In its cabinet meeting yesterday, the German government adopted the 2027 amendment to the EEG and the so-called grid connection package. In a position paper published on the subject, the energy park operator Alterric criticizes the regulations provided for in it as a massive brake on the expansion of renewables. From the company’s point of view, the Federal Cabinet is thus jeopardizing the transformation and international competitiveness of the German economy and industry, which is urgently dependent on cheap and secure energy.
“In the current version, both projects drive up the levelized cost of electricity and weaken the competitiveness of our industry in the long term. Especially in times when companies are already under enormous international competitive pressure, this is a fatal signal. Instead of improving the framework conditions for investments, the designs create additional uncertainty and costs,” says Dr. Frank May, CEO of Alterric. “The process behind it is all the more incomprehensible: a three-day feedback period for two legislative projects with such far-reaching significance for the energy transition and the business location are simply unacceptable. The lack of security of existence for investments made long ago cannot remain in this way either. System conversions of this magnitude require practical transitional periods. The Bundestag is now called upon to thoroughly sharpen and correct the parliamentary procedure.”
Grid connection package remains a brake on investment
Compared to the previously leaked drafts, the federal government has made improvements: The designation period for so-called “capacity-limited areas” has been reduced from 10 to 6 years (with the option of a one-time extension of 18 months). The threshold for triggering will increase from three to five percent, and the amount free of compensation will be capped at 18 to 20 percent of annual electricity generation. However, these adjustments are far from sufficient to avert the brake on the expansion of renewables.
After all, such an intervention may actually only serve as an emergency instrument under European law. The values now defined go far beyond this character. If entire regions are classified as limited in capacity across the board, this jeopardizes the expansion of renewables on a large scale. Especially in combination with the planned “system-serving connected load” (SAL), the interventions threaten to intensify each other. In addition, there has been a lack of transparency so far as to how many areas would be affected at all. A serious impact assessment is practically impossible, which leads to considerable planning and investment uncertainty. Alterric is therefore calling for a mandatory preliminary review of such area designations by the Federal Network Agency.
Additional market and cost risks arise from the tight schedule for the “system-serving connected load”. While the approach of an interpretation that serves the system makes sense in principle, the planned entry into force on 1 January 2027 seems impractical. The date underestimates the enormous technical conversion effort and ignores existing lead times for plant manufacturers. Projects that are already well advanced are in danger of getting into difficulties as a result.
Alterric, on the other hand, is clearly positive about the planned simplifications for co-location projects. In the future, grid operators will no longer be allowed to reject such projects across the board due to a lack of grid capacity. However, in order for these projects to actually go online faster, digitization must also progress among grid operators. Until now, analogue, non-transparent processes have hindered the connection of new systems.
Amendment to the Renewable Energy Sources Act (EEG): Poor market design and further market interventions due to a rent limitation
Alterric welcomes the fact that the German government is taking up the industry’s demand and increasing the tender volume for onshore wind energy by 12 gigawatts. Nevertheless, the EEG amendment in the current cabinet draft falls short of expectations and even creates new hurdles for expansion.
For example, the reform misses the opportunity for a modern market design with the introduction of bilateral contracts for difference (CfDs). Without a so-called market value corridor, plant operators lack a reliable investment framework. A corridor would receive market incentives and at the same time gradually introduce the industry to financing without state subsidies. For a sustainable market design, there is also a lack of reliable legal support for private-sector electricity supply contracts (PPAs).
The planned intervention in private lease agreements is to be viewed particularly critically. The planned cap on lease payments at 3.5 percent of plant revenues is out of touch with the market and misguided in terms of regulatory policy. Competition has recently already effectively regulated lease prices. Instead, state price intervention threatens to make it more difficult for property owners to make land available and further slow down construction.
The planned further development of the reference yield model is positive. The planned regional differentiation and the adjustment of the correction factor for southern Germany can make expansion in lower-yielding regions more economical. However, for the regulation to be effective, the legislator must also consider the interactions with other EEG and grid expansion regulations.
Appeal to members of parliament and parliamentary groups in the Bundestag
Before the start of the parliamentary deliberations, Alterric therefore urgently appeals to the parliamentary groups and members of the Bundestag to fundamentally improve the draft law. This is the only way to drive forward the system-friendly expansion of renewables, to ensure security of supply for German industry and to ensure the profitability of investments in all regions of Germany.
