German Renewable Energy Sources Act
|Renewable Energy Sources Act|
|Act for the development of renewable energy sources
(previously: Act on granting priority to renewable energy sources)
In Germany, the Renewable Energy Sources Act (also translated as the Renewable Energy Act) or EEG (German: Erneuerbare-Energien-Gesetz) was designed to encourage cost reductions based on improved energy efficiency from economies of scale over time. The EEG came into force in the year 2000 and was the initial spark of a tremendous boost of renewable energies in Germany.
On 1 August 2014, a revised Renewable Energy Sources Act entered into force. Specific deployment corridors now stipulate the extent to which renewable energy is to be expanded in the future and the funding rates (feed-in tariffs) will no longer be set by the government, but will be determined by auction. This page focuses on the year 2000 Act. A chart showing German energy legislation is available.
In the first half of 2014, 28.5% of Germany's electricity was produced from renewable sources, up from 23.4% in 2013. In 2012, 10.2% of heat and 5.7% of fuel use in Germany was generated from renewable sources Due to the use of renewable energies, 145 million tonnes of CO2 emissions were avoided during 2012. The renewable energy industry employed 377,000 people in 2012, up from 30,000 people in 1998. Of these jobs, 268,000 exist as a direct result of the Act. Germany is third after China and the US, the world's top renewable energy economies, as measured by investment in the renewable energy sector. Due to its success, the EEG can serve as an archetype of similar legislation in other countries. The 2014 EEG award went to Eurosolar for their memorandum during the debate about changes to German energy policy, concerning off-shore wind power.
The 2000 Renewable Energy Sources Act (EEG) succeeded the 1991 Electricity Feed-In Act (German: Stromeinspeisungsgesetz). The founders of the Act were Klaus Töpfer, former German Federal Minister of the Environment and member of the Christian Democratic Union, Dietmar Schütz, President of the Federal Association of Renewable Energies and Member of Parliament, Social Democratic Party, Hans-Josef Fell, Member of Parliament, Alliance '90/The Greens, Hermann Scheer, Member of Parliament, Social Democratic Party, Sigmar Gabriel, German Federal Minister of the Environment and member of the Social Democratic Party, Josef Göppel, Member of Parliament, Christian Social Union of Bavaria, and Jürgen Trittin, Member of Parliament, Alliance '90/The Greens. The EEG has frequently been revised to refine its regulatory framework and to adjust its financial support system to control costs and capacity. The latest revision, the EEG 2014, entered into force 1 August 2014.
The three main principles
The three main principles of the EEG are:
- Investment protection through guaranteed feed-in tariffs and connection requirement: Originally, every kilowatt-hour generated from renewable energy facilities received a fixed feed-in tariff. The system was modified in 2012 to include a market premium system. Network operators are required to preferentially feed-in this electricity into the grid over electricity from conventional sources (nuclear power, coal, and gas). Renewable energy plant operators in principle receive a 20-year, technology-specific, guaranteed payment for their electricity generation. Small and medium enterprises have been given new access to the electricity market, along with private land owners.
- No charge to Germany's public finances: The promotion of renewable electricity continues to be necessary up until now. The EEG rates of remuneration show what electricity from wind, hydro, solar, bioenergy, and geothermal energy actually cost. Compared to fossil fuels, there are less or no external costs, such as damage to the environment, the climate, or human health. The remuneration rates have until recently been considered not to be subsidies as such, since they are not paid for by taxes and are paid for by every consumer as an EEG surcharge (German: EEG-Umlage) that is included in every electricity bill. The polluter pays principle a.k.a. "whoever consumes more, pays more" is in effect passed on to consumers. In 2013, the total EEG surcharge amounted to €20.4 billion. In 2014, the EEG surcharge was set at 6.24 ct/kWh. Certain reductions of the EEG surcharge apply for energy intensive industries (so-called special equalisation scheme).
- Innovation by decreasing feed-in-tariffs: Feed-in tariffs in Germany decrease in regular intervals to exert cost pressure on energy generators and technology manufacturers. The decrease (called "degression") applies to new plants. Thus, it is hoped, technologies are becoming more efficient and less costly.
The EEG distinguishes between the different renewable energy sources for remuneration, each source receives a different guaranteed price according to its generation cost and capacity (see feed-in tariffs). Per the EEG mandate, the German Federal Network Agency (German: Bundesnetzagentur) publishes the currently installed PV capacity with adjusted feed-in tariffs monthly as a downloadable spread sheet. According to the January 2014 spreadsheet solar power fetched a price of 9.47 to 13.68 ct/kWh, depending on installed size. Hydropower ranged from a default of 3.4 to 12.7 ct/kWh, depending on size and if online since 2008 or if modernized.[dead link] The feed-in tariffs were again adjusted as part of the EEG 2014 revision.
The grid feed-in tariffs provide incentives to every company involved in the renewable energy generation business, especially for small and medium-sized energy firms, to invest in developing and generating renewable energy systems, to decrease initial market entry barrier for these businesses, and to reduce the costs of renewable energy systems for production and consumption over a period of time.
Impact on the German Market
The EEG has been the central political element of one of the greatest paradigm shifts since the start of the industrial revolution: the shift from fossil and atomic energy supplies to renewable energy sources (Green Energy Act Alliance, 2011).[clarification needed] The German energy market has started to turn away from fossil fuels and centralized electricity structures towards a decentralized approach of energy production. With investor friendly remuneration rates, electricity production is no longer in the hands of a few big energy companies. The Renewables 2016 Global Status Report by the Renewable Energy Policy Network for the 21st century (REN21) shows Germany's favorable position in the global renewable energy markets.
Various studies found that because the fixed feed-in tariff provides financial certainty, it is more cost effective and less bureaucratic than other support schemes, such as investment or production tax credits, quota-based renewable portfolio standards (RPS), and auction mechanisms.
The economic outcome of the EEG for Germany has been considerable. Building a safe and clean power supply incurs costs, but the net benefit of the EEG exceeds the costs of initial investment by €3.2 billion[better source needed] When the avoided external costs were compared to the compensation grid operators were paid for electricity from renewable energies in an early study, the reduced environmental impacts and related economic benefits far outweighed additional costs to compensate producers of electricity from renewable sources. (Krewitt and Nitsch 2001). Accounting for the external costs of the fossil fuel use and thus 'level[ing] the playing field' had been one of the key purposes when constructing the EEG.
The feed-in tariff generates more competition, more jobs, and more rapid deployment for manufacturing and does not pick technological winners, such as more mature wind power technology versus solar photovoltaics technology
The positive impact on the environment globally is less clear. Hans-Werner Sinn, German economist and chairman of the Ifo Institut für Wirtschaftsforschung has argued that Germany's renewable energy subsidies reduce world market prices for fossil energy. Thus, countries like China or the US have an incentive to consume more, and the net effect on climate is zero.
The goal of renewable energy by 2025 is 40 to 45% and by 2035 it is 55 to 60%. Many challenges lie ahead. One of them is integrating the electricity generated by decentralized renewable energy power plants into the existing electricity grid structure. Existing grids were built in accordance to the centralized energy system of the four main energy companies in Germany (namely: E.ON, Vattenfall, RWE, and EnBW). The more decentralized clean energy is produced (about 28% in the first half of 2014), the more urgent it is to adapt the grid infrastructure. Another challenge of paramount importance is the storage of electricity to be able to feed it in as needed.
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