EUR 442 Million August Profit on Renewable Surcharge Account – 1 Billion EEG 2014 Cost Reduction between July and August?

The TSOs reported a profit of EUR 442,832,426,76 for August 2014, leading to an increased positive balance on the Renewable Surcharge Account (EEG account) of EUR 1,506,159,979,54. This would be the first positive balance for the month of August, and is quite puzzling because of the important share of PV input. The situation gets even more surprising when looking at the total monthly expenses in August that are more than EUR 1 billion below the July figures. However, it appears as if the drastic reduction is due to a delayed payment flow reason, and not due to dramatically reduced EEG costs.

1. Factual Background

4,812 GWh renewable power were fed into the grids that had to be sold by the TSOs at the EPEX Spot power exchange, about 19% less than a year before (August 2013: 5,907 GWh), and about 18% less than a month before  (July 2014 :5,207 GWh). Solar input marketed by the TSOs was the highest with 3,330 GWh, decreased from 3,813 GWh in July 2014 (August 2013: 3,785GWh). Wind power input sold by the TSOs increased to 406 GWh (July 2014: 304 GWh; August 2013: 323 GWh). Input from biomass was down to 841 GWh after 860 GWh in July (1,532 GWh in August 2013). The first eight months of 2014 saw total renewable input marketed by the TSOs of 39,162 GWh, compared to 42,513 GWh in 2013. The TSOs in this context do to not publish figures on renewable generation that is sold through direct marketing.

The average price obtained by the TSOs at the power exchange in August 2014 went down to EUR 25.72/MWh, a record low after EUR 34.47/MWh in July (January EUR 38.20/MWh, February EUR 35.64/MWh, March EUR 27.07/MWh, April EUR 33.05/MWh, May EUR 28.31/MWh, June EUR 32.54/MWh). In August 2013 the average price was EUR 37.75/MWh.

So far EEG costs reported in the EEG surcharge account add up to EUR 14,707,836,459.37 by end of August 2014. Compared with costs of EUR 14,179,164,111.90 reported at the same time in 2013, this means that costs have risen by about 3.7%. At the end of the month August there is a positive balance of EUR 1,506,159,979.54.

2. The Surprise

The latest EEG account publication no longer contains the line item that previously covered market premium payments (line item 1a for premium payments). In July 2014, expenses at  this position were at  EUR 737,220,073.39.

The Media have already reacted to the published data and noticed the reduced costs. Newspapers like Frankfurter Allgemeine Zeitung are already writing about all the money in the EEG account and possible EEG surcharge reductions next year, others add that present figures are not related to the EEG 2014 revision.

The question is: Why do we have the August surplus?

a) Basis for Published Data

The publication rules for the EEG account are contained in the Equalisation Scheme Ordinance (AusglMechV). More specifically, Sec. 4 para. 2 AusglMechV lists the expenses that have to be published. Line item 1 for expenses mainly covered feed-in tariff payments, line item 1a premium payments. In the context of the EEG 2014 reform (which came into force on 1 August 2014), the respective provisions of the AusglMechV were amended to reflect changes brought about by the EEG 2014 reform. In this context, line item 1a in the publication obligation fell away.  This explains why the August 2014 publication of expenses no longer contains line item 1a that previously covered premium payments.

However, as part of this amendment of the AusglMechV, the content of what is to be listed under line item 1 was also changed. The new wording for line item 1 now refers to “financial support pursuant to Sec. 19, 52, 57 para. 1, and Sec. 100 to 102 EEG 2014”. Out of this list, Sec. 19 EEG 2014 appears most relevant, as the new Sec. 19 EEG 2014 covers both market premium payments as well as feed-in tariff payments.

As a result, it would appear that the new line item 1 in the expenses as of 1 August 2014 list shall cover both feed-in tariff payments as well as market premium payments. Looking at the development of costs in this area for July and August, we note that in July EUR 1,699,684,945.66 for feed-in tariffs plus EUR 737,220,073.39 for premiums add up to EUR 2,436,905,019.05. For August, we only have 1,429,705,041.16, and it looks like this figure may not include premium payments.

b) Explanation

The reduction of EUR 1,007,199,977.89 between August and September cannot be explained by less sun or wind generation in August.

One of the reasons for the EEG 2014 amendment was indeed a reduction of costs. But EUR 1 billion in the first month does sound like an awful lot.

Consequently, the August figures look surprising. is now quoting TenneT that the August surplus is due to a one-time effect, related to changing payment flows because of the EEG 2014 revision. In that case, the August surplus would simply be due to delayed cost payments, and not due to dramatically reduced EEG costs.

That would make sense. But would unfortunately also mean that we do not know what costs are attributable to August, and that we cannot meaningfully compare August 2013 with August 2014 figures.

Commercially, this explanation for the low August 2014 expenses would very much limit room for a real EEG surcharge reduction. Just to recall again: This year’s EEG surcharge of 6.24 ct/kWh is composed of 5.146 ct/kWh of core EEG surcharge (used for the actual transfer payments), 0.512 ct/kWh to build the 10% liquidity reserve (Section 3(7) AusglMechV) and 0.581 ct/kWh of deficit cover based on the (debt) status of the EEG account as of 30 September 2013 (as the EEG surcharge in previous years did not cover the EEG spending). Therefore, if the estimated EEG transfer payments for 2015 would remain stable, the EEG surcharge payment would – for purely technical reasons of calculating the EEG surcharge – have to be reduced from 6.24 ct/kWh to 5.146 ct/kWh (assuming no further back payments and no increase in liquidity reserve), as this is the amount of the core EEG surcharge that actually covers the EEG transfer payments. If the EEG surcharge for 2015 – just to give a number – would come out at 6 ct/kWh, this would look like a reduction at first sight, but in reality would indicate an increase in the underlying core EEG surcharge of over 15%.


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