In focus: The Renewable Energy Law 2017 > EEG 2017 – The early bird catches the worm

The amendment to the German Renewable Energy Law (EEG) had been completed shortly before the German parliament began its summer break. Therefore, the “Law Introducing Auctions for Electric Power Generated from Renewable Energy Sources and Implementing Other Amendments to the Renewable Energy Law” will most likely become effective on 1 January 2017. Thus, the bill that started as “EEG 2016” has transformed into “EEG 2017”.

The transition from an incentive scheme based on feed-in tariffs to an auction system, a process continued in EEG 2017, has been largely criticised by the industry in terms of the diversity of market players, project risks and incentives for the construction of new installations. Ultimately, especially in times where the market is shrinking, it is vital to recognise and seize new (or the existing) opportunities. In this context, the tendency to increasingly shorten amendment cycles and the length of legislative procedures, as continued in the 2016 EEG amendment, challenges the market players to respond to the opportunities arising from the amendment even earlier and faster in order to occupy new market niches and take advantage of the ever shorter time of relative legal certainty until the next amendment is implemented.

And the Winner is: Geothermal and small-scale photovoltaic systems

Past EEG amendments usually resulted in lower tariffs, on the one hand, and increased regulatory complexity, on the other hand. Also the auction model is eventually burdened with comparable consequences. Therefore, investors who remain not affected by an amendment can already feel like winners:

With capacity thresholds of 750 kW for PV systems (§ 22 (3) EEG 2017), a market segment of special relevance to power supply from residential and commercial rooftop PV systems has been thus preserved. Thus, only solar leasing models or models based on decentralised electricity supply to tenants [Mieterstrom], which can be implemented involving local actors, can expect further growth.

Likewise, hydropower, landfill, sewage or mine gas and geothermal installations continue to be excluded from the auction system (§ 22 (6) EEG 2017). So, municipalities and public utilities being typical municipal facilities may consider themselves as winners under the amendment.

In addition, as regards electricity generated from geothermal energy sources (§ 45 EEG 2017) the current tariff rate of 25.20 eurocent per kilowatt hour has been maintained while degression has been generously suspended until 2020. Thus, in the long term, the high level of investment certainty, which for a long time has been the essential reason for the high numbers of new installations installed under the EEG, will persist. In this context, it should be expected that investment funds from other EEG segments will be invested in geothermal energy.

Using the auction model for new investment forms

It is true that the privileges granted to citizen cooperatives (§ 5 no 15, § 36g EEG 2017) have been largely evaluated as a “fig leaf” for the energy policy and, therefore, it should rather be expected that the group of auction participants will be limited to a few project developers and large companies in the future. However, this does not mean that smaller market players will have to withdraw from the renewable energy market; in the future, they will be able to participate in the energy transition mainly by way of acquiring developed projects. Accordingly, acquisition of installations will grow in importance. In this respect, access to land will be the decisive factor for citizen cooperatives, municipalities and smaller-scale energy suppliers. Accordingly, appropriate profit sharing schemes as compensation for the local impact of renewable energy installations and options for participating in land purchase and leasehold agreements will increase in importance. Likewise, the long-term securing of rights ensuring power and heat purchasing on particularly favourable conditions could be an alternative “investment option” to the existing investment models.

Regional electricity products and models based on decentralised electricity supply to tenants

In this context, the newly introduced regional guarantees of origin will open up new opportunities for the commercialisation of electricity from regional renewable energy sources (§ 79a EEG 2017, §§ 1a, 2a and 4 of the Regulation on Guarantees of Origin). In this context, apart from the quality labels that have been widely used so far, the guarantees of origin under the EEG have increased in importance as regards guaranteeing the quality of electricity. Electricity sold under the auction model is particularly privileged, since the incentive for it is not subject to the deduction for the value added created in the process of regional electricity production. This deduction usually applies to electricity for which regional guarantees of origin were issued.

Finally, the power to issue a regulation that establishes a privileged status of models based on decentralised electricity supply to tenants in terms of the EEG surcharge (§ 95 no 2 EEG 2017) is an opportunity for these models to be on an equal footing with prosumers. In this context, we can only hope that an efficient implementation of the EEG 2017 will help soon open up the significant potential for supplying rented residential properties with electricity from local PV systems. Given this background, models based on decentralised electricity supply to tenants are becoming more and more attractive.

Statutory solution to the term “installation” used in the EEG and strengthening of the EEG-clearing body

The limitation of the term “installation” to mean one single module has reinstated the standard for PV systems, which had been recognised for many years (§ 3 no 1 EEG 2017).

Recently, decisions of the German Federal Supreme Court (BGH) have repeatedly led to the abolishment of decisions of the EEG-clearing body issued for many years; such abolishment had considerable retrospective effects. Specifically BGH's rulings on the so-called “wide interpretation of the term “installation” in the case of biogas installations and the so-called “Light bulb test” in the case of PV systems had severe implications on the market. Now, the legislator has established a golden bridge for grid and installation operators by granting them the right to object to claims for repaying the EEG surcharge. According to § 57 (5) EEG 2017, decisions of the EEG-clearing body are to be further applied, also when BGH has issued a contrary ruling, at least over the incentivisation period for the installation concerned. Thus, the installation operators’ and grid operators’ confidence in the technical competence of the EEG-clearing body is preserved.