Revision German Renewable Energy Sources Act – BMWi Starts Consultation on Draft EEG 2016

The Federal Ministry for Economic Affairs and Energy has started the consulting process on the 2016 revision of the German Renewable Energy Sources Act EEG. With this bill the government will use auctioning as the standard system to establish support levels for renewable energy, starting mainly in 2017.

1. Background

In connection with the introduction of the EEG 2014, compliance of the German renewables support scheme with European state aid law was very much under discussion. In the end, after the Commission had released its energy state aid law guidelines, the EEG 2014 was cleared by the Commission, but only under several conditions. Some of them came fairly late in the legislative process.

In the end, the European Commission approved German support of renewable electricity mainly until 31 December 2016. Under the EEG 2014 support is mostly no longer granted as fixed feed-in tariff payments, but in the form of a premium paid on top of the market price for electricity for new renewable power plants (mandatory direct marketing, for more information please see here). For tenders to determine financial support under the EEG 2014 as of 2017, the Commission pointed out that a new law were to be required to introduce the tenders.

With the EEG 2016 revision, the Government intends to continue on its way of integrating renewable energy into the market and fostering competition in the sector, in line with the EU Commission’s Environmental and Energy State Aid Guidelines.

Already under the EEG 2014, a new auction system has been tested in pilot auctions for freestanding PV power plants. Based on the lessons learned from this pilot project,  the recommendations in a scientific report and first comments received from the Federal States and associations the BMWi published its current draft of EEG 2016.

The current draft consist of two separate documents:

The two articles shall be integrated into the EEG during the legislative process.

2. Key Points of the Draft EEG 2016

The auctions are to cover more than 80% of electricity generated in new renewable energy installations. The auctioning shall only apply to wind onshore and offshore, as well as to solar energy. Auctions for these three technologies will begin in 2017. The auction design shall be adapted to each of the different technologies and the respective market conditions.

a) Common Rules of Auctions

Nevertheless, there are certain features that all three designs have in common. These include inter alia the following:

  • Where auctions are mandatory, remuneration will only be provided for installations that have been successful in an auction.
  • All auctions will be conducted by the Federal Network Agency (BNetzA).
  • Every year, BNetzA will be organising three to four rounds of auctions for onshore wind energy and for solar energy. In each round, BNetzA will be auctioning a predefined amount of capacity.
  • The auction rounds will be open to single and secret bids.
  • In the interest of ensuring that only serious bids are submitted, it will be mandatory for every bidder to provide a security.
  • Bids will be accepted, starting with the lowest, and until the amount of capacity that is being auctioned is reached. In principle, the amount of funding corresponds to the individual bid (pay-as-bid principle).
  • There is also a maximum price. Bids higher than the maximum price will not be accepted. The maximum price will be published in advance. The maximum price is guided by the current promotion amount.
  • As a general rule, the Federal Network Agency will announce auctions at least eight weeks in advance. The use of a reserve list is not intended.
  • The project must be implemented within a specified timeframe. In the interest of maximising the rate of project implementation, a contractual penalty applies in the event of non-completion of a project.

b) Solar energy

  • The auctioning system for PV is very similar to the one used for the pilot auction for freestanding PV power plants, which has been in place since the beginning of 2015.
  • Auctions shall apply for all PV installations with a capacity greater than 1 MW (e.g. freestanding PV power plants, rooftop installations and PV systems installed on sides)
  • The rules for freestanding PV power plants will remain unchanged from the pilot auctions.
  • The maximum size of 10 MW per installation will continue to apply.
  • In the light of the experience gained from the pilot auction, the initial security to be provided will be slightly raised.
  • There will be three auctions held per year. The dates by which bids must be submitted will be changed as of 2018 (1 February, 1 June, 1 October).

c) Onshore wind energy

  • Introduction of auctions for wind onshore power plants.  Exceptions apply for installations started up during the transitional period, installations with up to 1 MW of capacity and prototypes with a maximum capacity of 125 MW/year.
  • Auctions are open to all installations that have been approved under the Federal Immission Control Act (“late-stage auctions”).
  • The first deadline for bids to be submitted is 1 May 2017.
  • There will be two more rounds of auctions held in 2017; another four will take place in 2018. The decision to initially hold auctions more frequently is made in the interest of having a price level establish itself as soon as possible.
  • As of 2019, there will only be three auctions held per year. The deadlines for bids will then be the same as for solar energy.
  • Bids must be based on the “value-to-be-applied”.

d) Offshore wind energy

  • The promotion scheme set out in the EEG 2014 will continue to apply for all offshore wind energy installations that start operating before the end of 2020. The EEG 2016 will apply for all offshore wind power plants that start in 2021 or later.
  • The auctioning system will not include prototypes.
  • To ensure sufficient competition in the auction the sides will be examined by the government (“centralised model”). Bidders will compete for the right to establish a wind farm at the site that has been examined. The centralised model will ensure dovetailing between site planning, regional planning, approval of installations, promotion under the Renewable-Energy-Sources-Act, and grid connection, which will improve the system and render it more cost-effective.
  • Due to the long run-up periods required for planning and approval the centralised system under will only come into force as of 2025.
  • The Energy Industry Act (EnWG) will also be amended, to synchronise the expansion of the offshore grid.

3. Next Steps

The Federal States and associations shall submit their comments on the draft until 21 April 2016. Others may also comment, but outside of the regular legislative consultation process.

Comments will be evaluated and may find their way into the bill presented by BMWI to the Cabinet. Following Cabinet approval the bill will be presented to Parliament.

In its press release, BMWi does not provide a timetable for the EEG 2016. In February, BMWi planned to complete the legislative process in summer 2016, with European Commission approval in autumn. Auctions shall start end 2016/beginning 2017.

Source: BMWi

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