Market framework

Definition of ‘renewable energy’

Is there any legal definition of what constitutes ‘renewable energy’ or ‘clean power’ (or their equivalents) in your jurisdiction?

According to the legal definition in section 3, No. 21 of the Renewable Energy Sources Act 2017 (EEG 2017), ‘renewable energy’ is generated by:

  • hydropower, including wave, tidal, salinity gradient and marine current energy;
  • wind energy;
  • solar radiation energy;
  • geothermal energy; and
  • energy from biomass including biogas, biomethane, landfill gas and sewage treatment gas, and from the biologically degradable part of waste from households and industry.
Framework

What is the legal and regulatory framework applicable to developing, financing, operating and selling power and ‘environmental attributes’ from renewable energy projects?

Renewable energy in Germany is supported under the EEG. Initially, statutory feed-in tariffs were paid by the grid operators who took off the electricity. Meanwhile, only small plants still benefit from feed-in tariffs, whereas other installations have to sell the electricity and can receive additional support as a ‘market premium’, namely the difference between the market price and an ‘applicable value’ under the EEG.

Under the revised EEG 2017, an auction scheme for renewable energy remuneration was introduced, in line with state aid requirements by the EU Commission. For new onshore wind, offshore wind, PV and biomass plants exceeding a certain minimum capacity, remuneration under the EEG will only be granted if the operator wins an award in the tender proceedings (by offering a low level of remuneration). The successful bid determines the amount of the applicable value for calculation of the market premium. The auction proceedings are organised by the BNetzA. The dates and available amounts of capacity to be tendered for each type of renewable energy, as well as the requirements for participation, are prescribed by law. EEG remuneration is generally granted for a period of 20 years, starting from the entry of operation of the relevant plant. After the expiry of this period, no further EEG remuneration is available, with one exception: existing biomass plants may participate in the tenders under certain conditions and, if successful, can obtain an additional 10-year remuneration.

The EEG also mentions certain ‘environmental attributes’, but these play a limited role (see question 5).

Apart from the prerequisites for EEG remuneration, there are no specific restrictions on constructing and operating renewable energy plants. Permits must be obtained under general rules, and especially environmental law requirements must be respected. One notable exception is offshore wind: after the expiry of a transitional phase, permits will only be granted to operators that were successful in the tender proceedings.

Government incentives

Does the government offer incentives to promote the development of renewable energy projects? In addition, has the government established policies that also promote renewable energy?

The main governmental incentive for the development of renewable energy projects is the remuneration of renewable energy plants under the EEG as outlined in question 4. As renewable plants beyond a certain size have to sell the electricity and can receive remuneration as a ‘market premium’, the grid operators are no longer obliged to purchase the electricity from such plants in the ‘direct marketing’ regime. However, they are still obliged to connect renewable energy plants to the grid without undue delay, to physically offtake electricity from renewable sources and to distribute it with priority over electricity from other sources.

Further legislation aims at promoting renewable energy from the customer side. For example, there is a renewable heat incentive programme that provides subsidies for exchanging old heating systems for heating systems using solar thermal energy, biomass or a heat pump. The Renewable Heat Act sets out rules on the use of these technologies in new buildings. There are also additional stipulations and funding instruments for the use of renewable heat at provincial and municipal levels. In the transport sector, renewable energy is promoted through minimum quotas for biofuels and through research programmes for alternative propulsion technologies and fuels. For the production of electricity for self-consumption, the EEG surcharge (which is generally levied on all electricity consumption) will be reduced by 60 per cent if the electricity is produced from renewable energy or in a highly efficient combined power and heat plant.

The German promotional bank KfW offers several financing programmes related to renewable energy. Details are available on the bank’s website, www.kfw.de.

Are renewable energy policies and incentives generally established at the national level, or are they established by states or other political subdivisions?

Energy policies and incentives are generally a matter of federal law and established at the national level. This is especially the case for the remuneration of renewable energy generation in the EEG, which is a national law. European law plays an increasingly important role with regard to energy regulation, as well as with regard to state aid.

Federal states’ policies may be relevant for certain aspects of renewable energy projects. For example, some federal states have more restrictive planning rules regarding the minimum distance between wind energy plants and inhabited space.

Legislative proposals

Describe any notable pending or anticipated legislative proposals regarding renewable energy in your jurisdiction.

The latest major reform of renewable energy law, with the EEG 2017 and the Offshore Wind Act, only entered into force on 1 January 2017. The reforms introduced tender proceedings for renewable energy remuneration, which was a major system change. For the time being, we do not anticipate further major changes to renewable energy law. However, certain adjustments have already been made with regard to details of the tender proceedings, and further adjustments regarding the tender proceedings for onshore wind are currently being discussed. We expect that the developments under the new tender system will be monitored and any unwanted results may trigger further adjustments - for example, relating to the capacities available in the tender rounds.

The coalition parties expressly declared their support for the Paris climate change agreement in their coalition agreement. However, the 2020 goals are not expected to be met. The Federal Ministry for the Environment, Nature Conservation and Nuclear Safety has therefore introduced the proposal for a federal climate act that sets out guidelines for reaching the 2030 climate goals. However, political consensus within the governing parties hasn’t been found yet. Fixing annual emission quantities per sector, the adoption of the law has yet to be realised.

In addition, a commission established by the German Federal Government has submitted a report that suggests an end to the use of coal by 2038.

Disputes framework

Describe the legal framework applicable to disputes between renewable power market participants, related to pricing or otherwise.

Disputes between renewable power market participants are civil law matters. There are no courts specialised in energy matters, so the general civil law district courts have jurisdiction. This includes disputes regarding remuneration under the EEG. As these are paid by the grid operators and not by any authority, such disputes are considered civil law matters.

The EEG provides for a private institution outside the court system known as the EEG clearing house (Clearingstelle), which offers alternative dispute resolution regarding the EEG, the Combined Heat and Power Act and the Metering Point Operation Act. The alternative dispute resolution options include moderated discussions (mediation), assessment of the matters of fact and the legal situation in individual cases (‘votes’), and arbitration under the code of civil procedure. The Clearingstelle may further submit opinions to the courts in civil law proceedings, and it may prepare ‘indications’ or ‘recommendations’ for the general clarification of questions on the application or interpretation of the law, outside specific court proceedings. In more important proceedings, the Clearingstelle invites comments by industry associations. The alternative dispute resolution offered by the Clearingstelle is regularly used in practice due to its industry experience; in most cases, the outcome is accepted by the parties. The votes, indications or recommendations of the Clearingstelle are not binding on the courts, but provide helpful guidance for private parties as well as the courts.

For disputes regarding decisions of a regulator, the Higher Regional Court has jurisdiction. In the case of the BNetzA, the competent court is the Higher Regional Court of Düsseldorf. Even though the Higher Regional Courts are civil law courts, such disputes are matters of administrative law and in principle follow the rules of administrative court procedure, as specified in the EnWG.