Participation of local municipalities in the context of wind and photovoltaic projects

In-depth analysis

Section 6 Renewable Energy Sources Act 2021 (EEG) and the “Easter Package” introduced by the Federal Ministry for Economic Affairs and Climate Protection (BMWK)

The German government’s Coalition Agreement of November 2021 sets ambitious targets for the further expansion of renewable energies. Even without the war in Ukraine, electricity prices have recently risen significantly in Germany and elsewhere. An embargo on Russian oil and gas would have far-reaching consequences, not least another sharp increase in electricity prices. Especially against the background of the war in Ukraine and the existing reliance on coal, oil, gas and uranium from Russian sources, a massive expansion and extensive investment in wind and solar energy is imperative in order to increase the capacity of domestic renewable energies in the short to medium term. Bureaucratic obstacles must be removed and land and permits must be made quickly and easily available.

Participation of local municipalities and authorities in renewable energy plants often plays a central role for the acceptance of the plants on site and ensuring successful implementation of the rapid expansion of renewable energy projects. One instrument for participation on the local level should be Section 6 EEG (2021).

Our experts Thorsten Eggert and Dieter Lang now address some central questions that have arisen since Section 6 EEG came into force in August 2021 below, which are important in connection with many corresponding developments and transactions.

Question: What is Section 6 EEG all about?
Answer: With Section 6 EEG, the legislator created an instrument in mid-2021 for the financial participation of municipalities that are directly “affected” by the expansion of renewable energies. The provision was originally introduced as Section 36k EEG and only applied to onshore wind turbines. With the EEG amendment in August 2021, the scope was extended to include ground-mounted photovoltaic plants. The previous Section 36k EEG 2021 was transferred to Section 6 EEG 2021. Provided that the requirements of Section 6 EEG 2021 are met, plant operators may pay a voluntary amount to affected municipalities, up to a maximum of 0.2 ct/kWh, for electricity quantities actually fed into the grid. In the case of wind turbines, municipalities whose municipal area is at least partially located within a radius of 2,500 metres around the WTG’s centre of the tower are deemed to be affected. In the case of ground-mounted photovoltaic plants, the municipalities affected are those on whose municipal area the ground-mounted PV plants are located. For EEG-subsidised installations, the amount paid can be reimbursed by the grid operator. The contributions are unilateral contributions without any consideration on the part of the communities.

Question: Why is a “permission” from the legislator for financial participation necessary at all?
Answer: Within the framework of Section 6 EEG, the legislator permits payments by plant operators to communities without consideration. Such a payment (or the promise of such a payment) could very easily make plant operators liable to prosecution in the sense of a “bribe” without this explicit permission. For this reason, Section 6 of the Renewable Energy Sources Act also clarifies that the offences of bribery and acceptance of benefits under Sections 331 et seq German Criminal Code (StGB) are not applicable. Moreover, agreements that provide for such a promise would be null and void for this reason alone.

Question: Why is this so important for renewables?
Answer: It is an important goal of the legislator to promote and accelerate the expansion of renewable energies. It is necessary that the local municipalities are also involved in this process. On the one hand, they are the ones who decide on the expansion in individual cases (in the case of ground-mounted PV systems by drawing up the necessary zoning plans and in the case of wind energy through the participation according to Section 36 BauGB). On the other hand, it is important that the necessary energy transition also finds acceptance locally and thus also reduces the risk of legal challenges. Therefore, the legislator wants to make it possible for operators to financially support local communities. And this without the community having to do anything in return.

If Section 6 EEG did not exist, such agreements would first of all violate the prohibition of linkage under public law (öffentlich-rechtliches Koppelungsverbot) (cf. e.g. Section 11 (2) p. 2 BauGB or Section 56 (1) p. 2 and p. 3 VwVfG and comparable regulations accordingly). Then they would simply be null and void.

More importantly, however, both plant operators and community members would have run the risk of criminal liability. Unilateral payments to public bodies without permitted and appropriate consideration would quickly arouse suspicion of bribery or the granting or acceptance of advantages (Section 331 et seq. StGB). Therefore, the legislator has explicitly regulated in Section 6 (4) sentence 2 EEG that agreements and offers according to Section 6 EEG are precisely not considered an advantage in the sense of Section 331 to 334 StGB and do not constitute an offence.

Question: Is criminal liability of the parties involved therefore excluded? Or could an agreement still be considered as bribery of mandate holders?
Answer: If the requirements of Section 6 EEG are observed, criminal liability is excluded. The legislator, even after pressure from industry lobby associations, failed to explicitly include an exclusion from Section 108e StGB - bribery of mandate holders. However, Section 108e Criminal Code has narrower limits than Sections 331 et seq. StGB. In particular, if the agreement is properly drafted, the “concrete agreement of wrongdoing” required by section 108e StGB is likely to be lacking. Moreover, the explanatory memorandum to Section 6 EEG allows the conclusion that the exclusion of Sections 331 et seq. StGB is in any case only intended to be of a clarifying nature and the legislator has pursued an exclusion of criminal liability altogether. It must be said, however, that Section 6 EEG still leaves a number of questions open; from the developing practice on Section 6 EEG, many arrangements arise - sometimes desired by municipalities, sometimes by developers on site - which cannot be directly subsumed under Section 6 EEG in every case. Here, too, the legislator will have to sharpen things up in order to make Section 6 EEG a real success.

Question: What has to be considered in the practical structure of the payments?
Answer: The possibility of participation is limited by the legislator to a total of 0.2 cents per kilowatt hour of electricity actually fed into the grid. The main reason for this is probably to protect plant operators from excessive claims by the municipalities and to ensure the economic viability of further plant operation. The wording of the law is probably based on the assumption that payments may only be made after electricity has actually been fed into the grid. In this case, an annual payment in retrospect would be appropriate. It may also be possible to make advance payments (this is, for example, a vague point as mentioned below). If the operator makes use of subsidies according to the EEG, it can be reimbursed by the grid operator for the amounts paid in the previous year - if the electricity is sold freely on the market, e.g. via a PPA (Power Purchase Agreement) - i.e. currently especially for large PV projects - there is no entitlement to reimbursement.

Question: Are there other unclear points in Section 6 EEG?
Answer: Overall, it should be noted that the possibility of financial participation by communities is a new instrument and that both plant operators and municipality representatives feel a certain degree of uncertainty due to the possible criminal liability when leaving what is permitted by Section 6 EEG. Due to the lack of administrative practice and case law, as well as the partly vague formulations of Section 6 EEG, there are uncertainties at many points.

Question: What do the draft laws of the BMWK’s Easter package contain in this regard?
Answer: The scope of application of Section 6 EEG is to be further expanded. In particular, the version of the draft EEG 2023 presented as part of the Easter Package allows plant operators to also pay contributions under Section 6 EEG to communities affected by existing installations. In the future, if the installation operator decides to offer financial participation, all affected municipalities must be offered such participation. In the case of onshore wind turbines, financial participation by the municipalities will also be possible in future in the case of direct marketing without claiming EEG subsidies. However, reimbursement by the grid operator will continue to be made only if subsidies under the EEG have been claimed.

Summary

Despite the many ambiguities, we see a lively interest in the market (and understandably, especially among the municipalities) in concluding such agreements. Hardly any project for the construction of renewable energy plants in Germany currently gets by without questions concerning Section 6 EEG. The many existing uncertainties are coupled with the commitment of all parties involved in the creation of a (reasonably) legally secure opportunity for the municipalities to participate in, which in turn acts as an incentive to provide further land for the energy transition.

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