The EEG – An Investment in the Future

In February 2000, the German Bundestag passed the Renewable Energy Act (EEG), a law aimed at improving climate protection and giving greater priority to renewable energy sources. The objective of the act is to increase the share of renewable energy in Germany’s total energy mix and reduce dependency on finite fossil fuels like oil, natural gas and coal.

What does the EEG do?

The principle behind the Renewable Energy Act is straightforward. Operators who feed electricity that has been generated with renewable energy into the public power supply network receive a statutory feed-in tariff from the network supplier for a period of several years. In the case of photovoltaic plants, this period is 20 years, plus the year in which the plant was commissioned. For example, those who invest in a photovoltaic plant today benefit from this fixed tariff for two decades. This means the plant essentially pays for itself through its electricity yield, based on the current feed-in tariffs and under normal financing conditions. The feed-in tariff granted the same year that the plant was put into operation remains constant for a 20-year period.

The feed-in-tariff for newly installed systems decreases by a certain percentage each year, however. The intention behind this measure is to encourage the photovoltaic industry to lower its prices. And this has been successful: according to information from the Federal Ministry for the Environment, Nature Conservation and Nuclear Safety (BMU), this so-called degression has contributed towards lowering the total costs of photovoltaic installations quite considerably even until today.

The difference between the tariff and the market price of the electricity is shared equally between the power suppliers and added to the prices that end consumers pay. This method of sharing the costs equally means that each individual household in Germany must make only a small contribution to the advancement of renewable energy.

New compensation

Since the introduction of the EEG in the year 2000, the German Federal Government has amended this law on several occasions. In 2010, subsidies for solar installations were unexpectedly reduced in two stages. The first stage, a 13 percent reduction, went into effect retroactively on July 1, 2010. Yet another 3 percent reduction took place on October 1, 2010. On January 1, 2011, another scheduled reduction of subsidies was carried out.

An overview of the new EEG feed-in tariffs for PV systems:

Systems on the sides or on top of buildings (roofs, façades) that connect with the grid:

With the EEG 2009, compensation for power from systems installed on buildings that is to be used for private consumption was introduced for the first time. Starting on July 1, 2010, solar systems of up to 500 kWp were taken into consideration with respect to private consumption (previously: 30 kWp). Compensation for privately consumed power depends on the share that privately consumed power makes up of all of the solar power that is generated. This means compensation will be higher for volumes of power that exceed the private consumption share of 30 percent.

Systems on the sides or on top of buildings (roof, façade) in terms of private consumption

The following degressive rates apply, depending on the growth corridors for plants that are put into operation as of 1/1/2011 and 1/1/2012 respectively:

Starting with the 2009 amendment, the EEG calls for growth corridors to serve as market correction mechanisms. The legislator has defined both a maximum and a minimum value on how much new photovoltaic output should be installed in the years to come:

·      3.5 GW in 2011

·      3.5 GW in 2012

If the installed photovoltaic output lies outside this target range one year, the degression will be adjusted accordingly the following year.

As of January 1, 2009, solar installations must be registered. All new systems are to be reported to the Federal Network Agency by specifying the location, output and date that the system was put into operation for entry in a centralized registry. In addition, a modified form of feed-in management applies for large-scale systems of more than 100 kW: power companies are allowed to separate these from the grid in the event of an overload. In this case, however, the plant operators are to be reimbursed for the lost feed-in-tariffs.

From the Energy Supply Act to today’s EEG

At the beginning of the 1990’s, the government that was in office at the time introduced a milestone in energy legislation – the Energy Supply Law – and thus set the stage for the rapid expansion of this advanced segment of the future. Small companies that were producing energy from renewable sources back then were given little or no access to the integrated networks of the major network operators. The Energy Supply Act stipulated that power companies had to open up their infrastructure and guaranteed a set tariff to those who generated power. This act later spawned the Renewable Energy Act, which has increasingly proven to be a major growth driver in German industry.

Despite the latest reductions in feed-in tariffs, the most recent amendment can still be viewed as a clear commitment from the Federal Government to promote solar energy. Today, the EEG is considered to be a success story that makes Germany the leading industrial nation when it comes to expanding an alternative energy supply.

The EEG – a successful export

In the meantime, the EEG has become an export hit. More than 40 of the world’s nations, including China, France, Spain, Portugal, Brazil and the Czech Republic, have adopted the Renewable Energy Act as the role model for their own subsidy programs. Of the 25 European Union member states, 18 are following the German model and encouraging expansion by offering an appropriate tariff for environmentally-friendly electricity. France abandoned its alternative bidding system and also passed an energy feed-in act in 2002. Great Britain, a country that had initially moved towards a more expensive quota system following its negative experiences with a bidding system, just changed over to a compensation system that is based on Germany’s EEG in 2010.¹⁾

A report from the EU Commission confirms that the EEG is both the most effective and least expensive way of increasing the share of renewable energy in the total energy mix. Countries with similar feed-in regulations generally also achieve the highest growth. According to the study, this applies to wind energy in particular, but also to biogas and photovoltaics. Unlike countries that use quota systems and certificates, the costs of producing eco-friendly electricity are usually much lower in countries that use instruments similar to the Renewable Energy Act.

Sources: 1)  EU Commission Report on Renewable Energies, 12/2005.

Contact:

SCHOTT Solar AG                        

Lars Waldmann

Press and Public Relations                                                                  

Phone: +49 (0)6131 / 66 14 001                       

lars.waldmann@schottsolar.com        

www.schottsolar.com