European Commission approves German renewable energy law

The European Commission has rubber-stamped Germany's new Renewable Energy Act (EEG) after finding it to be in accordance with EU state aid rules.

The revamped law, which will regulate support to renewable electricity through 2016, provides support for production of electricity from renewable energy sources as well as from mining gas. It also reduces the financial burden on energy-intensive users and certain auto-generators by reducing their level of payment of the renewable energy law surcharge.

The EC found that the act provides that “aid will be progressively alloEuropean Commission approves German renewable energy lawcated through tenders, which will gradually be opened to operators located in other member states.

"The Commission has concluded that the EEG 2014 will further EU environmental and energy objectives without unduly distorting competition in the single market," the Commission said in a statement.

Joaquín Almunia, the Commission vice president in charge of competition policy, added: "The EEG 2014 paves the way for more market integration of renewables. In the medium term this should lead to lower costs for consumers. Also, the progressive opening up of tenders to operators located in other Member States is a very positive development for the internal energy market."

The government of Chancellor Angela Merkel presented the draft law in April. It will now go into effect August 1.

Germany's annual yearly budget for the support of renewable electricity is estimated at some €20 billion.

Producers of renewable electricity will now have to sell on the market and they will receive support in the form of market premiums paid on top of the market price for electricity. Market premiums will be determined by reference to "administratively set reference values" through 2016. The law also calls for a pilot tender program for ground-mounted solar installations that will determine the level of the premiums and allocation of aid to tender participants. As of 2017, tenders are to be generalized but a new law will be required to introduce them.

Small installations (below 100 kW) will continue to benefit from feed-in tariffs for the next 10 years and are not obliged to sell on the market. 　　

Germany's renewable energy subsidy program is financed by the EEG-surcharge that is to be paid by suppliers in respect of the electricity supplied to end consumers in Germany and by auto-generators (i.e. electricity producers for self-consumption). The law provides reductions for energy-intensive users in sectors that meet certain criteria in an effort to maintain competitiveness in German industrry.

Reductions are also granted under the EEG 2014 to certain auto-generators. Reductions for auto-generators using small installations are allowed as they are below the so-called "de minimis threshold." Reductions for auto-generators using renewable energy sources are also allowed since they are in line with the logic of the EEG-surcharge system. Auto-generators that are energy-intensive will also be eligible for reductions.

The Germany government is to review the possibility of reductions for other types of installations "in due time" and and eventually amend the law if need be.

The yearly cost of the reductions is estimated at around €5 billion.

In addition, instaallations located in EU member states that have concluded a cooperation agreement with Germany will be able to bid for up to 5% of the tendered capacity as part of the planned tender program.

The Commission noted that such cooperation agreements ensure that electricity produced in another member state that would obtain German subsidy support would count towards Germany's renewable energy targets.