EEG 2.0: Federal Government and Federal States Reach Agreement on Important Issues of EEG Reform

After a meeting with the sixteen state premiers, Chancellor Angela Merkel (CDU) and Economic Affairs and Energy Minister Sigmar Gabriel declared that “a high degree of consensus had been reached” on the reform of the Renewable Energy Sources Act (EEG). Yesterday, the latest draft bill has been published by the Economics and Energy Ministry (BMWi). The government wants to adopt the bill on 8 April 2014. Subsequently, the law that is officially aimed at cutting renewable support costs shall be to submitted to Parliament and the Federal Council so as to  enter into force on 1 August 2014. In view of the tight schedule the government made certain concessions.

Mrs Merkel pointed out that the government wanted to rein in EEG-related costs, in particular the renewable surcharge (EEG-surcharge), which consumers have to pay, while at the same time ensuring reliable renewable growth and a rising share of renewable energy supply in line with the German energy transition.

1. Agreement on Main Aspects of EEG Reform

There was agreement between the government and the states on the following main aspects of the EEG reform.

a. Dispute with Commission about State-Aid Compatibility of EEG Surcharge Reduction for Energy-Intensive Companies

The current reduction granted to energy-intensive companies on the surcharge promoting renewable energy sources in Germany (“EEG-surcharge”) has come under scrutiny by the Commission for alleged incompatibility with EU state aid rules. Germany has been defending the legality of the current provisions, arguing the EEG, including its reductions for energy-intensive companies, did not constitute state aid, and was therefore in compliance with EU law. At the same time, the government has been in talks with the Commission over an amendment of the provisions, as it fears for competitive disadvantages of large energy consumers due to high energy prices and wants to retain the EEG surcharge reduction at least partly.

The government and the premiers agreed that the negotiations in Bruxelles must be concluded in a way that allows for EEG-reductions for energy-intensive companies that do not bring these firms into serious problems due to competition.

A first proposal for an amendment has been made by BMWi (please see Sections 60 to 65 of the latest draft bill). The ministry pointed out that the talks with the Commission were not concluded yet, in particular concerning specific figures (for reductions) and hardship clauses.

b) Self-Generated and Self-Consumed Power

Presently self-generated and self-consumed power is exempted from the EEG surcharge (Section 37 para. 3, sent. 2 EEG). BMWi initially wanted to make not only new plants for self-use contribute 90% of the EEG surcharge, but also freeze the EEG exemption for existing plants on the 2013 EEG-surcharge level so that plants would have had to pay for a rising surcharge (for more information, please see here).

The latest BMWi draft made concessions, e.g. sparing existing plants and (with certain restrictions) replacements and enlargements of existing plants.

According to Mr Gabriel, the federal government and the Länder (states) agreed on these amendments. Please also see further information below (2.a.).

c) General Approach Towards EEG Reform

There was consensus Mr Gabriel said that the reform should enable Germany to contain the rising EEG-surcharge costs, stabilizing them and making further drastic increases impossible.

2. Agreement Concerning Specific Details

a) Self-Generated and Self-Consumed Power

The parties agreed that new power plants for self-use shall be treated differently (regarding the EEG-surcharge), depending on whether they use CHP and PV technology as opposed to conventional plants without CHP technology. Further details still have to be clarified.

b) Agreement on Modified Reference Yield Model for Onshore Wind Power Plants

The parties also agreed on a new reference yield model for onshore wind power plants.

For wind power an basic feed-in tariff is paid. However, operators can claim a higher initial tariff. This tariff is currently extended by two months for each 0.75 percent of the reference yield by which the yield of the installation falls short of 150 percent of the reference yield.

The first amendment of the reference model proposed by BMWi shall be further modified. According to Mr Gabriel the modification will have no effect on the EEG-surcharge. It will only be more favorable for states that are located inland, off the coasts.

c) Modified Calculation of 2.5 GW Onshore Growth Corridor

The new EEG shall introduce a 2.5 GW growth corridor. If exceeded it will trigger a higher degression of renewable support (which will in the future be primarily a marketing premium, as direct marketing will become mandatory for renewable energy generated in new plants).

The parties agreed that in case of replacements of wind power plants only surplus capacity will be calculated towards the 2.5 GW growth corridor.

d) Offshore Wind Power Target of 6.5 GW by 2020

In order to reach the (reduced) offshore wind power target of 6.5 GW by 2020, the parties agreed that grid connection capacities of 1.2 GW above the threshold can be licensed. Should this mean that the 6.5 GW target was exceeded, Mr Gabriel said this would be corrected in the following years. He called this assumption highly unlikely, saying there were still many projects that were not in a stage to be implemented.

Besides, the government has agreed to halve the proposed degression for the initial tariff for the first eight years from the date of commissioning of offshore power plants (Stauchungsmodell).

e) Biomass

Flexibility and enlargements of existing plants shall be ensured so that additional costs do not exceed approximately 0.1 ct/kWh by 2020.

3. Affects of Agreement Between Government and States

According to Mr Gabriel the concessions made by the government shall only amount to 0.2 ct/kWh by 2020. Initially the government wanted cut costs from an average financial support across all technologies of 17 ct/kWh under the currently applicable EEG to 12 ct/kWh for new installations by 2015 (please see key points of the EEG reform).

Source: Federal Government

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