What does EEG stand for?
Terms briefly explained
What is the Renewable Energy Sources Act?
The Renewable Energy Sources Act (EEG) is the most important legal foundation for the promotion of renewable energies. It has been a key driver of the change that was later referred to as the energy transition.
Over the years, the law has been repeatedly updated and adapted to the latest developments. However, the basic principle has always remained the same and is based on the promotion of renewable energies - particularly wind and solar - in the form of the EEG surcharge. This is also known as EEG remuneration.
Which energy sources does the EEG subsidise?
The EEG subsidises electricity generation from the following renewable energy sources (Section 3 No. 3 EEG):
- Hydropower including wave, tidal, salt gradient and current energy
- Wind energy
- Solar radiation energy (e.g. photovoltaics)
- Geothermal energy
- Biomass including biogas, biomethane, landfill gas and sewage gas as well as from the biodegradable portion of waste from households and industry
- Mine gas
How funding works with the EEG feed-in tariff
A levy was introduced in 2020 to finance the expansion of renewable energies. This obliges grid operators to prioritise the connection of renewable energy systems to their grid and to purchase and forward the electricity generated.
In detail, the mechanism works as follows:
- Operators of renewable energy plants feed their electricity into the public grid and receive a fixed feed-in tariff in return.
- Transmission system operators (TSOs) must prioritise the renewable electricity.
- The TSOs sell the electricity on the EEX or EPEX Spot electricity exchange. (Link to EEX)
- If the exchange prices are below the fixed feed-in tariffs, the TSOs are paid the difference.
- These payments are passed on to consumers as the EEG surcharge.
- All consumers - with the exception of privileged companies - must pay the levy as part of the electricity price.
The objectives of the current EEG 2023
The current version of the EEG dates from 2023. The aim of the EEG 2023 is to transform the electricity supply into a sustainable and greenhouse gas-neutral system based entirely on renewable energies. The Act is the biggest amendment to energy policy in recent decades.
The overarching goals of the EEG 2023
- The share of renewable energies in gross electricity consumption is to increase to 80 per cent by 2030
- Germany wants to be climate-neutral by 2045.
Why was the EEG levy abolished?
Electricity customers have no longer had to pay the EEG surcharge since 1 July 2022. This decision was part of the German government's relief package for citizens. The levy was replaced by financing from the federal budget, more precisely from the special assets of the Climate and Transformation Fund (KTF). This became questionable in autumn 2023 when the financing of the KTF was stopped by the Constitutional Court. However, when the 2024 federal budget was adopted on 2 February 2024, it was decided that the key relief for citizens - such as the abolition of the EEG levy - would be retained. This will be made possible by redeployment, savings elsewhere and the use of other financing channels.
The measures of the EEG 2023
- Prioritising renewable energies: Renewable energies are in the overriding public interest and serve public safety. This principle is intended to significantly increase the pace of expansion - and thus the planning and approval procedures.
- 80 per cent more wind and solar power by 2030: To achieve this, the tendering volumes will be significantly increased.
- Electricity storage and power plants with green hydrogen: The federal government is promoting the combination of renewable energies with plants that store electricity in the form of hydrogen. Storing electricity is becoming increasingly important as electricity generation from renewable energies fluctuates.
- Higher remuneration for solar systems: Higher remuneration rates apply to new rooftop photovoltaic systems. Systems with full and partial feed-in will be able to be combined in future.
- Simplifications for citizen energy companies: Wind and solar projects by community energy companies will be exempt from tenders and can therefore be implemented more easily.
- Better financial participation of municipalities in wind energy: Municipalities can participate more easily financially, even in the case of wind turbines in other direct marketing.
- Levies for own electricity supply are abolished: There are no longer any levies on own consumption and direct deliveries.
Did you already know?
In view of the 1.5-degree target and the recognised need to reduce CO2 emissions across all sectors, the EEG is generally viewed positively. It is no coincidence that around 65 countries worldwide have adopted at least some of its principles.
In particular, the priority given to renewable energies over building law, monument protection or species protection exemptions is seen as positive for the progress of the energy transition. The accelerated approval procedures from the EEG 2023 are also already making themselves felt.
The quota model and the tendering model are often discussed as competing systems. In the quota model, the state sets a quota of renewable energy that must be produced by energy suppliers. In the tendering model, the required amount of green electricity is put out to tender. The winning bidder receives a limited purchase guarantee for the generation. The advantages of quota and tendering models are politically and scientifically controversial.
It is debatable whether the expansion targets are sufficient for the energy supply of the future. In addition, the infrastructure - i.e. transport capacities, storage options and opportunities through flexibilisation - must be adapted in good time to the conditions brought about by volatile generation from renewable energy sources such as wind and solar. This applies above all in connection with the assumption that electricity demand is likely to rise sharply due to the increase in electromobility and the increased use of heat pumps for heating. In this context, there are repeated discussions about what reserve capacities are needed after the nuclear phase-out and the coal phase-out and how these should be fuelled.
Among other things, improvements are expected in the regulations on land use, further clarification of planning and authorisation law and a nationwide standardisation of species protection.
According to Agora Energiewende, there was a record 14.4 gigawatts of solar installations in 2023, which is well above the targets for 2030. In contrast, there was only a slight increase in wind power installations of 2.9 gigawatts. In order to achieve the statutory expansion targets for 2030, the annual expansion of wind power plants must increase to an average of 7.7 gigawatts from 2024.
In addition to energy generation, the opposite side - private, commercial and industrial energy consumers - must also be considered. Government support is needed here for climate-neutral heating systems, the transformation of industry and the electricity, heating and hydrogen grids of the future.
At the beginning of March 2024, the Federal Ministry for Economic Affairs and Climate Protection presented the introduction of climate protection contracts. This new global funding instrument is based on auctions that companies can use to subsidise their transition to climate neutrality. At the time of writing, it remains to be seen how this instrument will prove its worth.
