EEG 2021 – A thrilling plot but a let-down conclusion

In our December 2020 edition we introduced the long overdue amendment draft for the Renewable Energy Sources Act (“EEG”) as drawn up by the Federal Ministry of Economic Affairs and Energy. At that time, there was still some catching up to do in order to achieve the expansion of renewables that was planned and necessary for the climate targets. The required parliament sittings and decisions were, in almost a crime-like cliff hanger fashion, delayed by the government repeatedly. When it was finally agreed upon on December 17th 2020, the very last possible date of the year, the amendment was strongly reviewed, but ultimately the result was perceived half-hearted. This article aims to highlight the most important changes around photovoltaics and wind and weigh them up against the very first draft of the new law.

Expansion targets

The ambitious aim of reaching a 65 % share of renewables in the gross domestic electricity consumption by 2030, as stated in the first draft of the amendment, remained unchanged. Greenhouse gas neutrality by 2050 is another long-envisaged goal that was set in stone (1). Unfortunately, despite massive criticism from various energy experts, associations and utility providers, the underlying assumptions for electricity consumption was not corrected to represent the actual projected rise in demand and, therefore, the expansion targets for wind and solar were not increased. The installed onshore capacity is still set for a gradual increase from 57 GW in 2022 to 71 GW by 2030. The expansion pathway for photovoltaics is to rise incrementally as well; from 63 GW in 2022 to 100 GW by 2030 (2). With an average annual expansion of less than 2 GW and 5 GW for wind and solar energy, respectively, the government is significantly far from the necessary growth for climate neutrality. To reach climate neutrality, experts deem an annual expansion of PV and wind of around 25 – 30 GW (3) as vital. Only then, the desired shift to electromobility, decarbonisation of heat and production of green hydrogen would begins to look feasible.

Changes around photovoltaics

One of the major adjustments with an overall positive effect on the expansion of private and small-scale PV is the increased levy threshold for own consumption to 30 MWh/a for plants of up to 30 kW (4). Thusly, the government adapted the initial draft in accordance with the EU guideline EU-EE-RL 12/2018 Artikel 21 Abs. 3c), avoiding penalty payments that would otherwise have incurred starting mid-2021. Important to note, these raised thresholds apply to new, as well as existing plants starting with 2021. Moreover, the so-called “basic degression” of monthly remuneration rates is lowered from 0.5 % to 0.4 %, which will particularly benefit private and small-scale operators of under 300 kW capacity plants (5).

The extension of the subsidised corridor along motorways and railways from 110 m to 200 m as well as the doubled maximum subsidised plant size (10 MW to 20 MW irrespective of whether building-integrated or free-standing) open up more scope for subsidised solar parks. This not only makes it possible to expand existing plants, but also to erect larger, more economical plants. However, the legal framework regarding this matter must be simultaneously paralleled in the spatial and building regulations of the individual federal states, so that envisaged growth is not stalled by building regulations. Various federal states limit corridors for PV along rail and motorway networks to 110 m; these now need to be extended.

By redefining terms and regulations around photovoltaic systems on buildings and open spaces, the new EEG opens up the possibility of promoting innovative forms of installations. Thus, there are now solar power systems of the first segment, which include ground-mounted systems, but also PV systems at, on, or in structures that are neither buildings nor noise barriers (6). Then, solar power systems of the second segment decribe all photovoltaic systems on, at, or in a building or noise barrier (7). This redefinition opens up new possibilities of recognition and funding, in particular for so-called floating PV systems on artificial water bodies such as quarry lakes, but also for other forms of installation.

The revision of the tendering framework for PVA, which was already envisaged in the draft bill in September 2020 was implemented in the EEG 2021, although slightly modified. It remains the case that tender volumes are split between roof-mounted and free-standing installations, other installations and innovation plants in which the solar power plant is combined with at least one other renewable energy source. However, unfortunately the foreseen tender volumes have seen a decrease (8) rather than the increase prescribed by sector unions. It should also be mentioned here that an amendment to the Innovation Tender Ordinance was also passed with the EEG 2021. The accompanying revision of §§ 15 to 20, which concern the tendering for special solar installations, provides for the one-off introduction of a special tendering of 50 MW in April 2022 for photovoltaic installations on water bodies, arable land with simultaneous crop cultivation and car parks (9).

The legislator also made concessions with regard to the planned decrease of the tendering obligation for building-integrated photovoltaic systems. The threshold will remain at 750 kW. Operators only have the option of voluntarily participating in the tendering procedure for remuneration from an output of 300 kW (10). Unfortunately, for systems between 300 and 750 kW has been made as unattractive as possible by another trick of the legislator, as only a maximum of 50 % of the electricity generated is now remunerated when the legally stipulated subsidy is used (direct marketing with market premium) (11). If, on the other hand, the remuneration determined in a tendering procedure is claimed, self-supply with the self-generated electricity is prohibited (12). A decline in investments on industrial roofs to supply in-house infrastructure and thus the commercial use of self-generated, clean electricity is to be feared. Industry experts, such as BEE President Simone Peter, criticise this adjustment as an artificial market brake that continues to prevent the development of a large part of the unused commercial roofs, leaving a huge potential market unused (13).

Oberwiesenthal 2021, Kristin Weingart

The improvements provided in the EEG 2021 draft regarding the area of tenancy-bound PV power systems were revised again after criticism from the industry and the demand for economic equality with private operators of small PV systems on owner-occupied homes. The EEG subsidy for installations was newly fixed at up to 3.79 ct/kWh and increased for installations up to 750 kW (14). In addition, systems in residential neighbourhoods no longer have to be combined into one overall system (15) and thus now benefit from a more attractive subsidy policy. Unfortunately, the adopted EEG 2021 also continues to ignore both the exemption from the apportionment obligation and the reduction of the massive bureaucratic effort associated with it. Although this segment will experience an overall increase in expansion, it will still fall short of its potential. It is to be feared that especially smaller projects for the supply of up to 20 residential units will be deterred by the bureaucratic hurdles; for larger projects there are service providers and regional suppliers specialised in this segment (16).

As mentioned at the beginning, the amendment to the law became necessary above all to enable the continued operation of all functioning so-called post-EEG plants that were no longer eligible for subsidies and to avert the illegality of feeding electricity into the public grid, which would have applied to around 18,000 plants (17) as of January 2021. For affected photovoltaic plants, modified solution scenarios were included in the law compared to the September 2020 draft. Operators of old plants are offered a choice of transitional surplus or full feed-in of the electricity produced until 2027 with remuneration at the annual market price (18), as well as the option of simplified direct marketing of the electricity produced. If operators of post-EEG plants convert their plants, which were generally used for full feed-in until the end of the remuneration period, to self-supply, they benefit just like operators of new plants from the levy exemption for self-consumption of up to 30 MWh for plants up to a size of 30 kW and from the exemption from the obligation to install smart meters for plants with a capacity of up to 7 kW (19). In this way, the legislator has reacted to the massive criticism of the federal states chamber, as well as various industry associations and created a loss-free solution for the continued operation of the impacted plants. The premature decommissioning of around 447,000 functioning photovoltaic plants totalling around 3,370 MW solar capacity (20), a massive threat to expansion targets, is therefore fortunately off the table for now.

Adaptations concerning wind energy

As far as improvements in the wind energy sector are concerned, they clearly lag behind those in solar energy in terms of number and impact. Nevertheless, this sector has also experienced alteration in the 2021 Act, which should not go unmentioned.

Although disadvantageous overall, the legislator’s concession in the revision of the negative electricity price rule for remuneration rates determined in tendering procedures can be seen as positive in comparison to the draft version. For example, the period from which the remuneration for electricity generated from EEG-subsidised solar and wind power plants with a capacity of 500 kW or more is suspended, if prices on the electricity exchange are consistently negative was increased from 1 hour (draft) to 4 hours (21). At the same time, the remuneration period will be extended by the number of “outage” hours affected by this regulation (22) and operators will be given the opportunity to use the electricity generated during this time themselves (23). The planning security with regard to the economic viability of wind turbines is thus significantly improved compared to the draft amendment.

A new feature of the EEG 2021 is that a volume reduction is possible, if a tender round for wind turbines is about to be signed (24). The chief reporter of the trade journal Energie & Management, Ralf Köpke, also criticises the fact that the new EEG completely ignores the postponements of unused tender volumes anchored in the 2017 EEG. In 2018 and 2019, due to a lack of participation, the awarded capacity was lower then the EEG’s projection by a total of 3,000 MW, which, according to the old law, should now have been added to tender volumes in 2022 and 2023. The EEG 2021 does adopt this distribution mechanism, but only from 2024 and for volumes that were not called up in 2021. This means that important potential remains unused in the wind industry, which is already suffering. It would be essential to significantly increase the tender volumes in 2022 and 2023, which are already too low, in order to make progress in mitigating climate change and achieve the targets set by the government (25). Simone Peter, President of the German Renewable Energy Federation (BEE), also notes with consternation that the urgently needed volumes are effectively forfeited with the abolition of the tender volumes, which may only be put out to tender again three to four years later (26).

The EEG 2021 now offers a perspective (27) for subsidised, so-called Ü-20 wind turbines, at least for those turbines whose subsidy entitlement expires at the end of 2020 or 2021, but there is still a lack of a longer-term solution. Wind turbines that have so far received the EEG feed-in tariff will now be entitled to a tariff rate of between 3.0 and 3.8 cents per kilowatt hour determined by the Federal Network Agency through tenders; the prerequisite for this is successful participation in one of the tenders (28). By way of exemption, plants whose subsidies expire in 2020 will receive the annual market value for the months in which there is no surcharge or no surcharge yet, in addition to a surcharge that will gradually decrease from 1.00 to 0.25 ct/kWh until the end of 2021 at the latest (29). In addition, the operators of those turbines have the option of selling the electricity generated to a direct marketer and, in the best case, achieving more attractive prices. Unfortunately, the new EEG lacks remuneration solutions for all wind turbines that will cease to be subsidised after 2021 and 2022. However, it should be mentioned positively at this point that the restriction to a maximum turbine size of 100 kW, which was still contained in the draft law, was not adopted in the EEG 2021. Consequently, in principle, aforementioned claims can be filed for all wind turbines that have been removed from support by 2021. Due to the cessation of the EEG remuneration for several thousand pioneer plants at the beginning of the year, other direct marketing is experiencing unprecedented popularity. Current figures show that in the wind energy sector alone, plants with a total capacity of 2,029 MW have been included in other direct marketing; at the end of 2020, the volume was still only 65 MW (30).

The quota rule from the draft law to strengthen expansion in the southern region, which includes the federal states of Bavaria, Baden-Württemberg, Saarland and the south of Hessen and Rhineland-Pfalz, was included in the EEG 2021. The Federal Network Agency must now ensure in every onshore wind turbines tendering procedure that at least 15 %, and from 2024 20 %, of awarded contracts are located in southern districts. Overall, this separation is very positive. However, according to the law, this acceleration of the nationwide expansion of wind energy in Germany will not be introduced until 2022 (31). Until then, insufficient new construction is expected in southern Germany.

Oberwiesenthal 2021, Kristin Weingart

The regulation on the financial participation of municipalities, which has been adopted into the EEG, is seen as facilitating public approval of onshore wind energy plants. The new law now gives operators of wind turbines the option of allowing the municipalities affected by the erection of the wind turbine to participate in revenues with an amount of up to 0.2 ct/kWh. Here, the value is to be applied both to the actual amount of electricity fed into the grid and to the fictitious amount of electricity, which includes, for example, energy not fed into the grid due to grid-serving curtailment (32). Operators are also given the opportunity to demand reimbursement of this amount from the grid operator for payments made to the municipality in the previous year as part of the final settlement (33). Unfortunately, the version of the law that has been passed still does not provide for direct participation by citizens via citizen electricity tariffs or similar, which would certainly have been beneficial to the acceptance of wind power plants.

Approval procedure

The draft of the new Renewable Energy Sources Act included a declaration of renewable energies as being in the public interest and serving public safety (34). This paragraph was seen as a thoroughly relevant means of simplifying authorisation procedures for renewable energy installations. However, after strong protests from various environmental associations, the passage was unfortunately not included in the EEG 2021. The bureaucratic hurdles for free-field solar and wind energy plants in particular remain high and are currently even being tightened in some federal states, for instance the planned tightening of the distance regulations for wind energy plants from residential buildings in North Rhine-Westphalia. Industry experts expect 2021 to be the fourth year in a row with wind energy expansion far below plan (35). The coming years do not promise any significant improvement here either.

Our conclusion

The EEG 2021 did not succeed in bringing about a real revolution. Although the most important goal to ensure the legal continued operation of post-EEG plants has been achieved, other remain in urgent need of adjustments. To a large extent, it will be the task of the new federal government elected in September 2021 to rectify them. The current federal government has already agreed in a resolution to clarify the outstanding points of contention regarding the EEG 2021. Among other things, the definition of a more far-reaching expansion path in the first quarter of 2021, development of a budget-neutral financing model and further tightening of the rule on negative electricity prices are to be addressed.

Particularly in the area of solar energy, many of the amendments adopted with the EEG 2021 basically go in the right direction, even if they are far too timid with regard to the self-imposed goals of climate neutrality. The expansion paths and estimated production volumes are significantly low for the ambitious environmental goals of the German government. The reduction in bureaucracy demanded by the industry and sought by the legislature is also clearly missed. Furthermore, there is a lack of uniform nationwide criteria for renewable generation plants and adjustments to licensing law to facilitate procedures for green power plants and make the expansion of generation capacity attractive, which is beneficial to the energy transition.

The German Renewable Energy Federation considers the far-reaching detrimental changes to the tender design of individual renewable technologies to be fatal and criticises that the necessary expansion of renewables will be decisively jeopardised as a result. Obviously, the design is to interfere with tendering processes under a reference to EU competition requirements. Wind energy is particularly affected by this. Overall, the EEG 2021 has been “disimproved” in its final stages. With the adopted bill, the unwillingness of the government to recognise renewables as a central pillar for climate protection is once again expressed. Once more, the energy transition depends on the initiative of many citizens and associations who continue to develop and implement projects, both large and small, independent of the federal government’s subsidy pot, regardless of bureaucratic hurdles.

BY: KRISTIN WEINGARDT