Premium tariff (Market Premium)

Updated: 11.01.2019

Author: Tim Sternkopf

Starting with reform of the EEG in 2014, Market Premium has become the main support scheme for electricity from renewable energy sources. Following the amendment of the EEG in 2017, the market premium for most technologies has to be determined through a market-oriented procedure - a tender. Since the tender only applies for projects of a certain size, there are still remaining new projects entitled of a classical market premium. This is being calculated as the difference between a fixed feed-in and the monthly market value of the sold electricity (Annex I EEG 2017). The plant operator has to sell his electricity directly, i.e. to a third party by a supply agreement or at the stock market, and claim the so-called market premium from the grid operator. Nevertheless, the produced electricity is still prioritized in the power take-up, transport and distribution by the grid operator (§ 11 par. 1 EEG 2017).  

Eligible technologies

In general, all technologies used to generate electricity from renewable sources are eligible for the market premium (§ 19 par. 1 EEG 2017). The following conditions apply:

  • Actual sale of electricity. The market premium will be paid only for electricity that has actually been fed into the grid and purchased by a third party (§ 20 par. 1 no. 1 EEG 2017);
  • Technical requirements. Power plants shall be equipped with technical devices that enable the grid operator to reduce output by remote means at any time and to measure the amount of electricity fed in by each system (§ 20 par. 1-4 EEG 2017);
  • Accounting. Electricity shall be accounted for in a balancing group or a sub-balancing group which only accounts for electricity that is directly sold and for which the market premium is received. If electricity in the balancing group does not fulfil these requirements, it must not be fed in by the plant operator (§ 20 par. 1 no. 4 EEG 2017).

Wind energy

Eligible. 

Extra technical requirement for wind installation: Plants commissioned before the 1 July 2017 must guarantee to respect the provisions of the Ordinance on System Services by Wind Energy Plants when connecting the plant to the grid (§ 9 par. 6 EEG 2017, SDLWindV). 

Solar energy

Eligible.

Following additional technical requirements apply for solar installations:

Solar plants must feature the technical capacity of being remote-controlled for the case of network overload and of reporting in real-time the actual feed-in power (§ 9 par. 1 and 2 EEG 2017).

More solar installations, regardless of ownership, are considered one plant if they are on the same property or building and have been commissioned during 12 consequent calendar months. This consideration serves solely for the determination of the installed capacity (§ 9 par. 3 EEG 2017).

  • Building-mounted systems must comply with additional pre-requirements depending on their nature (attached to or on top of building-roofs, facades, noise barriers, other buildings) (§ 48 par. 1 no.1, par. 2 and 3  EEG 2017).
  • Ground-mounted systems: The installation has to be erected within the territorial application of a formal development plan (e.g. a local development plan) (§ 48 par. 1 no. 2-3 EEG 2017). Installations erected within the territorial application of a local development plan drawn up after 1.9.2003 must be located on certain plots of land such as areas next to speedways, railroad tracks as well as on sealed and conversion areas (§ 48 par. 1 no. 3a, 3b, 3c EEG 2017). 

Geothermal energy

Eligible (§ 19 par. 1 EEG 2017).

Biogas

Biogas is eligible for a feed-in tariff (§ 19 par. 1 EEG 2017). According to the definition of the technology (§ 3 no. 11 EEG 2017), biogas is every gas extracted through the anaerobic digestion of biomass.

§ 3 no. 21 EEG 2017 specifies that biomass includes biogas, biomethane, landfill gas and gas from purification plants and from the biological degradable part of household and industrial waste.

Biogas plant operators (except for plants using exclusively manure or waste) must additionally guarantee for plants commissioned after 31 December 2016 and fermentation residue storages built after 31 December 2011, that the hydraulic retention time is at least 150 days (§ 9 par. 5 EEG 2017).

Further pre-requirements are:

  • Definition of biomass. The substances regarded as biomass are specified in a separate ordinance (BiomasseV).
  • Capacity limits. Electricity generated by a plant using biogas from the fermentation of manure is only eligible, if the installed capacity does not exceed 75 kW (§ 44 no. 2 EEG 2017). Additionally, the mass proportion of manure excluding liquid and solid poultry manure must be of at least 80% (§ 44 no. 3 EEG 2017).
  • Obligation to employ CHP technology. Electricity from plants using biomethane is eligible only, if the electricity is generated through CHP (§ 44b par. 2 EEG 2017). The operator of the plant has to prove that the plant meets this requirement (§ 44b par. 3 EEG 2017).
  • Obligation to keep a record of substances. Electricity will be eligible for the full tariff as specified in the EEG only if the plant operator can prove which type of biomass is used by presenting a copy of a record of the substances used and if he provides evidence that no other substances are used (§ 44c par. 1 EEG 2017).
  • Technical requirements. The plant operator shall make sure that devices are used to avoid any escape of biogas (§ 9 par. 5 EEG 2017).
  • Electricity generation sites. Where electricity is generated from biogas that was generated from anaerobic fermentation of manure, the electricity shall be produced at the site of the biogas generation plant (§ 44 no. 1 EEG 2017).

Hydro-power

Eligible (§ 19 par 1 EEG 2017).

Biomass

Eligible (§ 19 par 1 EEG 2017). 

  • § 3 no. 21 EEG 2017 specifies that biomass includes biogas, biomethane, landfill gas and gas from purification plants and from the biological degradable part of household and industrial waste. A further specification of the substances regarded as biomass are to be found in a separate ordinance (BiomasseV).
  • Additionally there is an Obligation to keep a record of substances. Electricity will be eligible for the full tariff as specified in the EEG only if the plant operator can prove which type of biomass is used by presenting a copy of a record of the substances used and provides evidence that no other substances are used (§ 44cpar. 1 EEG 2017). 

Amount

The amount of the market premium is calculated every calendar month (§ 23a EEG 2017) and includes the following elements: 
The reference tariff, which is legally defined for each technology (§§ 40-51 EEG 2014) is subtracted with the monthly electricity value in EUR ct/kWh (§Annex 1 EEG 2017). In case of onshore wind energy, offshore wind energy and solar energy the monthly electricity value has to be calculated in a particular way (No. 2.2 Annex 1 EEG 2017).  
The EEG 2017 describes several reasons for the reduction of the reference tariff levels: 
Additionally, the EEG 2017 describes several conditions, which would lead to the reduction of the tariff levels:
  • If the plant operator receives a regional certificate, the tariff level shall be reduced by EUR ct. 0.1 per KWh (§ 53b EEG 2017).
  • The tariff level for tax except electricity shall be reduced by the amount of the tax exemption (§ 53c EEG 2017).
  • The tariff level will be reduced to zero in case that 
    • a plant operator has not registered his plant as required by law (§ 52 par. 1 no. 1 EEG 2017 in conjunction with § 71 no. 1 EEG 2017; AnlRegV). A plant operator has to register his plant at the Federal Network Agency (§ 6 par. 1 EEG 2017). This information to be submitted is defined by law and includes, for example, the name and contact details of the plant operator, the location of the power plant, the type of power plant, and its installed capacity (§ 6 par. 2 EEG 2014).
  • The tariff level will be reduced to the actual market value in the case that 
    • technical requirements are not met (§ 52 par. 2 no. 1 EEG 2017 in conjunction § 9 par. 1, 2, 5 or 6 EEG 2017);
    • the plant operator has switched between direct marketing of the electricity and the feed-in tariff without informing the grid operator (§ 52 par. 2 no. 2 EEG 2017); 
    • a plant operator breaches the prohibition of multiple sale electricity from renewable energy sources and mine gas (§ 52 par. 2 no. 5 EEG 2017 in conjunction with § 80 EEG 2017).

Solar energy

The amount of tariff depends on the site of production and the installed capacity.

  • specific building-mounted systems (e.g. roofs, facades, noise barriers, other building) EUR ct 8.91 – 12.70 per kWh (§ 48 par. 1 and 2 EEG 2017).

Wind energy

  • Onshore: EUR ct 4.66 – 8.38 per kWh (according to the duration of payment) (§ 46 EEG 2017);
  • Offshore until 2020: EUR ct 3.9 – 1.4 per kWh (according to the duration of payment and scheme chosen by the plant operator) (§ 47 EEG 2017).

Geothermal energy

EUR ct 25.2 per kWh (§ 45 EEG 2017) minus EUR ct 0.2 per kWh (§ 53 no. 1 EEG 2017). 

Biogas

  • Biogas from bio-waste: EUR ct 13.05 – 14.88 per kWh (according to plant size) (§ 43 EEG 2017);
  • Biogas from manure: EUR ct 23.14 kWh for plants smaller than 75 kW (§ 44 EEG 2017);
  • Landfill gas: EUR ct 5.66 – 8.17 per kWh (§ 41 par 1 EEG 2017);
  • Sewage gas: EUR ct 5.66 – 6.49 per kWh (§ 41 par 2 EEG 2017).

Hydro-power

EUR ct 3.47 – 12.40 per kWh (depending on plant size and date of commissioning) (§ 40 par. 1-4 EEG 2017).

Biomass

EUR ct 5.71 – 13.32 per kWh (according to plant size) (§ 42 EEG 2017).

Addressees

A plant operator is entitled to receive a market premium according to the subsequent provisions of the law (§ 19 par. 1 EEG 2014) for the amount of energy fed into the grid. The grid operator is required to purchase, transfer and distribute the feed-in electricity (§ 11 EEG 2017). A plant operator is one who, irrespective of the issue of ownership, uses a plant to generate electricity from renewable energy sources (§ 3 no. 2 EEG 2017). Grid operators are the operators of grid systems of all voltages for general electricity supply (§ 3 no. 36 EEG 2017).

Procedure

Process flow

Statutory law does not set out a formal application process. According to the EEG, the conclusion of a contract between the grid operator and the plant operator must not be made a condition for the payment of tariffs (§ 7 par. 1 EEG 2017).

Competent authority

The implementation of the EEG is monitored by the Federal Network Agency (§ 85 EEG 2017). The Act is evaluated by the Federal Government (§ 97 EEG 2017).

Degression

For most technologies, the tariff levels will decrease in regular periods of time.  New plants will receive the tariff level applicable on the day they are put into operation. This tariff level will apply for the entire payment period, i.e. for 20 years (§ 25 EEG 2017). For some technologies, the percentages by which the tariff levels will decrease are set by law and are not subject to change. For other technologies the percentage by which the tariff levels will decrease depend on the amount of newly installed capacity. 

Wind energy

  • Onshore: In 2017, the premium was reduced on the 1st of the months from March to August 2017 by 1.05%; in 2018 the degression contained a basis degression rate of 0.4% every 3 months (1 October 2017, 1 January 2018, 1 April 2018, 1 July 2018 and 1 October 2018) (§ 46a par. 1 EEG 2017). The EEG 2017 has defined a target-corridor for the development of on-shore wind power of 2,500 MW per annum. If the real development surpasses the corridor, the degression rate will be increased from 0.5% to up to 2.4% (§ 46a par. 2 EEG 2017). If the development of wind power goes below the targets of the corridor, the degression rate is reduced and in extreme cases, the tariff rate will be even increased by 0.4% (§ 46a par. 3 and 4 EEG 2017). From 2019 onwards, the reference tariff will be calculated with the average of the highest successful bidding prices in the tender rounds two years before (§ 46b EEG 2017).
  • Offshore: Since 2018, the degression is between 0.5  and 1.0 ct/kWh , depending on the year and the support level (§ 47 par. 5-6 EEG 2017). 

Solar energy

The degression contains a basis degression rate of 0.5% every month (§ 49 par. 1 EEG 2017). The EEG 2017 has defined a target-corridor for the development of solar power of 2,500 MW per annum (§ 49 par. 2 EEG 2017). If the real development surpasses the corridor, the degression rate will be increased from 0.5% to up to 2.8% (§ 49 par. 2 EEG 2017). If the development of solar power goes below the targets of the corridor, the degression rate is reduced and in extreme cases, the tariff rate will be even increased by up to 3% (§ 49 par. 3 EEG 2017). The current degression rates can be retrieved from www.bundesnetzagentur.de/cln_1931/DE/Sachgebiete/ElektrizitaetundGas/Unternehmen_Institutionen/ErneuerbareEnergien/Photovoltaik/DatenMeldgn_EEG-VergSaetze/DatenMeldgn_EEG-VergSaetze_node.html (only in German).

Geothermal energy

The degression rate will be 5% every year from 2021 (§ 45 par. 2 EEG 2017).

Biogas

Since 2018, the degression rate for landfill gas sewage gas is 1.5% annually (§ 41 par. 4 EEG 2017).

Since April 2017, the degression of biogas from other forms of biomass has a degression rate of 0.5% every 6 months (1 April and 1 October) (§ 44a EEG 2017).

Hydro-power

Since 2018, the degression rate is 0.5% every year (§ 40 par. 1 no. 1 EEG 2017).

Biomass

Since April 2017, the degression for biomass has a degression rate of 0.5% every 6 months (1 April and 1 October) (§ 44a EEG 2017).

Eligibility period

The tariff payment period is 20 years (§ 25 EEG 2017).

Distribution of costs

Consumers

The costs of the premium tariff scheme are borne by the final consumers.

Distribution mechanism

  • Grid operator – transmission system operator. The grid operator is obliged to transfer the electricity received to the transmission system operator without undue delay (§ 56 EEG 2017. The grid operator is entitled to the purchase of and payment for the quantity of electricity he has paid tariff for (§ 57 par. 1 EEG 2017).
  • Transmission system operator – transmission system operator. The transmission system operators divide the costs resulting from the EEG equally among themselves (§ 58 par. 1-3 EEG 2017). A transmission system operator is eligible for compensation from other transmission system operator in case he incurred higher costs due to feed-in tariff and premium payments than the average compensation costs of all transmission system operators (§ 58 par. 3 EEG 2017).
  • Transmission system operator – spot market. The transmission system operators sell electricity from renewable sources on the day-ahead or intraday spot market at the stock exchange price (§ 59 EEG 2017 in conjunction with § 2 EEV).
  • Transmission system operator – utility companies. The utility companies are obliged to reimburse the transmission system operators for their costs (§ 60 par. 1 EEG 2017 in conjunction with § 3 EEV).
  • Utility companies – final consumers. The costs incurred are included in the electricity price and thus, passed on to the final consumers via their electricity bills (§ 60 par. 1 EEG 2017). Special regulations apply for electricity intensive companies and rail operators (§§ 63-65 EEG 2017). 

Germany

Further information

Basic information on legal sources