Optimizing Solar Power Remuneration – With And Without The EEG Support
What compensation options are available for solar power? How can you market the electricity from your photovoltaic system in Germany after the 20-year EEG feed-in tariff expires? Find out in this article how you can optimize your income .
There have long been alternative marketing options for your solar power besides the classic feed-in tariff under the Renewable Energy Sources Act (EEG). These are variants of direct marketing and electricity supply contracts – so-called Power Purchase Agreements (PPA).
As more and more solar plants will reach the compensation limit of 20 years from the EEG in the next few years – but will still deliver solar yields – direct marketing will play an increasingly important role. Following the EEG promotion, it is one of the most important forms of remuneration.
Even before the EEG remuneration expires, you can optimize your income. After all, switching between the marketing forms is possible at any time.
Overview of direct marketing
Solar electricity can either be marketed through a marketer on the electricity exchange or sold directly to individual buyers. For that matter, the EEG distinguishes between subsidized EEG direct marketing and other direct marketing.
EEG direct marketing
For plants larger than 500 kW that were commissioned from 1.8.2014 onwards, an obligation exists to market the energy within the framework of the EEF. Since 1st January 2016, this obligation also applies to plants with an installed capacity of over 100 kW.
Other plants with EEG entitlement, on the other hand, can voluntarily switch to EEG direct marketing. However, remote control of the solar system is mandatory.
Other direct marketing
Other direct marketing includes all forms in which the feed-in tariff, market premium or tenant electricity surcharge is voluntarily waived or in cases were the EEG promotion has expired. In these cases, the legal obligation to provide remote control of the system is not applicable.
However, it can still be contractually required by direct marketers or the remuneration model. In addition, there is the legal obligation to equip the plant with a facility for ¼ hourly measurement/balancing.
Power Purchase Agreement (PPA)
A PPA is a power purchase agreement between a power consumer and a power generator. This contract contains regulations on the quantity of delivered electricity, which is either physically defined and corresponds to the generated quantity, or is synthetically indicated via purchase and procurement by the electricity trader.
The term of the contract can be up to 15 years for new plants, and 1 to 5 years for existing plants. The contracting party is either an individual large consumer (“corporate PPA”), which purchases the electricity for its own use, or an electricity trader (“merchant PPA”), which buys the generated electricity and either markets it on the electricity exchange or resells it to individual consumers.
Optimizing remuneration with EEG entitlement
If your plant is entitled to the EEG remuneration, you can check whether switching to EEG direct marketing might pay off for you. On the internet you will find revenue calculators in which you can enter the output and your funding conditions, and obtain a meaningful comparative calculation. And if you are already in EEG direct marketing, it is possible to find direct marketers with better conditions.
The EEG remuneration for EEG direct marketing is calculated according to the market premium model. This consists of two price components:
- The direct marketer pays the market value of the solar energy (average stock exchange hourly price for solar electricity of the previous month) of the generated electricity quantity.
- The grid operator pays the market premium, which is the difference between the market value and the EEG remuneration.
That way, the level of the EEG feed-in tariff remains secured and independent of price fluctuations on the energy exchange.
In addition, you receive a management premium of 0.4 cents per kWh as additional revenue. Even in the market premium model, the entitlement to the EEG remuneration remains valid for 20 years.
An investment has to be made in the installation of the remote-control technology, which costs between 150 and 600 EUR. In addition, direct marketers charge a service fee. For systems below 750 kW, flat rates are based on the size of the system, and for larger systems individual prices are customary in the market.
Due to these costs, direct marketing is currently economically recommendable from systems with a capacity of approx. 100 kWp upwards.
The “other direct marketing” including the PPAs usually only pays off for plants that fall under the EEG.
Photovoltaics after the end of EEG support
From 2021 onwards, the EEG support for the first plants will gradually be phased out. Anyone wishing to continue producing electricity and feeding it into the grid after that date is obliged under §21b EEG of 2017 to switch to other forms of direct marketing and fulfil all the associated obligations.
You can either rely on a direct marketer or conclude a PPA. After this phase, you must be able to deal with economic risks, such as price risks, shorter terms and the creditworthiness of your customers.
This is because prices on the electricity exchange fluctuate and are usually below the fixed remuneration rates from the EEG promotion.
Which remuneration option is the most profitable?
Find out who offers you the best conditions. With many direct marketers, you can request an offer online that includes contractual obligations and the marketing fee. It is worthwhile to obtain several offers because there is no price transparency on the market. The photovoltaic compensation for such direct marketing is calculated via the spot price and/or the market value.
In the case of a PPA, a fixed type of remuneration is agreed. It takes into account all expected risks, electricity price fluctuations and marketing costs. You can obtain indicative prices from electricity traders.
Depending on the location, you may also find what you are looking for directly in the vicinity of your plant. For example, the solar power can be marketed on a cold storage site or a generating company via a PPA.
Implement direct marketing
When selecting a direct marketer, there are service aspects in addition to price aspects. Some service providers handle the application at the same time. The application process involves coordination between several players: network operators, installers, system operators and remote-control technology.
If you want to agree on a PPA, you need a consumer for your electricity and must bring any financing partners (e.g. bank) on board. These partners pay particular attention to the creditworthiness of the consumer. An energy supplier, for example, has a much better credit rating than a local bakery.
This article was prepared with the kind support of Anastasia Bestmann, Sales Manager, Virtuelles Kraftwerk der EnBW.