The German government announced sweeping reforms of the country’s renewable energy policy on April 8, 2014. The draft law maintains aggressive targets; however, renewable energy will now be subject to annual caps and competitive bidding beginning in 2017. The change comes as German consumers are experiencing significant increases in the cost of power resulting from renewable energy incentives.

Key Details

• German energy prices are among the highest in Europe, rising every year since 2000
• The draft law plans to increase renewable sources from approximately 25% of electricity production today to 40%–45% by 2025 and to 55%–60% by 2035
• Beginning in 2017, premiums for renewable energy projects over 100 kW will be determined by competitive bidding instead of statutory feed-in tariffs
• To ensure measured growth, support for renewable additions will be capped at 2.5 GW of wind and solar each year and 6.5 GW of offshore wind by 2020
• The German parliament is expected to vote and approve the reforms before August

Implication

Germany is a dynamic testing ground for renewable energy policy, integration, and business models. The recent course correction in policy was necessary to slow ballooning costs of renewable energy feed-in tariffs, which pay a set price for the expected lifetime of a renewable system.

Additional Information

Reuters: Germany ushers in renewable energy reform

NY Times: Germany Moves Forward on Renewable Energy Plan

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