The German Renewables Act (EEG) and the Development of

Photovoltaics in Germany Holger Gassner,RWE Innogy

Thorsten Schneiders, E.ON Climate&RenewablesChristoph Weißenborn,BDEW

EEG – lessons learnt

• Setting the right tariff and monitoring it on a regular basis is essential, as the Solar Photovoltaics market has become very dynamic and equipment prices have been dropping significantly over thelast years

• Coordinated approach of linking the increase of renewables capacity and the adoption and extension of the grid infrastructure is needed to smoothly integrate renewables into the supply system and to avoid delays of projects

• Keep the tariff structure simple and easily to understand to makeit run smoothly and to avoid misunderstandings and abuse

• The support for renewables leads to an increase on the customers´ rates and might raise questionsfrom the side of residential and industrial customers

Seite 3

Feed-In Tariffs - Principle

Supply Electricity[1 kWh]

Transmission

Customers (via grid operators)

FIT Feed-In Tariff[€€€]

Payout

Feed-in tariff RES Plant operator sells his renewable electricity for a fixed price (feed-

in tariff) to the grid operator for a duration (e.g. 12 – 20 years) and is paid for each

kWh during this time

Most European countries employ feed-in tariffs for the support of photovoltaics

4

Basic Principles of the EEG

The German Renewables Act (EEG)…

– was set up in 1991 to incentivize investments into renewables

– provides a cost-based fixed feed-in tariff over a period of 20 years

– grants renewables power priority grid access and transmission

– has undergone several regular and amendments to adopt tariffs to market conditions or to improve administrative handling

The Feed-in Tariffs (FIT)…

– have a large vriety of sub-categories with regard to technologies and size of plants

– are subject to a degression, i.e. they are reduced by a certain percentage every year (Photovoltaics: 9%) for the new plants commissioned in that year

There is no other support mechanism for renewables power (apart form low-interest loans for private investors by the state bank KfW)

5

Roleplay within the EEG

The renewables operators can feed in…

– Anytime - no forecast or "early warning" necessary

– Any amount - no real-time metering

Grid operators (distribution grid and transmission grid)…

– take over and pay for the renewables electricity

– pass on the electricity to the wholesale market

– are in charge of the forecast, system balancing and services

– have to extend the grid to connect and transmit renewbales power, or have to pay compensation otherwise

The power retail companies…

– charge an EEG-surcharge on the customers´ bill and pass on this money to the grid operators

– Until 2009 had to take over and bpass on the EEG-electricity physically which lead to significant problems and financial riks in their portfolio

Solarbuzz solar market forecast

Sudden over supply in the PV market in 2009…

6

5,1 GW

MW

Solar demand

Solar supply

Solar market

Source: Lux Research, New Energy Finance

7

...and very large drop in Polysilicon Prices

0

50

100

150

200

250

300

350

400

Jan 0

8

Feb 0

8

Mrz

08

Apr 0

8

Mai

08

Jun 0

8

Jul 0

8

Aug 0

8

Sep 0

8

Okt 0

8

Nov 0

8

Dez 0

8

Jan 0

9

Feb 0

9

Mrz

09

Apr 0

9

Mai

09

Jun 0

9

Jul 0

9

Aug 0

9

Sep 0

9

Okt 0

9

Nov 0

9

€*/kg

*Assumes exchange rate of 1.41 $ = €Source: New Energy Finance Silicon , Nomura news and Wafer Spot Price Index

Silicon spot price developments

Polysilicon market stabilizing

Recent developments

• Strong decline of equipment prices and concerns of the unexpectedly high growth rates of solar installations and the cost impact on the customers´ bill lead to adoptions of feed-in tariffs for solar photovoltaics

• In Germany, tariff cuts in addition to the regular degression of 9% amount to 16%

• Similar approaches have been carried out in Spain, Italy, France, Austria and Czech Republic

Getting the definitions right to avoid abuse

Getting the definitions right to avoid abuse

Getting the definitions right to avoid abuse

Getting the definitions right to avoid abuse

Getting the definitions right to avoid abuse

BMU – KI III 1Version: March 2010 Development of renewable energy sources in Germany in 2009 14

Installed capacity and energy supply from photovoltaic installations in Germany 1990 - 2009

6,20

0

4,42

0

313

556

1,28

2

2,22

0

3,07

5

1 2 3 6 8 11 16 26 32 42 6476 162

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

5,500

6,000

6,500

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

[MW

p ]

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

[GW

h]

Electricity supply [GWh]

installed capacity [MWp]

Source: BMU-KI III 1 according to Working Group on Renewable Energies-Statistics (AGEE-Stat); Image: BMU / Bernd Müller; all figures provisional

Installed capacity and energy supply from photovoltaic installations in Germany 1990 - 2009

The electricity mix in Germany 2009

Source: Statistisches Bundesamt, BMWi, BDEW, AGEB, AGEE_Stat; Status; 04/2010

SEITE 16RWE Innogy

Introduction of renewables is not for free Cost increase EEG until 2015

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Hydro Biomass Wind Onshore Wind Offshore PV other

EEG-Support (overall payments under EEG) in bn Euro

1,61,22,2 2,6 3,6

4,55,8

7,9

20,422,0

Source: EEG-Mittelfristprognose Stromtransportnetzbetreiber

9,010.0

12,3

14,6

16,8

18,85,4

5,8

5,3

4,9

0,5

0,1

2,2

3,6

2,60,4

> Support to be concentrated where needed and effective, e.g. no PV in Germany

SEITE 17RWE Innogy

Generation of Wind + Photovoltaic January 2010(presently > 36.000 MW installed)

0

5.000

10.000

15.000

20.000

25.000

30.000

35.000

1 25 49 73 97 121 145 169 193 217 241 265 289 313 337 361 385 409 433 457 481 505 529 553 577 601 625 649 673 697 721

Photovoltaik

Wind

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31

Wind: 26.000 MWPV: 9.800 MW(Stand 1.1.10)

SEITE 18RWE Innogy

Generation of Wind + Photovoltaic 20.6. – 05.07. 2010 (presently > 36.000 MW installed)

0

5.000

10.000

15.000

20.000

25.000

30.000

35.000

1 25 49 73 97 121 145 169 193 217 241 265 289 313 337 361

Photovoltaik

Wind

20.6. 21.6. 22.6. 23.6. 24.6. 25.6. 26.6. 27.6. 28.6. 29.6. 30.6. 1.7. 2.7. 3.7. 4.7. 5.7.

Dauerhaft niedrige Windeinspeisung von unter 10% der installierten Leistung

123 MW Wind am 23.6. (Stundenmittelwert 8:00 bis 9:00 Uhr)entspricht 0,46% der inst. Leistung

3.520 MW Wind am 3.7. (Stundenmittelwert 0:00 bis 1:00 Uhr)entspricht 13,5% der inst. Leistung

Wind: 26.000 MWPV: 9.800 MW(Stand 1.1.10)

SEITE 19RWE Innogy

Renewable energies make electricity production more volatile …

0

2000

4000

6000

8000

10000

12000

14000

16000

18000

20000

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31

Day (January 2008)

Capacity in MWDaily min and max available wind capacity in Germany in January 2008

Scource: bdew

SEITE 20RWE Innogy

Renewable energies make electricity production more volatile …

Source: BDEW

Example: Demand and renewable input 2.10.08 – 7.10.08 in East-Germany

Netzlast und EEG-Einspeisung 02.10.08 - 07.10.08

0

20000

40000

60000

1 12 23 34 45 56 67 78 89 100 111 122 133 144

h

MW

0

50

100

150

200

250

300

350

€/M

Wh

Ist-EEG

Netzlast

Band

Preis

SEITE 21RWE Innogy

01.0

5.20

09

-200

-150

-100

-50

0

50

100

150

200

250

300

350

01.1

0.20

08

01.1

1.20

08

01.1

2.20

08

01.0

1.20

09

01.0

2.20

09

01.0

3.20

09

01.0

4.20

09

01.0

6.20

09

01.0

7.20

09

01.0

8.20

09

01.0

9.20

09

01.1

0.20

09

01.1

1.20

09

€ / MWh

Times with negative prices increase

Täglicher Höchstpreis

Täglicher Tiefstpreis (rot falls negativ)

494.26

-500.02

SEITE 22RWE Innogy

Industry is consumer of RES

Note: Einspeisetarife als Mittelwerte von maximaler und minimaler Einspeisevergütung

-50

0

50

100

150

200

250

300

350

400

450

500

01.01.09 01.02.09 01.03.09 01.04.09 01.05.09 01.06.09 01.07.09 01.08.09 01.09.09 01.10.09 01.11.09

Offshore Wind Onshore Wind Biomass Photovoltaic EEX Spot (day average

SEITE 23RWE Innogy

EEG – lessons learnt

Setting the right tariff and monitoring it on a regular basis is essential, as the Solar Photovoltaics market has become very dynamic and equipment prices have been dropping significantly over thelast years

Coordinated approach of linking the increase of renewables capacity and the adoption and extension of the grid infrastructure is needed to smoothly integrate renewables into the supply system and to avoid delays of projects

Keep the tariff structure simple and easily to understand to makeit run smoothly and to avoid misunderstandings and abuse

The support for renewables leads to an increase on the customers´ rates and might raise questionsfrom the side of residential and industrial customers