German Laws

1. The German Renewable Energy Act – 2009
Chances & Risks under the Scope of an European Front-Runner
Dr. Marius Boewe
Counsel
+49 221 5771 233
mboewe@mayerbrown.com
Mayer Brown LLP is a limited liability partnership established under the laws of the State of Illinois, U.S.A.
Mayer Brown LLP ist eine Partnerschaft mit beschränkter Haftung nach dem Recht des Staates Illinois, U.S.A.

2. Overview
• Introduction and background information
• History of current Renewable Energy Act (EEG)
• Operation mode of EEG
– Energy sources
– Feed-in tariffs
– Burden sharing
• Case study
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3. Background Information
Shares of renewable energy sources among total final
energy consumption in Germany 2009
Hydropower
0.8 %
Wind energy
1.6 %
RES share 2009
10.1 % Biomass 2)
Other fossil energy
7.0 %
resources (e.g. hard coal,
lignite, mineral oil, natural
gas) and nuclear energy
89.9 %
Other renewables
0.7 %
)
RES - Renewable Energy Sources; solid, liquid, gaseous biomass, biogenic share of waste, landfill and sewage gas; Deviations in the totals are due to rounding;
Source: BMU-KI III 1 based on Working Group on Renewable Energies-Statistics (AGEE-Stat) and the Centre for Solar Energy and Hydrogen Research Baden-Württemberg
(ZSW), according to Working Group on Energy Balances (AGEB); all figures provisional
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4. Background Information
Structure of final energy supply from renewable energy
sources in Germany 2009
Total: 237.8 TWh
Biogenic solid fuels,
heat
42.4 %
Biofuels
14.2 %
Geothermal energy ,
2.1 % Hydropower
8.0 %
Solar thermal energy
2.0 % Wind energy
Photovoltaics
Biogenic fuels, 15.9 %
2.6 %
electricity
12.8 %
Biomass (total)*,
including biofuels: 69 %
* Solid, liquid, gaseous biomass, biogenic share of waste, landfill and sewage gas;
Source: BMU-KI III 1 according to Working Group on Renewable Energies-Statistics (AGEE-Stat); all figures provisional
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5. Background Information
Development of electricity generation from renewable
energy sources in Germany 1990 - 2009
120,000
Hydropower Wind energy
EEG:
Biomass * Photovoltaics
100,000 January 2009
Electricity generation [GWh]
EEG:
August 2004
EEG:
80,000 April 2000
Amendment to BauGB:
60,000
November 1997
40,000 StrEG:
January 1991 - March 2000
20,000
0
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
* Solid, liquid, gaseous biomass, biogenic share of waste, landfill and sewage gas;
Electricity from geothermal energy is not presented due to the negligible quantities of electricity produced; StrEG: Act on the Sale of Electricity to the Grid; BauGB: Construction Code; EEG: Renewable
Energy Sources Act; Source: BMU-KI III 1 according to Working Group on Renewable Energies-Statistics (AGEE-Stat); Image: BMU / Christoph Edelhoff; all figures provisional
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6. European Background
• Dec.2008: Political agreement on the Renewables Directive
• 11.-12. Dec. 2008: EU summit agrees final version of the
Renewables Directive (2009/28/EG)
• 30. June 2009: EU issues template for National Renewable Energy
Action Plans (NREAPs)
• 30. June 2010: Deadline for EU states to present National
Renewable Energy Action Plans
• 2020: Target date for EU objective of sourcing 20% of energy from
renewable sources
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7. Europeanwide Comparison of Shares in
Renewable Energies by Member States
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8. History of Current Act
• 1991: Renewable Energy Input Statute (StromeinspeisungsG)
– First steps to guarantee feed-in of renewable energy producers
– First legally guaranteed feed-in tariffs
– Only profitable for wind power
• 2000: Renewable Energy Act 2000
– Increasing the scope of reneweable energy sources
– Raising the feed-in tariffs
• 2004: Renewable Energy Act 2004; and
• 2009: Renewable Energy Act 2009
– Adjustments on tariffs, periods of sponsorship and degressions
– 1 sec. 2 EEG 2009: by 2020 share of renewable energy sources shall
at least amount to 30 percent 8

9. Operating Mode of EEG
Operator of
Legally guaranteed feed-in reneweable energy
of entire produced power production plant,
into power grid and legally e.g., windmill
guaranteed feed-in tariff for
20 years to be paid by grid-
operator
Power grid
„feed-in tariff " to be paid by
end consumer as renewable
energy contribution
End consumer
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10. Renewable Energy Sources
Sec. 3 No. 3 EEG
• Hydropower (including wave power)
• Tidal power
• Salt gradient and flow energy
• Wind energy
• Solar radiation
• Geothermal energy
• Energy from biomass (incl. biogas)
• Landfill gas and sewage treatment gas
• Biodegradable fraction of waste
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11. Feed-In Tariffs
Feed-in tariffs depend on:
– Renewable energy sources
– Year of commissioning
– Capacity of power plant
– Degression
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12. Examples of Feed-In Tariffs
• Hydropower:
Capacity up to 500kW 500kW-2MW 2MW-5MW
12.67 8.65 ct/kWh 7.65 ct/kWh
ct/kWh
• No degression; no difference in year of commissioning
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13. Examples of Feed-In Tariffs
• Offshore wind energy:
– Degression rate until 2014: 0.0 %; from 2015: 5%; duration of tariff
payment: 20 years
Initial tariff in ct/kWh Early bird bonus Basic
for first 12 years during initial tariff tariff in
period ct/kWh
2009 13 2 3.5
2010 13 2 3.5
2011 13 2 3.5
2012 13 2 3.5
2013 13 2 3.5
2014 13 2 3.5
2015 12.35 1.90 3.33
2016 11.73 0.0 3.16
2017 11.15 0.0 3.00
2018 10.59 0.0 2.85
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14. Burden Sharing under the EEG
• Grid operator is obliged to
– Accept entire amount of renewable energy
– Pay legally guaranteed feed-in tariff
– Sell renewable energy at spot market
• Grid operator is allowed to
– Pass through difference between paid feed-in tariff and earned profit
to end consumer („renewable energy contribution“)
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15. Requirement for Compensation Mechanism for
Practical Reasons
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16. Consequence: Equalisation Scheme
Operator of RE plant
Energy Tariff
Local grid operator
Energy Tariff
Transmission grid operator Selling RE at spot market
Equalisation amongst
transmission system operator Nationwide equalized RE contribution
Energy provider
Energy price, including RE contribution
Energy
(currently 2,047 ct/kWh)
End consumer
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17. Case Study
• Client runs biomass plant, revenue has been calculated on basis of
EEG, which defines all relevant figures for 20 years.
– Basic tariff + energy crops bonus (for using plants/parts of plants from
agricultural operations, have not been treated or modified in any
way)
• Calculated investment : 4.72 Mio €
• Calculated earnings by selling EEG-power: 1.275 Mio € (p.a.)
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18. Case Study
Biomass plant originally used saw mill as energy source
• Issue: saw mill waste ≠ energy crop
• Client reaction: import of silvicultural waste from Netherlands
• Problem: very high proportion of soil/sand
soil/sand outweighs wood 4-5 times
• Consequences: - as waste is delivered on m³ basis and paid by weight,
client paid for 450 kg/m³ instead of 400 kg/m³
 12 % higher costs
 more waste required
- sand melts in plant and slags mechanism
Further consequence:
• maintenance must be conducted 4 times a year (instead of 1 time)
• each maintenance lasts 1 week (additional costs)
• missing feed-in tariffs 100,000 € (p.a.)
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19. Case Study
• Client reaction: change of supplier
• Problem: new supplier (inter alia) contaminated wood
(tar, plumb , etc. )
• Consequences: -Client loses energy crops bonus
(225,000 € p.a.)
-Client loses guarantee and warranty of plant
for using improper fuel (sand, tar, etc. )
-Client violates various laws and was fined for:
-Unlawful operation of plant
-Unlawful combustion of contaminate
waste (tar)
 Actual Investment: 5.30 Mio € (+580 t € difference)
 Actual EEG-earnings: 0.855 Mio € (-420 t € difference)
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20. Contact
Dr. Marius Boewe
Counsel, Cologne
T.: +49 221 5771 233
E.: mboewe@mayerbrown.com
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