The German renewable energy act of 2012

Dec 08, 2011 12:00 AM

by Dr Marius A. Boewe and Andrea Stratmann

The German government has reconsidered the role of nuclear energy in Germany as a result, in part, of the nuclear accident at Fukushima, Japan. This decision has resulted in recent energy policy decisions to phase out nuclear-generated energy by the end of 2022, and to increase use of renewable energy sources.
In addition, the transition from reliance on conventional energy to the use of renewable energy is further driven by the nation’s ambitious climate protection policy.

Germany aims to incrementally increase its use of renewable energy:

  • 17 % in 2010,
  • 20 % in 2011,
  • at least 35 % by 2020,
  • at least 50 % by 2030,
  • at least 65 % by 2040 and
  • at least 80 % by 2050.

Under this plan, greenhouse gas emissions will be reduced from their 1990 levels by 40 % by 2020 and up to 95 % by 2050.

In order to achieve these aims, the German Federal Parliament (the Bundestag) has revised the current Renewable Energy Sources Act (EEG 2009). The revised act (EEG 2012) is scheduled to come into force on January 1, 2012. EEG 2012 affirms these aggressive energy goals and thereby complies with previous EEG revisions enacted in 2004 and 2009.
Although these numbers may seem quite ambitious and far-reaching, it must be noted that since 2000, when the first EEG was implemented, the share of Germany’s power generated from renewable sources has exceeded each legislative aim so far.

EEG 2012, like its predecessors, covers a wide range of hydropower renewable energy sources, including wave power, tidal power, salt gradient and flow energy, wind energy, solar radiation and geothermal energy. The act also addresses energy from biomass, including biogas, bio-methane, landfill gas and sewage treatment gas, as well as biodegradable municipal and industrial waste.
In addition, the EEG guarantees that 100 % of the power generated from such renewable sources will be fed to public grids at a guaranteed minimum price.

The EEG provides a special compensation scheme relative to these energy sources. It allows for the priority purchase, transmission and distribution of, and payment for, the entire available quantity of electricity produced from renewable energy sources and from mine gas electricity by the grid system operators.
EEG 2012, moreover, imposes an equalization scheme on Germany’s energy consumers through revisions in most of the nation’s energy feed-in tariffs.

The table here compares tariffs for selected renewable energy sources placed in operation in 2012 under EEG 2009 and EEG 2012.

Renewable Energy Source

Tariff under EEG 2009  
in EUR/$

Tariff under EEG 2012  
in EUR/$

Tariff Difference 
in %

Biomass for plants less than 150 kW in size

EUR 0.11/kWh
($ 0.16/kWh)

EUR 0.14/kWh
($ 0.20/kWh)

+30 %

Geothermal plants
(irrespective of plant size)

EUR 0.16/kWh
($ 0.22/kWh)

EUR 0.25/kWh
($ 0.36/kWh)

> + 50 %

Offshore wind

EUR 0.13/kWh
($ 0.19/kWh)

EUR 0.15/kWh
($ 0.21/kWh)

+ 15 %

The majority of these tariffs are subject to a so-called “degression”. That is, the tariff to be paid for the next 20 years depends on the year in which the plant starts operating. The later this start-up occurs, the lower the feed-in tariff will be for the entire 20 years.
Degression will have a massive impact on the profitability of any energy production investment. For example, an onshore wind installation that begins operating in 2012 will receive 9.41 ct/kWh, whereas the same installation starting operation in 2015 will receive only 8.53 ct/kWh. Offshore wind parks that commission by 2017 will receive 15 ct/kWh for an initial period of 12 years. Those that begin operating in 2019, however, will receive only 12.97 ct/kWh.

Besides degression, other tariff components exist, such as the so-called technology bonus and repowering bonus. The entire system of feed-in tariffs is very complex and depends on various factors that require specific expertise to understand.
In any case, it should be emphasized that EEG 2012 encourages early investment to achieve its legislative goals: the sooner an installation starts the generation of energy, the more the operator will receive over the next 20 years.

Even though offshore wind is currently seen as the major renewable energy source of the future, there will also be massive demand for onshore wind parks.
In particular, the federal states of Baden-Wuerttemberg and Bayern have decided to greatly increase power generation from wind energy. Baden-Wuerttemberg, for example, plans to grow the share of its wind-generated energy from below 1 % of its total power currently to 10 % in 2020.

EEG 2012 regulates the grid connection system for renewable energy power plants. It does this by obliging grid operators to connect a renewable energy source with that point on their system (the “grid connection point”) that is, inter alia, at the shortest linear distance from the source installation’s location. As a result, renewable energy plants are granted preferential grid connections in comparison to conventional energy sources.
The renewable energy producer, however, must pay the costs incurred by connecting the plant to the grid connection point. Germany’s revised Combined Heat and Power Act (KWK Gesetz) 2012 provides a similar compensation scheme to support energy production by cogeneration.

Finally, the German government has established a special funding program (the Offshore Wind Energy program) through its KfW bank group.
The program provides EUR 5 bn in order to support construction of the first 10 offshore wind farms in Germany.

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