LawFlash

German Offshore Windfarm Riffgat Runs Idle

German Consumers Must Pay for Most Parts of the Delays

August 20, 2013

Building offshore wind farms in Germany could become more costly than planned. There are various delays that could hurt investors and German consumers. Most prominently, the offshore wind farm Riffgat could provide green electricity immediately — but instead its turbines are running idle powered with diesel engines to avoid damages from a standstill. Apparently, the grid operator Tennet has not connected the park on time as a cable connection of 15 kilometers that Tennet is supposed to provide is not yet ready. Tennet blames various factors for the delay, such as ammunition on the seabed that needs to be removed which is more complicated and costly than foreseen. The German press expects that the turbines will be connected by 2014. Riffgat is a joint venture by the local utility EWE in connection with the developer ENOVA. It has a capacity of approximately 100 MW generated by 30 turbines for 120,000 households.

This delay will be costly for the German electricity consumers. The grid operators in Germany rely on a provision in the Electricity Economy Code (Section 17f  - Belastungsausgleich) from last fall known as “offshore allocation” or “burden-sharing.” This provision stipulates that if a transmission grid operator doesn’t connect a wind farm on time and therefore must pay a contractual compensation to the wind farm operator, it can pass on most of these costs to the consumers — even if the transmission grid operator has acted negligently. In this case, the network operator remains only liable for a relatively small part of the damage that it cannot pass on to the consumers. The amount of this deductible depends on the amount of the damage and is between 5 and 20 percent.

According to an earlier Tennet project report, the German Federal Government will likely miss its goal of building new North Sea wind farms. Officially, the Government aims at 10 GW of newly installed offshore capacity by 2020. In Government circles, however, a significant reduction of this goal is already being discussed. The mentioned project report expects only 3.7–5.9 GW  by 2023. In addition, a (German) study authored by the German management consulting firm Offshore Management Resources that Tennet has commissioned states that so far only a total power generation capacity of 2.9 GW has been secured and financed in the German North Sea. Of this amount, the offshore generation facilities that are currently being built will only produce 2.3 GW. By contrast, the Government’s message is that offshore wind turbines with a capacity of 25 GW will be up and running a by 2030. Tennet states in the study that it has 6.2 GW of power transmission capacity in the North Sea either mandated or under construction.

Contacts

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This article was originally published by Bingham McCutchen LLP.