History of the Energiewende

Renewable Energy Act (EEG)

Germany's Renewable Energy Act guarantees full-cost compensation to cover the actual cost of a specific investment in terms of size and technology. The rates offered are guaranteed for 20 years starting in the year of installation to protect investments, but the rates drop for newly installed systems each year to put price pressure on manufacturers.

The main difference between the Feed-in Act of 2000 and the Feed-in Act of 1991 was that feed-in tariffs were no longer linked to a percentage of the retail rate, but were instead differentiated by the actual cost of the specific investment in terms of system size and technology type.

In 2004, the law was adjusted to do away with the 100,000 Roofs Program for photovoltaics, which provided an upfront bonus for the purchase price; instead, solar arrays were now eligible for feed-in tariffs in full. In 2009, the law was once again amended, making it three times larger than in 2004; what had begun as two pages nearly two decades before now had 51 pages. The law was most recently amended in 2012 and 2014.

"EEG closer to the market"

The EEG of 2009 was the first to be amended by the grand coalition of Social Democrats and Christian Democrats, with the Green Party no longer in power. While the basic tenants of the EEG were retained – feed-in tariffs and the priority of renewable energy – a number of Social Democrats and Christian Democrats felt that the policy should be changed to bring renewables “closer to the market.”

The main changes in the 2009 EEG therefore reflect what these politicians thought constitutes a market. For instance, producers of wind power were increasingly encouraged to sell directly on the power exchange instead of receiving feed-in tariffs, and a “marketing bonus” is also offered because of the extra work involved. Yet, this option only needs to be exercised if it proves more profitable than feed-in tariffs, so it essentially constitutes a risk-free bonus – not exactly what you would expect from a policy that promises “more market.” Germany’s traditional onshore wind sector overwhelmingly opposes this option because it provides windfall profits and unnecessarily raises the cost of the energy transition for consumers.

In 2016, a first-instance EU court ruled, however, that the EEG of 2012 did indeed constitute "state aid." The German government had notified the EU in Brussels of the policy support, but the European Commission insisted that it have input. Berlin responded by showing a willingness to negotiate but insisted that this openness was voluntary, claiming that the EU had no right to such input. The court found, however, that the EU did indeed have such a right. Because the negotiations resulted in a compromise satisfactory to both parties (Berlin and Brussels), the EEG of 2012 does not need to be changed retrospectively. The court merely specified that Berlin does not have the right to refuse negotiations with the EU. Finally, feed-in tariffs are considered admissible aid, because the EU and its member states have renewable energy, climate and environmental targets.

Which brings us to where we are today: Germany has kept feed-in tariffs for systems smaller than 750 kW but is now using auctions for larger projects. The 2014 EEG also implemented, for the first time, limits on the growth of renewables: no more than 45 percent by 2025. Previous iterations of the EEG law always spoke of "at least" a certain percentage.