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2016 Renewable Energy Sources Act: A paradigm shift
The share of renewables is growing rapidly in Germany, from 17 per cent in 2010 to more than 33 per cent today. By 2025, they are to account for 45 per cent of our power supply. We are right on track to reaching this target. In the first quarter of 2016 alone, the share of renewables grew by 5 per cent year-on-year.
This shows that the energy transition has reached the point of no return. Now is the time to turn to the renewables framework – i.e. the electricity market and our grid infrastructure – and to make sure that we put our future energy supply on a solid footing and keep an eye on the costs. This is the only way we will be able to ensure that our energy supply remains secure and affordable.
So we want the boom in renewables to make a real impact, which requires some smart steering on our part
This is why on 8 June 2016, the Federal Cabinet (i.e. the German government) approved the revised version of the Renewable Energy Sources Act. What will change under the new legislation?
First of all, the amount of funding for renewables will be determined by the market rather than by the government. This should bring down the costs. After all, renewables are more than ready to compete successfully on the market. The switch-over to an auctioning system is to ensure that the expansion in the use of renewables proceeds at a steady and controlled pace and at a minimum cost.
Furthermore, the pace of the expansion in renewables capacity is to be synchronised with the pace of grid expansion, so as to ensure that the power reaches the consumers. The energy reforms will only be a success if we have transmission lines reliably delivering energy from where it is generated to where it is needed.
The energy transition 'Made in Germany' is continuing to make big strides
In a cabinet meeting on 8 June, the German government approved what is one of the last major building blocks of the agreements on the energy transition. The decision will ensure that the energy transition 'Made in Germany' continues to make big strides. In retrospect, it would be fair to say that the German energy transition has taken place and that it has passed the point of no return. The 2014 revision of the Renewable Energy Sources Act was about making the energy transition reliable, and this is what the government is continuing to do now. When it comes to measuring the success of the energy transition, it would be wrong to do this based on how fast the share of renewables is growing – the real question is how to ensure that the entire energy system is fit and ready for the age of renewables. For instance, how to ensure that the expansion of the grids is in sync with the expansion of renewables? If Germany wants to continue to develop renewable technologies and make the energy transition a success – not least in economic terms – it needs to have a close look at the electricity market, the energy infrastructure, and, above all else, keep an eye on the costs.
Key change number 1: The amount of funding is now to be set by the market
The first major change introduced under the new legislation is the following: Funding for renewable power is to be limited to the amount that is needed to allow for the installations to operate in a cost-effective way. This means that the price of renewable energy will be decided by means of competition rather than by the Bundestag and Bundesrat (The two chambers of the German Parliament).
Renewables have long outgrown the phase where they needed to be shielded from competition. It is now time that the most efficient installations win the day. The market will show which ones are the most cost-efficient.
We already know that the auctioning system works
This is the outcome of the trial auctions that were held for ground-mounted PV installations last year.
Prices fell considerably – without any risk that the installations might be rendered economically unviable. The good news for electricity consumers is that the price for funding fell from one bidding round to the next. The average funding granted for electricity generated in ground-mounted PV installations in 2014 was 9.41 cents per kilowatt hour (kWh). Under the competitive auctioning system, this figure fell to 7.4 cents per kilowatt hour as of early 2016.
So the auctioning system for solar energy has had a promising start. Soon, auctions are also to be used for other types of renewable installations. Beside solar, the focus is on on and offshore wind power, but auctions are also to be used to lower the cost of funding electricity generation from biomass. The auctioning systems are different for each technology, taking account of the differences between, say, an offshore wind farm and a rooftop solar installation. Small PV installations with a maximum capacity of 750 kilowatts and small-scale biomass installations capable of generating no more than 150 kilowatts are exempt from the auctioning system.
Diversity of players upheld under the new system
Bids were submitted by many different players in the trial phase, and some of the successful ones were small bidders and projects. The new legislation is to ensure a level playing field for small players, such as citizens' energy cooperatives or local project developers. In fact, the auctioning scheme is designed to favour citizens' energy cooperatives over large corporations. The former do not need to furnish a certificate of compliance with immissions control regulation, which reduces the cost of participating in the auction.
And incidentally, there are to be opportunities for bidders from other EU Member States to participate in the auctions.
Key change number 2: The expansion of renewables capacity and of our grid capacity is to be better synchronised
The second major change introduced under the new legislation is to ensure that the grids can keep up with the expansion of renewables capacity. This is on account of the fact that wind and solar energy will only be cost-effective if there are no bottlenecks preventing it from being delivered to the consumption centres. In other words, the expansion of the grids must be sped up and synchronised with the pace at which renewables capacity is added. This is why the government has defined clear renewables targets to ensure that consumers can actually use the additional green electricity that is generated.
The debate on how to achieve this centred on two key questions: How much capacity for biomass, PV and on and offshore wind energy can be added without this resulting in the grids being outpaced? And: How to deal with the fact that the north of the country is the area best-suited for onshore wind energy, but is lacking the necessary grid infrastructure?
A great deal of effort and care was put into answering these questions, and in a way that takes account of many different players. The result is a specific path of expansion for each technology, which is set out in the 2016 version of the Renewable Energy Sources Act.
- The amount of PV capacity to be auctioned each year is 600 megawatts (MW);
- the gross figure for onshore wind energy is 2.8 gigawatts (2.9 GW as of 2020);
- for biomass, it's 150 megawatts (200 MW from 2020 to 2022);
- and the figure for offshore wind energy is an annual 730 megawatts between 2021 and 2030.
No more, no less – The renewables targets will remain unchanged
The overall renewables target for Germany will remain the same: The share of renewables in our gross electricity consumption is to reach between 40 and 45 per cent by 2025 – no more and no less. The figure is to rise to between 55 and 60 per cent by 2035.
The rise of renewables is continuing as the energy transition is making progress. The 2016 overhaul of the Renewable Energy Sources Act is to ensure that this rise becomes more organised and sustainable. It's about making the energy transition easier to plan and control, and about accountability for the entire endeavour. And it's about ensuring that renewables are ready to face competition on the market, and ready for the future.
The draft bill is now undergoing the ordinary legislative procedure. It is to enter into force on 1 January 2017.