Daimler and Norwegian renewable electricity provider Statkraft announced a deal last month that will extend the life of six community-owned wind farms in Germany.
Daimler says under the deal it will become the first major industrial company to source electricity from German wind farms whose guaranteed payments end after 2020. The six wind farms, which together host 31 turbines with a combined generating capacity of 46 megawatts, were commissioned between 1999 and 2001.
Under Germany’s Renewable Energy Act (EEG), which took effect in April 2000, owners of wind farms and other renewable energy projects could secure 20-year contracts with guaranteed payments for each kilowatt-hour fed to the grid, known as feed-in tariffs. With the first tranche of FITs for renewable energy projects expiring soon, project owners must decide whether to decommission or seek to extend the life of their assets.
As GTM reported in May, the looming expiration of FITs has prompted concerns that Germany faces a potential gigawatt-scale “decommissioning wave” in its onshore wind sector. Corporate power-purchase agreements (PPAs) for wind power, as conceived in the Daimler-Statkraft deal, could be one way to extend the life of the wind farms.
“Expiry of FIT subsidies will trigger large-scale decommissioning, which could erode a part of Germany’s installed base,” wrote Andrea Scassola, a senior market analyst for Wood Mackenzie Power & Renewables, in an email.
He added, “PPAs allow wind farms to remain economically viable and [they are] therefore the ideal marketing model for operators and owners of existing wind farms that no longer receive EEG remuneration.”
“Operation without subsidies is often possible when market-oriented action, targeted marketing and efficient plant operations come together," Dr. Carsten Poppinga, managing director of Statkraft in Germany, said in a statement.
Daimler’s push for CO2-neutral car manufacturing
The PPA with Statkraft was undertaken, according to Daimler, as part of a larger effort to supply all its German Mercedes-Benz Cars manufacturing plants with “CO2-neutral energy” by 2022.
Daimler says that all new manufacturing plants in Germany and elsewhere in Europe will have CO2-neutral energy from the start. An engine plant scheduled for completion in 2019, in Jawor, Poland, for instance, will source electricity from the nearby Taczalin wind farm.
Daimler’s PPA with Statkraft calls for delivery of 33.1 million kWh in 2021, 74 million kWh from 2022 through 2024, and 21.8 million kWh in 2025.
A Daimler spokesperson declined to comment on how the company plans to source electricity for the German Mercedes-Benz Cars plants after the five-year Statkraft PPA expires and did not disclose the per-kWh price paid for wind electricity delivered under the deal.
Corporate PPAs could delay wind farm decommissioning
According to WoodMac’s Scassola, increasing corporate appetite for clean energy could provide a limited lifeline to wind farms with expiring FITs.
“In the best-case scenario,” he said, “corporate PPAs will slow down and defer the choice of decommissioning some assets further into the future.”
He went on, “These PPAs are based on short-term contracts (three to five years), which are easier to conclude than long-term contracts and could become a more widespread reality post-2020. An increasing amount of companies are setting sustainability targets and are showing interest in sourcing an RES [renewable electricity standard] supply.”
Scassola placed the Daimler-Statkraft PPA in the context of other recent deals in which offtakers agreed to procure electricity from wind farms with soon-to-expire FITs. In September, German electric utility Greenpeace Energy signed a deal to procure electricity from the Ellhöft community wind farm, which was commissioned in 2000, for private customers. The five-year PPA takes effect in 2021.
Also in September, German turbine maker Enercon signed a PPA to supply electricity to the Association of German Cold Stores and Logistics Companies (VDKL) from four small existing wind farms with a combined generating capacity of 10.6 MW.
“I would expect more to happen during 2019,” said Scassola.
He noted that new onshore wind farms are struggling to access the market in the wake of Germany’s shift from fixed feed-in tariffs to competitive actions. Added to this, he said, is the fact that repowered wind projects — those in which turbine components are replaced to extend the project life, or turbines are decommissioned and replaced with new equipment at the same site — must compete in auctions against new-build projects, and both are subject to same annual installation cap of 2.8 gigawatts through 2019 and 2.9 gigawatts in 2020.
Given those constraints, Scassola said, “asset owners will increasingly strive to find ways to extend the life of their operating assets, and short-term corporate PPAs could be a way to make it happen.”