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Germany Taxes and incentives for renewable energy KPMG Global Energy & Natural Resources.

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Support schemes

KfW Programs

KfW Bankengruppe is a German government-owned development bank, supporting projects related to the environment as well as other areas.

KfW Renewable Energies Program

  • Investments are available in three programs:
    • Standard: in plants for electricity generation from renewable energy sources such as PV, biogas, hydro, onshore wind or geothermal energy and heat generation in CHP systems.
    • Premium: in large plants for heat generation from renewable energies (solar panels, biomass,biogas, deep geothermal energy) as well as CHP installations and heat networks/pumps not promoted under the Standard program.
    • Storage: in new installations of stationary battery storage systems combined with PV systems
  • Premium funding was initiated to strengthen the establishment of the renewable technologies in the heat market through low-interest KfW loans and repayment subsidies by the Federal Ministry for Economic Affairs and Energy. These technologies include:

    • PV systems with more than 40 square meters gross collector area for the purpose of water heating and/or space heating of properties with three or more residential units or non-residential properties with minimum 500 square meters of usable area– biomass plants for the combustion of solid biomass with a rated heat capacity of more than 100 kW
    • heat-controlled biomass CHP with a thermal output at par with at least 100 kW and a maximum of 2 MW
    • heat networks with a minimum of 50 percent of heat generated by renewable energies or with a minimum of 20 percent of heat generated by solar energy and with heat sales of a minimum of 500 kWh per year and meter of route
    • heat storages with more than 10 cubic meters
    • biogas pipes with a minimum length of 300 meters (for biogas used for CHP purposes or as biofuel)
    • heat pumps with a rated heat capacity of more than 100 kW
    • facilities for the development and use of deep geothermal energy with a drilling depth of more than 400 meters, a minimum thermal fluid temperature of 20° C and a minimum geothermal heat output of 0.3 MWth

All plants shall be commissioned in accordance with their designated purpose for at least 7 years. Plants eligible for remuneration under the Renewable Energies Act (Erneuerbare Energien Gesetz or EEG) 2014 are not entitled to be promoted.
  • The funding shall be granted as a long-term, interest-reduced loan up to 100 percent of the investment costs (excluding VAT), maximum total lending of EUR25 million per project (Standard) and EUR10 million per project (Premium).
  • Level of funding shall be increased up to 10 percent for small to medium-sized enterprises (Premium).
  • Eligibility for funding depends on the program part.
  • Loan-term: 5, 10 or 20 years with a repayment-free, start-up period of up to 3 years.
  • In 2014, KfW provided a total credit volume of EUR234 million for Premium and around EUR3.9 billion for Standard. Funding for Storage since initiating the program in May 2013 amounted to EUR134 million.

KfW Offshore Wind Energy Program

  • Special promotion of offshore wind energy projects within the 12 nautical mile zone or the German Exclusive Economic Zone (EEZ) of the German North and Baltic Sea. Project financing for up to 10 offshore wind parks is available in the form of:
    • direct loans granted by bank syndicates (a maximum of EUR400 million/project)
    • finance packages comprising loans from KfW on-lent through a bank
    • direct loans limited to 70 percent of the total debt capital required per project and EUR700 million per project
    • direct loans to finance unforeseen additional costs (a maximum of EUR100 million per project).
  • Eligible to apply: all project companies investing in the German EEZ or in the 12 nautical mile zone of the North Sea and the Baltic Sea.
  • Maximum funding: EUR5 billion.
  • Loan-term: up to 20 years with a repayment-free start-up period of up to 3 years.

KfW Energy Efficiency Program

  • Incentives for commercial enterprises to invest in energy efficiency measures are granted through low interest rates and repayment bonuses and are available in two programs:
    • Production Systems/Processes: for investment, modernization as well as reinvestment measures leading to energy savings of at least 10 percent (basic standard) or at least 30 percent (premium standard) compared with previous energy consumption or the typical consumption level within the sector.
    • Eligible to apply: all domestic and foreign commercial companies majority-owned by private individuals as well as enterprises under an energy contract, projects carried out abroad by German companies, their subsidiaries or by joint ventures with major German participation.
    • Outside the EU, the share provided by the German partner will be financed.
    • The funding is available as a loan up to 100 percent of investment costs and usually up to EUR25 million per project. Limit may be increased if the measures are particularly worthy of promotion.
    • Loan-term: 5, 10 or 20 years with up to 3 repayment-free start-up years.
  • Energy-efficient construction and rehabilitation: for the construction or modernization of non-residential buildings according to the standard of a ‘KfW Efficiency House.’ This also applies to individual rehabilitation measures with respect to a building’s shell or technical facilities.
    • Eligible to apply: domestic and foreign commercial companies that are majority-owned by private individuals, companies purchasing existing non-residential buildings and enterprises providing services for non-residential buildings under an energy contract involving third parties.
    • Maximum funding: usually EUR25 million per project, up to 100 percent of eligible investment costs as well as repayment bonuses of up to 17.5 percent.
    • Loan-term: 5, 10 or 20 years with up to 3 repayment-free start-up years.

Program incentives are complemented by the SME Energy Efficiency Advice program of the Federal Office for Economic Affairs and Export Control (BAFA), which subsidizes small and medium enterprises that identify energy savings potential and reduce costs by improved energy efficiency.

  • Commitment volume in 2014: EUR3.2 billion.

KfW Energy Turnaround Financing Initiative

High-volume loans are available for large-scale investment projects in Germany in the areas of energy efficiency, innovative projects in the areas of energy conservation, electricity generation, storage and transmission, as well as the use of renewable energy.

  • Two promotional funds are available:
    • direct loans under a banking consortium, with KfW contributing 50 percent to the financing of the project.
    • financing package composed of a loan on-lent through a bank and a syndicated loan with participation by KfW.
  • Amount of loan: usually from EUR25 million up to EUR100 million per project.
  • Loan-term: up to 20 years with a repayment-free start-up period of up to 3 years.
  • Eligible to apply: large commercial enterprises in and outside Germany with an annual group turnover EUR500 million to EUR4 billion.
  • Commitment volume in 2014: EUR140 million.

BMUB Environmental Innovation Program

The Federal Ministry for the Environment, Nature Conservation, Building and Nuclear Safety (BMUB) funds major industrial pilot projects in environmental sectors such as climate protection and resource efficiency. KfW is responsible for the administrative and financial side of the program, while the Federal Environment Agency manages environment technology issues. Funding is available as an interest subsidy or as a loan with interest grant from the BMUB.

  • Interest grants up to 30 percent of financeable costs, loans up to 70 percent. No maximum amount.
  • Eligible to apply: domestic and foreign companies, SMEs receive priority funding.
  • Loan-term: up to 30 years with five repayment years at the most.

Generally, projects shall be operated in accordance with their designated purpose for 5 years.

Administrative procedures:

Applications must be filed, via credit institution, with the governmental-owned bank KfW or, in the case of the SME Energy Efficiency Advice program, with the BAFA.

Sources: KfW, BMWi Förderdatenbank

Operating subsidies

The EEG 2014 became effective on 1 August 2014. Remuneration is available for electricity produced. All tariffs and ranges in principle apply to plants commissioned as of 1 August 2014. Plants approved prior to 23 January 2014 that began operations by 31 December 2014 will still be governed by the provisions of the previous EEG 2012.

The most important objectives of the EEG 2014 include the integration of renewable energies into the electricity market by mandatory direct marketing and a focus on cost-effective technologies.

Current regulations pave the way for another revision of the EEG expected by the end of 2016. By the beginning of 2017 at the latest, financial support for all technologies shall be determined by auctions. This transformation process will be structured in light of experience gained through a pilot project testing a tender scheme for ground-mounted solar plants. The pilot tender project was initiated in February 2015.

Expansion Corridors

The percentage of renewable energies is to be expanded within specific corridors:

  • by 2025 renewables are to produce 40 to 45 percent of the total energy mix
  • by 2035 renewables are to produce 55 and 60 percent of the total energy mix

These targets are to be achieved by individual corridors laid down for the specific technology.

Captive Consumption of Renewable Electricity Generation

Consumption of self-generated electricity from new plants is charged with 30 percent (until the end of 2015), 35 percent (in 2016) or 40 percent of the EEG surcharge (from 2017). Existing plants and in exceptional cases new plants (for installations without grid connection, auto-generation without electricity purchasing source as well as small plants with an installed capacity up to 10 kW) are exempted.

Mandatory Direct Marketing

Plants are to market their power directly. Compulsory direct marketing is being introduced in stages:

  • as of 1 August 2014, plants with an output of 500 kW and above
  • as of 1 January 2016 for plants with an output of 250 kW
  • as of 1 January 2017 for plants with an output of 100 kW or more.

Market Premium

In addition to the revenue from directly sold electricity a market premium can be claimed. The market premium consists of a fixed statutory payment (anzulegender Wert) differentiated by technology and rated power minus a technology-specific monthly market value (Monatsmarktwert).

In order to receive the market premium, plants must be remote-controllable as of 1 January 2015, including plants already commissioned.

Fixed statutory payment for plants being commissioned as of 2016 will be reduced to zero if the value of hourly contracts at the EPEX Spot in Paris is constantly negative for at least six hours.

Exemptions from Mandatory Direct Marketing

Exemptions from mandatory direct marketing exist for small plants and in case of so called ‘default marketing‘:

  • Operators of small plants can decide to demand the fixed statutory payment from the grid operators instead of direct marketing. Fixed statutory rate will be reduced by the saved direct marketing expenses, namely, ct 0.4/kWh or ct0.2/kWh depending on the respective energy source.
  • In case of ‘default marketing,‘ plant operators temporarily unable to market their electricity are entitled to a tariff in the amount of 80 percent of the respective fixed statutory payment.

Technology-specific corridors and remunerations

Hydro

  • no individual expansion corridor
  • fixed statutory payment depending on nominal generation capacity of the individual plant:
    • up to 5 MW: ct6.31/kWh to ct12.52/ kWh
    • more than 5 MW: ct4.28/kWh to ct5.54/kWh
    • more than 50 MW ct3.5/kWh.
  • degression: 0.5 percent per annum as of 1 January 2016.Biomass
  • expansion corridor: annual increase of up to 100 MW (gross)
  • fixed statutory payment depending on nominal generation capacity of the individual plant: ct5.85/kWh to ct13.66/ kWh (biowaste installations and small manure gas ct15.26/kWh to ct23.73/kWh).
  • plants with a nominal generation capacity of more than 100 kW:
    • fixed statutory payment just for 50 percent of nominal generation capacity per annum
    • additional flexibility premium: EUR40/kW installed capacity per annum.
  • breathing caps: financial support increases or decreases if growth exceeds or falls below the targets of the expansion corridor.
  • degression: according to ‘breathing caps’ between 0.5 and 1.27 percent per quarter as of 2016.
Other methane gas (mine, landfill, sewage sludge gas, etc.)
  • fixed statutory payment depending on nominal generation capacity of the individual plant: ct3.8/ kWh to ct8.42/ kWh
  • plants with a nominal generation capacity of more than 100 kW:
    • fixed statutory payment just for 50 percent of nominal generation capacity per annum
    • additional flexibility premium: EUR40/kW installed capacity per annum.
  • degression: 1.5 percent per annum as of 2016.

Geothermal

  • fixed statutory payment: ct25.20/kWh
  • degression: 5 percent per annum as of 2018

Wind

Onshore

  • expansion corridor: annual expansion 2.5 GW (net)
    • Repowering measures will be considered only with respect to the net increase of nominal power.
  • fixed statutory payment:
    • ct4.95/kWh (basic payment)
    • increased basic payment (initial payment) of 8.9 ct/kWh for at least 5 years; possibility of extension for locations with a reference yield below 130 percent.
  • breathing caps
  • degression:
    • basically 0.4 percent per quarter as of 2016
    • decreases or increases in a range between zero and 1.2 percent depending on reaching breathing caps

Offshore

  • expansion corridor: 6.5 GW until 2020, 15 GW until 2030
  • fixed statutory payment:
    • basic payment: ct3.90/kWh
    • increased initial payment (Basic model): ct15.4/kWh during the first 12 years after commissioning (extended depending on water depth and distance from shore)
    • acceleration model: If the offshore wind farm is commissioned before 31 December 2019, the operator can select an increased initial payment of ct19.4/kWh for 8 years (extended depending on location with a payment of ct15.4/kWh for the prolonged period).
  • degression:
    • for the Basic model: annually ct0.5/ kWh as of 1 January 2018, ct1.0/ kWh as of 1 January 2020, and ct0.5/kWh as of 1 January 2021.
    • for the Acceleration model: ct1.0/kWh as of 1 January 2018 p.a. (in 2019 degression will be suspended).
  • Grid connection from the offshore switch station to the shore supported by the transmission system operator (Sec 17 par 2a EnWG).

Solar

  • Expansion corridor: annual growth of2.5 GW (gross)
  • Plants from 10 kW installed capacity must be remote-controllable.
  • Plants of 800 watts to 10 kW must be equipped with adjustable performance inverters

In and on buildings

  • depending on the amount of nominal generation capacity: ct9.23/kWh to ct13.15/kWh
  • degression:
    • 0.5 percent per month as of 1 September 2014.
    • degression decreases or increases according to breathing capsin a range between zero and 2.8 percent on a quarterly basis.

Ground-mounted plants in open spaces

Support of plants in open spaces was shifted from feed-in tariffs to a support involving a competitive tender process. The pilot project of tendering an average of 400 MW in three annual rounds was launched by the Federal Network.Agency. Details are regulated in a separate ordinance (FFAV). In the first round, a total of 150 MW was put out for tender, with the maximum rate set at ct11.29/kWh. The highest awarded bid amounted to ct9.43/kWh, while the average successful bid was ct9.17/kWh.

  • For plants operational as of 1 September 2015:
    • Plants must participate in the tender process and be awarded in order to obtain financial support in form of the market premium.
    • Contracts are awarded to the tenders with the lowest offered fixed statutory payment value until the total volume put out for tender has been reached.
    • Eligible to apply:
      • For the year 2015, only those sites already being permitted under the EEG 2014 (certain sealed areas, land conversions, land along freeways and railway tracks) are eligible.
      • Bids must amount to at least 100 kW and may not exceed 10 MW, multiple bids per round allowed.
      • Bids for energy generated in the installations must be stated in ct/kWh and have to indicate the capacity of the installation in kW.
    • Duration of support: up to calendar 20 years (year of initial operation included).
    • No Degression: awarded rate remains unchanged.
  • For plants operational before 1 September 2015:
    • Fixed statutory payment: up to a nominal generation capacity of 10 MW ct9.23/kWh
    • Support available for plants in areas being subject to an approved land-use plan that has been:
      • approved prior to 1 September 2003 or
      • approved after 1 September 2003 where plants were erected either on land to be devoted to different usage (Konversionsfläche) or alongside freeways (Autobahnen) or railroad lines or
      • a land-use plan that designated the area as commercial-industrial prior to 1 January 2010.
    • Degression: equivalent to plants erected on buildings.

Additional information

Duration of subsidized market premium: Up to 20 years plus the year of initial operation.

Taxes and Incentives for renewable energy

A 2015 KPMG report that provides updates on renewable energy promotion policies for over 31 countries.

 
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