1. The German Renewables Act (EEG) and the Development of Photovoltaics in Germany Holger Gassner,RWE Innogy Thorsten Schneiders, E.ON Climate&Renewables Christoph Weißenborn,BDEW

2. EEG – lessons learnt Setting the right tariff and monitoring it on a regular basis is essential, as the Solar Photovoltaics market has become very dynamic and equipment prices have been dropping significantly over thelast years Coordinated approach of linking the increase of renewables capacity and the adoption and extension of the grid infrastructure is needed to smoothly integrate renewables into the supply system and to avoid delays of projects Keep the tariff structure simple and easily to understand to makeit run smoothly and to avoid misunderstandings and abuse The support for renewables leads to an increase on the customers´ rates and might raise questionsfrom the side of residential and industrial customers

3. Seite 3 Feed-In Tariffs - Principle Supply Electricity [1 kWh] Transmission Customers (via grid operators) FIT Feed-In Tariff [€€€] Payout  Feed-in tariff RES Plant operator sells his renewable electricity for a fixed price (feed-in tariff) to the grid operator for a duration (e.g. 12 – 20 years) and is paid for each kWh during this time  Most European countries employ feed-in tariffs for the support of photovoltaics

4. 4 Basic Principles of the EEG The German Renewables Act (EEG)… –was set up in 1991 to incentivize investments into renewables –provides a cost-based fixed feed-in tariff over a period of 20 years –grants renewables power priority grid access and transmission –has undergone several regular and amendments to adopt tariffs to market conditions or to improve administrative handling The Feed-in Tariffs (FIT)… –have a large vriety of sub-categories with regard to technologies and size of plants –are subject to a degression, i.e. they are reduced by a certain percentage every year (Photovoltaics: 9%) for the new plants commissioned in that year There is no other support mechanism for renewables power (apart form low- interest loans for private investors by the state bank KfW)

5. 5 Roleplay within the EEG The renewables operators can feed in… –Anytime - no forecast or "early warning" necessary –Any amount - no real-time metering Grid operators (distribution grid and transmission grid)… –take over and pay for the renewables electricity –pass on the electricity to the wholesale market –are in charge of the forecast, system balancing and services –have to extend the grid to connect and transmit renewbales power, or have to pay compensation otherwise The power retail companies… –charge an EEG-surcharge on the customers´ bill and pass on this money to the grid operators –Until 2009 had to take over and bpass on the EEG-electricity physically which lead to significant problems and financial riks in their portfolio

6. Solarbuzz solar market forecast Sudden over supply in the PV market in 2009… 6 5,1 GW MW Solar demand Solar supply Solar market Source: Lux Research, New Energy Finance  Cuts in Spanish FIT in 2008 resulted in an large unanticipated drop in demand: 2.5 GW installed in Spain 2008 vs. 300 MW installed in 2009  Financial crisis amplified the drop in demand as many PV projects relied heavily on cheap and accessible debt

7. 7...and very large drop in Polysilicon Prices €*/kg *Assumes exchange rate of 1.41 $ = € Source: New Energy Finance Silicon, Nomura news and Wafer Spot Price Index Silicon spot price developments Polysilicon market stabilizing

8. Recent developments Strong decline of equipment prices and concerns of the unexpectedly high growth rates of solar installations and the cost impact on the customers´ bill lead to adoptions of feed-in tariffs for solar photovoltaics In Germany, tariff cuts in addition to the regular degression of 9% amount to 16% Similar approaches have been carried out in Spain, Italy, France, Austria and Czech Republic

9. Getting the definitions right to avoid abuse

14. BMU – KI III 1 Version: March 2010 Development of renewable energy sources in Germany in 2009 14 Installed capacity and energy supply from photovoltaic installations in Germany 1990 - 2009

15. The electricity mix in Germany 2009 Source: Statistisches Bundesamt, BMWi, BDEW, AGEB, AGEE_Stat; Status; 04/2010

16. SEITE 16RWE Innogy Introduction of renewables is not for free Cost increase EEG until 2015 EEG-Support (overall payments under EEG) in bn Euro 1,61,2 2,2 2,6 3,6 4,5 5,8 7,9 20,4 22,0 Source: EEG-Mittelfristprognose Stromtransportnetzbetreiber 9,0 10.0 12,3 14,6 16,8 18,8 5,4 5,8 5,3 4,9 0,5 0,1 2,2 3,6 2,6 0,4 >Support to be concentrated where needed and effective, e.g. no PV in Germany

17. SEITE 17RWE Innogy Generation of Wind + Photovoltaic January 2010 (presently > 36.000 MW installed) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 Wind: 26.000 MW PV: 9.800 MW (Stand 1.1.10)

18. SEITE 18RWE Innogy Generation of Wind + Photovoltaic 20.6. – 05.07. 2010 (presently > 36.000 MW installed) 20.6. 21.6. 22.6. 23.6. 24.6. 25.6. 26.6. 27.6. 28.6. 29.6. 30.6. 1.7. 2.7. 3.7. 4.7. 5.7. Dauerhaft niedrige Windeinspeisung von unter 10% der installierten Leistung 123 MW Wind am 23.6. (Stundenmittelwert 8:00 bis 9:00 Uhr) entspricht 0,46% der inst. Leistung 3.520 MW Wind am 3.7. (Stundenmittelwert 0:00 bis 1:00 Uhr) entspricht 13,5% der inst. Leistung Wind: 26.000 MW PV: 9.800 MW (Stand 1.1.10)

19. SEITE 19RWE Innogy Renewable energies make electricity production more volatile … 910111213141516171819202122232425262728293031 Day (January 2008) Capacity in MW Daily min and max available wind capacity in Germany in January 2008 Scource: bdew

20. SEITE 20RWE Innogy Renewable energies make electricity production more volatile … Source: BDEW Example: Demand and renewable input 2.10.08 – 7.10.08 in East-Germany

21. SEITE 21RWE Innogy 01.05.2009 -200 -150 -100 -50 0 50 100 150 200 250 300 350 01.10.200801.11.2008 01.12.200801.01.200901.02.2009 01.03.200901.04.200901.06.200901.07.200901.08.2009 01.09.200901.10.2009 01.11.2009 € / MWh Times with negative prices increase Täglicher Höchstpreis Täglicher Tiefstpreis (rot falls negativ) 494.26 -500.02

22. SEITE 22RWE Innogy Industry is consumer of RES Note: Einspeisetarife als Mittelwerte von maximaler und minimaler Einspeisevergütung -50 0 50 100 150 200 250 300 350 400 450 500 01.01.0901.02.0901.03.0901.04.0901.05.0901.06.0901.07.0901.08.0901.09.0901.10.0901.11.09 Offshore WindOnshore WindBiomassPhotovoltaicEEX Spot (day average

23. SEITE 23RWE Innogy EEG – lessons learnt Setting the right tariff and monitoring it on a regular basis is essential, as the Solar Photovoltaics market has become very dynamic and equipment prices have been dropping significantly over thelast years Coordinated approach of linking the increase of renewables capacity and the adoption and extension of the grid infrastructure is needed to smoothly integrate renewables into the supply system and to avoid delays of projects Keep the tariff structure simple and easily to understand to makeit run smoothly and to avoid misunderstandings and abuse The support for renewables leads to an increase on the customers´ rates and might raise questionsfrom the side of residential and industrial customers