Offshore wind opportunities in Germany

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As part of the German government’s commitment to reduce CO2 emissions by 2020 to 40% below 1990 levels, the German government adopted a draft Renewable Energy Act (Erneuerbare-Energien-Gesetz – “EEG”) in December 2007. The Act, which will replace the existing EEG, is aimed at further boosting electricity generation from renewable sources in Germany and, in particular, offshore wind farm projects around Germany’s North Sea and Baltic Sea coast. For energy companies and investors keen to get involved in German offshore wind farm projects, we outline below some of the key measures set out in the EEG.

The new EEG introduces a guaranteed feed-in tariff of €12 cent/kWh for electricity generated from offshore wind farms for a period of 12 years from commencement of operations, with an additional €2 cent/kWh for offshore wind farms that come into operation prior to 31 December 2013. In order to further incentivise offshore wind farm projects which are set up in very remote areas or in deep waters, the 12 year period referred to above is extended by 0.5 months for every extra nautical mile beyond a 12 nautical miles distance from the coast and by 1.7 months for every extra metre of water depth beyond a depth of 20 metres. Following the expiry of the 12-year period (as may be extended), electricity generated from offshore wind farms would still attract a guaranteed feed-in tariff of €3.5 cent/kWh for a further 8-year period but developers will be authorised to obtain higher tariffs.

The new EEG is expected to be approved shortly by the German Parliament and to come into force by 1 January 2009. In anticipation of the new EEG, a variety of international and domestic investors are investing in project companies that already hold approximately 20 permits for offshore wind farm developments in the Exclusive Economic Zone (EEZ) in the German North Sea and the Baltic Sea. Observers expect that the coming into force of the new EEG will result in a substantial increase in the number of offshore wind farm projects being approved and taking place in the coming years. Currently over 40 applications to build and erect offshore wind farms in the German EEZ are being considered by the competent authority.

The development of the offshore wind farm industry in Germany has also received a further boost from the German Energy Industry Act (Energiewirtschaftsgesetz) which requires transmission system operators to provide at their own cost the grid connection for all offshore wind farms which start construction prior to 31 December 2011.The German Government is currently considering extending this period to 31 December 2013 and a decision on this issue is expected by May 2008.

For further information on opportunities available to offshore wind farm developers in Germany and specialist advice on potential projects, please contact us.

To read our recent Law-Now on the corresponding developments in relation to offshore wind farm projects in the UK, please click here.