Germany: Bundesnetzagentur raises price caps in tenders for electricity from biomass and biomethane by 10%

The German regulator, the Bundesnetzagentur, raised on 26 February 2024 by about 10% the upper bid caps in tenders for electricity from biomass and biomethane. For new biomass installations the cap is now 19.43 ct/kWh, and for biomethane installations 21.03 ct/kWh. For existing installations, which after 20 years of first support apply for a further period, the cap remained at 19.83 ct/kWh.

What exactly was changed

The German EEG provides for tenders for larger biogas plants and biomass power plants in which generators submit price bids (the so-called value to be applied, anzulegender Wert). Bids above the set cap are rejected. The act contains its own cap values, but the regulator can replace them with its own if it considers that the statutory ones do not correspond to costs. This possibility was used in 2024.

The increase for new installations and biomethane is almost exactly 10%. According to the Bundesnetzagentur, such determinations apply for twelve months, including for the bid deadline of 1 April 2024; tenders are held twice a year.

Why the regulator decided on a change

The justification was based on tender results. In 2023 almost no bids were received for new biomass installations, and the forecast costs of generating electricity in such installations were clearly higher than the previous cap. In the case of biomethane no bid was submitted at the last two deadlines, which the regulator took as a signal that the gap between costs and possible revenue is too large.

For existing installations the situation was different. Competition in the 2023 tenders was strong, and the regulator expected similar in 2024, so it saw no need to raise the cap. This split shows that the German auction system in practice serves mainly to extend the operation of existing biogas plants, not to build new ones.

What this means for generators

The bid cap is not a guaranteed rate. The price is set by the bid, and winners receive exactly what they bid, in the form of a market premium: the difference between the value from the bid and the monthly average market price of energy from the given source. If, however, the cap is well below costs, a sensible investor does not submit a bid at all. Raising the cap therefore gives, above all, a chance that bids for new capacity will appear at all.

For owners of existing biogas plants the article is of informational significance: the upper limit of 19.83 ct/kWh remains a reference point when calculating a bid for the next 10 years. The context of the expiry of the first 20-year support periods is explained by the tender in which such installations apply for a further 10 years. The foundations of the system are described in the article on EEG 2021.

Conversion into zloty

For orientation: 19.43 ct/kWh is €194.3 per MWh. At an exchange rate of approx. PLN 4.30 per euro (indicative value for March 2024) this gives approx. PLN 835/MWh. This is thus a rate more than twice typical wholesale energy prices, which explains why German biogas plants without support would not survive on the market.