The New Face of Germany’s EEG: an Overview of its 2021 Amendments
As opposed to many nations, Germany is one of the handful of countries globally to have embraced carbon neutrality in their national law
Alongside cheers and celebrations, 2021 marked the enactment of the new amendment to the German Renewable Energy Sources Act (EEG). Consolidating the ambition of carbon neutrality into national legislation, the EEG reformed statutory targets to aim for a greenhouse gas neutral electricity production by 2050 and an increase to a 65 percent share of renewable electricity for gross annual consumption by 2030. With these changes, 100 GW of photovoltaics, 71 GW of wind power and 8.4 GW of biomass are expected to be installed, phasing out brown, hard coal and nuclear energy as energy sources. This article intends to highlight the changes brought by the amendment that directly affect the expansion of renewable technologies in German cities.
The EEG and its amendment
First drafted in the year 1999 and now undergoing its 6th amendment, the Renewable Energy Sources Act is the driver behind the expansion and implementation of renewables in Germany. Through each of its amendments, the EEG has served as a best practice in energy policy and has paved the path for a sustainable energy supply. According to the Federal Association of Wind Energy (BWE), the share of renewable energy in Germany has soared from 5.4 percent in 1999 to 40.3 percent in 2017 under the influence of EEG, as seen in Figure 1. Each amendment has been executed in order to redirect Germany’s course of action for the successful implementation of renewable energies.
What has changed?
From the modifications made to the 2017 EEG, I have identified the following points as the most important and with the highest effect on the statutory targets:
Revenue sharing with municipalities for wind energy
One of the main barriers to wind energy implementation is its negative social acceptance, stemming from the well-known Not-In-My-Back-Yard (NIMBY) mentality. The most recent amendment, therefore, seeks to provide an economic incentive for municipalities, cooperatives and organizations to embrace wind energy installations. Under the new EEG, wind power plant operators may grant the “affected” party up to a maximum of 20 ct/kWh. This incentive will ease the implementation of wind turbines in publicly owned land as it can bring a sense of ownership to municipality residents, and possibly transform the NIMBY mentality to a PIMBY (Please-In-My-Back-Yard).
Wind energy is by far the highest electricity producing renewable energy source (RES) in Germany. In 2019 alone, wind energy accounted for roughly 50% of the renewable electricity produced. When compared to other RES, wind energy has the lowest emission factor (from a Life Cycle Assessment perspective).
Therefore, wind energy is the leading technology for achieving decarbonisation.
Increase to 30 kW for EEG-Levy exempted solar PV plants
With the new amendment, the installed capacity limit above which a pro-rata EEG levy must be paid for self-consumed electricity has been raised from 10 to 30 kW. This means that operators of solar photovoltaic (PV) systems with a maximum output of 30 kW and a maximum annual solar self-consumption of 30 MWh will no longer pay the EEG levy of 6.5 ct/kWh for self-consumed solar electricity. The exemption applies (as opposed to previous amendments) to both old and new systems. Even Ü20 operators (PV plants that will lose the fixed feed-in tariff after 20 years) with an installed capacity of up to 30 kW will be exempted.
This amendment will help to promote the investment and generation of small-scale green PV plants in the private sector for self-consumption, making the operation of rooftop PV installations financially feasible for prosumers to power technologies with high levelised cost of electricity (LCOE), such as heat pumps.
Remuneration in periods of negative electricity prices
The remuneration for negative prices intends to improve the market integration of renewable energies. In past EEG versions, if the hourly electricity spot market prices were negative on more than six consecutive hours, these would then be reduced to zero and no market premium was to be paid. Now, the amendment stipulates that negative prices shall be reduced to zero if the price at the spot market is negative for only one hour.
This reduction in remuneration will play a key role in the promotion and improvement of energy storage systems, as plant operators would require alternative ways to cope against negative price periods. This can additionally foster cooperation agreements with storage operators and grid operators leading to the increase of storage capacity.
Changes in auction proceedings
In previous versions of the Act, only energy systems with an installed capacity equal or higher to 750 kW were obliged to participate in electricity tendering. Now, the EEG 21 stipulates that energy systems between 300 kW to 750 kW of installed capacity can either decide to participate in the tendering process or remain under the statutory subsidy. Nevertheless, if they decide on the latter, the amendment establishes that only 50 percent of the generated electricity is eligible for subsidies, whilst the remaining 50 percent is to be consumed by themselves or sold directly.
This change is rather hindering for small private producers such as cooperatives. Firstly, they cannot self-consume the electricity, and secondly, the market price for direct electricity selling is lower than the one obtained through tendering (as the feed-in market premium scheme is not available). Nevertheless, this change will eventually foster the implementation of energy storage systems as this could allow energy producers to sell in times of peak market prices and store in low market price periods.
What is missing?
Critics of the EEG 2021 have marked the proposed renewable energy expansion target as weak and without the necessary measures for accelerating planning and approval of projects, especially those for repowering ageing wind turbines. According to the BWE, in 2021, 4000 MW of onshore wind energy will reach the end of the 20-year funding period and will no longer benefit from the federal feed-in tariff. From 2025 onwards, an average of 2400 MW annually will lose federal support. If these wind power plants are not able to operate profitably, then many plants would shut down without proper framework conditions. Power Purchase Agreements and sector coupling pose as fair framework conditions for ensuring the continued operation of both ageing PV and wind power plants.
Whether critiqued as weak or not ambitious enough, portraying an expansion target of the installed capacity of renewable energies as national legislation is the most effective and direct strategy for achieving national decarbonisation.
As opposed to many nations, Germany is one of the handful of countries globally to have embraced carbon neutrality in their national law. It will be thrilling to see how renewable energies will develop based on the enactment of the new EEG. If successful, it will certainly pave the path for many other nations pursuing similar ambitions.
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