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  • Service: Tax
  • Type: Regulatory update
  • Date: 9/24/2014

Germany 

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

Support schemes

KfW Programs


KfW Renewable energies program


  • Investments are available in two programs:
    • Standard: in plants for electricity generation from renewable energies photovoltaic (PV), biogas, hydro, onshore wind or geothermal energy) and heat generation in combined heat and power (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 photovoltaic systems.
  • Premium funding was initiated to strengthen the establishment of the renewable technologies in the heat market (in the context of the Market Incentive Program by the Federal Ministry for the Environment). These technologies include:
    • solar panel 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
    • beat-controlled biomass CHP with 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 and 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.
  • 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).
  • Additional reduced interest rates are available for small to medium-sized enterprises (Premium).
  • Eligibly for funding depends on the program part.
  • In 2013, KfW provided a total credit volume of around EUR298 million for Premium. Since initiating the program, over 10 years ago, credit volume over EUR2 billion for both programs has been granted.
  • Loan-term: 5, 10 or 20 years with a repayment-free, start-up period of up to three years.

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. In 2013, KfW provided a credit volume of EUR194 million.
  • Loan-term: up to 20 years with a repayment-free start-up period of up to three years.

KfW Energy Efficiency Program


Low-interest loans are granted for investments in and outside Germany that achieve substantial energy-saving effects. As part of the joint initiative ‘Energy Efficiency of Small and Medium Sized Enterprises’ by KfW and the Federal Ministry for Economic Affairs and Energy, SMEs are additionally supported by favourable interest rates.


  • Outside the EU, the share provided by the German partner will be financed.
  • Replacement investments must lead to energy end-use savings of at least 20 percent on the basis of the average consumption of the previous 3 years. New investments must achieve energy savings of at least 15 percent compared with the industry average.
  • The funding is available as a loan to finance investments in energy efficiency measures (i.e. renewal of machine base, new building etc.) up to 100 percent of investment costs and usually up to EUR25 million per project.
  • Loan-term: 5, 10 or 20 years with up to three repayment-free start-up years.

It is complemented by the ‘SME Energy Effiency Advice’ program, which subsidizes small and medium enterprises identifying energy savings potential as well as reducing costs by improvement of energy efficiency.


KfW Energy Turnaround Financing Initiative


High volume loans 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 energies.


  • 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.
  • Eligibly to apply: large commercial enterprises in and outside Germany with an annual group turnover EUR500 million to EUR4 billion.

Incentives for energy efficiency and corporate environmental protection, housing, home modernization and the reduction of carbon emissions


  • Low interest rates on loans and grants used for the efficient production of energy, usually accessed by SMEs.
  • Subsidies for new privately owned buildings or buildings which are brought to a new standard in renewable energy or energy savings. Reduced interest rates, abatement of instalment payments on loans, direct subsidies for modernizing buildings and reducing carbon emissions.
  • Commitment volume in 2013 around EUR10.4 billion.

Administrative procedures: Applications must be filed via credit institution or with the governmental-owned bank KfW.


Sources: KfW Bankengruppe, BMWi Förderdatenbank

Operating subsidies

Based on current information, the reformed Renewable Energies Act (EEG 2014) shall be in force as of 1 August 2014. Legislative procedure being on-going, the following statements are provided on the basis of the Draft Law of 11 April 2014 and may be subject to further amendments.


The reformed law aims to make renewable energy development more predictable and more efficient by using tools as expansion corridors. Furthermore, a new approach or remuneration is pursued by replacing the feed-in tariffs with remuneration of subsidized direct marketing.


Applicability


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 begin operations by 31 December 2014 will still be governed by the provisions of to the previous EEG 2012.


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 rising to 55 – 60 percent.

Mandatory Direct Marketing


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


  • As of 1 August 2014, plants with an output of 500 kW and above are obligated to direct marketing.
  • 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.


Exemptions from Mandatory Direct Marketing</p>

Exemptions from mandatory direct marketing exist for small plants and in case of so called ‘default marketing’ when plant operators are temporarily unable to market their electricity, receiving 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: cent (ct)6.31/kWh to ct12.52/ kWh
    • more than 5 MW: ct4.28/kWh to ct5.54/kWh
    • more than 50 MW ct3.3/kWh.
  • Degression: 1 percent per annum (p.a.). as of 1 January 2016.

Biomass


  • Expansion corridor: annual increase of approximately 100 MW (gross)
  • Fixed statutory payment depending on nominal generation capacity of the individual plant: ct5.85/kWh to ct13.66/ 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 per kW installed capacity and 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: ct4.00/ 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 per kW installed capacity and annum.
  • Degression: 1.5 percent p.a. as of 2016.

Geothermal


  • Fixed statutory payment: ct25.20/kWh.
  • Degression: 5 percent p.a. 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 OWP will be commissioned until 31 December 2019, 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 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 1January 2021.
    • For 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 borne by the TSO (Sec 17 par 2a EnWG).

Solar


  • Expansion corridor: annual growth of 2.5 GW (gross)
  • Plants from 10 kW installed capacity must be remote-controllable,
  • Plants of 800 watts to 10 kW must be equipped with adustable 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 caps’ in a range between zero and 2.8 percent on a quarterly basis.

Ground-mounted plants in open spaces


Support of plants in open spaces is shifted from feed-in tariffs to a support involving tendering. Therefore, a pilot project of tendering 400 MW is launched organized by the Federal Network Agency. If this concepts proofs to be successful, it is to be adopted for all other renewable technologies.


  • Fixed statutory payment: up to a nominal generation capacity of 10 MW ct9.23/kWh
  • 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 is equivalent to plants erected on buildings.

Additional information

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

 

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