Germany: Energy Briefing

Transcription

1 Germany: Energy Briefing December 2012 Contents Background 01 Key contents 02 Further process of legislation 04 Contacts 05 German Offshore Grid Connection Act passed by German Federal Parliament (Bundestag) On 29 November 2012, the German Federal Parliament (Bundestag) adopted the bill for the Third Act for the Modification of the Energy Law (Drittes Gesetz zur Neuregelung energiewirtschaftlicher Vorschriften) (the Act ). The Act is expected to come into effect on 1 January 2013, provided that the German Federal Council (Bundesrat) does not object. The Act provides long awaited amendments and clarifications regarding the grid connection between offshore wind farms and the onshore grid. Background Under German law, it is the grid operator (and not the offshore wind project company), which must implement the grid connection between the onshore grid and the offshore wind farms. Under the former law, the grid connection had to be available when the first turbine was commissioned. In practice, the grid operator issued an unconditional grid connection confirmation, which the offshore wind project company relied upon. However, it remained doubtful under which circumstances and to what extent the grid operator would be liable for a delay in the grid connection. This issue came to a head when TenneT TSO GmbH, the grid operator for the German North Sea and a part of the German Baltic Sea, published a letter to the Federal Government which stated that the continued implementation of grid connections in this manner was not possible, given the financial burden arising out of the increasing number of offshore wind farms and grid connection applications. In recent months, TenneT has informed several offshore wind farms of substantial grid connection delays. The actual and potential delays to grid connection and the legal uncertainties regarding the consequences were one of the most threatening issues for the implementation of German offshore wind projects, and the growth of the sector in Germany. wfw.com

2 02 GERMANY: ENERGY BRIEFING The Act distinguishes between offshore wind farms which have obtained the unconditional grid connection confirmation prior to 29 August 2012 and those which have not. The first Offshore Grid Development Plan is intended to be in place on 3 March 2013 and will contain the realisation date, location and size of future grid connections. Key contents The Act implements a revised liability regime and introduces a new offshore grid development plan (the ʺOffshore Grid Development Planʺ), which has far reaching consequences. The Act distinguishes between offshore wind farms which have obtained the unconditional grid connection confirmation prior to 29 August 2012 and those which have not. New projects and Offshore Grid Development Plan Offshore wind farms which did not obtain an unconditional grid connection confirmation (unbedingte Netzanschlusszusage) before 29 August 2012, will be subject to the new Offshore Grid Development Plan, which will replace the unconditional grid connection confirmation and will form the basis of the relationship between the grid operator and the offshore wind project company. Its purpose is to implement a clear, efficient, economic, detailed and reliable timetable for a ten year period during which grid connection will be available to the offshore wind farms. The plan will be prepared annually by the grid operators and subject to the review and approval by the Federal Grid Agency. The first Offshore Grid Development Plan is intended to be in place on 3 March 2013 and will contain the realisation date, location and size of future grid connections. As a consequence, grid connections for wind farms may not be available at the time and/or with the capacity envisaged by the project company. The plan will be binding on the grid operators once approved by the Federal Grid Agency, but project companies will only be able to rely on the Offshore Grid Development Plan (and the envisaged completion date set out in it) during the 30 months before the expected completion of the grid connection. Until then, envisaged completion dates may still be subject to adjustments, which will require approval by the Federal Grid Agency. This will need to be reflected in the construction planning of the wind farm. Grid operators and project companies must also agree on a realisation plan which coordinates the timing of wind farm construction and the completion of the grid connection. Any construction delays must be notified to the grid operator immediately. In addition, if the completion of the wind farm is delayed, the capacity allocated to it in the Offshore Grid Development Plan may be re allocated to other projects. For those projects which are subject to the Offshore Grid Development Plan, the liability of grid operators for a delay in completing the grid connection will depend on whether it was completed by the date specified in the Offshore Grid Development Plan. Grandfathering of confirmed projects Offshore wind farms which have received an unconditional grid connection confirmation prior to 29 August 2012 can still rely on the existing law. This also applies to projects which have received a conditional grid connection confirmation but were able to prove that the criteria for an unconditional grid connection confirmation were fulfilled by 1 September For these projects, the grid connection must still be completed no later than the actual commissioning of the first wind turbine. The liability of the grid operator for any delay in the grid connection depends on whether the grid connection was in place before the date set out in the unconditional grid connection confirmation. Revised liability regime In the event of a delay in the grid connection, the grid operator will be liable to pay the project company liquidated damages from and including the eleventh day from the date as set out in the unconditional grid connection (for confirmed projects), or from the date set out in the Offshore Grid Development Plan (for new projects). The amount of

3 GERMANY: ENERGY BRIEFING 03 liquidated damages will be 90% of the statutory feed in remuneration calculated on the average production of a comparable wind turbine on a daily basis for any delay or interruption in service, or 100% where the interruption or delay has been caused by the grid operator deliberately. In case of an interruption of service to an installed grid connection, the grid operator will be liable for liquidated damages if access to the grid is not available to a wind farm for more than ten continuous days, or for several periods of more than 18 days in aggregate per calendar year, or in case of maintenance interruptions of more than ten days per calendar year. In general, the project company will only be entitled to liquidated damages if the turbines are capable of operation. However, if grid connection is delayed, the project company may choose to postpone the installation of turbines in order to mitigate damages such as potential emergency operation and maintenance costs. In that case, liquidated damages will be payable, provided that the foundations and substation have been installed. If there is a subsequent construction delay, the Act stipulates that the project company is obliged to repay all liquidated damages with interest. Payment shall commence with the actual completion of the grid connection. Note that the Federal Council had unsuccessfully proposed to remove the requirement to have the substation installed. The liquidated damages are calculated on the average production of a comparable wind turbine on a daily basis. The period for which the project company receives liquidated damages is to be deducted from the high tariff period (i.e. the minimum 12 year period at 150/MWh in the base model or the minimum eight year period at 190/MWh in the compression model). As an alternative to the liquidated damages pursuant to the new regime, the Act allows the project company to apply the previous law and to extend the term of the high tariff period by the period of delay in the implementation of the grid connection or its interruption. It should be noted, however, that the previous law was unclear in this respect. This was one of the main reasons for the enactment of the new Act. The Act has not provided any clarification in this respect. Reimbursement As a rule, payments made with respect to liquidated damages and related insurance costs shall be subject to a settlement mechanism amongst the group of grid operators, and will be subject to certain deductibles and caps depending on the degree of negligence or wilful misconduct as well as on mitigation measures: > > In the case of wilful misconduct, the grid operator will have to bear the full amount of the liquidated damages and cannot submit such costs to the settlement mechanism. In the case of negligence, the amount to be borne by the grid operator on its own is expressed by a calculation comprising four levels of decreasing percentages of damages in aggregate resulting in a cap of 110m per year as well as by a sub cap of 17.5m per single event, such sub cap is applicable only in the case of mere negligence. This contribution cannot be made subject to the settlement mechanism and, as a result, cannot be passed on to end users. Note that the Bill had proposed to cap the contribution amount to 100m in aggregate with no sub cap for simple negligence. This was apparently changed upon lobbying by TenneT. The Act provides for a rebuttable presumption of gross negligence in case an operator of a wind farm suffers damages due to a delay in the completion of the grid connection or an interruption of service of an installed grid connection. The project company is entitled to 90% of the statutory feedin remuneration calculated on the average production of a comparable wind turbine from the 11th day of the grid connection delay....the project company may choose to postpone the installation of turbines in order to mitigate damages such as potential emergency operation and maintenance costs. In that case, liquidated damages will be payable provided the foundations and the substation have been installed. Watson, Farley & Williams December 2012

4 04 GERMANY: ENERGY BRIEFING The grid operator will be reimbursed by electricity end users and other grid operators subject to certain deductibles capped at 17.5m per single event in case of simple negligence and 110m in aggregate per year in case of (simple or gross) negligence....conciliation procedure may delay the implementation of the Act. The Act does not expressly address the issue of whether or not the grid operator could ask for the reimbursement of costs resulting from a reasonable mitigation measure from end users. This could be relevant, for instance, for interim grid connections via an alternative substation, where possible. The Act only provides that, as a general rule, grid operators can only pass on their costs by submitting them to the settlement mechanism if all feasible and reasonable measures to minimise damage were taken. In this respect, the Act refers to a specific future ordinance that is meant to address, among other things, the details of the settlement mechanism particularly regarding the correlation between liquidated damages and mitigation measures, such as an interim grid connection providing limited access to the grid. Other than in the circumstances described above, the grid operator can effectively pass on payments made in respect of liquidated damages and related insurance costs to end users by adding it to the tariff for electric power. The Act foresees that this will be governed by a future ordinance. For the time being the allocation of such costs is governed by the existing Co generation Act (Kraft Wärme Kopplungsgesetz). In any event, for end users off taking up to 100,000 kwh/year, the additional charge on the tariff is capped at 0.25 Eurocent per kilowatt hour. Liability cap for property damages The grid operator s liability for property damages is capped at 100m per incident unless caused intentionally. This does not reduce the grid operator s exposure for liquidated damages due to a delay in the implementation of the grid connection, or its interruption. Further process of legislation While the Act was adopted by the German Federal Parliament (Bundestag), the German Federal Council (Bundesrat), i.e. the second chamber of Germany s bicameral legislature, which is scheduled to meet on 14 December 2012, has the right to object to the Act. If it were to do so, then the Act would have to be considered by the Conciliation Committee (Vermittlungsausschuss). Should the members of that committee be unable to reach a compromise, then the German Federal Parliament (Bundestag) can reject the objection by the German Federal Council (Bundesrat). Nevertheless, this conciliation procedure may delay the implementation of the Act. In the previous parliamentary process, the German Federal Council (Bundesrat) had made some proposals regarding the Act, which the German Federal Parliament (Bundestag) declined to adopt. However, given that the German Federal Council (Bundesrat) can only delay the parliamentary process and its arguments have been considered, there is a good chance that the Act will come into force as expected.

5 05 GERMANY: ENERGY BRIEFING Contacts Should you like to discuss any of the matters raised in this briefing, please contact a member of our team below. You may also be interested in our two earlier briefings (issued in July and August this year), which discussed previous drafts of the Bill. Gerrit Bartsch gbartsch@wfw.com Marcus Bechtel mbechtel@wfw.com Sven Fretthold sfretthold@wfw.com Malte Jordan mjordan@wfw.com Stefan Kilgus skilgus@wfw.com All references to Watson, Farley & Williams and the firm in this brochure mean Watson, Farley & Williams LLP and/or its affiliated undertakings. Any reference to a partner means a member of Watson, Farley & Williams LLP, or a member of or partner in an affiliated undertaking of either of them, or an employee or consultant with equivalent standing and qualification. This brochure is produced by Watson, Farley & Williams. It provides a summary of the legal issues, but is not intended to give specific legal advice. The situation described may not apply to your circumstances. If you require advice or have questions or comments on its subject, please speak to your usual contact at Watson, Farley & Williams. This publication constitutes attorney advertising. Watson, Farley & Williams HAM KW KW 05/12/2012 wfw.com/germany