In the first half of 2023, renewable energy sources contributed to 57.7% of the total electricity generation, while energy production from fossil fuels (coal, natural gas) and nuclear reactors has declined significantly.
The Electricity Feed-in Act (1991) encouraged small-scale, decentralised energy generation through engaging the private sector and providing economic incentives for individual entrepreuneurs. It also facilitated job creation, increased tax revenue, which in turn resulted in political and public support.
The Environmental Tax (eco tax) raised petrol, diesel and natural gas prices. Additionally, it imposed a new duty on electricity production from fossil fuel in Germany. [4]
In 2000, the Electricity Feed-in Act was replaced by Renewable Energy Sources Act (EEG 2000). The Act provided an updated feed-in tariff structure for renewables.
The EEG was amended to introduce the Special Equalisation Scheme in 2003 to maintain global competetiveness of energy-intensive industries.
The EU Third Energy Package was introduced to improve the efficiency of the internal energy market and to resolve inherent structural problems.
The Renewable Energy Sources Act (2000) was amended in 2004, 2009, 2012 and 2014, to raise renewable energy targets and provide avenues for renewable energy promotion, market improvements and integration with the existing grid system. EEG (2000) amended to EEG (2012).
The 2023 amendment to the EEG committed the government to significantly raising the target for renewable energy to at least 80% of the country's gross electricity consumption by 2030.
A market premium scheme was introduced in 2012 as an alternative to the feed-in tariffs. The responsibility of selling electricity on the market shifted from transmission network operators to the plant operators, with the intention of aligning price signals in the market.
The amendment of the Renewable Energy Sources Act in 2016 implemented a public tender processes for onshore wind, offshore wind, solar, and biomass projects as part of the country's transition from providing feed-in tariffs to embracing a market-oriented approach for determining renewable energy prices. Consequently, projects were no longer guaranteed feed-in tariff compensation by law; instead, they were required to participate in public auctions organised and overseen by the Federal Network Agency, where they competed for remuneration.
Germany implemented the Electricity Feed-in Act in 1991 which mandated power companies to procure electricity from renewable sources. This law ensured that individuals or entities feeding renewable energy into the system received adequate compensation through premium pricing/ feed-in tariffs. The Electricity Feed-in Act intended to reduce the financial burden on the government and shift the scope and responsibility of promoting renewable energy development onto electricity suppliers and their customers.
Main policy objective: Develop the renewable energy sector
Secondary objective: Tax revenues, job creation
The eco tax was launched in 1999 and ran until 2003. The eco tax applied to fossil fuels used in electricity generation, transport and heating. Fuel prices have seen five consecutive yearly tax increases of approximately 3 EUR cents /litre. [9]
Main policy objective: Reduce fossil fuel dependence
Secondary objective: Recycling the generated revenue to reduce public pension contributions [4]
In 2000, the Electricity Feed-in Act was replaced with Renewable Energy Sources Act (EEG 2000). EEG provides a feed in tariff structure for renewables (solar, wind, coalmine methanes; Leiren & Reimer, 2018). The EEG law primarily granted independent photovoltaic producers access to the electricity grid if economically feasible. Notably, the law introduced a competent market rate for individual producers to sell their surplus electricity with a 20 year contract, thus locking in the policy. For utilities with over 50% feed-in tariff eligible electricity sales, an added incentive was provided to motivate utilities to boost their renewable energy shares. [2]
Main policy objective: Increase the proportion of electricity produced from renewable sources
In 2003, the Bundestag, supported by the Ministry of Economics, amended the EEG to introduce the Special Equalisation Scheme. The Scheme exempts energy-intensive industries from the EEG surcharge. This decision aimed to protect German companies and maintain their competitiveness in the global market.
Main policy objective: Exempt energy-intensive industries from the EEG surcharge and to maintain their global competitveness
The implementation of the EU's Third Energy Package (2009) was another significant alteration in the EU energy policy legal framework. This mandated member states to segregate energy supply and generation from the operation of transmission networks to prevent unjust infrastructure access. Germany incorporated these regulations into its Energy Sector Law which came into force in 2010. The legislation introduced unbundling, which compelled integrated power companies to divest their electricity transmission network operators. This change was criticised severely as unbundling had adverse effects on the financial situation of major utility companies.
Following the Fukushima disaster in March 2011, the German Chancellor temporarily suspended the nuclear extension plan and declared the commencement of safety inspections for all nuclear plants, including the decommissioning of the seven oldest ones. The phase out of the remaining nine by 2022 was confirmed in July 2011. This resulted in increased energy demand.
Main policy objective: Promote unbundling of electricity value chains, strengthen internal energy market
Following the 2005 elections, new amendments were made to the Renewable Energy Sources Act (2000). The amendments raised the renewables target incrementally and introduced a growth corridor with flexible financial degression. With a growing share of renewables in the total electricity production mix, the importance of market integration, system integration and grid integration gained considerable focus. The main mechanisms employed to achieve this were: an optional market premium for renewables, a flexibile premium for biogas facilities, a rebate in compensation payments for utility companies selling electricity generated at least 50% from fluctuating renewable energy sources, and other supporting instruments outside the Act.
Main policy objective:
Promote renewable energy sector growth by:
35% by 2020
50% by 2030
65% by 2040
80% by 2050
An essential alteration was made to align renewable energy prices more closely with market dynamics and bolster their contribution to the overall energy landscape. In this context, the Renewable Energy Sources Act (2012) introduced additional incentives for direct marketing of energy, accompanied by a market premium, aiming to foster better synergy between conventional and renewable energy sources, along with energy storage systems.
This scheme enabled power producers to sell directly to the power exchange instead of receiving feed-in tariffs, and thus facilitating a market premium for producers.
Main policy objective: Align renewable energy prices with the market and provide proper price signals
Secondary objective: Increase renewable energy share
In 2016, the government incorporated an auction system for various renewable technologies, including photovoltaics, onshore wind, offshore wind, and biomass, into the legal framework. This auction system is tailored to the specific requirements of each technology. Small-scale installations, however, are exempted from the auction process. Renewable energy installations with capacities below 750 kilowatts (kW) or 150 kW for biomass continue to benefit from feed-in tariffs to support citizen cooperatives and small project developers. [5]
The latest amendments to Germany's energy policy were made in 2023, where several critical elements to advance the country's renewable energy objectives were introduced. Notably, the amendment sets a target of at least 80% of Germany's gross electricity consumption to be produced by renewable energy in 2030, significantly expanding the target. It also establishes that renewable energies should be prioritised as a fundamental principle. To achieve this target, mechanisms have been introduced to allow flexibility of up to 25% in response to market dynamics when adjusting the maximum values in tenders for onshore wind turbines and photovoltaic systems by up to 25%. The amendment also simplifies the expansion of photovoltaic systems, provides incentives for accelerated growth in onshore wind energy, focuses on the use of biomass in highly flexible peak load power plants, and enhances support for citizen-led energy initiatives. Additionally, it promotes green hydrogen and replaces the EEG levy with financing through federal funds. The Energy Finance Act (2023) accompanying this amendment also includes new regulations for energy levies, a special equalisation scheme for EEG subsidies and direct federal funding.
Primary policy objective: Renewable energy expansion