German government officially passed the Renewable Energy Source Act (RESA) reform. In the future, it will terminate electricity generation Feed-in Tariffs (FiT) subsidy for large-scale solar and wind projects. German government hopes to slow down installations' explosive growth, and well control power consumption and electricity costs of all renewable energy resources.

According to a Reuters report, Germany's favorable renewable energy subsidy policy stimulated a significant growth of installations for renewable energy generation (such as wind, solar and biofuel). Nonetheless, the overly rapid growth escalated end users’ electricity costs and put the country’s power grid under severer stress.

In order to solve issues above, Germany government went through many rounds of discussions, and passed the reform of RESA which will take effect in 2017. According to the reform, FiT subsidy for large-scale solar and wind projects will be eventually phased out. Renewable energy vendors must win tenders to develop new power plants, and sell the electricity for their income.

Currently, approximately 33% of nationwide power supply in Germany is from renewable energy resources. The RESA reform aims to assist the German government to control the expansion speed of renewable energy installations. As a result, Germany's new installation capacity for onshore wind projects will be limited within 2.8 GW from 2017 to 2019. After 2019, the government will offer 2.9GW each year for bidding.

As for solar PV power plants, starting from 2017, only can small-scale rooftop systems (~750 kW) receive FiT subsidy. Starting from 2017, 600 MW of solar projects will be available for bidding every year.

The German government officially specified that in 2025, renewable energy power generation must occupy 40~45% share of total power consumption. In 2035, the elevated goal will be 55~60%. Germany will maintain its goal to exit the nuclear power in 2022. In addition, Germany will continue to reduce its carbon emission levels to 40% less than 1990 emission level by 2020.

Energy Transformation

To promote energy transformation, Germany firstly stimulated renewable energy installations via subsidies, and passed the RESA reform to adjust the growth pace for development paces of the power grid and energy storage systems to synchronize.

To promote renewable energy, Germany imposed renewable energy taxes and additional fees on electricity end-users. Individual consumers' electricity expenditure consequently increased, while the subsidies ended up benefiting renewable energy vendors. Based on statistics, in 2015, German electricity users' renewable energy fees were as much as 25 billion Euros, and it might be even higher in 2016. This trend is not helping energy transformation. Hence, Germany planned to reduce renewable energy subsidies to pursue a balanced and healthy development.

As for power distributing issue, Germany needs to transmit electricity from its north to its south because most of Germany's wind and solar power installations are in its northern region, but power demand from heavy industries in southern regions is stronger than in northern regions. Therefore, Germany planned to construct high voltage cables on the ground to transmit electricity from north to south. Nevertheless, residents along the route objected to the plan and caused the installation schedule to delay. The construction is not likely to be finished until 2025.

Germany's renewable energy development encountered the power grid issue. How to distribute and properly use the intermittent renewable power, and how to balance the regional electricity generation and demand, will post large challenges for Germany's energy transformation process.

Germany considered energy storage systems as a critical part of energy transformation. Thus, starting from March this year, Germany launched subsidies for batteries installed with solar PV systems. Its initial plan was to provide 30 million Euros budget for subsidies until the end of 2018.  Moreover, Germany also provides various types of energy storage solutions including water heating and fuel cells (such as hydrogen fuel cells), to hopefully consume renewable energy more effectively.

The following four domains of electricity industry are all vital to energy transformation: generation, distribution, storage, and effective consumption. Germany's policies can be what other nations learn from.

(Translated from Chinese by Janet Chen, translator at WitsView, a research division of TrendForce Corp.)