This is an extract from two press releases by European Commission titled “State aid: Commission approves modification of German scheme to support electricity production from renewable energy sources” and “State aid: Commission approves amendments to German scheme to support offshore wind energy generation“ both of which were released on December 21, 2022

Modifications to scheme to support electricity production from renewable energy sources

The European Commission has approved, under EU State aid rules, the modification of a German scheme to support the production of electricity from renewable energy sources. The scheme reflects a recent amendment by Germany to its Renewable Energy Act (“Erneuerbare Energien Gesetz” – ‘EEG 2023′), and will further contribute to achieving Germany’s energy and environmental targets and the EU’s strategic objectives relating to the European Green Deal.

The German measure

Germany notified the Commission of its plans to prolong and modify its support scheme for renewable energy, mostly replacing the support currently available under the EEG 2021 scheme approved by the Commission in April 2021 (SA.57779), and amended in December 2021 (SA.64376) and September 2022 (SA.102303). The amended scheme will be applicable until end 2026.

The EEG 2023 support scheme, with an overall budget of €28 billion, aims at achieving a share of 80% of electricity produced from renewable energy sources by 2030, with a view to achieving climate neutrality by 2045.

Under the scheme, the aid will generally take the form of a market premium paid by the network operator to the producer on top of the market price for the electricity. However, in the case of very small installations, the aid will take the form of feed-in tariffs. Beneficiaries will be selected through competitive, transparent and non-discriminatory bidding processes.

Tenders will be organised per technology. Germany plans to increase the number and the volume of innovation tenders, as well as of tenders for rooftop and ground-based solar photovoltaic, onshore wind and biomethane.

The EEG 2023 scheme introduces new elements and amends the previous scheme as follows:

  • Tender procedures are modified to make them more competitive, further limit the risk of overcompensation and keep costs to a minimum for consumers and taxpayers. In particular, on top of the existing safeguards for onshore wind and biomass, the scheme introduces an effective volume control mechanism for innovation, solar photovoltaic and biomethane tenders. As a result, there is a mechanism that allows to adjust the volumes tendered for each technology and avoid undersubscription.
  • A new transitory solution is introduced to address Germany’s continued grid congestion issues. Regional measures will promote the development of electricity production from onshore wind, biomass and biomethane in the South of Germany, addressing the higher costs of renewable energy deployment in the area and ensuring projects are developed where more electricity consumption occurs.
  • Germany will completely phase out as of 1 January 2027 the support for renewable electricity production at times of negative prices (i.e. when demand is lower and prices fall), in order to prevent overcompensating producers.

The Commission’s assessment

The Commission assessed the modification of the German scheme under EU State aid rules, in particular the 2022 Guidelines on State aid for climate, environmental protection and energy (‘CEEAG’).

The Commission found that:

  • the scheme is necessary and appropriate to promote the production of renewable energy sources and to reduce greenhouse gas emissions. The scheme also contributes to better grid stability.
  • the aid is proportionate, as it is limited to the minimum necessary, and the positive effects of the scheme, in particular the positive environmental effects, outweigh its negative effects in terms of distortions to competition. In particular, the aid is granted through a premium based on the lowest bids in an open and transparent bidding process. In addition, the tenders include an appropriate volume control mechanism for all technologies, ensuring that tenders will be competitive. Furthermore, the aid is limited to a maximum defined by the funding gap, which is the amount needed to develop projects. Finally, market signals will be less distorted in the future since support at times of negative prices will be phased out.

In line with the evaluation requirement envisaged by the CEEAG, Germany has developed a detailed plan for the independent economic evaluation of the EEG 2023, and has committed to improve the data gathering and the use of empirical methodologies in this respect.

On this basis, the Commission approved the modification of the German scheme under EU State aid rules.

Amendments to the scheme to support offshore wind energy generation

The European Commission has approved, under EU State aid rules, amendments to a German scheme to support offshore wind energy generation in Germany (German Offshore Wind Energy Act –  ‘WindSeeG’). The scheme complements the German Renewable Energy Act (Erneuerbare Energien Gesetz – ‘EEG 2023′) and will further contribute to achieving Germany’s energy and environmental targets and the EU’s strategic objectives relating to the European Green Deal.

The German scheme

Germany notified to the Commission its intention to amend the existing WindSeeG scheme to further develop offshore wind energy generation in Germany. The original scheme was approved by the Commission on 23 July 2014 (SA.38632) and was prolonged and amended several times, lastly in 2021 (SA.57610), under the 2014 Guidelines on State aid for climate, environmental protection and energy.

Germany notified the following amendments to the scheme, with a total budget of €1.5 billion:

  • An increase of expansion targets for installed capacity of offshore wind energy installations (i) from 20 GW to at least 30 GW by 2030; (ii) to at least 40 GW by 2035; and (iii) from 40 GW to at least 70 GW by 2040;
  • A new tender procedure for a different type of sites in the German Exclusive Economic Zone (‘EEZ’) allowing offshore wind electricity producers to bid for sites that have not been centrally pre-investigated by the German government. With this new procedure, Germany expects to increase and speed up offshore wind development.
  • A dynamic bidding procedure for tenders for non-centrally pre-investigated sites, which will allow Germany to differentiate and select between multiple bids with a bid value of zero.

The amended scheme will continue to be applicable until the end of 2026.

The Commission’s assessment

The Commission assessed the amended scheme under EU State aid rules, in particular the 2022 Guidelines on State aid for climate, environmental protection and energy (‘CEEAG’) that apply since January 2022.

The Commission found that the measure continues to be necessary and appropriate to promote the use of renewable energy sources and to reduce greenhouse gas emissions.

Furthermore, the Commission found that the aid is proportionate and limited to the minimum necessary. The Commission also found that the positive effects of the scheme, in particular the environmental ones, outweigh any possible negative effects in terms of distortions to competition. In particular, the aid is granted through a premium on top of the electricity market price, based on the lowest bids in an open and transparent bidding process. The aid is limited to a maximum defined by the funding gap, which is the amount needed to develop projects.

In line with the evaluation requirement envisaged by the CEEAG, Germany has developed a detailed plan for the independent economic evaluation of the scheme and has committed to improve the data gathering and the use of empirical methodologies in this respect.

On this basis, the Commission approved the amended German scheme under EU State aid rules.