Policy framework: The Renewable Energy Sources Act (EEG)
The German Renewable Energy Sources Act (EEG) came into effect in 2000 and has been adapted by many countries around the world. It was amended several times and triggered an unprecedented boom in solar electricity production. Within a few years, the annual revenue of the sector has grown to over 8.7 billion Euros. This undeniable success is largely due to the creation of favourable political framework conditions.
The principle of the EEG is very simple. Both private and institutional investors in photovoltaic systems receive a guaranteed remuneration (feed-in tariff) for solar electricity fed into the public grid. The tariff has been calculated in a way to make investment in PV systems economically attractive. Grid operators are legally obliged to pay producers of solar electricity a fixed remuneration for solar generated electricity fed into the grid, depending on the size of the system and the kind of the installation. The tariffs vary to account for the different costs of rooftop or ground-mounted systems and in accordance with the size of the system. Since the EEG guarantees the FIT-payments for a duration of 20 years, it provides sustained planning security for investors in PV systems.
Since the establishment of the first feed-in tariff law in 1991, electricity generated from renewable energy sources enjoys priority status. Any such plants wishing to be connected to the grid must be given priority. Grid system operators are required to extend their grid to accommodate the connection of additional renewable energy capacities to the grid.
With grid parity in sight, market conditions will change and are likely to become even brighter. These processes will probably require policy adaptations. The EEG already provides a framework to enhance the direct consumption of electricity produced by PV system.. The aim is to reinforce the process decentralizing Germany’s energy supply to advance innovation, energy independence, and to mitigate climate change implications.
Download an overview of the changes as of 2012 (PDF)