Auctions to determine the price of wind and solar
The Renewable Energy Act provides a financing mechanism for renewable energies and the proposed changes constitute the most important overhaul of this system to date. At the heart of the reform, which is slated to take effect at the beginning of 2017, is a switch from feed-in tariffs for green power, decided on by parliament, to competitive auctions. The government says reforms are necessary to control the costs of future renewables roll-out, and to allow precise steering of green energy development.
The EEG, with its feed-in tariffs and priority access for renewables, is credited with enabling Germany’s renewables growth. The share of renewable electricity generation increased from 3.6 percent in 1990, when the law was enacted, to 30 percent in 2015. Find an overview of the Renewable Energy Act, which has been copied by dozens of countries around the world, in the CLEW
- Factsheet Defining features of the Renewable Energy Act (EEG).
- For more background, also consult the Dossier EEG 2.0 – A new legal framework for the German energy transition.
Why reform the EEG?
In early 2016, the economics ministry released some key points of the reforms, and a first draft for the “EEG 3.0” law has been leaked. The reforms aim to keep a steady hand on the rise of renewable power over the next decade and achieve the renewables targets of 40-45 percent by 2025, to 55-60 percent by 2035 and to a minimum of 80 percent by 2050. In particular, the 2025 target implies that recent renewable development will have to slow down to avoid overshooting, as renewables' share has already risen to above 30 percent.
To this end, a “deployment corridor” will specify how much renewable power generation capacity may be built per year, and determine the volume of tailored auctions for each renewable technology (photovoltaics, onshore wind, offshore wind). Only those installations that have won a tender will receive payments for the power they supply. More details on the reform proposals can be found in the
The government hopes the reform will get approval from the government cabinet and be passed by the two parliamentary chambers before parliament’s summer recess. The upcoming meeting between Merkel and the state premiers is aimed at guaranteeing passage of the reform in the upper house, the Bundesrat. A first meeting did not yield a compromise. Germany’s 16 federal states may have a common goal – to cut emissions and fight climate change – but there are many different opinions about how to achieve it and how exactly the Energiewende should progress. Find more details in the
The draft law has stirred a heated debate in Germany, as the reforms face strong resistance. Renewable proponents argue the reforms will stifle green power development, especially onshore wind, and endanger citizens’ participation, an Energiewende trademark. Energy-intensive industry, on the other hand, believes reform plans do not go far enough to lower costs. Find more details in the
- News article First reactions to Renewable Energy Act reform proposal.
The government began a trial auction system in 2015 for large-scale, ground-mounted photovoltaic plants. According to the government, strong participation in the trial tenders and declining prices show the effectiveness of this system. In 2017, the reform is meant to extend the auction system to onshore and offshore wind parks, and to large roof-mounted solar arrays as well. Find a summary of the trial auctions and reactions from stakeholders in CLEW’s blow-by-blow account in the
Onshore wind is the largest stumbling block
One of the most contentious parts of the reform, which strongly affects regional states, is the future role of onshore wind development. According to the proposal, new onshore wind will fill the renewable capacities left over by solar and offshore wind. Critics argue this makes the future of onshore wind highly uncertain, putting many jobs in the wind industry at risk.
To oppose these changes, the heads of Germany’s northern states joined forces and called for a consistent development of onshore and offshore wind energy with their ‘Wismar Appeal’ in January of this year. When reforming the EEG, the target of 40-45 percent renewables by 2025 should not be used as a ceiling for wind power expansion, they argued.
Northernmost state Schleswig-Holstein’s environment minister Robert Habeck said that his state should stretch its own plans to produce three times more electricity from renewables than it consumes to 2030, instead of 2020. However, he criticised that current federal government plans slowed down wind development too much, even with the adjusted targets.
Germany’s wind industry, the Industrial Union of Metalworkers (IG Metall), and several industry associations and companies protested against the EEG reform plans on 25 May as part of the campaign ‘Save the Energiewende’.
Other voices from recent CLEW News Digests
- Richard Fuchs from public broadcaster dw.com says there is a lot of pressure on Chancellor Angela Merkel and state premiers to hammer out a compromise at the meeting amidst a “lobby battle over the Energiewende”.
- The Green Party called on regional states to hold their ground in the talks to avert the "destruction" of wind power and “protect the energy transition and climate protection against the federal government.” In contrast, pro-business party FDP said “organised particular interests and states block the desperately needed policy change...the money-printing machine called Renewable Energy Act must be stopped.”
- Michael Fuchs, deputy head of the CDU-CSU Conservative Parties’ parliamentary group, argued renewable expansion must be limited to keep pace with grid expansion. He said new facilities that could not deliver their electricity because of grid bottlenecks should not be fully compensated. But Greenpeace said large conventional power plants have to become flexible instead. “The [Christian Democrats] want to make wind power the scapegoat for grid bottlenecks. That is absurd.”
- The federal economics ministry says controlling the costs of the Energiewende is one of the key reasons to reform the EEG. According to a paper recently submitted to regional states, the ministry warned a rise in the renewable surcharge for next year is “likely” and that costs for grid management “could rise strongly in coming years”.
- The German Association of Energy and Water Industries (BDEW) said that reform plans show that “business-oriented thinking can be injected into the renewables roll-out.” BDEW called for as few and clear regulations as possible and rejects exceptions for individual states. Claudia Kemfert from the German Institute for Economic Research (DIW) said in a commentary in Die Zeit that the tendering process for renewables needs to be as investor-friendly as possible.
- Georg Erdmann from Berlin’s technical university warned of increasing government intervention and the lack of technological neutrality with the current draft. This contradicted the aim of a cost-efficient and reliable Energiewende, as well as open markets and the essential industrialisation of renewables.
- “Renewable support has to end at last,” wrote Angela Hennersdorf in Wirtschaftswoche. “Companies like (wind turbine maker) Enercon have benefitted for years from the sweet poison of public subsidies, even though their business has been ready for the market for some time.” Andreas Mihm also criticised the “over-supported system” in a commentary in Frankfurter Allgemeine Zeitung.
- Instead of slowing down the development of renewable energies because of grid bottlenecks, the federal government should focus the reform of the EEG on modernising the grid, wrote Lars Fischer in a commentary on the website of science magazine Spektrum der Wissenschaft.
- Cologne Institute for Economic Research (IW Köln) welcomed the plans to introduce growth corridors to make sure the grid expansion can be carried out accordingly. However, it warned that even with current reform plans for the EEG, it were unlikely that renewables expansion will stay within the growth corridors the government is expected to propose.
- Most of the grid extension needed to transport electricity from wind produced in Germany’s north to the industrial south is carried out and paid for in eastern states, wrote Saxony state premier Stanislaw Tillich in a letter to federal economics minister Sigmar Gabriel and called for a fairer division of grid costs on a national level.