ENERGY NEWS #2/2017
Summary
- Even before EEG 2017, which was enacted in July 2016, entered into force on 1 January 2017, it had already been amended for the first time, more or less in the slipstream of the most recent amendment to the KWKG (Act of 22 December 2016, Federal Law Gazette I, p. 3106). The amendments to EEG 2017 pertain in particular to the bidding procedures for onshore wind turbines. For one thing, the special rules on awards for the additional construction of wind turbines in the so-called grid expansion areas (section 36c EEG 2017) have been expanded with regard to the upper limit for additional construction in the grid expansion area (Netzausbaugebiet).
- For another, the special provisions on bidding procedures for so-called citizen energy companies (Bürgerenergiegesellschaften) in section 36g EEG 2017 have been made more stringent so as to better prevent circumventing structures, e.g. by way of front-man transactions.
Changes as regards the grid expansion area
1. Point of departure
Within the grid expansion area, awards may be granted for onshore wind turbines only up to a certain upper Limit (section 36c(4) EEG 2017). This is meant to control and limit the additional construction in this area, in which the transmission grid is under a great deal of stress. The grid expansion area and the upper limit are defined in detail by legal ordinance in accordance with section 88b EEG 2017. According to the draft of the Ordinance on the Establishment and Design of a Grid Expansion Area (Verordnung zur Einrichtung und Ausgestaltung eines Netzausbaugebiets – Netzausbaugebietsverordnung – NAGV) which is presently available, the grid expansion area is supposed to encompass broad sections of northern Germany, i.e. Schleswig-Holstein, Mecklenburg-Vorpommern, Bremen and Hamburg, as well as northern Lower Saxony. The upper limit is to comprise approximately 900 MW per calendar year.
2. Key changes
Paragraph 6, which has been newly added to section 36c EEG 2017, integrates the provisions on determining the upper limit for the grid expansion area into the provisions on “cross-border bidding procedures” pursuant to section 5 EEG 2017. Now, with the new section 36c(6) EEG 2017 – to put it simply – the wind turbines in the grid Expansion area which are awarded in the course of cross-border bidding procedures must be taken into account when determining the upper limit for the grid expansion area.
Changes as regards citizen energy companies
1. Point of departure
Under sections 36g and 55(2) EEG 2017, citizen energy companies enjoy facilitated prerequisites for participating in bidding procedures for onshore wind turbines. The reason for this is that the normal prerequisites typically exceed the capacity of local citizen energy companies. However, the legislator wishes to enable locally based citizen energy companies to participate nonetheless because it believes that they make an essential contribution to the necessary social acceptance of new onshore wind energy projects.
The facilitations in comparison with the general competitive bidding procedure prerequisites consist in particular of the facts that the wind turbines need not yet be licensed by the bidding date, that only a reduced security (“first security”) needs to be provided by the bidding deadline, that “uniform pricing” applies and that the period for realising the project is much longer. What is especially economically attractive is the uniform pricing, which means that the successful
bidder’s award will be in the amount of the highest successful bid submitted in the tendering round.
The legislator had therefore formulated its definition of citizen energy companies very narrowly already in the original version of section 36g EEG 2017 (section 3 no. 15 EEG 2017) and imposed stringent participation criteria in section 36g EEG 2017. Accordingly, citizen energy companies must comprise at least ten natural persons as members/ shareholders with voting rights, at least 51% of the voting rights must be held by natural persons and no member/ shareholder may hold more than 10% of the voting rights. A citizen energy company may only submit bids for a maximum of six wind turbines with a total installed capacity of no more than 18 MW.
2. Key changes
In the autumn of 2016, however, the legislature had doubts as to whether that would be sufficient to prevent false incentives and circumventing structures. Moreover, it was recognised that there was a need for regulation with regard to the grid expansion area. The amendments in section 36g EEG 2017 essentially consist of the following:
a) Increase in the requirements for the self-declaration when submitting a bid
- Pursuant to the reworded lit. a of section 36g(1) sent. 1 no. 3 EEG 2017, at the time the bid is submitted, the company must be a citizen energy company and the company and its members or shareholders may not have concluded any contracts prior to the submission of the bid for the transfer of their shares or voting rights after the submission of the bid or any other arrangements to circumvent the prerequisites set out in section 3 no. 15 EEG 2017 after the submission of the bid, where the agreed transfer or other arrangements would mean that after the bid has been submitted, the prerequisites set out in section 3 no. 15 EEG 2017 would no longer be fulfilled or would be circumvented.
- Pursuant to the reworded lit. b of section 36g(1) sent. 1 no. 3 EEG 2017, the declaration should not only furnish proof that no awards had been granted in previous rounds of the competitive bidding procedure, but also that in the ongoing tendering round, the upper limit of six turbines with up to 18 MW installed capacity is not being exceeded.
b) Increase in the requirements for the self-declaration in the allocation of the Award
The reworded lit. a of section 36g(3) sent. 4 no. 3 EEG 2017 is linked to the new lit. a of section 36g(1) sent. 1 no. 3 EEG 2017. The requirements imposed on the citizen energy companies must be met uninterruptedly up to the filing of the application pursuant to section 36g(3) EEG 2017, i.e. up to the application for allocation of the Award.
c) Integration with the provisions on the grid expansion area
The newly introduced sentence 2 of section 36g(5) EEG 2017 is likewise meant to prevent false incentives. It provides for exceptions to the uniform pricing procedure regulated in section 36g(5) sent. 1 EEG 2017 for cases in which the upper limit for the grid expansion areas is exhausted in a tendering round. In these cases, what will be applicable for citizen energy companies which have submitted a bid for a wind turbine in the grid expansion area is not the amount of the highest bid submitted in the territory of the Federal Republic, but rather that of the highest bid submitted in the grid expansion area. This is meant to prevent strategic bidding, in particular bids which are lower than the true costs.
d) Extension of the holding period
The newly introduced sentence 4 of section 36g(5) EEG 2017 extends the holding period for citizen energy companies. Citizen energy companies profit from the uniform price over the entire 20-year subsidy period only if they have met the requirements for citizen energy companies (section 3 no. 15 EEG 2017) uninterruptedly from the submission of the bid to the end of the second year after commissioning. If the requirements cease to be met before the holding period expires, then as of the time of such cessation, the uniform price will no longer be deemed to be the award value, but rather the bid value.
e) Restricting the authorisation of the members/shareholders to represent the citizen energy company
Under the new paragraph 6 of section 36g EEG 2017, contracts or other arrangements made by members or shareholders of the citizen energy company will require the consent of the citizen energy company if they are entered into prior to commissioning and these members or shareholders are obliged to transfer their shares or voting rights after commissioning or to transfer profits after commissioning. Such consent may not be granted if the agreed transfer of the shares or voting rights would mean that after the commissioning the prerequisites set out in section 3 no. 15 EEG 2017 would no longer be met or would be circumvented. This amendment also aims to prevent circumventing structures and front-man transactions. Accordingly, as stated in the legislative
notes, contracts with banks or other credit institutions which only serve to finance the projects and provide for a transfer of the project in case of default and a pure payment of interest would not be subject to such consent.
Gleiss Lutz commentary
With the newly introduced paragraph 6 in section 36c EEG 2017, the legislator has underlined its intention to control and restrict the additional construction in the grid expansion area so as to effectively counter the grid system overload there. The practical relevance of this amendment, however, will ultimately depend on the extent to which cross-border competitive bidding procedures pursuant to section 5 EEG 2017 even affect the grid expansion area at all.
With the numerous amendments of section 36g EEG 2017 regarding the citizen energy companies, the legislator is emphatically implementing its objective of depriving pseudo-citizen energy companies of the benefits of section 36g EEG 2017. However, the increased requirements stemming from the amendments could impair the primary objective of the legislation, which is to keep the “citizen energy companies” as players in the market, since these amendments create legal uncertainties: The legislation prohibits structures with which the prerequisites set out in section 3 no. 15 EEG 2017 ”are circumvented”. This indefinite legal term is so general that it necessarily gives rise to the question of which structures are permissible and which constitute an impermissible circumvention. This paves the way for legal discussions which in practice will most likely not exactly facilitate the financing of projects of citizen energy companies.
Proposed citation: Dannecker/Kerth, Bidding procedures for onshore wind turbines – amendments to the Renewable Energy Sources Act 2017 (EEG 2017) in the wake of KWKG 2017 (Ausschreibungen für Windenergieanlagen an Land – Änderungen des EEG 2017 im Windschatten des KWKG 2017), Gleiss Lutz Energy News #2/2017 of 12 January 2017
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