The German Renewable Energy Sources Act (EEG): A lot of noise, though little progress

30 Oct 2020 / Market

2020 has been a surprising year in many ways, but September brought several astonishing developments for German energy and climate policy. After months of inaction, the major amendment to the Renewable Energy Sources Act (EEG) was rushed through departmental coordination and state and association hearings in just under four weeks, before being quickly adopted by the cabinet.



Disagreement on the EEG amendment within the Federal Government

What is particularly remarkable is the open dissent within the Federal Government. While the CDU-led Ministry of Economics has submitted a draft of the EEG, that includes numerous demands of energy-intensive and conventional industries, for the SPD-led Ministry of the Environment the expansion of renewables can't move fast enough. In a protocol statement, SPD Minister of the Environment Svenja Schulze pointed out that she sees room for improvement in three areas - a higher expansion of renewables, improved regulations for post-EEG systems and a mandatory combination of new buildings with photovoltaic systems.

What will happen to post-EEG plants after the EEG amendment?

The amendment needs to urgently address what happens to post-EEG plants. At the beginning of 2021, after 20 years of operation, the first plants will be phased out of EEG support. Today, it is still not clear what will happen to them. This is all the more frustrating because we - like many others - have been pointing out the unclear situation for almost two years.

In contrast to the Minister of the Environment, we see the need for improvement for post-EEG systems not only for wind power plants where repowering is not possible, but above all for small solar plants. Various estimates show that at least 18,000 plants will be affected in 2021 alone, with this rising to 180,000 plants by 2025.

The main problem for the smallest systems is that self-consumption is made very difficult. Plant operators can continue to feed their electricity into the grid at acceptable costs with minimal yields. But if they want to consume their electricity, retrofitting with a smart meter and control technology is mandatory. Under the current conditions this retrofit is not economical for very small plants.

However, supporting self-consumption, even for small plants, would be the sensible option. It would allow post-EEG plants to continue operating and their electricity to be used directly on-site, making it an alternative that will also support the strong growth of electric vehicles and home energy storage. However, this option is made extremely difficult, if not impossible, by technical, administrative and financial hurdles. 

One example is the "sun tax" - the charging of levies and apportionments on the self-consumption of electricity from PV systems. The EU issued a directive about this in 2018, stating that self-consumption from plants up to 30kW should be exempt from these financial obligations. This abolition of the burden of taxes and levies on self-consumption, as demanded by the EU, is not implemented in the current EEG draft.

Suggestions for improvements to the EEG amendment

To solve this problem, an alliance of energy companies has already made practical suggestions for improvement. These include the introduction of small-scale direct marketing, in which existing energy industry processes can continue to be used while reducing costs for the plant operator. Generally, balancing should take place every quarter of an hour, but this should not be necessary when the costs of balancing exceed the revenues. In that case, standard feed-in profiles and load profiles should be used. We expressly support this proposal because it takes into account the interests of the various players in a sensible way, balances costs and benefits, and promotes innovation instead of preserving the status quo. 

Standard load profiles could also be used to strengthen the role of prosumers. They would enhance self-consumption, avoid unnecessary meters and support the decentralized energy transition. The Berlin think tank Agora Energiewende also proposed this in late summer, but their suggestions have not been taken into account either. 

All in all, the draft law now passed by the German government is disappointing, especially for self-consumption. The clear and deliberate blocking of the use of self-generated electricity is an impossible development. Although the power limit for photovoltaic systems has been raised from 10kW to 20kW, the proposal now adopted falls short of EU regulations, which must be transposed into national law by 2021. 

An EEG amendment that's not future-proof

The innovation and prosumer hostility of the current EEG bill is also surprising because the Minister of Economics, Peter Altmaier, presented a 20-point plan for climate neutrality and prosperity at the beginning of September. In this plan he commented: "The EEG will be comprehensively reformed and adapted to the new objectives of the EU and gradually developed into a European instrument that can decisively advance electricity transformation throughout Europe."

However, this goal was missed by the Minister and his party's proposed amendment to the EEG. It merely continues an established logic - the feeding in of electricity or not. The Ministry of Economics, which normally invokes innovation and the market economy when it comes to climate protection, ignores their potential for self-consumption. In particular, the growth of storage systems and electric vehicles offers countless opportunities to use self-generated electricity in an innovative, cost-effective and grid-compatible manner. 

Interestingly, proposals for improvements come not only from leading energy companies and players but also from consumer protection groups and the automotive industry. A good example is the current development of §14a of the Energy Industry Act. It proposes peak load shaving, which supports the rigid limitation of charging processes. Instead, it should strengthen intelligent and market-based approaches. Despite demands from such a broad alliance, these proposals have also not yet been considered.

The decentralized energy transition and its more than one million prosumers could have been strengthened with the EEG amendment. We hope that the parliamentary process will address the weaknesses of the draft and amend it accordingly.

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Kay Schwarz
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