German Renewable Energy Act - The Three Main Principles

The Three Main Principles

The three main principles of the EEG are:

a) Investment protection through guaranteed feed-in tariffs and connection requirement: Every kilowatt-hour that is generated from renewable energy facilities receives a fixed feed-in tariff. Furthermore, the network operators must feed in this electricity into the grid preferentially to the electricity generated by conventional sources (nuclear power, coal and gas). Renewable energy plant operators receive a 20 year, technology specific, guaranteed payment for their produced electricity. In particular, small and medium-sized enterprises (SMEs) have been given new access to the electricity market, along with private land owners. The Federal Ministry for Environment, Nature Conservation and Nuclear Safety (2010) argues that anyone who produces renewable energy can now sell his ‘product’ for a 20-year fixed price.

b) No charge to Germany’s public purse: as of today, the promotion of renewable electricity is still necessary. The EEG rates of remuneration clearly show what electricity from wind, hydro, solar, bio and geothermal energy actually cost. Unlike fossil fuels, there are no external costs such as damages to the environment, the climate or human health. The remuneration rates are not subsidies as such since they are not paid for by taxes. On the contrary, the “polluter pays principle” (OECD, 2006) is distributed to the consumer: who consumes more pays more. The remuneration rates are paid for by every consumer with the electricity bill.

c) Innovation by falling feed-in-tariffs: periodically lowering rates of remuneration for new plants (degression of 1% per year) exerts cost pressure on manufacturers. Thus, technologies are becoming more efficient and less costly.