Subsidy-Free Solar Arrives in Germany’s Biggest Panel Farm Yet

Germany’s largest solar park will be built by Energie Baden-Wuerttemberg AG, the first utility willing to forego guaranteed payments or subsidies for the power the farm will produce when it’s ready next year.

EnBW approved a decision to invest in the 180 megawatt Weesow-Willmersdorf park in the state of Brandenburg northeast of Berlin on Wednesday. Germany’s third-biggest utility will spend a “high double-digit million euro” sum to develop the 405-acre site acquired from Procon Solar GmbH, according to a spokeswoman.

“We are convinced that major solar parks of this size can be operated economically without funding,” said Hans-Josef Zimmer, the chief technical officer of the Karlsruhe-based company.

It’s EnBW’s second major milestone in subsidy-free German clean power investment. In 2017 it signed on to build offshore wind projects without price guarantees for the electricity it generated. While Germany has Europe’s biggest solar fleet at 45 gigawatts, it has yet to catch up with countries like Spain in testing merchant investments that allow the market to set prices.

EnBW has a fair chance of pulling off its investment wager, said Jenny Chase, head of solar analysis at BloombergNEF. Economies of scale and highly competitive solar equipment costs will likely mean that the life-cycle investment costs of the project will be at the lower end of 50 to 70 euros a megawatt-hour, the current range for solar investment costs in Germany, according to the Zurich-based analyst.

EnBW likely calculated that electricity prices will rise next decade in Germany as coal and nuclear plants power down, underpinning the project’s financial viability over its 30-year life cycle, Chase said. She added that priority dispatch rules for green power also support the investment.

The utility doesn’t rule out eventually seeking a power purchase agreement with a partner to take Weesow-Willmersdorf’s output, spokeswoman Friederike Eggstein said. She declined to comment on whether EnBW also plans storage for the park’s generation. Like RWE AG, EnBW is transitioning from a coal and nuclear plant operator to a global developer of green assets.

The utility’s investment decision sends a welcome signal to the government in Berlin as it struggles to keep a lid on green power subsidies amid plans for a rapid expansion of solar generation to 2030. Chancellor Angela Merkel’s coalition aims to double solar’s total capacity over the next decade to 98 gigawatts, according to draft legislation.

Source: Bloomberg L.P.