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BMI View: We maintain our upbeat outlook for the German non-hydropower renewables sector, as the
introduction of capacity auctions - while slowing down growth in the short-term - will help reduce cost of
new capacity and ensure that new intermittent power generating capacity can be integrated into the power
grid without jeopardising the stability of power supply. Over the long term, these cost-reductions and the
improved integration of capacity will cement renewables importance in the power mix, particularly as other
power sectors stagnate and the backlog of expensive renewables subsidies is phased out.
Latest Updates And Structural Trends
? Germany will introduce competitive auctions in the renewables sector from January 2017, as the EEG
2017 was passed through the German parliament in July 2016. The new mechanism will be introduced on
the back of a series of solar power pilot auctions over 2015, that are meant to help the government better
calibrate the new system. The amount of capacity awarded in auctions will be capped in order to ensure
that new capacity can be integrated into the grid system without jeopardising the stability of the power
supply. While this will slow growth over the short-to-medium term, we believe it will be a strong positive
for the sector over the longer term, as costs decrease and new technologies that can support renewables
integration gain traction in the country (like automated demand-response measures and battery storage).