Renewable energy, energy package; Source: istockphoto.com/Sjoerd van der Wal

© istockphoto.com/Sjoerd van der Wal

Following intensive discussions, Minister Gabriel and EU Competition Commissioner Vestager have agreed on an energy package. This covers key aspects of the Combined Heat and Power Act, the Electricity Market Act and the 2017 Renewable Energy Sources Act, and their compatibility with European state aid rules. The German government believes that the investigation of the draft legislation notified to Brussels can now also be concluded via the formal decision-making procedures of the European Commission.

Minister Gabriel declared: "I greatly welcome the fact that it has proved possible in very intensive but constructive discussions with Commissioner Vestager to achieve a political understanding on three central pieces of energy legislation and their compatibility under state aid rules: the funding of combined heat and power generation, the Electricity Market Act and the 2017 Renewable Energy Sources Act. This agreement creates a basis on which companies can plan for the future. This is of course particularly true of the funding-related section of the CHP Act and the grandfathering clauses for companies supplying their own electricity. It will ensure that Germany's electricity-intensive companies can stay competitive and will thus safeguard jobs and high-quality employment in Germany."

Against the background of the understanding which has been reached, the German government assumes that the laws and ordinances, many of which were adopted before the summer break in the 2017 Renewable Energy Sources Act and the Electricity Market Act, as well as the rules to be presented in September which will implement the understanding, will be compatible with European state aid rules. As is usual, the understanding is subject to confirmation via the formal Commission procedure.

The required changes to national law deriving from the talks with the European Commission are currently being drawn up. The draft will be presented by the Federal Ministry for Economic Affairs and Energy this autumn.

Basically, the understanding covers the following points:

Self-supply
Under the Renewable Energy Sources Act (EEG), existing self-supply installations will remain fully exempt from the EEG surcharge. If they undergo substantial modernisation, existing installations will be permanently subject to an 80% reduction in the surcharge; i.e. they will normally only pay 20% of the EEG surcharge. For new installations, in contrast, the rules of the 2014 Renewable Energy Sources Act basically remain in place.

Relief for energy-intensive industries
The CHP surcharge exemptions granted to energy-intensive industries will be shaped in the same way as the special equalisation scheme of the 2017 Renewable Energy Sources Act: a company which has received a decision granting it an exemption on the basis of the Renewable Energy Sources Act will also enjoy relief under the CHP Act.

Combined Heat and Power Act (CHP Act)
CHP funding for small installations between 1 and 50 MW will be auctioned. The legislation permitting the arrangements for this to be put in place will be adopted in 2016, and the necessary ordinance will be enacted in 2017.

The auctions will commence in the winter of 2017/18.

2017 Renewable Energy Sources Act
Joint auctions for onshore wind and PV will trial cross-technology auctions. From 2018, 400 MW of capacity will be auctioned each year for onshore wind and large PV installations on a technology-neutral basis. There will be an open-ended evaluation of the results, and this will also compare them with the technology-specific auctions.

In addition, Germany will undertake an innovation auction of 50 MW of capacity each year for installations which are especially useful to the system.

Electricity Market Act

Capacity reserve:
A systemic analysis will be carried out in the autumn. To the extent that this confirms the need for a capacity reserve, the capacity reserve will be introduced and launched as envisaged by the Electricity Market Act. The auction will not discriminate between technologies, and will start with up to 2 GW in mid-2017. The necessary size of the reserve will be regularly reviewed in line with a procedure drawn up with the European Commission.

Grid reserve:
The existing grid reserve system will be continued. However, its size is to be reduced via various measures.

You can find out more about current German energy policy in the fortnightly Newsletter "Energiewende direkt".