Güglingen, 20 February 2025 – Recently, the German Bundestag and Bundesrat passed the so-called “Solar Peak Act (Solarspitzengesetz)” and thus important energy reforms, including the stop of feed-in tariffs in the event of negative prices on the electricity exchange and simplifications in the direct marketing of PV electricity. This is intended to stabilize the power grid and avoid solar peaks. The solar specialist hep solar explains what the changes mean for the solar market and what role private power purchase agreements will play in the future.
Germany promotes the expansion of solar systems through regular tenders, state feed-in tariffs, market premiums and financial advantages for self-consumption and tenant electricity. These are regulated by the Renewable Energy Sources Act (EEG) and would be important for promoting the expansion of solar power. There are now around 7.4 million solar systems in Germany with a capacity of almost 100 gigawatts; on sunny days, so much electricity from renewable energies is fed into the grid that there are sometimes negative spot market prices on the electricity exchange.
With the new law, operators of newly installed PV systems will therefore no longer receive a state feed-in tariff at such times in the future. Instead, they are to store the solar power generated for later and consume it themselves. Alternatively, PV system operators can sell the surplus electricity via so-called direct marketers. The reform adopted is intended to make it easier for owners of PV systems with a low output (less than 100 kilowatts) to sell solar power. In addition, the hurdles for storing electricity are being lowered: Battery energy storage systems (BESS), which are part of a solar park or wind turbine, can now be used not only for renewable energies, but also for electricity from the grid.
Martin Vogt, Global Head Project Development at hep solar: “For project developers like hep solar, the changes regarding BESS in particular are a game changer. The regulatory adjustment will make the coupling of BESS with solar parks much more interesting for us. This is because we then have the opportunity to store the electricity generated in times of negative prices and also benefit from wholesale arbitrage.”
Reform can lead to new electricity purchase models
The reforms also open up new electricity purchase models that go beyond the feed-in tariff under the EEG. Germany is thus following the path that is also emerging in other countries: state-guaranteed feed-in tariffs are increasingly being replaced by privately organized or market-driven remuneration models such as power purchase agreements (PPAs). These are concluded between energy producers and electricity consumers. A distinction is made between physical PPAs and virtual PPAs.
In the case of physical PPAs, the electricity is delivered directly to the customer; the latter feeds it into its network or consumes it itself. He is responsible for purchasing the electricity and ensuring the correct operation of a grid connection. Such contracts are usually concluded with suppliers such as municipal utilities and payment is made according to a fixed price. Virtual PPAs, on the other hand, do not involve physical delivery of electricity. The buyer acquires the right to claim the environmental benefits of the electricity generated by purchasing guarantees of origin and both parties agree on a fixed electricity price beforehand. However, the electricity itself is sold on the electricity market. If the market price is above the agreed price, the producer pays the difference to the buyer. If the market price is lower, the buyer pays the difference to the producer.
Developments in other countries
In other countries where hep solar is active, private power purchase agreements are also playing an increasingly important role. For example, the Canadian state supports the national expansion of wind, water and solar capacities as well as grid modernization through government subsidy programs and tax incentives. However, revenues are secured through the sale of CO₂ certificates as well as private power purchase agreements. The USA, as the world’s second-largest solar market, has also pushed ahead with the expansion of renewable energies with the Inflation Reduction Act (IRA) and tax incentives; however, the remuneration is made via PPAs. And in Japan, the expansion of renewable energies is promoted by tax breaks, subsidies and high investments in research and development; at the same time, private power purchase agreements are becoming increasingly important.
hep solar also welcomes the development towards a market-oriented solution. Martin Vogt comments: “PPAs offer a secure basis for calculation, as we can sell the electricity at a fixed price over several years. This protects against fluctuations in the electricity market. The long-term contracts also ensure financial stability. Incidentally, EEG auctions are already showing that the trend among financial investors and players with the necessary expertise is towards PPAs; they are already hardly participating in the auctions.”
About hep solar
hep solar is a specialist for solar investments and solar parks. The owner-managed family business from Baden-Württemberg develops, builds, operates and finances solar parks all over the world, but especially in Germany, Japan and North America. For over 15 years, hep solar has been combining know-how in the operational management of solar parks with a high level of expertise in the financial sector. The company covers the entire solar energy value chain: from project development and construction to long-term operation. Through international solar investments, hep solar offers investors the opportunity to participate in the global expansion of solar energy. hep solar employs more than 200 people worldwide with offices in Germany, Japan, the USA and Canada.
