Since then, there have been two revisions of the EEG, each four years apart, to take account of progress and the challenges of the dynamic growth of renewables. The next revision has already been started because Germany's governing coalition of the CDU/CSU and FTP specified in their coalition agreement that the new law is to take effect in January 2012 after only three years.
How the EEG works
The principle behind the feed-in tariffs in the Renewable Energy Act (EEG) is quite simple. Owners of renewable power generators receive a set rate for each kilowatt-hour of renewable power over a period of 20 years. The specific rate paid depends on the technology and location.
Each year, the rate is reduced slightly for systems newly connected to the grid, though the rate remains the same for 20 years once you are connected. In other words, the longer you take to connect to the grid, the less compensation you receive. The reduction in feed-in tariffs provides an incentive to lower costs, such as for equipment, in order to make renewables competitive on the market.
In addition to feed-in tariffs, the EEG also stipulates that renewable power has priority on the grid. To begin with, owners of renewable power generators have a right to an immediate grid connection with priority. In addition, the renewable power generated and exported to the grid has priority over conventional power, including for transmission and distribution. Here, grid operators are also obligated to expand their grid capacity as need be.
Why we need the EEG
Renewables require special support because they are not yet cost-competitive with conventional sources of energy, such as coal and nuclear power, which have been subsidized for decades to bring down the price. Furthermore, the price of fossil energy does not contain external costs, such as environmental impacts and carbon emissions. The EEG makes the playing field more level. It takes the positive aspects of renewables – which are carbon-neutral and do not have any hidden social costs or other follow-up costs – into account in the various feed-in tariffs so that the learning curve and economies of scale can make renewables cost-efficient.
Success story and major export
By providing a stable investment environment, the EEG has become a success story. Thanks to this law, the share of renewable power has risen from 5.4 percent in 1999 to more than 16 percent in 2009. UPDATE? In 2009 alone, electricity funded by feed-in tariffs offset 74 million tons of carbon dioxide – almost as much as Romania emits in an entire year. During this time, the renewables sector was one of the fastest growing industries in Germany, creating 280,000 jobs, two thirds of which were the result of feed-in tariffs. In the end, it was feed-in tariffs that allowed German firms in the renewables sector to be technology leaders.
Since it was implemented, the EEG has proven to be the most efficient of all policies in paving the way for sustainable energy supply. Today, 21 member states in the European Union have followed the German example and implemented similar feed-in tariffs. Worldwide, more than 50 countries and 25 states/provinces have implemented FITs.
Germany will have to continue to expand the renewable energy if it wants to meet the targets specified in Directive 2009/28/EC for its National Action Plan of August 4, 2010. To this end, the Renewable Energy Act must be retained to ensure the stability of the planning and investment environment for renewables projects.