EU reaches deal on Germany EEG reform, awards EUR 1bn climate change funding

Germany’s ambitious plans to transform its energy sector have been given an overhaul this week after its ministers reached an agreement with the European Union on how to make its green energy proposals compatible with EU state aid rules.

Joaquin Almunia, the EU antitrust chief, said that the two parties had reached a definitive final agreement on the issue, which stretches back to December when the European Commission launched an investigation into Germany’s revamped renewable legislation (EEG). The EEG aims to boost the use of renewable energy sources in the German grid, with fossil fuels set to be phased out altogether by 2050. To achieve this aim, the surge in green power production in the country has led to increased utility bills for consumers – a so-called power-price surge.

The EU had challenged the terms of Germany’s energy transformation, suggesting that some German energy intensive industries may had benefited unfairly from government subsidies. Another strand of the investigation revolved around the suggestion that a surcharge imposed on power imported into Germany amounted to a customs duty, thus violating the EU’s internal market rules.

Agreement reached

This week, however, there appears to be a little more clarity and cooperation between the EU and Germany’s economics minister, Sigmar Gabriel, who had previously been critical of what he called the EU’s attempts to "destroy" the country’s renewable energy ambitions.

Germany has agreed to allow energy importers to supply energy on the same conditions as domestic producers, and has also amended the legislation to state that 5% of the tenders for renewable energy projects must go to international, non-German energy suppliers.

The German deputy economics minister Rainer Baake also confirmed that 350 German companies will have to pay back a combined sum of €30 million ($41 million) to cover discounts received on renewable energy support payments that the German government had previously granted them.

The European Commission, which has the power to compel EU governments to recover funds given to companies if the laws obliging so breach EU rules, argued that the current EEG support scheme represented unfair taxation on customers bills, and also favored domestic energy producers.

However, Almunia said that he believes Germany has now allayed concerns over this "unfair advantage", adding: "We have started the procedure to respond with a positive decision to the notification of the new EEG sent out by the German government."

Germany’s plan to give 40% discounts to industrial and manufacturing companies that produce and consume their own power was upheld by the EU. The German government is due to cast its final vote on these matters tomorrow, Friday July 11.

€1bn funding program

Brussels also this week steered €1 billion ($1.36 billion) of polluters’ revenues to 19 clean energy projects across Europe as part of the EU’s so-called NER 300 funding program. The monies for the fund are derived from the sale of emission allowances in the EU Emissions Trading System, and will be directed to a number of climate positive projects, including a 24 MW PV project in Portugal, which is set to receive €8 million in financing.

"With these first-of-a-kind projects, we will help protect the climate and make Europe less energy dependent," said EU Commissioner for climate action Connie Hedegaard. "The €1 billion we are awarding will leverage some additional €900 million of private investment. So that is almost €2 billion of investment in climate-friendly technologies here in Europe. This is a contribution to reducing Europe’s energy bill of more than €1 billion per day that we pay for our imported fossil fuels."

In addition to the Portuguese PV project, the remaining 18 projects will be developed in Croatia, Cyprus, Denmark, Estonia, France, Ireland, Italy, Latvia, Spain, Sweden and the U.K.