Bloomberg News

RWE, EON Offshore Wind Projects May Be Unlocked by German Accord

November 28, 2012

RWE AG (RWE) and EON SE’s stalled offshore wind projects may be unlocked by a deal between Germany’s ruling coalition parties that seeks to spur investment in links to the electricity grid by reducing risks for network operators.

The agreement to lower a cap on damages grid companies must pay for delays in connecting offshore turbines will help network operators raise funds needed to build the links, said Sophia von Waldow, analyst at Bloomberg New Energy Finance. It’s part of an energy bill that would compensate developers for the delays, with utilities able to pass on costs exceeding the caps to consumers through higher power bills.

EnBW Energie Baden-Wuerttemberg AG (EBK), Germany’s third-biggest utility, this month delayed a decision to invest at least 1.5 billion euros ($1.9 billion) in a North Sea wind farm because it wasn’t clear when the project could be connected. Dong Energy A/S suspended work on Borkum Riffgrund II after failing to get a date for a connection. EON and RWE have also suffered delays.

“This is great news for the investment security and the future of offshore wind in Germany,” Von Waldow said by phone from London. “If this is passed, I expect large developers including RWE, EnBW and Dong to restart their projects.”

Damages Cap

The coalition agreed to reduce by 82.5 percent a ceiling on damages after grid operators said insurers wouldn’t cover them for the risk of delays, halting investment. EON and RWE wouldn’t invest in future offshore wind until the issue was resolved. The parliament’s economy committee today endorsed the revised bill even after the country’s three main opposition parties voted against it, according to the official HIB newsletter.

“Germany is now much more interesting for large investors from Asia that have already been open to invest,” Von Waldow said. “It’s bad news for the consumer, who will probably have to shoulder a greater share of the burden.”

Multibillion-dollar projects have been stalled since TenneT TSO GmbH, responsible for connections in the North Sea, said it was suffering delays of several months in linking to wind farms.

“Legal certainty is needed to make sure that offshore wind energy can move forward,” Ulrike Hoerchens, a spokeswoman for the company owned by the Dutch state, said today by telephone, adding the company wants to see the law passed before Christmas.

A group of German municipal utilities known as Trianel GmbH filed a suit against Tennet last month after their installation of a transformer station and 40 Areva SA-made turbines was held up until next year at a planned 200-megawatt North Sea project.

Biggest Utility

For EON, Germany’s biggest utility, the damages issue “is one of many factors, but definitely not the decisive one, for if and when we take an investment decision,” spokesman Christian Drepper said. RWE officials weren’t immediately able to comment.

“We are certain that the German government will establish the necessary certainty to the German offshore market,” said Christoph Mertens, head of engineering at Dong’s German unit.

The company can’t comment on the details of the new draft until it has seen a copy, Mertens said today by e-mail.

Friederike Eggstein, an EnBW spokeswoman, wouldn’t comment before the coalition deal becomes law. RWE wasn’t immediately able to comment on the accord when contacted today by phone.

The coalition agreed yesterday to lower the cap on damages when grid companies are found negligent to 17.5 million euros from 100 million euros in an earlier draft energy bill, said Joachim Pfeiffer, a lawmaker with Chancellor Angela Merkel’s Christian Democratic Union. Damages may still be as high as 110 million euros should operators act with “gross negligence.”

Germany added 45 megawatts of offshore wind turbines in the first half, less than expected, mainly because of the delays. It plans 25 gigawatts of sea-based turbines by 2030 as part of the country’s plans to shift away from nuclear generation.

The draft bill will be debated in the Bundestag, the lower house of parliament, on Nov. 30, Pfeiffer said. Environment Minister Peter Altmaier said Nov. 23 he sought to pass the bill by the year-end to send a “signal of optimism” to industry.

To contact the reporter on this story: Stefan Nicola in Berlin at snicola2@bloomberg.net

To contact the editor responsible for this story: Reed Landberg at landberg@bloomberg.net


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