The Renewable Energy Sources Act (EEG)
The most important legislative instrument available to promote the generation of electricity from renewable sources is the Renewable Energy Sources Act (EEG). It regulates the supply and remuneration of electricity generated entirely by renewable energy sources through electricity distributor, which operate the common power supply. The EEG first entered into force in 2000, with later amendments taking market developments into account in 2004, 2009, 2012, 2014, 2016 and 2020, respectively. This Act obliges the grid operators to connect installations generating electricity from renewable energies to their grid on a priority basis, as well as to purchase the electricity generated at fixed rates of remuneration. The legislature has thereby immensely improved the regulatory framework for the generation of electricity from renewable energies. The level of remuneration differs depending on the type of installation and its capacity level. Prior to the revision in 2016, the remuneration period amounted to 20 years, plus the year in which the installation entered into service. The basic remuneration and the bonuses are subject to an annual degression: this amounts to 1 percent for installations entering into service until 31.12.2011 (EEG 2009), and 2 percent for installations entering into service from 2012 onwards (EEG 2012). Due to the EEG 2016 the remuneration will not be predefined legally any longer, but oriented by biddings at the open-market. In 2021, the fifth revision of the EEG entered into force with some changes for biomass systems.
For the remuneration of electricity from biomass, the EEG 2021 offers various options depending on the size of the plant:
- fixed remuneration (1-100 kWel)
- market premium (1-150 kWel)
- tendering system (151-20,000 kWel)
Revisions in the EEG 2021 for biomass plants without participation in tenders
According to EEG 2021, new biomass plants with an installed capacity of up to 100 kWel receive a fixed payment of 12.6 ct / kWhel. It results from the value to be applied in the amount of 12.8 ct / kWhel (§42) and a reduction for biomass systems according to §53 of 0.2 ct / kWhel. The remuneration is based on the rated output of 45% of the installed capacity for biogas and 75% for solid biomass (Section 39i, Paragraph 2). The remaining 55 or 25% are remunerated with the exchange price. The value to be applied will be reduced annually by 0.5 percent compared to the previous year (§44a) from 1 July 2022.
Novelties in the EEG 2021 for biomass plants participating in tenders
According to the 2020 operator survey (reference year 2019) by the German Biomass Research Centre (DBFZ), almost 60% of the biogas plant operators surveyed stated that they wanted to continue operating their plant after the EEG remuneration expired. Around 70% of them see their systems in the tender in the future.
The tendering system is based on the same principle of direct marketing and receiving the market premium. The main difference: The value to be applied is not determined by law, but determined by competition. For this purpose, plant operators of biomass plants with an installed capacity of 150 kW or more must take part in the tender. Biomass systems with an installed capacity of less than 150 kW are not allowed to participate in the tenders unless they are existing systems (Section 22 (4)).
In the EEG 2021, the federal government set the expansion target for biomass plants to 8.4 GW installed capacity for 2030. In order to achieve this goal, the annual tender volume was increased to 600 MW. The tenders for biomass plants take place every year on the bid dates 1 March and 1 September. The maximum bid values were raised to 16.4 ct / kWhel for new systems and to 18.4 ct / kWhel for existing systems. From 1 January 2022, they will be reduced annually by 1% compared to the respective previous year's value (§39).
In order to maintain competition between the bidders in all tendering rounds, a new regulation was introduced in the award procedure: If a tender offers less performance than was tendered, then only 80 percent of the new systems and 80 percent of the existing systems are awarded regardless of the tender volume. The remaining tender volumes will be carried over to the third following year (§39 d).
Furthermore, small biomass plants are to be strengthened in the future. In the tendering system, however, due to their higher specific costs, they are less economical than systems in higher performance classes and are therefore disadvantaged. To counteract this, small systems with an installed capacity of up to 500 kW, which will be added in the years 2021-2025, receive a bonus of 0.5 ct / kWhel (§39g).
The period for commissioning new systems was increased from 24 months to 36 months in the EEG 2021. This regulation is particularly helpful for wood-fired thermal power stations (§39 e). In addition, the deadline for existing systems that want to switch to the second payment period will be shortened from 12 to 2 months (§39g).
Newly awarded biogas plants must comply with a with a maximum share of corn (maize, cereal grains) of 40 percent by mass according to EEG 2021. In the EEG 2017 this was still 44% (§39 i).
Introduction of a southern quota
With the EEG 2021, the so-called southern quota will be introduced from 2022 (§39 d). It stipulates that at least half of the advertised service is awarded in the southern region. The southern region includes districts that are mainly located in Bavaria, Baden-Wuerttemberg and southern Rhineland-Palatinate (defined in Annex 5 EEG 2021). The introduction of the southern quota is intended to compensate for network bottlenecks between northern and southern Germany.
Tender segment for highly flexible biomethane CHP units
From 1 December 2022, in addition to the previous biomass tenders, 150 MW for highly flexible biomethane combined heat and power (CHP) units will be tendered annually in the southern region (§39m). The highest bid value in this tender segment is 19 ct / kWhel. The EEG 2021 defines corresponding requirements for the implementation of the highly flexible driving style. In the first year of the invitation to tender (2021), nationwide projects can still bid, from 2022 only biomethane CHP units in the southern region.
Novelties in flexibility
The previous cap on the flex bonus was removed in the EEG 2021. In addition, the flexibility surcharge for newly awarded systems over 100 kW was increased from 40 to 65 € / kWinst. raised (§50a). If the flexibility surcharge is used for the first time after December 31, 2020, although the surcharge was granted before 2021, the increase also applies in principle. Existing systems that switch to the second payment period, however, do not receive the flexibility premium for services for which the flexibility premium was already paid in the first payment period. This also applies to systems that were awarded a premium before 2021 and which will use the flexibility premium for the first time after 31 December 2020.
In order to implement the flexible driving style, the rated outputs for the different flexibility options were adjusted in the EEG 2021. In the EEG 2017, the remuneration was paid for a maximum rated output, which corresponds to 50% of the installed output. The rated output according to EEG 2021 is 45% in the regular tender, 75% for the combustion of solid biomass, 15% for highly flexible biomethane CHPs and 50% of the installed output for small liquid manure systems (Section 39).
With the EEG 2021, quality criteria for flexibility were introduced. Accordingly, newly awarded systems in the regular tendering segment must call up at least 85% of their installed capacity for at least 4,000 quarter hours per year. Systems in the segment for highly flexible biomethane CHP units must call up at least 85% of their installed capacity in at least 2,000 quarter hours per year (§50).
In order to be able to continue to operate existing plants economically after the EEG subsidy expires, the new plant category "subsidized plants" will be introduced in the EEG 2021 (§3a). According to EEG 2021, these are systems, which went into operation before 1 January 2021 and for which the original claim to payment according to the version of the EEG relevant for the system has ended.
According to EEG 2021, biomass plants up to 100 kW are entitled to the feed-in tariff until 31 December 2027 (Section 25, Paragraph 1, No. 2). From 2021 onwards, the amount of the remuneration results from the annual mean value of the spot market price, the so-called annual market value (Annex 1 number 4 of the EEG 2021). In 2021, 0.4 ct / kWhel are to be deducted from this. From 2022, the value that the transmission system operators publish as the cost of electricity marketing on their website must be deducted.
Subsidized systems with an installed capacity of more than 100 kW do not receive any further funding.
Information/press releases on the German Renewable Energy Sources Act 2021
European Commission: https://ec.europa.eu/commission/presscorner/detail/en/ip_21_2042
Federal Ministry for Economic Affairs and Energy (BMWi): https://www.bmwi.de/Redaktion/EN/Pressemitteilungen/2021/04/20210429-altmaier-european-commission-approves-2021-renewable-energy-sources-act.html
EEG 2021 full text (in German): https://www.gesetze-im-internet.de/eeg_2014/EEG_2021.pdf
FNR’s website (in German): https://biogas.fnr.de/rahmenbedingungen/eeg-2021