innovation
​Tender round
July 2024
​June 2024
​August 2024
​September 2024
​Tendered quantity (in kW)
​2.147.784
​258.058
​2.708.940
​583.250
​Admissible bids submitted (in kW)
​3.555.970
​315.985

​2.948.135
​1.676.953
​Permissible maximum value (in ct/kWh)
​7,37
​10,50
​7,35
​9,18

​Average volume-weighted bid value (in ct/kWh)
​5,05
​8,94
​7,33
​7,09

Lowest awarded bid value (in ct/kWh))
​4,50
​7,95
​5,73
​6,74

​Highest awarded bid value (in ct/kWh)
​5,24
​10,19
7,35
​7,45
Tender results for the technologies ground-mounted solar, rooftop solar, onshore wind and innovation
Source: ​ Bundesnetzagentur - Beendete Ausschreibungen / Statistiken (Last access: 16.10.2024), Bundesnetzagentur - Beendete Ausschreibungen / Statistiken​​ (Last access: 16.10.2024), Bundesnetzagentur - Beendete Ausschreibungen / Statistiken​​ Last access: 16.10.2024),​ Bundesnetzagentur - Beendete Ausschreibungen​ (Last access:​ 16.10.2024).)​

The tendering round for ground-mounted PV systems was oversubscribed for the fifth time in a row. The volume-weighted average award value has fallen continuously since the tendering round in March 2023 from 7.03 ct/kWh (currently: 5.05 ct/kWh).6 As part of Solar Package 1, it was also decided to expand the area eligible for EEG funding. „Bids on arable land and grassland that can only be used for agricultural purposes to a limited extent [...]”7 were taken into account in the tender in July 2024 throughout Germany. In total, almost half of the awarded bids were for PV systems to be installed on such areas (1,037 MW, 123 awards).8

A similar picture is also emerging in the technology category of rooftop PV systems. This tender was also repeatedly oversubscribed and the volume-weighted average award value has fallen compared to last year from 10.87 ct/kWh to 8.94 ct/kWh.9 The situation was different in the past for wind-on-shore tenders. These were recently signed continuously with the exception of the current tendering round in August. The volume-weighted average award value is still close to the maximum value of 7.35 ct/kWh.10 The innovation tender in September was also significantly oversubscribed. Accordingly, the volume-weighted average award value has also fallen compared to the previous tendering round with a slight undersubscription from 8.33 ct/kWh to 7.09 ct/kWh.11 

As a result, the current tender rounds are characterised by corresponding competition, particularly in the technology categories of photovoltaics and innovation, which led to award values well below the maximum values.


Overview of political reforms and strategies in the context of renewable energies / electricity sector

In July 2024, the German government presented its growth initiative for a new economic dynamic for Germany. A total of 49 measures are intended to make Germany more attractive, competitive and innovative as a business location in order to increase the economy's growth potential. One chapter of the growth initiative deals with 12 measures in the area of ‘An efficient energy market for the economy of tomorrow’. One measure concerns the stabilisation and expansion of the electricity price package. The plan is to reduce the electricity tax to the EU minimum in the long term for those players who are already benefiting from the temporary reduction of the electricity tax to 0.05 ct/kWh (see also electricity price package). In addition, electricity price compensation is to be applied until 2030 (previously until 2028).

Furthermore, the potential of electricity storage systems is to be optimised, the storage ofCO2 made possible and the expansion of the hydrogen infrastructure accelerated. Another measure concerns the prioritisation of the ‘new market design for power plants, renewables and flexibility’. Obstacles in the context of flexibility should be removed and the expansion of renewable energies should continue to be driven forward rapidly. According to the growth initiative, ‘the expansion of new renewable energies [...] is to be switched to investment promotion [...], in particular to allow price signals to have a distortion-free effect’12.


A further change is planned for subsidies in the event of negative prices. This is to be suspended for new installations from 1 January 2025, with the exception of small installations. In addition, the threshold in the context of the direct marketing obligation and the taxability of installations is to be lowered. In addition, the introduction of a capacity mechanism is once again advocated. Further measures relate to the evaluation of offshore wind tenders, the reduction of grid costs for companies and households (see also the following comments on the reforms of the Federal Network Agency), the staggering of grid expansion to reduce costs, the securing and diversification of gas supply, the promotion of fusion energy, support for the reimbursement ofCO2 costs for exports and the decarbonisation of heat supply. According to the growth initiative, the German government wants to realise the corresponding measures in the near future13.
 
Following the agreement reached by Federal Chancellor Olaf Scholz, Economics Minister Robert Habeck and Finance Minister Christian Lindner in February of this year, the German government has now also agreed on the key points of the power plant strategy as part of the growth package. In ‘anticipation’ of a comprehensive capacity mechanism, the tendering and realisation of a total of 12.5 GW of power plant capacity and 500 MW of long-term storage will take place in two pillars. As part of the first pillar, it is planned to tender new H2-ready gas-fired power plants with an installed capacity of 5 GW and H2-ready modernisations amounting to 2 GW. The switch to green or blue hydrogen is to take place from the 8th year after commissioning or modernisation.
In addition, 500 MW of pure hydrogen power plants and 500 MW of long-term storage facilities will be put out to tender. In the second pillar, a further 5 GW of new gas-fired power plants are to be put out to tender, ‘[...] which are intended to contribute to security of supply, particularly in dark doldrums.’13 The public consultation in the context of the Power Plant Security Act for the realisation of the power plant strategy will run from September to October 2024.14

Against the backdrop of the necessary transformation of the energy system, including grid operation in the context of the energy transition, the Federal Network Agency published a key issues paper in July 2024 as part of a process to determine the reform of grid fees for industrial customers. This provides for financial incentives in the form of reduced grid fees for system-friendly behaviour by companies15.
 

This privilege is intended to benefit ‘[...] those who significantly increase their consumption compared to their individual annual average during periods of particularly low prices and significantly reduce their consumption compared to their individual annual average during periods of particularly high prices’16.

Against the backdrop of the necessary transformation of the energy system, including grid operation in the context of the energy transition, the Federal Network Agency published a key issues paper in July 2024 as part of a determination procedure to reform the grid fees for industrial customers. This provides for financial incentives in the form of reduced grid fees for system-friendly behaviour by companies.17 This privilege is intended to benefit ‘[...] those who significantly increase their off-take compared to their individual annual average during periods of particularly low prices and significantly reduce their off-take compared to their individual annual average during periods of particularly high prices’18.

​After the key issues paper was consulted on in December 2023 and the corresponding draft specification in May 2024, the Federal Network Agency published the corresponding specification on the distribution of additional costs at the end of August.


As part of the reform, a tiered system is envisaged in which grid operators affected by particularly high costs due to the expansion of renewable energies are identified in the first stage. In the next step, affected grid operators will receive financial compensation for the additional costs, which can be distributed evenly across the nationwide electricity consumers. The first estimates of the cost compensation (‘rolling volume’) and specific relief for the grid operators are to be made in mid-October. The relief regime will apply from 1 January 202519. The key issues paper was in consultation until 18 September 2024 and is due to come into force on 1 January 2026. 20

The last article already reported on the Federal Network Agency's key issues paper in the context of the distribution of the additional costs that ‘[...] arise in distribution grids with particularly high levels of renewable electricity generation’21. After the key issues paper was consulted on in December 2023 and the corresponding draft specification in May 2024, the Federal Network Agency published the corresponding specification on the distribution of additional costs at the end of August. As part of the reform, a tiered system is planned in which grid operators affected by particularly high costs due to the expansion of renewable energies are identified in the first step. In the next step, affected grid operators will receive financial compensation for the additional costs, which can be distributed evenly across the nationwide electricity consumers. The first estimates of the cost compensation (‘rolling volume’) and specific relief for the grid operators are to be made in mid-October. The relief regime will apply from 1 January 2025.22

Adapting the current electricity market design to the challenges associated with the transformation to a climate-neutral electricity system has been part of the political and public debate for some time. Since 2023, stakeholders from various sectors have been discussing the electricity market design of the future as part of the Platform for a Climate-Neutral Electricity System (PNKS). Based on the PNKS exchange and under the influence of the growth initiative (see also above), the Federal Ministry for Economic Affairs and Climate Protection (BMWK) published an options paper for the electricity market design of the future in August. The options paper differentiates between four fields of action: the investment framework for renewable energies, the investment framework for controllable capacities, local signals and the flexibilisation of demand.23  In the context of the investment framework for renewable energies, the BMWK lists alternative design options to the current EEG support instrument of the sliding market premium. The sliding market premium is still authorised under European law until 2026. From 2027, the subsidy system must be designed with a repayment mechanism for revenues that are higher than the subsidy requirement. The options paper proposes four alternative ways of organising investment support for renewable energies:

  • ​Option 1: Floating market premium with refinancing contribution (production-dependent bilateral contract for difference with market value corridor)
  • Option 2: Production-dependent bilateral contract for difference without market value corridor
  • Option 3: Production-independent bilateral contract for difference
  • Option 4: Capacity payment with production-independent refinancing contribution
Options 3 and 4 are currently being further examined by the BMWK as of August. The BMWK sees the two production-independent options as having the particular advantage of incentivising efficient use of the system and a system-promoting system design. As part of the growth initiative, the Federal Government has spoken out in favour of investment cost subsidies (see also the above comments on the growth initiative). Option 4 comes closest to this idea. The options paper also presented and discussed a number of possible alternatives in the other three fields of action. In the context of the investment framework for controllable capacities field of action, the German government has confirmed its goal of establishing a technology-neutral capacity mechanism as part of the growth initiative and presented key points on the power plant strategy (see also above). As part of the field of action, the options paper explained the possibilities of a capacity hedging mechanism through peak price hedging as well as a decentralised, centralised and combined capacity market.

The BMWK has spoken out in favour of the combined capacity market option, as this combines the advantages of the other options. In the context of the local signals field of action, it is described that grid expansion and redispatch in particular continue to be decisive for the distribution of PV and wind power, but that these must be supplemented by measures in the area of local signals. The following options are listed: time and region-dependent grid charges, regional regulation in support programmes and the integration of loads in redispatch. Finally, the goal of reducing obstacles in this context was formulated in the flexibility field of action. In addition, three fields of action were agreed upon: enabling price reactions (establishment of time-variable and innovative tariffs), flexibility-promoting alignment of the grid fee system and the reform of individual grid fees / realisation of flexibility in the industry (see also the reform of the Federal Network Agency mentioned above). It was possible to take part in the consultation until 6 September.24   The results of the consultation were presented and discussed at the meeting of the PNKS at the end of September.25

In July, the German government also agreed on a draft law to implement the Renewable Energy Directive RED III. The draft law is intended to designate fast-track areas for onshore wind energy plants and solar energy plants with associated energy storage systems. The designation of these areas and shorter approval times are intended to speed up the approval process.26  The federal government's draft bill was discussed and debated in the Bundestag for the first time at the end of September 2024.27

In addition, the two-year trial phase of the ‘Use instead of curtailment 2.0’ market mechanism in accordance with Section 13k EnWG began on 1 October 2024. The reform aims to create incentives for the additional purchase of electricity in relief regions in northern Germany. The aim is to reduce the curtailment of renewable energy producers due to electricity-related grid bottlenecks. The Federal Network Agency has defined corresponding additionality criteria that a switchable load must fulfil as part of the new regulation. During the trial phase, electricity volumes will be allocated using a simplified allocation procedure. Subsequently, the allocation is to take place via a competitive tendering procedure. 28

To summarise, the energy sector is currently characterised by a high level of political dynamism. The BMWK's options paper illustrates the many necessary adjustments to the current electricity market in order to be able to integrate additional renewable energies and at the same time guarantee the functionality and security of the system. This article has already presented various reforms in the context of the further development of the electricity system that are currently being implemented. However, it is also clear that the framework conditions for market players on the electricity market will continue to change significantly in the future as a result of further reforms and legislation. This transformation can represent an opportunity for various players as well as the possibility of establishing new business models. An update on the development of the electricity sector will follow in the next issue of E|nEws.

_____________________________________________________________​

1 The series ‘WIND + SUN = POWER’ is updated in every issue of E|nEws. This article refers to events in the period from 19 June 2024 to 16 October 2024. 

2 Cf. net electricity generation in the first half of 2024: Record generation of green electricity, fossil fuels continue to decline - Fraunhofer ISE (last accessed: 17 October 2024), pie charts on electricity generation | Energy-Charts (last accessed: 17 October 2024) and RE statistics MaStR - August 2024 (as of 16 September 2024).xlsx (bundesnetzagentur.de) (last accessed: 17 October 2024). Note: For the values in the context of public net electricity generation, the current data from Energy Charts (and not the article in this context) was used
4 Own calculation based on the data Exchange electricity prices | Energy-Charts (last accessed: 16.20.2024).
12 Cf. Federal Network Agency - Completed tenders (last accessed: 16/10/2024).
14 Cf. growth initiative - new economic dynamism for Germany (bundesfinanzministerium.de), p. 1f., 24-31 (last accessed: 17 October 2024).


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