Germany to scrap feed-in-tariffs for auctions in Energy Transition Law reform

Final decision on changes expected shortly.

The German parliament is expected on Friday (July 8) to approve a decision made last month by the German federal cabinet, the country’s executive body, to almost entirely scrap the feed-in-tariff (FIT) for green energy and to replace it with auctions under a new draft of the energy transition law (EEG), in a move designed to reduce costs for the country’s huge Energiewende transition from coal, gas and nuclear power to renewables.
The government says final enactment of the law reform is planned for January 1, 2017.
Renewable energy now represents a third of total energy consumption in Germany. The growth was spurred by the FIT under which electricity utilities were required to buy power offered by any wind or solar electricity generator at a “tariff”, guaranteed over a 20-year contract. But the reformed draft law would require renewable energy companies to pitch their projects to the Bundesnetzagentur, the German utilities administrator, via auctions, with the government selecting the project representing the best value with the least subsidies.
The reformed draft law is seeking to reduce costs, ensure renewables are promoted at a competitive market price and enable the government to have greater control over the energy transition. One example, the government says, is that because of current bottlenecks in the German grid, the further growth of wind energy needs to be slowed to allow the energy grid to be expanded first.However, Germany’s Green Party argues that the reason for the bottleneck is not a lack of grid capacity for renewable energy but congestion by other energy producers. It says that if brown power generators curtailed their electricity production on windy or sunny days, overcapacity in the grid wouldn’t occur.
But press reports in Germany say demanding utilities to curtail their energy generation is unpopular with the federal governing coalition. Instead they have decided to put a cap on renewables by setting a government-mandated upper limit on the amount of new capacity permitted each year.
The share of renewables is planned to rise along to a so-called “deployment corridor”: 40-45 percent by 2025, 55-60 percent by 2035, and to a minimum of 80 percent by 2050, says the draft EEG law.
The draft law does not apply to every renewable energy technology equally. Depending on the kind of technology and its size, the design of the auction differs. Small renewables installation of under 750 kilowatt (kW), for example, will be excluded from the tender system and continue to be regulated by the EEG 2014 with its feed-in-tariffs. Citizen cooperatives and small project developers are sought to remain active in operating small renewable plants.
The reformed law aims to ensure that the diversity of the electricity market players is maintained going forward in the energy transition. Other European countries can participate in the auctions for an amount of five percent of the annually installable capacity.

The draft reformed law can be found at the following link