Germany: new renewable law does not spell the end of feed-in tariffs

Around two weeks ago the German passed an update to its Renewable Energy Sources Act, the EEG. The reworking of the law underpinning solar PV and other renewable generating capacity development in the country has been widely reporting as spelling an end to FITs. The BEE counters that tariffs for large scale projects will still be awarded, however under a tender system, and will remain in place for solar arrays smaller than 750 kWp.

“There was a big misunderstanding in most press coverage in the German media, which said the new EEG was the end of the FIT and afterwards the system has transitioned to a tender system,” explained Carsten Pfeiffer, the head of strategy and politics at the BEE. “However this is not the point, as a tender results in a FIT being awarded.”

Under the new EEG, 600 MW of ground mounted PV will be awarded annually under a tender system. Germany has already conducted three trial tenders, for an annual limit of 400 MW of capacity, in a process used to iron out any problems with the tendering system.

These tenders have resulted in some remarkably low prices, particularly in a country with less-than-stellar solar resources. Successful bids under the trial tenders have coming in at around €0.085/kWh – €0.12/kWh, however many of the projects have not yet commenced construction.

“I can only assume that as there is a good chance of falling PV module prices, it makes sense to delay projects for as long as possible,” BEE’s Pfeiffer told pv magazine.

For PV installations smaller than 750 kW the normal FIT rate will apply. This is down from 1 MW under the previous iteration of the EEG. Germany’s solar FIT has not been reduced in recent quarters as installation rates continue to fall well below the 1.5 GW annual ‘corridor’ targeted by the government and currently stands at between €0.0853 to €0.1231/kWh dependent on system size.

Residential and commercial electricity rates commonly come in significantly above the FIT, therefore providing an incentive to consumers in both market segment to consume as much electricity produced by a PV array on site. The BEE’s Pfeiffer says that despite this market development, the retaining of the FIT for installations smaller than 750 kW is a good result.

“The main purpose of people who wanted to reduce this [750 kW] capacity further down, was not to deliver tenders or competition, but actually to do away with FIT for prosumers completely,” said Pfeiffer. “This was the hidden agenda.”

The BEE expects to see an annual solar market of between 750 MW and 1 GW in Germany under the new EEG, although this is dependent on module price trends. An installation rate in this order would be insufficient to meet the German government’s climate and renewable energy goals.

“It is always disappointing when there is a gap between climate announcements and the reality of politics,” said Pfeiffer.

The new EEG also includes a mechanism to enable subsidies to be reduced more closely in accordance with market developments. The law comes into effect on January 1, 2017.

Additional reporting by Sandra Enkhardt