Paving the way for a renewables-based electricity sector by introducing a ‘real-time physical allocation scheme’ for renewable electricity

In order to obtain a share of renewable electricity of at least 35% by 2020 and 80% in 2050, the German legislator created the German renewables Act (EEG) which has proven to be extremely successful (nearly 20% in 2011) in facilitating investment in renewable power plants and lowering their feed-in-tariffs. But this success currently imposes an evolution of the EEG: As a result of the introduction of binding sales of the EEG-current on the EPEX, spot market prices are lowered due to the renewables-induced merit-order-effect. As feed-in-tariffs are taken in charge through these spot market revenues and the remaining monetary EEG-allocation, there is an intrinsic mechanism leading to higher amounts per kWh to be borne by end users. The authors propose a new mechanism intended to decouple monetary EEG-allocation from spot market revenues forming a first milestone of the necessary transformation of the marginal-cost-based electricity market towards a renewables-based electricity sector.