Renewable Energy Law

The German Renewable Energy Law ("Erneuerbare-Energien-Gesetz", or EEG), promotes the development of renewable energy sources via a system of feed-in tariffs. [English translation of EEG legislation [http://www.bmu.de/files/pdfs/allgemein/application/pdf/eeg_en.pdf] ] In conjunction with Germany’s climate preservation efforts, the ultimate objective of this legislation is to increase the amount of renewable energies in the German power supply to 12.5% by 2010.

Overview

The fundamental idea of the EEG is that grid operators must pay a government-specified feed-in tariff to energy generators supplying energy to the grid from renewable sources. This feed-in tariff is intended to make energy from renewable sources cost-competitive with that from traditional sources, and it varies with the amount of energy generated by the producer and the type of renwable energy source. As an incentive to encourage technolgical advancements and cost decreases for parts and installation, the feed-in tariff drops yearly by a fixed percentage (degression rate).

The renewable energy sources supported by feed-in tariffs are as follows:
* Landfill gas, sewage treatment plant gas, and mine gas
* Biomass
* Geothermal
* Energy from solar radiation (eg, solar photovoltaic, solar thermal)
* Hydropower
* Wind power

Under the German electricity grid system, the grid operator is legally obligated to provide free access to the grid for all interested generators, and to pay the specified reimbursement for those suppliers qualifying under terms of the EEG. No contract with the plant operator is necessary.

The Energy Feed-In Unit ("Energieversorgungsunternehmen", or EVU) is responsible for calculating feed-in tariffs in an equitable way based upon current market prices of energy. Grid generators then pass the feed-in tariff costs down to end-consumers as an incorporated part of the final price seen on their energy bills.

History

Energy Feed-In Law ["Stromeinspeisungsgesetz"] (1991)

The precursor of the EEG, the Energy Feed-In Law was introduced on December 7, 1990. At the time of this legislation, grid operators were not yet obligated to provide free grid access to all electricity generators; as a result, the small-scale facilities responsible for most renewable energy generation found themselves either denied access to the grid, or otherwise strongly discouraged from accessing it.

Thus, this law represented a true milestone, by obligating all generators to be guaranteed access to the integrated electrical grid, and by ensuring the generators profitable compensation through the first generation of feed-in tariffs.

Renewable Energy Law ["Erneuerbare-Energien-Gesetz"] (2000)

On April 1, 2000, the Energy Feed-In Law was replaced by the Renewable Energy Law of March 29, 2000. This legislation largely maintained the statutes of its predecessor, but with a few changes – most notably, the introduction of compensation rates for energy produced from geothermal sources.

In conjunction with the phase-out of the popular 100,000-Roof Program (100,000-Daecher-Programme), an amendment to the EEG was made to adjust compensation rates for energy generated by solar photovoltaic sources. In addition, it clarified the legal relationship between regional grid operators and the facility operators generating electricity from renewable sources. This amendment was passed on July 21, 2004 and came into effect on August 1, 2004.

Feed-in Tariff Rates

"All specified feed-in tariffs and projected degression rates are as indicated by the EEG, and valid as of the August 1, 2004 version of the legislation."

Gas

For electricity generated by power plants utilizing landfill gas, sewage treatment plant gas, and/or mine gas, the minimum baseline compensation is as follows:
* Capacity of 500 kW or below: 7.67 cents per kWh
* Capacity above 500 kW: 6.65 cents per kWh

Additional compensation may be available, depending on the nature of the electricity generation process, or if the gas has been processed to reach the quality of natural gas.

Beginning January 1, 2005, the compensation rates for newly-commissioned plants will be reduced by 1.5% annually of the relevant value for new plants commissioned in the previous year.

Biomass

For energy produced from facilities that exclusively use biomass as fuel and have capacity 20 MW or below, the minimum baseline compensation is as follows:

* Capacity of 150 kW or below: 11.5 cents per kWh
* Capacity 150 kW to 500 kW: 9.9 cents per kWh
* Capacity 500 kW to 5 MW: 8.9 cents per kWh
* Capacity above 5 MW: 8.4 cents per kWh

The feed-in tariff will only be 3.9 cents per kWh if the biomass facility utilizes waste wood of categories III-A and IV-A (as established in the Waste Wood Ordinance of August 15, 2002).

Additional compensation is available dependant on the origin of the biomass material used and the capacity of the biomass plant itself, as well as whether or not the plant utilizes combined heat and power generation.

Beginning January 1, 2005, the compensation rates for newly-commissioned plants will be reduced by 1.5% annually of the relevant value for new plants commissioned in the previous year.

Geothermal Energy

For energy produced from geothermal power generation facilities installed before January 1, 2010, the minimum baseline compensation is as follows:

* Capacity of 5 MW or below: 15 cents per kWh supplied
* Capacity 5 MW to 10 MW: 14 cents per kWh
* Capacity 10 MW to 20 MW: 8.95 cents per kWh
* Capacity above 20 MW: 7.16 cents per kWh

For a newly-constructed geothermal installation, a uniform feed-in tariff is paid until the end of the twentieth year after the facility first opened (thus, an installation which opened during 2004 would receive payments until December 31, 2024.) After 2009, the compensation rates for newly-commissioned plants will be reduced by 1% annually of the relevant value for new plants commissioned in the previous year.

Solar Energy

For energy produced from power generation facilities utilizing solar radiation (ie, solar thermal or solar photovoltaic installations) that were commissioned prior to 2005, the feed-in tariff must amount to at least 45.7 cents per kWh. If the installation is attached to or integrated on top of a building or noise barrier, the compensation rates are as follows:

* Capacity of 30 kW or below: 57.4 cents per kWh
* Capacity 30 kW to 100 kW: 54.6 cents per kWh
* Capacity above 100 kW: 54.0 cents per kWh

Facade installations – that is, solar installations which are neither on a building's roof nor are part of the roof, but which make up a substantial portion of the building – receive an additional 5 cents per kWh of electricity generated, as they have a lesser energy output than true roof installations. To increase public awareness of renewable energies, even higher feed-in tariff rates are provided for visible facade installations which are in the field of vision of observers.

For a newly-constructed solar installation, a uniform feed-in tariff is paid until the end of the twentieth year after the facility first opened (thus, an installation which opened during 2004 would receive payments until December 31, 2024.)

Beginning January 1, 2005, the compensation rates for newly-commissioned solar installations will be reduced by 5% annually of the relevant value for new plants commissioned in the previous year. Beginning January 1, 2006, this rate is further decreased to 6.5% for those installations generating electricity from solar radiation but which are not attached to or integrated on top of a building or noise barrier.

Hydropower

For energy produced from hydroelectric power plants with capacity 5 MW or below which began operation before January 1, 2008, the minimum baseline compensation is as follows:

* Capacity of 500 kW and below: 9.67 cents per kWh (also applicable for hydroelectric plants built after 2007, but with some restrictions)
* Capacity 500 kW to 5 MW: 6.65 cents per kWh

For a newly-constructed hydropower installation, a uniform feed-in tariff is paid until the end of the thirtieth year after the facility first opened (thus, an installation which opened during 2004 would receive payments until December 31, 2034.) The tariff amount itself is dependant on the year in which the installation first opened, and decreases by 1% annually respective to the baseline 2004 year.

Hydroelectric power plants with capacity from 5 MW to 150 MW are also eligible to receive compensation for electricity generated if the plant was modernised between August 1, 2004 and December 31, 2012, on the dual conditions that 1) at least 15% more electrical energy was produced over previous levels, and 2) either good ecological status or "substantial improvement" over previous status resulted. The applicable tariff rates are only paid for the amount of additional electricity generated due to modernisation, and are subdivided as follows:

* For an increase in capacity of 500 kW and below: 7.67 cents per kWh
* For an increase in capacity 500 kW to 10 MW: 6.65 cents per kWh
* For an increase in capacity 10 MW to 20 MW: 6.10 cents per kWh
* For an increase in capacity 20 MW to 50 MW: 4.56 cents per kWh
* For an increase in capacity above 50 MW: 3.70 cents per kWh

For a newly-constructed hydroelectric installation, a uniform feed-in tariff is paid until the end of the fifteenth year after the facility first opened (thus, an installation which opened during 2005 would receive payments until December 31, 2020.)

Beginning January 1, 2005, the compensation rates for newly-commissioned plants will be reduced by 1% annually of the relevant value for new plants commissioned in the previous year.

Wind Energy

For an onshore wind installation constructed prior to January 1, 2005, the feed-in tariff must amount to at least 5.5 cents per kWh. However, for a period of five years after commissioning, plants which generate 150% of the baseline yield within this time may receive an additional 3.2 cents per kWh of electricity generated. For any other plants, this five-year period may be extended by two months for each 0.75% they fall below the output goal of 150% of the baseline yield; however, once extended, the period may not exceed 20 years. For example, a wind installation which generated 120% of the baseline output would thus gain 5 years + (.30 / .0075) * 2 months = 11 years 8 months of increased compensation.

Of additional note is that, with the revision of the EEG on July 21, 2004, the grid operator is no longer required to reimburse energy from wind energy installations with output lower than 60% of the baseline output.

For an offshore wind installation at least three nautical miles from the shoreline and that was constructed prior to January 1, 2008, the feed-in tariff must amount to at least 6.19 cents per kWh. An additional 2.91 cents per kWh will be paid for twelve years after commissioning for plants which began operations on or before December 31, 2010, with extensions possible for plants located further than twelve nautical miles offshore or in water at least 20 meters in depth.

For onshore wind farms commissioned after 2004 and offshore wind farms commissioned after 2007, the compensation rates will be reduced by 1% annually of the relevant value for new plants commissioned in the previous year.

Costs and Advantages

Some critics have argued that some renewable energies supported under the EEG have disproportionately high compensation rates for the actual benefit provided. One commonly-cited example is energy generated by solar photovoltaic sources, which in 2006 contributed only 0.25% to total national energy production, and yet cost around one billion Euros in feed-in tariffs for the 2,000 GWh of electricity generated. Thus, the environmental benefits of funding solar PV energy are in fact extremely expensive – the price of one ton of CO₂ spared in this manner is 900 Euros, or 30 times the average price of a carbon credit certificate under the EU emissions trading program. [FAZ Artikel zur Photovoltaik, basierend auf einer Studie des Rheinisch-Westfälische Institut für Wirtschaftsforschung RWI [http://www.faz.net/s/RubC5406E1142284FB6BB79CE581A20766E/Doc~E42CAA2FCFBC84BDBAD620C3CD0329144~ATpl~Ecommon~Scontent.html?rss_aktuell] ] . However, most other renewable energy sources are much more efficient to operate, with environmental benefits far outstripping the feed-in tariff costs. In particular, the generation of over 30,000 GWh of wind energy has cost only three billion Euros. [http://www.vdn-berlin.de/global/downloads/Netz-Themen/eeg/EEG-Mifri-2013.pdf Zahlen des Verbandes der Netzbetreiber] ]

In the coming years, costs of renewable energy are expected to increase as the sector further develops; this is expected to be offset by degression of feed-in tariff rates as well as general decreases in the price of conventionally-generated electricity. For example, over the last year, energy prices in the European Energy Exchange (EEX) 200-day average have increased from 4 to 6 cents per kWh. On July 27, 2006, the daily price for peak load energy on the Leipzig energy market reached 54 cents per kWh, marking the first time that solar-generated electricity had a lower price of generation than energy from conventional sources. [http://www.solar-server.de/solarmagazin/newsa2006m07.html#news5649 "BSW: Solarstrom erstmals preiswerter als Strom aus Atom-, Gas- und Kohlekraftwerken"] ] Admittedly this was a relatively brief event, but it is expected that in the long term, compensation rates and market prices will converge and the costs of energy production from renewable energies will decrease further.

By 2020, feed-in tariffs are expected to cost German consumers 6.8 billion Euros per year, nearly two-thirds of which will go toward wind installations, by then expected to account for about 17% of total national energy production. U. Wagner, O. Brückl: [http://www.ipp.mpg.de/ippcms/ep/ausgaben/ep200401/bilder/0104_wagner.pdf "Erneuerbare Energien und die Zukunft der deutschen Energieversorgung"] Vortrag auf dem VRE-Symposium „Erneuerbare Energien zwischen Anspruch und Machbarkeit“ Berlin, 16. Oktober 2003, (PDF)] By the same token, the BWM estimates that solar energy will comprise less than 2% of German energy production in 2020. [http://www.erneuerbare-energien.de/files/pdfs/allgemein/application/pdf/leitstudie2007.pdf Leitstudie Ausbau Erneuerbare Energien des Bundesumweltministeriums] ]

ee also

Energy policy of the European Union

Green energy

Climate change mitigation

References