Germany´s “Tenant Supply Act”

Germany could pioneer the “Energiewende” again with an ambitious „Third party green energy supply act“

The Federal Ministry of Economics (BMWi) presented a draft legislation to promote the supply of tenants with solar power. The draft foresees a direct financial remuneration from 2,21 to 3,8 €-Cent per kWh depending on the size of the PV-installation. The remuneration is limited to tenant-supply-models started after the adoption of the law, PV plants up to 100 kW and 500 MW total per year. According to a study the potential for tenant supply is huge: 3,8 million flats. Tenants will be free in their decision to be supplied by their landlords. Therefore, lease and tenant-supply are two separate contracts and the maximum term for the supply contract is one year.

A lot of winners

Tenant-supply with solar energy has a lot of positive aspects for a lot of players:

  • finally also tenants actively participate in the “Energiewende” and benefit financially from the positive aspects of the energy transition, e.g. decreasing costs for PV
  • new business cases for utilities and housing sector and opportunity to increase customer loyalty
  • increases the acceptance of the “Energiewende” among millions of tenants as well as among utilities and housing sector
  • boosts use of renewable energy, fight climate change
  • grid-friendly close-to-generation-consumption

Key issues

But there are still some serious issues that might stop the legislation.

  • Taxation privileges

Trade and corporate taxation might be the “show stopper”. So far, housing companies benefit from trade and corporate taxation privileges. Revenues from tenant-supply-models put these privileges at stake and hence might make housing companies and landlords step back from tenant supply models. That is why the BMWi proposed in a first version a threshold up to 20 % of revenue for landlords without losing taxation privileges. But this proposal is not part of the official draft as it still needs interministerial approval.

  • „De-Bureaucratization“ of vendor´s role

Secondly, the vendor´s role remains untouched making it hard for small prosumers to implement third party supply. The current framework that was made for the “old energy world” with big central generation and a multi-level supply and transaction system imposes many obligations on vendors. Small prosumers such as landlords of single-, two- or multi-familiy homes could hardly fulfill these obligation without the help of specialized service providers. The costs for those would impact the profitability. As a consequence, only big players like housing companies, utilities or service providers could implement third party supply models under the current regulatory framework. The “energydemocratic” potential of tenant supply models would not be fully “reaped”.

  • Metering scheme

Thirdly, the technical implementation of tenant-supply models is very challenging, especially the metering scheme. The so far often used “Summenzählermodell” does not display the physical distribution of tenant supply in a building accurately. Smart meter-based metering schemes would be more accurate but are still too expensive. Nevertheless, tenant-supply models have to be aligned with the recently adopted “Smart Meter-Act”. Blochchain-based metering and billing schemes might be a solution but are not considered yet in the law making process.

Collective and district supply?

The draft law only promotes models where tenants consume energy generated on top/in the same building. It does not include community and district supply models. Especially renewable energy associations ask the BMWi to enlarge the law´s scope and include also supply outside the “generation building”. This leads to the general question: Should community and district supply models also be supported?

The EU-Commission´s plans for a “consumer-centric energy union” are important in this context. Firstly, it tells Member States in the draft “Electricity directive” and “RES-directive” to ensure that not only “renewable self-consumers living in the same multi-apartment block” but also “located in the same commercial, or shared services, site or closed distribution system, jointly engage in self-consumption as if they were an individual renewable self-consumer” (art. 15 “Electricity directive” resp. art. 21 “RES directive”). The EU-Commission also wants to support “local energy communities” (art. 16 “Electricity directive”) and “renewable energy communities” (art. 22 RES-directive). Germany might follow the EU-approach in the “Tenant Supply Act” including also collective and district supply.

Ambitious roadmap

The BMWi wants the law to be adopted in this legislative term – this means: before summer break. With regard to the challenges this roadmap seems to be very ambitious, amongst them:

  • interministerial coordination especially on taxation
  • approval by EU-Commission under state aid rules needed

Looking back at the highly controversial law making process regarding the “Renewable Energy Act” and the “Smart Meter-Act” it is far from being impossible that the “Tenant Supply Act” might get stuck and will not be adopted. With regard to the many positive effects that would be a pity …

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