The rollout of the Feed-in Act at the beginning of 1991 marked a turning point in the history of wind power in Germany. For the first time, grid operators were required by law to pay a floor price for renewable power sold to the grid. The rates paid were based on the average power prices for all retail customers in the previous year.
Grid operators were obligated to pay 90 per cent of that figure for electricity from wind power and solar arrays, 80 per cent for power from biomass and small hydro stations with a capacity up to 500kW, and 65 per cent for power from hydro plants with a capacity ranging from 500kW-5MW.
For instance, Germany’s Bureau of Statistics calculated that the average price per kilowatt-hour in 1997 was 9.4 eurocents, so the rate paid for wind and solar power in 1999 was 8.4 eurocents per kilowatt-hour. In 2000, 0.2 eurocents less was paid for a kilowatt-hour of wind power because the liberalization of the power market had brought power prices down in most areas, thereby reducing the base price for 2000.
Another change was brought about by the revision of the Energy Act in the version that took effect on 29 April 1999. Legislators have adopted a special rule for the Feed-in Act, stipulating that utilities no longer had to compensate for power if the renewable energy exceeded 5 per cent of the utility’s total power sales, with the obligation falling on the supplier between the utility and the producer. And if the supplier in-between also had 5 per cent renewables in its total sales, it also did not have to pay for any additional power.
This rule – called the ‘duel 5 per cent ceiling’ back then – was introduced in order to limit the financial burden on individual power providers. By then, a large number of wind turbines had been installed on the northern German coast, so power distributors in these areas were more affected by the law than other power companies.33
But this ceiling was not a good way to solve the problem, and it would have slowed down the further growth of the wind market. So when the law was revised in 2000, the Renewable Energy Act did away with that rule (see 11.10).
Potential investors were unsure about what feed-in rate they would get in the future for their renewable power. To provide more clarity and hence more investment incentives for renewables, feed-in rates were made independent of the retail rate when the law was revised.