Reform of German Renewable Energies Act

  • Germany
  • 07/28/2014
  • Beck Rechtsanwälte

After the German Bundestag had passed the German Renewable Energies Act (Erneuerbare-Energien-Gesetz – EEG) on 27/06/2014, the German Bundesrat has now approved its reform on 11/07/2014. Thus, the law will come into force on 01/08/2014.
The new EEG includes in particular the following amendments:

1. Protection of Public Confidence and Continuation Permits
Plants under the old EEG 2012 requiring official approval which will be put into operation by 31/12/2014 enjoy protection of public confidence if they have been approved before 23/01/2014.
Continuation permits apply for all old plants. Old plants are such plants which have been put into operation before 01/08/2014.
Otherwise the regulations of the EEG 2014 will apply for new plants.

2. Expansion and Remuneration
Expansion corridors have been introduced for the various forms of power generation. For their compliance, a central plant register will be set up where all new plants have to be registered within 3 weeks at the latest after having been put into operation. Otherwise, the claim for remuneration is no longer applicable.
A yearly expansion between 2,400 and 2,600 MW (net) has been decided with respect to onshore wind energy. Repowering projects are not included into the expansion corridor. A so-called “flexible cap” with automatic adaptation of support rates is to ensure that the actual expansion reaches the level of the planned trajectory and does not exceed or fall below it on a permanent basis.
The repowering bonus has been cancelled. The system service bonus expiring at the end of 2014 will not continue. The aim is to achieve that the remuneration of profitable wind sites will be brought down by 10-20% in 2015 below the level of 2013. In this respect, a two-stage reference yield model has been introduced.
The increased initial rate in the amount of 8.90 cent/kWh will be initially paid for a period of 5 years after having been put into operation. In the following, any further payment of the increased initial rate will depend on the quality of the wind site which will be rechecked on the basis of a reference yield model after expiry of the first five years. In this connection, the data of the plant and the electricity actually fed into the grid during the first five years are being compared. The increased initial rate will be extended as follows, depending on the reference yield: for one month 0.36% below 130% of the reference yield as well as for an additional month 0.48% below 100% of the reference yield.
After expiry of the initial rate a basic remuneration of 4.95 cent/kWh will be paid for the remaining term of the 20-year support under the EEG.
With respect to offshore-wind energy, an expansion of plants with a total installed capacity of 6,500 MW by 2020 has been decided as well as plants with a total installed capacity of 15,000 MW by 2030. Quantity control has been introduced for the time up to 2020, considering mainly projects with an unconditional grid connection approval. It is planned to build two new offshore wind farms per year by 2030.
There will still be two remuneration models in the offshore area: the basic model and the acceleration model.
The basic model grants the operators remuneration in the amount of 15.4 cent/kWh for twelve years (where appropriate, with extension due to water depth or distance to the shore), after that in the amount of 3.9 cent/kWh. As of 01/01/2018, the basic model remuneration will decrease by 0.5 cent/kWh, as of 01/01/2020 by 1.0 cent/kWh and as of 2021 by 0.5 cent/kWh annually.
The acceleration model has been extended by two years until 31/12/2019. According to the acceleration model, the operator will receive remuneration in the amount of 19.4 cent/kWh during the first eight years (where appropriate, with extension due to water depth or distance to the shore), after that in the amount of 3.9 cent/kWh. As of 01/01/2018, remuneration will decrease by 1.0 cent/kWh in the acceleration model.
An annual expansion between 2.400 and 2,600 MW (gross) has also been decided with respect to solar energy. The principle of a “flexible cap” is being maintained.
The support system already introduced under the EEG 2012 is being maintained.
With respect to bioenergy, the focus is now on the predominant use of waste and residue, and the expansion has been limited to 100 MW (gross) per year. The limitation is to be achieved by a sharp degression of the rates of support.
Promotion of biomass has been substantially reduced due to high costs. Expansions of existing biogas plants will only be remunerated in accordance with the new EEG 2014. In addition, a maximum power rating has been introduced, limiting the eligible quantity of electricity. This maximum power rating means the capacity which has been installed by the end of 2013 or 95% of the capacity installed by 31/07/2014, depending on whichever one is the highest. Biogas plants producing electricity from liquid or solid biomass are excluded.
The bonus in connection with gas processing for new plants has been cancelled.

3. Market Integration – Compulsory Direct Marketing
Pursuant to the new EEG, new plants have to market direct, based on performance, the electricity produced as of the first kilowatt hour as follows, earning only the so-called variable market premium: – as of 01/08/2014 all new plants with a capacity of 500 KW – as of 01/01/2016 all new plants with a capacity of 100 KW
The management premium was cancelled and has already been priced into the remuneration (approx. 0.4 cent/kWh in the wind and solar sector).
In order to market the electricity direct it has to be possible to control all new plants remotely and to measure them online. However, the EEG 2014 provides for exceptions and transition periods with reference to the Energy Industry Act.
In order to avoid possible financing problems in relation to compulsory direct marketing, the legislator has introduced a system of marketing making good for any losses caused due to the lack of customers (“Ausfallvermarktung”). Plant operators who temporarily cannot market direct the electricity produced in cases as provided for by the EEG 2014 may offer electricity to a marketer (“Ausfallvermarkter”) who reimburses the electricity with an amount of up to 80% of the value which would have been achieved in the market premium.
The earlier green electricity privilege in all forms has been abolished.
The EEG 2014 provides for the following forms of remuneration: promoted direct marketing, any other direct marketing, feed-in remuneration for smaller plants as well as feed-in remuneration in exceptional cases. If the requirements have been fulfilled, both forms of remuneration may be used in monthly turns.

4. Tendering Model
It is envisaged as of 2017 to determine by competitive tendering to what extent the renewable energies are being promoted. The objective is to achieve quantity control. Any specific details regarding the structuring of this system are yet unknown.

5. Consumption of Own Electricity
Existing plants put into operation before 01/08/2014 will also in future be exempt from the EEG reallocation charge for any electricity they produce and consume themselves. This also applies for modernizations and replacement investments if the capacity increases by a maximum 30%.
Here, existing plants also include plants which have been approved before 23/01/2014 and will be put into operation for the provision of electricity consumed by producers themselves before 01/01/2015.
As a matter of principle, the EEG reallocation charge has to be paid in full on electricity consumed by producers themselves after the EEG 2014 has come into force. Small plants with a maximum capacity of 10 kW are being excepted if the amount of electricity consumed by producers themselves does not exceed 10 MWh. Any additional consumption will be charged with the EEG reallocation charge. Also exempt from payment of the EEG reallocation charge are in-house consumption of power plants, stand-alone power plants as well as the complete supply provided by renewable energy facilities without the need to apply for funding.
First, 30% of the EEG reallocation charge has to be paid by the end of 2015 and then 35% of the EEG reallocation charge by the end of 2016 on electricity provided by new plants and consumed by producers themselves. All plants put into operation as of 2015 have to pay 40% of the EEG reallocation charge on electricity consumed by producers themselves.
EEG reallocation charge for 2014 presently amounts to 6.24 Cent/kWh.

6. Länderöffnungsklausel
A so-called “Länderöffnungsklausel” has been integrated into the German building code as a result of the EEG reform, enabling each single German state to determine the minimum clearance between renewable energy plants and developments requiring protection (e.g. residential developments). So far, Bavaria has announced to use the clause to considerably increase the minimum clearance for wind power plants. This might in some cases lead to a drastic reduction of areas which would be appropriate for onshore wind power plants.

Contact partners:
Thilo Wind tw@becklaw.de t: 0049 40 30100 7237
Markus Krieger mkr@becklaw.de t: 0049 40 30100 7242