First Information on Key Points of Reform of German Renewables Law

The German energy transition towards a mainly renewable energy supply remains one of the main challenges Germany was facing, the new Minister of Economic Affairs and Energy, Sigmar Gabriel said at a conference organized by the newspaper Handelsblatt.  It also has the potential to become a great economic success, or lead to a major de-industrialization. Mr Gabriel pointed out important aspects of the key point paper for an overhaul of the renewables law (EEG) that he will present today to the cabinet. The reform is intended to contain surging EEG related costs. The burden for the economy as a whole had reached a limit, Mr Gabriel said.

According to the coalition agreement between the Social Democrats (SPD) headed by Mr Gabriel and their conservative CDU/CSU coalition partners, renewable growth shall be encouraged so that renewables have a share in the energy mix of 40% to 45% by 2025 of 55% to 60% by 2035. Cost-efficiency and the security of supply are given equal importance.

In view of these targets Mr Gabriel gave the following first information on the EEG overhaul.

1. Introduction of New Expansion Corridors/Caps in EEG

The key point paper wants to introduce new expansion “corridors” respectively caps for the support of renewable power plants under the EEG. Thus far only a cap of 52 GW for the support of solar energy exists (cf. Section 20b (9a) EEG).

According to Mr Gabriel (and media reports like Manager Magazin citing from the paper), the following caps shall apply:

  • Onshore wind power: Annual growth of 2,500 MW
  • Solar power: Annual growth of 2,500 MW
  • Biomass: Annual growth of 100 MW of plants using mainly waste and residue
  • Offshore wind power: In line with the coalition agreement, reduction of the national targets for offshore wind power  from 10 MW to 6.5 GW by 2020 and from 25 GW to 15 GW by 2030.

2. Reduction of Costs

Mr Gabriel stressed that the energy transition came with a price tag attached to it. Yet, a further increase of costs had to be avoided. Hence one had to focus on the most cost-efficient technologies, i.e. onshore wind power and photovoltaics, while at the same time reducing support, he said.

Reportedly, Mr Gabriel wants to lower support that presently amounts to 17 ct/kWh across all renewable technologies under the currently applicable EEG to 12 ct/kWh. In particular onshore wind power subsidies for plants in windy locations shall be cut, albeit with profitable operation remaining possible.

3. Market Integration of Renewables

According to the coalition agreement renewables shall be exposed more to market forces. To this end the coalition agreement provides for a mandatory direct marketing obligation for new renewable power plants with a capacity of 5 MW. Presently, direct marketing is voluntary and its financial consequences are cushioned by the market premium paid under the EEG in addition to the revenue obtained from the sale of energy directly marketed.

Reportedly the key point paper to be presented today by Mr Gabriel to the cabinet reduces the threshold for direct marketing contained in the coalition agreement to 500 kW as of 2015 and further to 100 kW in 2017.

According to the coalition agreement, the appropriate level for financial support shall be determined as of 2018 in an auction process, provided a pilot project proves that auctioning will reduce costs.

4. Amend EEG in View of EU Law

The EEG shall also be amended with a view to the draft guidelines for assessing public support projects in the field of energy and the environment) proposed by the European Commission in December 2013), Mr Gabriel said.

Regarding the in-depth investigation launched last year by the European Commission into EEG surcharge exemptions for energy-intensive companies, Mr Gabriel said that the German economy needed to stay competitive. He stressed that Germany was partly financing the knowledge gained with renewable support in Europe.

According to media reports, the government wants to limit the possibility for large energy users to receive EEG reductions, yet the key point paper does not contain specific limitations.

5. Security of Supply and Conventional Power Plants

Favourable legal conditions for controllable (non-volatile) power plants (of all kinds) were necessary, Mr Gabriel said. The government did not believe in a simultaneous phase-out of nuclear power and coal-fired power plants. Security of supply was a key task of the energy policy. Mr Gabriel added that not only could rising electricity costs reduce public acceptance of the energy transition, but power outages as well.

Currently there was sufficient conventional power plant capacity, Mr Gabriel said. This could, however, change by the end of the decade if power plant operators were forced to shut down unprofitable plants (due to the growing share of renewable energy, which is subsidised pursuant to the EEG and enjoys feed-in priority). In the medium to long-term one had to decide how to ensure the competitiveness of conventional power plants, without deciding on certain technologies. Since so-called “capacity markets” would potentially cause further costs, solutions should be developed together with industry, which would still take time, the minister said. He announced to deal with the matter immediately after the presentation of the new EEG, adding that a first answer had to be given by the end of the year.

6. Grid Infrastructure and Energy Efficiency

The grid infrastructure had to be adapted to the new needs and renewable growth and grid expansion linked, Mr Gabriel said. Besides, energy efficiency had to be given greater importance.

7. European Energy and Climate Policy Goal for 2030

Regarding the ongoing debate in the EU about the energy and climate goals for 2030, Mr Gabriel said that Germany was in favour of a 40% CO2 emission reduction as well as a new target for the expansion of renewable energy sources.

Sources: Press release by the Federal Government (Bundesregierung); Video of speech by Mr Gabriel

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