The reformed Renewable Energy Sources Act will create expanded market opportunities across the renewable energy sector and new investment opportunities in generation projects and smart grid operational technologies.
For many years, Germany has been a global trailblazer in promoting renewables to replace most fossil-fueled energy production. Germany’s Renewable Energy Sources Act (EEG), enacted in 2000 and amended in 2014, regulates the promotion of renewables. As a result of the EEG, in 2015, 32.5% of Germany's electricity was produced from renewable sources.
A recent change to the EEG, approved in draft form by the Cabinet of Germany on June 8, will open new opportunities in Germany for independent energy producers, service providers (some of which are from the United States), and investors—solidifying the EEG once more as a model for other countries seeking to promote the use of sustainable energy sources and reduce reliance on fossil fuels.
The EEG promotes the development of a sustainable energy supply that conserves fossil energy resources and advances new technologies for the generation of electricity from renewable energy sources (primarily wind, solar, biomass, hydroelectric, and geothermal energy). The EEG aims, in a steady and cost-efficient manner, to increase the share of electricity generated from renewable energy sources to at least 80% of gross electricity consumption by 2050. To this end, the goal is to have renewables account for 40–45% of all energy production in Germany by 2025 and 55–60% by 2035.
The existing elements of the EEG include the following:
The new elements of the EEG under the reform will include the following:
The goal is that 80% of the electricity produced from new renewable energy projects will be subject to auctions scheduled to begin in 2017. The auctions will be carried out nationwide by Bundesnetzagentur (BNetzA), which will determine the maximum bid price in advance to the auction. The applicant with the lowest bid will win (referred to as a “reverse auction”).
The envisaged auction system has three aims:
1. Comply with the development corridors of the current EEG and control the development of renewables. Although 3–4 auctions are envisioned for each covered category (solar, onshore wind, and offshore wind), there will only be as many auctions as necessary to develop generation in the amounts set for the development corridors.
2. Increase competition and thereby decrease costs (cost efficiency).
3. Preserve the diversity of generators and provide a fair chance to all actors.
The new auction system and the development corridors of the reform—especially the increased cap for onshore wind installations—have been criticized. Critics claim that the development corridor for onshore wind installation is still too small with respect to the ongoing development in this renewable category and that small businesses could be forced to step out of the business due to the auction system.
Furthermore, the German government and states recently agreed on a division of Germany into two onshore wind energy zones. Most of the wind energy is to be produced in zone 1, whereas in zone 2 (which consists of the northwest states), the development of new wind energy installations is to be reduced by approximately one third. This division could lead to different energy prices in the two geographic zones.
Following the Cabinet’s vote to approve the reform on June 8, the German Federal Parliament must vote on it, and the EU Commission must be notified. If approved, the reform will presumably be implemented by early 2017.
Once in effect, the reformed EEG will create expanded market opportunities across the renewable energy sector. The development corridors, and especially the raised cap for onshore wind, will allow for new investment opportunities in generation projects as well as smart grid operational technologies. The nascent auction system will further call for advisors on auction procedures and sophisticated electricity market analysis.
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