Renewable energy
National targets

Renewable energy

As a result of strong legislative activity in favour of renewable energies, in the past 20 years the development of renewable energies has made significant progress. In particular, wind power, solar power and biomass are now well-established types of renewable energy and represent a substantial share of electricity production. Biomass plants also aid in heat production. In electricity production, wind power has become the most important renewable energy source. While it has become increasingly difficult to find suitable onshore sites for wind turbines, it is expected that offshore wind farms will soon contribute significantly to the further development of wind power. Several offshore wind farm projects are currently being planned and developed in the North Sea and Baltic Sea.

Geothermal energy facilities used to produce heat energy have already been established, while the (additional) production of electricity through geothermal energy plants is expected to develop in the near future. Other renewable energy facilities, such as hydropower and landfill projects, also contribute a small share of the entire energy output.

According to the Renewable Energy Act, the share of renewable energy in Germany's overall power supply will total 30% by 2020 and is expected to increase continuously. This 30% target is a concrete aim stipulated in the act, but is not legally binding. However, the target is a general principle for execution of the act and a political target of the government. It exceeds the 20% target set out by the European Union to be achieved by 2020.

In addition, according to the Renewable Energy Heat Act, the share of renewable energy in Germany's overall heat supply will total 14% by 2020. This target is also not legally binding. However, the act does contain certain legally binding targets for the use of renewable energy in buildings.

The Renewable Energy Act covers:

  • hydropower, including wave power, tidal power, salt gradient and flow energy;
  • wind energy;
  • solar radiation;
  • geothermal energy;
  • energy from biomass, including biogas, landfill gas and sewage treatment plant gas; and
  • biodegradable fraction of municipal and industrial waste.

The Renewable Energy Act entitles operators of renewable energy facilities to claim specific, fixed amounts of feed-in tariffs for the production of renewable energy and feed-in to the public grid. The act guarantees these tariffs for 15 years or more, providing long-term security for investors. In addition, renewable energy takes priority over non-renewable energy in relation to the feed-in and transmission of electricity in the public grid. This means that grid operators must accept the feed-in of electricity from renewable energy facilities, at the same time reducing capacity from non-renewable energy production facilities. However, in contrast to other legal systems, the act does not oblige energy companies to produce or sell a certain amount of their energy from renewable energy sources. A subsidy mechanism exists entitling the operator of a renewable energy facility to claim a fixed feed-in tariff, which is higher than the market price. It thereby incentivises operators to invest in renewable energy facilities to benefit from the legally guaranteed feed-in remuneration.

In addition, the Combined Heat and Power Act promotes combined heat and power facilities by guaranteeing fixed feed-in remuneration for the power produced in those facilities. The same incentive mechanism applies for the Renewable Energy Act. The Renewable Energy Heat Act contributes to the dynamic development of renewable energy in the production of heat by two main measures. First, it requires the use of a certain amount of renewable energy for the heat supply of newly constructed buildings. Second, it contains financial incentives.

All three pieces of legislation are under review to better adapt the regulatory framework and the feed-in tariffs to changing circumstances and requirements. Financial incentives are the key mechanism of the renewable energy legislation to promote the development of renewable energies. The main approach is to provide long-term, guaranteed feed-in tariffs for electricity produced in renewable energy facilities, which are considerably above the market standard tariff for electricity. These guaranteed tariffs will provide reliable conditions, and therefore low and calculable risks for investments\, in renewable energy. From a legal viewpoint, these incentives are not subsidies. The financial incentives vary depending on the renewable energy used. Relatively high feed-in remuneration for solar energy is guaranteed to promote its use. The same applies to energy from offshore wind farms, particularly because this technology is not yet well established and requires significant investment in offshore wind farms. However, there is a strong political will to realise the potential of offshore wind energy.

National targets

Certain measures aim to increase energy efficiency in buildings, which is the source of over one-third of Germany's entire end-use energy demand. The national programme to reduce greenhouse gas emissions is based mainly on:

  • public relations;
  • incentive measures;
  • research and innovation; and
  • regulatory measures.

All measures are intended to ensure the efficient use of energy and security of supply, as well as to increase energy efficiency and the use of renewable energy. However, there is no fixed target relating to the reduction of greenhouse gas emissions from buildings.

The energy efficiency requirements for buildings are regulated under the Energy Conservation Regulations. The legal basis for the regulations, which implement the Energy Performance Directive (2002/91/EC), is the Energy Conservation Act.

Under the regulations, which entered into force on October 1 2009, specified minimum standards for energy performance must be met in relation to both:

  • constructing new buildings; and
  • carrying out structural alterations of existing buildings, such as modernisation, conversion, expansion and extension.

In a few specific cases, retrofitting obligations relating to old boilers and thermal insulation also apply. For example, central heating boilers installed before October 1 1978 must be taken out of operation and replaced. In addition, the regulations set out minimum energy performance requirements for:

  • heating;
  • cooling and ventilation techniques; and
  • hot water supply.

The relevant limit values and standards are set out in annexes to the regulations.

The regulations apply to heated and cooled buildings or autonomous parts of a building (eg, newly constructed parts of a building with more than 50 square metres of used area). However, certain buildings (eg, buildings which are not normally heated or cooled - such as leisure residences, buildings constructed for temporary use such as tents, and buildings with specified uses such as greenhouses or cattle sheds) are exempt from most of the energy-saving requirements. The only applicable regulations to these kinds of buildings are those relating to the inspection of air-conditioning systems and the operation of boilers.

Failure to comply with the regulations can be sanctioned as a regulatory offence with the potential imposition of fines up to €15,000 - for example, if either:

  • the required inspection of the air-conditioning systems is not carried out; or
  • boilers or central-heating are not installed in compliance with the regulations.

Germany has adopted the Integrated Energy and Climate Programme, which aims to reduce greenhouse gas emissions by 40% by 2020 compared to 1990 levels. To achieve this, the government has adopted several laws and ordinances, such as the Renewable Energy Heating Law, which entered into force in 2009. This law obliges owners of new buildings to use a certain percentage of renewable energies to heat their buildings. The required percentage depends on which source of alternative energy the owner of a building decides to use (eg, solar energy must satisfy at least 15% of the building's heat requirements and biomass must satisfy at least 50%). Alternatively, other measures can be adopted, such as improving a building's insulation.

For further information on this topic please contact David Elshorst at Clifford Chance LLP by telephone (+49 69 71 99 01), fax (+49 69 71 99 4000) or email ([email protected]).