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The German parliament passed a revision to the German Renewable Energy Source Act (the "EEG") on 30 June 2011 and the Federal Council (Bundesrat) approved the same on 8 July 2011.

The amendments to the EEG did not have the purpose to limit the investments in new renewable energy capacity and thus costs to the German state as was thought by some international spectators. In contract the amendments came in connection with a decision to abandon nuclear power by 2022 and intend to secure a continued growth in the renewable energy capacity in order to reach the ambitious goals of not less than 35% of renewable energy in electricity supply in 2020, not less than 50% by 2030, not less than 65% by 2040 and not less than 80% by 2050, e.g. more aggressive goals than earlier set forth, and goals that are now codified in the latest version of the EEG.

The most significant changes relate to wind power and the attempt to ensure a more flexible electricity market.

On-shore Wind

Tariff: The already existing guaranteed feed-in tariff system remains almost unchanged. The tariff for wind turbines commissioned in 2012 amounts to EUR 89.30 per MWh for a period of five years with an extension of up to 15 years based whether the production from the turbine (wind park) matches the reference production. Thereafter the tariff falls to a base rate of EUR 48.70 per MWh.

Degression: The guaranteed feed-in tariff is subject to an annual degression which has been increased from 1% p.a. to 1.5% p.a., e.g. if the guaranteed tariff for 5 + (up to) 15 years will for the full period be 1.5% lower than for projects commissioned in the preceding calendar year.

System Services Bonus: The system services bonus is further still offered for wind turbines commissioned prior to 1 January 2015, if such wind turbines fulfil the technical requirements set forth in the Ordinance on System Services for Wind Energy Plants (SDL bonus). The SDL bonus amounts to EUR 4.80 per MWh.

Repowering Bonus: The EEG further offers a limited repowering bonus for repowering of projects commissioned prior to 31 December 2001. However, as repowering bonus aims to promote the repowering of projects which are considered problematic to integrate in the system, the repowering bonus carries certain conditions.

Compensation claims: As a mean to better control the grid, wind turbines must be equipped with technical means to control the feed-in (including a full short down). Compensation claims for losses due to a required part or full shut down are generally capped at 95% of the loss. However, the 95% only applies up to 1% of the annual output of the wind turbine.

Off-shore Wind

Degression: Off-shore wind parks will also be subject to a degression of the guaranteed tariff. However, the start of the degression period has been moved from 2015 to 2018, but the annual degression been increased from 5% to 7%.

Tariff: The tariff (including a EUR 20 per MWh "sprinter bonus" paid for installations commissioned prior to 2016) amounts to EUR 150 per MWh for a period of 12 years from commissioning. The initial remuneration period may further still be extended based on the distance from the mainland and the water depth.

Compression model: An optional compression model is offered. If the compression model is opted for the initial tariff remuneration increases from EUR 150 per MWh to EUR 190 per MWh. However, the period for such increased tariff remuneration is only 8 years instead of the 12 years. Any extendable time period based on the distance to the mainland and water depth is further only remunerated with EUR 150 per MWh.

Financing: The German development and reconstruction bank, KfW has further established a EUR 5 billion off-shore wind finance programme. KfW can thus take a significant risk stake in the financing of such wind parks alongside the commercial risk takers.

The Electricity Market

In order to incentivise the market driven electricity trading, the option to opt in and out of the guaranteed tariff scheme which was introduced in 2009 has been amended. With the latest amendments the owners can still opt in and out, but now they still receive a subsidized contribution while selling their electricity in the open market. The subsidized contribution to be paid will be calculated as the difference between the average market prize in the preceding month and the guaranteed tariff which the installation would have been entitled to, had the electricity not been sold in the open market.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.