German government approves auctions for combined heat and power plants

German government approves auctions for combined heat and power plants

Today, the German government has approved changes to the Combined Heat and Power (CHP) Act. The Act sets out the process for determining the level of financial support for CHP plants. Under the current system, the amount of financial support – a fixed premium on top of the wholesale power price – is determined by lawmakers in a semi-transparent legislative process. A key change is that the level of the premium will become, from winter 2017/18, the outcome of an auction based, competitive bidding process between CHP plants with installed capacity of between 1 and 50 MW.

Frontier Economics has set out the advantages of auctions for the efficiency and transparency of renewable energy promotion schemes. This change, which aims at more transparency and competition in CHP promotion, is part of the outcome of negotiations over the last two years between the German government and the European Commission.

Frontier  regularly advices private utilities and state authorities on climate policy, auction design, and bidding advice in the energy sector and beyond.

For more information, please contact Miriam Rau at [email protected] or call +49 221 337 131 00.