Germany is planning to stop using fixed-term contracts for renewable energy installations

According to the Economy Ministry, Germany will no longer use long-term fixed-price contracts for buying power from new renewable energies installations. However, it will continue to support this sector.

The critics of fixed feed-in rates say that they are too expensive for the government and energy consumers, and that renewable industries have been established enough to be subjected to market forces.

The economy ministry announced that alternative financing models will be examined. The economy ministry said that alternative financing models would be considered after presenting the results of an energy transition monitoring study.

"We need to be honest about the situation." "The energy transition will only be successful with more pragmatism, and realism," Economy minister Katherina Reiche stated in a press release. She presented a 10-point plan to keep Germany on the path towards climate neutrality while maintaining competitiveness.

Germany has struggled with a weak economic performance for many years. The industry has blamed this in part on the high cost of energy and climate policies.

The EWI and BET institutes conducted the study. It found that renewable energy sources, which now make up nearly 60% of Germany’s electricity, still produce too much during windy and sunny hours, but not enough during quieter periods. They are also expensive.

The report recommended that feed-in rates be replaced by market-based mechanisms. The ministry didn't give a timeline for the change.

The Ministry proposed incentives such as regional bonuses, a coordinated expansion to the grid, storage and renewable energy. The ministry also proposed cable pooling and grid charges based on capacity.

It added that new renewable plants could also be subject to higher costs in areas with high congestion, while projects in less well-served areas would benefit from cheaper and faster connections.

By 2027, the government will also launch a technology-open market for capacity that will prioritise flexible back up generation, such as gas plants convertible to hydrogen. (Writing and reporting by Friederike Hiene, Riham Alkousaa, Editing by Ludwig Burger & Mark Potter)

(source: Reuters)