More than €30bn a year could be available to expand renewable energy capacity in Germany with the right policies in place, according to the Climate Policy Initiative.
The CPI said in a new study – Policy and investment in a cost-effective German renewable energy transition – that the available money is over twice the amount required to finance the addition of 7.4GW of new solar photovoltaic and wind capacity a year to 2020.
However, it said “policy must encourage the right mix of investors including utilities, developers, banks, pension funds and large and small energy consumers in order to attract investment at the lowest possible cost.
“Particular care must be taken with the design of auctions that were first introduced last year for ground-mounted solar PV systems as they may discourage small investors because of their high complexity.”
CPI said small investors, such as private households, farmers or energy cooperatives could invest up to €8bn a year, around half of the total investment required to reach Germany’s expansion targets to 2020.
“As this group of investors often demand a lower return on their capital, the cost of the energy transition could rise if policy changes restrict their future participation in the market,” it added.
The study said that, if the current set of policies remains in place, by 2030 the number of negative electricity price hours a year could increase tenfold from the current 100 to 1000.
“In this scenario, the current agreement on state aid between the German government and EU, which prohibits revenue support during times of prolonged negative prices, would increase revenue risk for investors who would demand higher returns in compensation.
“This could increase by nearly 20% the cost of supporting an onshore wind farm starting construction in 2020,” CPI said.
CPI Energy Finance executive director and lead author of the report David Nelson said: “There is more than enough capital available to cost effectively meet 2020 targets for renewables provided policy continues to encourage a mix of investors.
“Exemptions from renewable auctions or simplified bidding processes can help small investors, for example, to stay in the game.
“Beyond 2020, creating greater electricity system flexibility through demand-side measures and improved energy market design can prevent the imposition of unmanageable risks on renewable energy investors and keep costs low.”
Image: an onshore wind farm in Germany featuring Nordex turbines (Nordex)