5 November 2021
Q&A Energy & Infrastructure – 9 of 8 Insights
The goal of climate neutrality, which is enshrined in law at European and national level, will massively change the future of the building sector. The themes of ESG, sustainability and decarbonisation are already becoming increasingly important for financing banks, contractual partners and tenants. Rooftop solar systems offer significant potential to reduce CO2 emissions, especially in the building sector. At the same time, these offer new business opportunities to increase the value of real estate without making continuous investment or generating ongoing additional income.
However, many roof areas of retail shops, warehouses, manufacturing facilities and industrial buildings are currently unused, although they often offer ideal conditions. In addition to the unrecognised potential, this is often due to the complexity of large projects, which can result from the number of stakeholders and the multitude of regulatory requirements. These stakeholders include project planners, housing construction companies, industrial and commercial companies, property owners, tenants, module manufacturers, installers, financiers, authorities, grid operators and metering point operators.
Current political and social discussion indicates however that rooftop solar systems will gain importance at all levels in the future. We have therefore summarised and explained the most important legal aspects in our Q&A below:
Question: Is there an obligation to install rooftop solar systems in Germany?
Answer: According to the exploratory paper published on 15 October 2021 by the SPD, BÜNDNIS 90/DIE GRÜNEN and FDP, the expansion of PV systems is to become mandatory for new commercial buildings and the rule for new private buildings. Currently, such an obligation already exists for certain cities (Waiblingen, Tübingen, Bonn to a limited extent; from 2023 Bremen, Bremerhaven, Hamburg and Berlin) and for the federal state of Baden-Württemberg (from 01/2022 for commercial properties, from 05/2022 for private new buildings, from 01/2023 for roof refurbishments).
Question: Are rooftop solar systems subsidised by the state?
Answer: Rooftop PV projects can receive direct government subsidies or special loan conditions from the KfW development bank, depending on the specific use and location. In addition, the legislator sets different incentives by means of feed-in tariffs, market premiums, tenant electricity surcharges, electricity price savings or building efficiency improvements. Furthermore, in any future coalition government of SPD, BÜNDNIS 90/DIE GRÜNEN and FDP, the existing subsidies could be significantly expanded.
Question: Rooftop solar systems are associated with the realisation of new business opportunities, what are these exactly?
Answer: Rooftop PV projects can be realised in various forms in order to take into account in the best way the different circumstances as well as the regulatory hurdles and advantages. For example, more and more customers are refraining from feeding the electricity produced exclusively into the grid, which, depending on the size of the PV system, requires participation in a complex tendering process. Other options are, for example, (proportional) self-consumption of the electricity or passing it on to the tenants of the building or to resident third-party companies within a customer facility. In this way, various taxes, levies and charges can be saved, which has a positive effect on the electricity production costs.
Question: What must be considered when implementing rooftop solar systems?
Answer: Depending on the company’s own personnel and material resources, it is possible to involve different stakeholders in the realisation of the project. This is usually done within the framework of contracts for manufacturing, maintenance, leasing and operational management. Due to the diverse number of manufacturers, installers, energy suppliers and other project planners, structured procurement within the framework of private tenders as well as support from experts with relevant industry experience can make sense, depending on the project volume. The drafting of contracts can be very extensive, especially for large projects. In addition to contractual aspects, regulatory and, in some cases, construction law aspects must also be taken into account.
Question: What makes rooftop solar systems complex from a regulatory perspective?
Answer: The Renewable Energy Sources Act 2021 contains a number of new obligations for PV systems, including the participation in tenders to determine the value to be applied (the size to be used as a basis for the subsidy), which is divided into two segments. In addition, the tenders are carried out according to numerous formal, in part strict regulatory requirements. Integration into the electricity grid and the electricity market can also be legally challenging, among other things because the legal requirements for grid connection, subsidies and self-supply have changed several times and the process has become more complex in a legal sense. PV systems and the electricity generated can also be marketed in different ways. To summarise, the complexity depends in particular on the size of the system, the amount of electricity generated, the electricity demand, the tenant structure and the personnel and technical effort required.
Q&A series: Energy & Infrastructure