Dr. Bönning-Huber, the EEG 2023 contains a legal regulation to reduce the remuneration for solar power when electricity prices are negative. Who is affected?
This affects PV systems with an installed capacity of more than 400 kWp, whereby Section 24 Paragraph 1 of the Renewable Energy Sources Act applies to determine the system size. This means that system capacities that have been put into operation within 12 calendar months on the same property, the same building, within the same company premises or otherwise in close proximity are summarized.
It also applies to all plants that have been put into operation since January 1, 2023, as well as tendered plants if the award was determined in a bid date from January 1, 2023. Important: The cancellation of the remuneration for even one hour of negative electricity prices from 2027 will also be relevant for the plants that are put into operation in 2023 and are now subject to the regulation.
How high do you estimate the total loss of revenue? Are plant operators entitled to full compensation?
No, there is no full compensation. So far, the legislature has assumed in Section 51a of the EEG that there is no economic compensation at all. The funding period is only extended accordingly for tendering systems. However, this can also lead to hours of sunshine being extended during rainy periods. For example, in 2025, between 11:00 a.m. and 2:00 p.m. on 10 days in March, the price would be negative for 3 hours in a row. That is 30 hours in total. That is 1 day (24 hours) and 6 hours. According to Section 51a of the EEG, my funding period will then be extended by 2 days. If I had actually received funding until November 30, 2044, for example, the extension would mean that the presumably sunny and productive hours over lunchtime on 10 days in March would extend my funding on December 1st and 2nd. However, the yield on December 1st and 2nd will probably be significantly worse than on the 10 days in March 2025 between 11:00 a.m. and 2:00 p.m. Some of my clients have done some calculations and are currently assuming losses that would eat up the return. The calculation was based on the current stock market prices and the effects of a negative electricity price for just one hour. So there will hardly be the kind of expansion we would like. This is all the more true if the electricity is fed in at all times – i.e. without intermediate storage – so that there will always be an oversupply at midday.
The conditions for paying out compensation for negative electricity prices are to be tightened in the coming years. In a strategy paper for a “growth initiative”, the traffic light government even announced that it would gradually introduce mandatory direct marketing for systems of 25 kW and above. Are there consequences here too, since these systems must also be equipped with controllability devices?
No, the mandatory direct marketing has not yet had any direct impact on this issue. The legislator still requires mandatory direct marketing for systems over 100 kW, but does not provide for a loss of payment in the event of negative prices. The current limit is 400 kW. Systems up to 400 kW therefore continue to receive the value to be invested, even if electricity prices are negative.
What impact can the legal regulation have on the failure of the plant operator to pay?
Currently, the regulation is still rather cautious with its effects. Three hours of negative prices only apply to systems that have been in operation since January 1, 2023 as non-tendered systems. But the first clients have already reported that banks want to withdraw from this area, or that loans will only be granted if there is significantly higher equity or additional security for the loans. Some clients have also reported that investors feel deceived because they were not aware of this uncertainty and many investors in recent years do not currently want to invest in PV.
Why does this happen?
It is understandable that paying compensation for electricity that has no value at the time is problematic. However, the success of the EEG was also based on the fact that the investor was supposed to have investment security. The bank provides capital and the investor invests partly through a loan that burdens him and partly by raising his own funds, because he could assume that he would receive an amount x with a fairly high degree of probability if the materials were good and the installation was carried out correctly. Investments were made in systems because, although it does take a few years for income to exceed expenditure, there is a realistic chance that this will happen and a profit will be made. The amount x was determined using the value to be invested according to the EEG and the expected electricity generation in average years. Now this result must be given a significant factor because, although the system will generate 958 kWh/kWp in an average year, for example, these 958 kWh may only be compensated for at 90%. The uncertainty is putting a strain on the banks’ ability to release funds, as the transfer of the remuneration payments means that their loans are less secure. It has happened several times now that banks only grant loans if the equity contribution is significantly increased, if real estate is provided as additional security, or if other secure financing options are available. In many cases, the bank is not interested in the customer not being able to repay their loan. Banks earn money by lending money and then getting it back with interest. So if there is a fear that the investor will have difficulty repaying the loan, the bank is more likely to be reluctant.
This means that the potential circle of investors is reduced. Those who have sufficient assets can offer the required security or do not need a loan. At the same time, the uncertain prospect of returns leads to less interest in investing.
Who are the winners and who are the losers? What loss of income must citizen energy communities expect?
There are unlikely to be any winners. The risks are there for everyone, although the award-winning plants at least have advantages due to the extension of the funding period. For a citizen energy company, however, this means that the advantage of not having to go into tender with a plant of up to 6 MW entails a considerable risk.
In your opinion, which legal regulations are absolutely necessary to protect private investors and community energy projects?
The legislator must be clear that he cannot create incentives for plants by offering higher remuneration if he simultaneously burdens those interested with uncertainty about the level of income and more expensive loans. That will be pointless. Unless you want only energy suppliers and particularly wealthy investors to invest. The EU legislator has left it open how the plant operator will be given back the losses. In any case, periods of loss must be offset by other advantages as quickly as possible and a reliable figure created with which the credit side can be used again.
Thank you for this interview.
