2014 Renewable Energy Sources Act: Plannable. Affordable. Efficient.

The expansion of renewable energy is one of the central pillars in Germany's energy transition. Expanding renewable energy will make our power supply more environmentally sound and climate-friendly and make us more self-sufficient in the face of the world's diminishing reserves of fossil fuels. At the same time, energy must remain affordable and reliable.

Stack of coins symbolizing EEG-Reform; Source: Fotolia.com/RFSole
© Fotolia.com/RFSole

To achieve this, a successful instrument to promote green electricity was conceived: the Renewable Energy Sources Act, which entered into force in 2000. This law had the aim of enabling young technologies such as wind and solar energy to enter the market with support provided by fixed tariffs, a purchase guarantee and priority feeding-in of renewable electricity into the grid.

The reform of the Renewable Energy Sources Act: an important step for re-booting Germany's energy transition

The Renewable Energy Sources Act built a platform for the expansion of renewables, enabling them to emerge from a niche to become one of the mainstays of Germany's power supply, generating 25% of our electricity. However, the rapid expansion also resulted in a rise in the surcharge imposed under the Renewable Energy Sources Act ("EEG surcharge"). In addition, it posed a growing challenge for the stability of the electricity grids and the security of our energy supply.

The amendment of the Renewable Energy Sources Act in 2014 was therefore an important step towards ensuring the continued success of Germany's energy transition. The revision particularly aims to substantially slow any further rise in costs, to systematically steer the expansion of renewable energy, and to bring renewable energy more and more to the market. It is clear that for energy-intensive industries, the price of electricity is a major factor in their level of competitiveness. It is vital that the competitiveness of electricity-intensive industries - which already pay high electricity rates in comparison to their international competition - is not jeopardised and that value creation and jobs are retained in Germany, because our economy's industrial core is of vital importance to prosperity and employment in Germany.

The amendment of the EEG (PDF: 1.2 MB) entered into force on 1 August 2014. The reframing of the EEG is an important first step in re-booting the Germany's energy transition. With the 10-point energy agenda presented by the Ministry for Economic Affairs and Energy, the time frame and the scope of the reform of the EEG and the other energy projects from the 18th legislative period are being dovetailed.

At present, there are plans to alter certain aspects of the special equalisation scheme of the 2014 Renewable Energy Sources Act (inclusion of hardening plants and forges). The Federal Government adopted a corresponding bill on 1 April 2015. The Federal States and the associations had an opportunity to comment on the draft by 24 March 2015. The comments can be found here (only in German).

The reform of the Renewable Energy Sources Act

Reducing the costs of funding renewables and distributing them better

In order to lower the costs for the further expansion of renewable energy, the new Renewable Energy Sources Act focuses on less expensive technologies such as wind energy and photovoltaics. Overfunding will be eliminated, bonuses dismantled and assistance reduced in stages. Currently, the average remuneration for renewable energy is approx. 17 cents per kilowatt-hour (kWh). Starting in 2015, operators of new plants will only receive approx. 12 cents/kWh.

The transformation of our energy supply is a task for society as a whole. Which is why not only industry but also private electricity customers are to bear a reasonable share of the costs under the new Renewable Energy Sources Act. As a result, exemptions from the EEG surcharge will be possible only when they are actually necessary. This way, the burdens arising from the energy transition will be spread over more shoulders, following the principle of solidarity.

Special Equalisation Scheme for electricity-intensive industries:
The Special Equalisation Scheme under which electricity-intensive companies do not have to pay the full EEG surcharge or are exempt from it was revised and brought into line with current EU law. In future, the exemption will apply only to electricity-intensive companies in sectors that compete internationally. It is vital that the competitiveness of electricity-intensive industries - which already pay high electricity rates in comparison to their international competition - is not jeopardised.

In concrete terms, the Special Equalisation Scheme works as follows: beneficiaries pay the full EEG surcharge for the first gigawatt hour and then 15% of the EEG surcharge for every kilowatt hour of electricity they consume above and beyond this. This burden is limited to a maximum of 4% of the respective enterprise's gross value added or, in the case of enterprises with an electricity-cost intensity of 20% or more, a maximum of 0.5% (cap / super-cap in the EU's Guidelines on State aid for environmental protection and energy).

In the course of revising the Special Equalisation Scheme, the applicable fee ordinance was also adjusted to cushion the cost increases resulting from the expanded administrative burden. The amended fee ordinance went into effect on 5 August 2014. The key information about the Special Equalisation Scheme can be found here (PDF: 42 KB).

Self-supply
In future, companies who produce conventional electricity to supply their own needs (self-suppliers) will be required for the first time to bear a share of the costs for the expansion of renewable energy. This applies to new installations. Nothing changes for existing installations. Self-suppliers whose installation was put into service before the new Renewable Energy Sources Act went into force on 1 August 2014 may continue to consume the electricity they generate in their installation without having to pay the EEG surcharge.

Self-suppliers who use new renewable energy installations or new, highly-efficient heat-power cogeneration systems have to pay only a reduced EEG surcharge. In order to progressively introduce the new provisions for renewable energy installations and highly efficient heat-power cogeneration systems, the reduced surcharge rate will initially be 30% through 2015 and then raised to 35% for 2016. These reduced rates will apply only during these two years. Installations that are put into service during this time and all renewable energy installations and highly efficient heat-power cogeneration systems that are put into service at a later date will pay a reduced EEG surcharge of 40% from 2017.

Continuing and managing the expansion of renewable energy

The expansion of renewable energies is to be managed more effectively and made more methodical. To achieve this, the Renewable Energy Sources Act has laid down concrete details for the expansion of renewable energies. Based on this, the share of renewable energy is to reach 40 to 45% by 2025 and then rise to between 55 and 60% by 2035. In addition, concrete quantity targets ("deployment corridors") for the annual increases in capacity have been defined for each type of renewable energy technology:

  • Solar energy: annual increase of 2.5 gigawatts (gross),
  • Onshore wind energy: annual increase of 2.5 gigawatts (net),
  • Biomass: annual increase of approx. 100 megawatts (gross),
  • Offshore wind energy: installation of 6.5 gigawatts until 2020 and 15 gigawatts until 2030.

A flexible "breathing" cap will be used in future to control the actual amounts of energy generated using photovoltaics, onshore wind installations and biomass. This means that when more installations are built to generate renewable energy than are provided for by the deployment corridor, the assistance rates automatically decline for the extra installations. A fixed cap applies to the amount of offshore wind energy.

Bringing renewable energy closer to the marketplace

One of the core objectives of the reform of the Renewable Energy Sources Act is to better integrate renewables into the national and European electricity market. To achieve this, operators of larger new installations are obligated to directly market the electricity they generate. This obligation will be introduced in stages so that all market players can prepare themselves accordingly.

  • Since 1 August 2014: all new installations with a capacity of 500 kilowatts or more.
  • Starting 1 January 2016: all new installations with a capacity of 100 kilowatts or more.

Auctions instead of fixed funding rates: Pilot auction for ground-mounted PV installations and market analyses

The 2014 Renewable Energy Sources Act has created the preconditions to convert the funding of renewable energy from rates prescribed by the administration to rates determined by competition.

In a first step, the level of funding for electricity from ground-mounted PV installations is to be determined by way of bidding procedures. The Federal Government adopted the necessary ordinance for this on 28 January 2015. Further information on the PV pilot auction is available here.

Whilst this is taking place, preparations are also being made for auctions for the other types of renewable energy. The Federal Ministry for Economic Affairs and Energy uses market analyses to lay the foundations for the design of the auctions. For this reason, the market analyses are published for consultation. The introduction provides an overview of the future approach to the issue of market analyses.

Since the market analyses are to form the basis for the future discussion of the design of the auctions, the Federal Ministry for Economic Affairs and Energy requested all the stakeholders to comment on the market analyses and to transmit additional findings as comments (only in German) to the Ministry by mid-March 2015.

Further information on the auctions can be found (in German) at: www.erneuerbare-energien.de.

The reform of the Renewable Energy Sources Act in the European context

Parallel to the parliamentary procedure in Germany, the draft Renewable Energy Sources Act was also the subject of intensive deliberations conducted at European level to ensure in conjunction with the European Commission that it is compatible with EU state aid rules. In July 2014, the German government agreed conclusively with the European Commission on all points - while respecting the partly divergent interpretations of the law.
Thus, for example, electricity-intensive companies only have to repay a fraction of the benefits granted in 2013 and 2014. This only effects a few hundred of the over 2000 companies which benefited from the EEG surcharge. The European Commission has now expressly ordered the partial repayment and has set out the calculation methods for this in a decision from 25 November 2014 (PDF: 364 KB).

In future, the auctions will open up 5% of the new capacity to be installed to foreign projects. This is already being targeted by upcoming pilot invitations to tender for ground-mounted photovoltaic installations. The problems of the so-called "green electricity privilege" in the old 2012 Renewable Energy Sources Act and imported green electricity, which were raised by the European Commission, were resolved by a state payment of ¤50 million earmarked for an EU infrastructure project.

Evaluation of the Renewable Energy Sources Act

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