developments in german energy law dörte fouquet, jan ole voß, stefan missling lawyers bbh...
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Developments in German Energy Law
Dörte Fouquet, Jan Ole Voß, Stefan Missling
Lawyers BBH
Meisenheim, 24 August 2012
AEEC Summer Camp24.08.2012 200833-05/188147.
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AEEC Summer Camp24.08.2012 300833-05/188147.
Content
Renewable Energy Law Capacity Mechanisms for Conventional Power Plants Financing and Regulating the Grids of the Future
AEEC Summer Camp24.08.2012 400833-05/188147.
Energy Concept 2010 / „Energiewende“ 2011
GHG reductions: Aim of minus 40 % until 2020, 55 % until 2030 and minus 80 – 95 % until 2050 (base year 1990)
Renewable Energies: Until 2020 18 %, until 2050 60 % (gross energy consumption). For electricity generation: 35 % by 2020 and 80 % by 2050
Market and Network Integration of Renewable Energies Energy Efficiency (including Energy-efficient restoration
of buildings and use of renewable energy sources) Nuclear Energy: After Fukushima: phasing out until 2022 Mobility
AEEC Summer Camp24.08.2012 500833-05/188147.
Renewable Energy Sources Act (EEG)
Central pillars of the EEG: Priority grid connection Duty of grid operators to expand grid (and pay
the costs) Feed-in tariffs EEG creates statutory obligations between
installation operator and grid operator; binding law Equalization scheme
Market and system integration of renewable energies Technical requirements Feed-in Management System Services of Wind turbines Market premium and flexibility premium (EEG
2012)
AEEC Summer Camp24.08.2012 600833-05/188147.
EEG support mechanism
CUSTOMERS
1
2
3
55
(TGO) 1(TGO) 1
Final supplier
Distribution grid
operator
Third party (Stock
exchange)
Third party (Stock
exchange)
“EEG-Account”4
(TGO) 2(TGO) 2
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Feed-in tariffs
Feed-in tariff depend on energy source and the capacity of installation Wind: Higher initial tariff for a certain period depending on wind
harvest, afterwards basic tariff. Different for onshore, offshore, repowering
Solar: Different for building and open area panels. Heavy reductions in 2010 and 2011.
Biomass: Complex system on different tariffs depending on used biomass
Tariffs for 20 years and year of commissioning Principle of Exclusivity (no co-firing of biomass and fossil fuels) Constitutional protection of the reliance in tariffs for 20 years; retroactive
reduction is generally impermissible Reduction of tarrifs for new installations must be decided by Parliament
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Market premium
Registration Market premium
Electricity supply agreement
TraderTrader
Customer
Grid operator
Grid operator
Renewable energy source
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Outlook – PV-Novelle 2012
Aims: Bringing an end to high installations (7,5 GW in 2011) Reduce the costs for the energy consumers who pay the costs for the
EEG Changes for photovoltaic installations
Sharp cut in the EEG tariffs for new installations: Between 20 and 31 % New tariffs for installation, starting operation 1st of April 2012
Extensive political discussion in Germany Law had passed the parliament (Bundestag), but the federal states
blocked the law in the second chamber (Bundesrat) Compromise has to be found
AEEC Summer Camp24.08.2012 1000833-05/188147.
Content
Renewable Energy Law Capacity Mechanisms for Conventional Power Plants Financing and Regulating the Grids of the Future
AEEC Summer Camp24.08.2012 1100833-05/188147.
Investment Dilemma on German Power Generation Market
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Need for new power plants & Missing-Money-Problem
Currently: Overcapacities on power generation market But: In the long run – considerable capacity losses through
shut down of nuclear power plants (20 GW) closure of conventional plants (ca. 20 GW)
Required max capacity remains stable + highly efficient plants necessary for „Energiewende“ as back-up
Missing-Money-Problem low electricity prices and thus no price signals in future: diminishing operation time for conventionals price effects of renewable energies
AEEC Summer Camp24.08.2012 1300833-05/188147.
Capacities according to Ethical Committe
Loss until 2013
New until 2020
12 GW
80 GW
Maximum capacity
Guaranteed Capacity
2010
3 GWlifetime
8,5 GWNuclear
11,5 GW
7 GW2,5 GW
21,5 GW
20 GW
Nuclear
90 GW
AEEC Summer Camp24.08.2012 1400833-05/188147.
Capacity Mechanisms as Solution?
AEEC Summer Camp24.08.2012 1500833-05/188147.
What are capacity mechanisms?
payment for capacities
and not only for energy
new design ofbalancing energy
markets
new payment model
central determinationof capacity
needsstrategic reserve
governmentalpayments
obligation for powerproducers
AEEC Summer Camp24.08.2012 1600833-05/188147.
Current Status of Discussion
Economists still split on necessity of mechanisms But: German Government is working on proposal
BNetzA: situation in electricity grid in the winter of 2011/2012 was severely strained
BMWi: assignment of institute to examine necessity of capacity mechanisms
EWI-proposal for new market design: Versorgungssicherheitsverträge (security of supply contracts)
AEEC Summer Camp24.08.2012 1700833-05/188147.
Legal Issues concerning Capacity Mechanisms
Legal questions arise on three levels EU Law
Directive 2009/72/EC (design of capacity tender) state aid law (design of capacity payments, governmental
payments or cost roll-over) German constitutional law – esp. Art. 14, Art. 12 and Art.
3 GG, e.g., existing plants or new projects? also renewables or only conventionals?
German energy law and environmental law Further need to resolve political and legal questions
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Content
Renewable Energy Law Capacity Mechanisms for Conventional Power Plants Financing and Regulating the Grids of the Future
AEEC Summer Camp24.08.2012 1900833-05/188147.
Framework until 2009: Cost-based Grid Fee Approval
„Cost-plus-regulation“
Refund of the operating and capital costs required for the reliable grid operation plus return on equity
Grid fees are based on company‘s individual costs
Advantage: reliable investment potentials Disadvantage: no incentive for the increase of
productivity („Averch-Johnson-Effect”)
AEEC Summer Camp24.08.2012 2000833-05/188147.
Framework since 2009: Regulated Revenue Caps
„Incentive regulation“
Revenue caps are set for five years („regulation period“) Hybrid system: revenue caps based on individual costs (plus
efficiency parameter) Principle: no adjustment of revenues to change in costs
Advantage: incentive for cost reduction (additional cost reductions cause extraordinary margin)
Disadvantage: risk of missing investments in the grid infrastructure for financial reasons
AEEC Summer Camp24.08.2012 2100833-05/188147.
Revenue Caps of the Second Regulation Period
controllable cost
components
Revenue cap at the beginning of the
2nd regulation period
permanently non-
controllable cost
components
Revenue cap at the end of the
2nd regulation period
reduction of inefficiencies
reduction by the sectoral productivity growth (Xgen):
1.5 % p. a.
no reduction
temporarily non-
controllable cost
components
temporarily non-
controllable cost
components
permanently non-
controllable cost
components
inefficient costs
2013/2014 2017/2018
efficient costs
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Return on Equity – Incentive for Investments?
Return on equity = margin for operating the network
Determined by the BNetzA (= competent authority) for each regulation period
„New Assets“ „Old Assets“ (before 2006)
1st regulation period
9.29% 7.56%
2nd regulation period
9.05% (-0.24%) 7.14% (-0.42%)
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Necessary Investments (in short and long term!) Assumptions of the German „Energy Concept“
Considerable increase of electricity generation in offshore and in coastal regions;
Many decentralised generation plants producing electricity from e.g. PV and biomass will feed into the grids of DSOs;
Based on the geographical position, Germany will increasingly take part in the exchange of electricity within Europe.
Assumed necessary investments for the integration of renewable energies in Germany: up to € 27 billion!
Additional investments relating to „smart grids”?
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How to improve the investment climate?
Expanding the catalogue of permanently non-controllable costs in § 11 Abs. 2 ARegV: investments for the integration of renewable energies investments for the implementation of smart grids
Adjustment of the German efficiency benchmark („Effizienzvergleich“): costs concerning investments in renewable energies or smart grids
should no longer be „inefficient“ Investment budget: equal treatment of TSOs and DSOs Further development of the „quality regulation“ Additional „output factors“ for the determination of revenue caps Extension of the regulation periods Implementation of “CAPEX regulation”
AEEC Summer Camp24.08.2012 2500833-05/188147.
Capex Regulation = „Smarter“ Regulation?
„operating costs”
basic and operational costs
„capital costs“
imputed depreciation
return on equity
cost of debt capital
imputed trade tax
OPEX (with efficiency parameter)
CAPEX (without e.p.)
Thank you for your attention!
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Contacts: Dörte Fouquet, Jan Ole Voß, Stefan MisslingLawyers BBH