Feed-in tariffs in Germany

Feed-in electricity tariffs have been introduced in Germany to encourage the use of new energy technologies such as wind power, biomass, hydropower, geothermal power and solar photovoltaics. Feed-in tariffs are a policy mechanism designed to accelerate investment in renewable energy technologies by providing them a fee (a "tariff") above the retail rate of electricity. The mechanism provides long-term security to renewable energy producers, typically based on the cost of generation of each technology.^[2] Technologies such as wind power, for instance, are awarded a lower per-kWh price, while technologies such as solar PV and tidal power are offered a higher price, reflecting higher costs.

As of July 2014, feed-in tariffs range from 3.33 ct/kWh (4.4 ¢/kWh) for hydropower facilities over 50 MW to 12.88 ct/kWh (17.3 ¢/kWh) for solar installations on buildings up to 30 kW and 19 ct/kWh (25.5 ¢/kWh) for offshore wind.^[3] As of August 2014, a revised Renewable Energy Sources Act (EEG 2014, also called EEG 2.0) will enter into force, with some modifications to the feed-in tariffs.^[4] The aim is to meet Germany’s renewable energy goals of 40 to 45% of electricity consumption in 2025 and 55% to 60% in 2035. The policy also aims to encourage the development of renewable technologies, reduce external costs, and increase security of energy supply.^[5]

In the first half of 2014, 28.5% of gross electricity production in Germany came from renewable sources.^[6] The Federal Environment Ministry estimated that renewables were to save 87 million tonnes of carbon dioxide by 2012. The average level of feed-in tariff was €0.0953 per kWh in 2005 (compared to an average cost of displaced energy of €0.047 kWh). In 2004, the total level of reallocated EEG surcharges was €2.4 billion, at a cost per consumer of €0.0056 per kWh (3 per cent of household electricity costs).^[5] By 2013, the figure had risen to €20.4 billion.^[7] The tariffs are lowered every year to encourage more efficient production of renewable energy. By 2014, the EEG surcharge - which pays for the additional costs through feed-in tariffs - had increased to 6.24 ct/kWh.^[8] As of July 2014, the regular reductions (degressions) were 1.5% per year for electricity from onshore wind and 1% per month for electricity from photovoltaics.

The solar sector employed about 56,000 people in 2013, a strong decline from previous years, due to many insolvencies and business closures. Although most of the installed solar panels are nowadays imported from China, the Fraunhofer institute estimates, that only about 30 percent of the EEG apportionment outflows to China, while the rest is still spent domestically. The institute also predicts that Germany's solar manufacturing sector will improve its competitive situation in the future.^[9]

Progression of FiTs since 2012

As of July 2014, feed-in tariffs for photovoltaic systems range from 12.88 euro cents per kWh for small roof-top system, down to 8.92 euro cents per kWh for large utility scaled solar parks. Also, FiTs are restricted to PV system with a maximum capacity of 10 megawatts (MW). The feed-in tariff for solar PV is declining at a faster rate than for any other renewable technology.^[10]

Progression of FiTs before 2012

The feed-in tariff system has been modified frequently. The feed-in tariff, in force since 1 August 2004, was modified in 2008.^[13] In view of the unexpectedly high growth rates, the depreciation was accelerated and a new category (>1000 kWp) was created with a lower tariff. The facade premium was abolished. In July 2010, the Renewable Energy Sources Act was again amended to reduce the tariffs by a further 16% in addition to the normal annual depreciation, as the prices for PV-panels had dropped sharply in 2009.^[14] The most recent modification of the EEG occurred in 2011, when part of the degression foreseen for 2012 was brought forward to mid-2011 as a response to unexpectedly high installations in the course of 2010.^[15]

Support duration 20 years, constant remuneration. Feed-in tariffs was lowered repeatedly (decreasing by 9% default and a maximum of 24% per year). Degression will be accelerated or slowed down by three percentage points for every 1000 MWp/a divergence from the target of 3500 MWp/a.

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