German bank leads way with major funding for renewable energy

The German state-owned bank, KfW, is highly regarded globally for its support for both energy efficiency and renewable energy.  It is often seen as a “best practice” bank that sets the standard, even though few other governments have proven willing to create such an institution.  Reuters reports on a new initiative from KfW that will support Germany’s plan to exit nuclear energy by 2022.

Germany’s KfW to lend 100 billion euros for switch to renewables

German state development bank KfW plans to put up about 100 billion euros ($123.6 billion) to help finance the planned shift to renewable energy in Europe’s biggest power market, it said on Wednesday.

Chancellor Angela Merkel is struggling to implement the green revolution she announced last year, under which Germany will exit nuclear power by 2022 and shift to renewables.

Problems include opposition from industry, ministerial infighting and high investment costs, especially in offshore wind.

The KfW has long been mentioned as a possible source of credit for the huge upfront costs related to offshore wind.

“We are planning to make available total loans of over 100 billion euros for renewable energy and energy efficiency,” KfW head Ulrich Schroeder told reporters at an event in Frankfurt.

“With the implementation of the once-in-a-century energy revolution, the KfW public development bank sees itself as being responsible.”

In the first six months of the year, KfW granted credit of over 12.1 billion euros for environmental projects, and it plans to lend roughly the same amount again in the second half.

Schroeder said the majority of funding had gone to small-scale initiatives rather than big projects such as offshore wind parks, however, and that might change.

“The KfW is involved in discussions about improving the financing situation for grid connections to offshore and the expansion of the grid,” he said.

Expanding and upgrading the power grid, just one part of the overall plan, will require 30 billion euros in investment over the next 10 years, network operators say.

Germany aims to boost renewable energy so that it accounts for at least 35 percent of power generation by 2020 and 80 percent by 2050, up from about 25 percent now.

Wind power is supposed to supply the bulk of that, but there have been major delays to offshore wind parks, casting doubt over plans to install 10,000 MW of offshore capacity by 2020.

Grid operators object to plans that would force them to compensate wind park operators if power lines break down, making them reluctant to build connections to the offshore turbines.

This has deterred potential offshore investors, who argue they have no guarantee they will be able to sell their power.

In Berlin, Economy Minister Philipp Roesler said an agreement on the question of liability for offshore wind turbines was imminent, which would clear the way for much-needed investment.

Roesler said he had agreed on the main points with representatives from German states involved and with grid operators after talks in the capital on Wednesday.

“We must improve the conditions for investment in offshore wind energy. The question of liability is especially important, and the government will present a solution this summer,” Roesler said, adding that liability would be shared between grid operators and the companies that run the wind parks.

This will open the way to billions of investment in offshore wind, he said.