Waiting for the amendment of EEG and KWKG – no good start for the grand coalition‘s energy policy

​In a nutshell:

Although the European Commission and the Federal Ministry of Economic Affairs and Energy (BMWi) have reached an agreement over the approval under state aid law of the EEG privilege for CHP plants producing electricity for self-supply, the amendment to the Renewable Energy Law (EEG) and the Combined Heat and Power Act (KWKG) necessary for the implementation of the agreed issues has been further delayed due to the smouldering coalition conflict and increasing political resistance.

The further legislative work has been postponed until after Parliament‘s summer recess due to the controversy within the coalition between Federal Minister of Economic Affairs Altmaier and Federal Environment Minister Svenja Schulze (SPD) over additional auctions under the EEG: Schulze believes that they should have been included in the amendment, initially euphemistically termed „100-day law“, but they were delayed contrary to the coalition agreement by Minister Altmaier, an opponent of the EEG and climate protection policy. It is expected that there will be considerable delays and legislative amendments in the further course of the legislative process after the summer recess.

Whereas the approval under state aid law for the exemption of CHP plants producing electricity for self-supply from the EEG surcharge has been missing since the second last EEG amendment in 2014, the European Commission gave the green light for partial exemption from the EEG surcharge already early May.

As early as March, the Federal Ministry of Economic Affairs and Energy (BMWi) submitted a bill amending the EEG and KWKG, which besides various further amendments laid the foundations for  the implementation of the issues agreed during the negotiations with the European Commission.

The Ministry wanted to amend the EEG by further reducing the incentive allowance caps in auctions for onshore wind turbines and photovoltaic power plants. This would further limit the funding opportunities. According to the Ministry‘s proposal, the allowance cap for energy from onshore wind turbines would be reduced from 6.3 cent/kWh to 5.7 cent/kWh in the auction period from August 2018 to February 2019. The allowance cap of 8.91 cent/kWh for photovoltaic plants would be cut down to 6.50 cent/kWh.

The funding conditions should generally worsen also for CHP plants:

First of all, the rule for all CHP funding should be that „investment grant may not cumulate“. Furthermore, the incentives for the existing CHP plants of currently 1.5 cent should be reduced to 0.7 cent/kWh. The prospect that the amendments to the EEG and KWKG are to apply retrospectively as of 01/01/2018 and will cover not only levying EEG surcharges to CHP plants producing electricity for self-supply but also the reduction of incentives for CHP plants, caused irritation among industry players.

The bill at least made it clear that the transitional provision of § 35(14) KWKG 2017 also applied to modernisation measures involving modernisation costs of at least 25 percent but lower than 50 percent of the construction costs of a new CHP plant.

In the meantime, also the CHP industry has set up a political initiative against the plans of Federal Minister of Economic Affairs Peter Altmaier (CDU) to limit the protection of investment projects provided under the EEG and KWKG and the legitimate expectations arising from those laws. This is concurrent with the increasing economic pressure exerted by some network operators pro-actively implementing the legislative plans. Those operators have been charging the affected CHP plants the full EEG surcharge already since 01/01/2018. 

Industry experts estimate that about 10,000 small CHP plants with a capacity of up to 1 MW and about 300 CHP plants with a capacity of 1 MW to 10 MW currently no longer enjoy the partial EEG surcharge exemption. Thus, for example, even smaller municipalities that have installed small block heating power plants with a power capacity of 50 kW in their schools must now pay over EUR 10,000 in extra EEG surcharges annually. Much harder hit are the power self-supply facilities of municipal utility companies, which have been caught by surprise by the Ministry‘s plans to lower the capacity threshold up to which relief is granted to 1 MW, and industrial CHP plants, which have, anyway, always faced a barrage of criticism from the European Commission. CHP plants with a power capacity of 2 MW often have to pay over half a million euros annually to cover the extra portion of the EEG surcharge. This renders such plants entirely unprofitable. Plant operators may, therefore, respond to these circumstances only by a shutdown, creating provisions or – if they secured their business by setting up a special-purpose entity – by filing for insolvency. Thus, it should be expected that, being in financial distress, they will file claims against this legally contentious practice and lawmakers will be under a still stronger pressure after the summer recess.