Commentary by Renewable Energy Hamburg Managing Director Jan Rispens
It is worth taking a critical look at this law. In summer 2020, Renewable Energy Hamburg had already presented a stance on the amendment to the Renewable Energy Act (LINK, German only).
Renewable Energy Act amendment as a stopgap law
The main point of criticism regarding the current amendment is that it is not possible to achieve the target of securing 65% of the power supply with renewable energy by 2030 with the level of expansion that is planned. The energy consumption expected for 2030 is roughly the same as the current level; an increase in consumption due to electric mobility and sector coupling has not yet been taken into consideration. Moreover, the law gives the impression of being a ‘stopgap law’ that will meet the most urgent need for action with small-scale regulations in the run-up to the federal elections. This is anything but a milestone; for that we will have to wait until after the federal elections in autumn at the earliest.
Wind at sea is the simplest matter. One positive is that the expansion target for 2030 was increased from 15 to 20 GW. A target has been set for 2040 for the first time: 40 GW. The problem is that the additional expansion for 2030 is scheduled to take place almost entirely in the last few years of the decade.
Wind energy on land
With regards to wind energy on land, there was a discussion on construction regulations: plans for a blanket minimum distance of 1,000 metres between wind farms and housing development failed in autumn. It is now up to the regional governments to decide whether or not to introduce such a minimum distance. One positive outcome is that the current restrictions for wind farms in the ‘network expansion area’ in coastal regions will be lifted, while a ‘southern quota’ of, initially, 15% of the expansion, and later 20%, will be reserved in the tenders for southern Germany. In future, wind farms at weak 60%-wind locations will also be taken into consideration by the reference yield model.
A follow-up regulation of limited duration has been drawn up which stipulates compensation at the market price and a small ‘bonus’ for wind farms that will no longer receive compensation under the Renewable Energy Act as of 2021. This regulation is a ‘stopgap’ to prevent old wind farms from being quickly decommissioned – in the hope that electricity prices on the stock exchange are higher in two years’ time so the wind farms can be operated with private electricity supply contracts.
In addition, a regulation was introduced in the final stages to automatically reduce the volume of tendered wind power if the previous wind tender was signed and there is an insufficient number of eligible wind farms in the register of approved wind farms. This could result in a downward spiral of ever smaller tendering rounds. The approach is wrong: a much stronger and more binding mechanism should have been created to systematically oblige all regional state governments to a maintain a procedure for developing wind farm areas with regional planning in mind and to approve wind farms (more quickly). Without a doubt, the tender volume for wind farms on land should have been left untouched.
According to the new law, operators can pay municipalities a fee for a wind farm in order to increase acceptance levels. This fee is voluntary and falls short of the industry’s wish for a uniform, nationwide regulation. This is the only way to achieve higher nationwide acceptance for wind energy on a municipal level.
In terms of solar energy, a category was defined for large rooftop installations, which can now also apply in tenders. For installations with an output of 750 kW and above, the electricity is compensated in full at the awarded price. Installations between 300 and 750 kW can also participate in these tenders, but only receive compensation for half of the amount of electricity. It is yet to be seen whether these regulations will stand the test in the complex practice of commercial rooftop installations.
For old installations with an output of up to 100 kW, which represents the majority of solar installations, there is a follow-up compensation for further operation if they lose the compensation provided by the Renewable Energy Act after 20 years. This regulation will apply until 2027 and enables private consumption solutions under certain conditions.
The tender quantities are being adjusted for freestanding solar installations in order to integrate any announced special tenders. Larger individual solar installations with a maximum output of 20 MW will now also be able to bid.
Tenant Electricity Scheme and the Renewable Energy Act surcharge regulation
The Tenant Electricity Scheme has also been adjusted for solar installations so that tenant electricity concepts can be implemented in districts as well. Service providers can also carry out the implementation for solar operators in order to offer tenants solar power from the roofs of properties. A Tenant Electricity Scheme was introduced a few years ago with high expectations, but ultimately failed because of several conflicting financial and tax regulations. It is difficult to say whether the new regulations will have more success.
Last but not least, the decision was made to drop the surcharge from the Renewable Energy Act for smaller installations with an output of up to 30 kW, which will help the development of private consumption solutions in the smaller solar segment. The regulation to pay 40% of the Renewable Energy Act surcharge on the energy we use ourselves will remain in force for larger solar installations, which complicates medium and large-scale commercial solutions in particular.
Four-hour regulation for negative electricity prices
As of 2021, larger renewable energy installations that have already been put into operation will still not receive any compensation if there are negative electricity prices on the electricity stock market for longer than four hours. Compared to the time period of one hour that was originally planned, this is a considerable improvement.
Exemption of electrolysers from the Renewable Energy Act surcharge
Electricity compensated by the Renewable Energy Act which is used in electrolysers to produce hydrogen will be fully exempt from the surcharge imposed by the Renewable Energy Act. This is a positive development and a significant prerequisite for creating a hydrogen economy. However, the electricity used in electrolysers is subject to taxes and other levies. This ensures that hydrogen produced using this method remains more expensive than hydrogen produced conventionally.
Mixed conclusion for various sources of renewable energy
The most important pillars of renewable energy in electricity supply perform differently. In terms of solar energy, significant improvements can be expected in the various size and installation categories, even if it is unclear whether the tenant electricity solutions will have a positive effect and to what extent private consumption solutions will prevail. I draw a positive conclusion with regards to offshore wind energy, whereas wind energy on land – the most important pillar of renewable energy – remains a worry. The aim here is for a number of short-term, highly complex regulations to improve the tenders and keep old wind farms connected to the grid. Just how promising this is remains questionable.