In this strategic insight report, we focus on the new EEG and the road towards 2030. We will analyse highlights of the new law and its expected impact on renewables buildout and revenues. Moreover, we tackle the question of when we can expect large-scale merchant-based renewables in the market and phase-out of government support.
The key highlights are:
- The new EEG 2021 enshrines the Net Zero target for 2050 and sets a more ambitious and clearer RES buildout trajectory until 2030, though changes can be expected given the uncertainty of demand projection and recently introduced higher EU climate ambition
- The two new auction formats for rooftop solar and innovative plant combinations can be expected to spur new business models
- Post 2030 we expect capture prices rise to 50 52 EUR/MWh in early 2040 ’s before decline to 42 44 EUR/MWh by 2050 offering attractive merchant tail revenues with project IRR increase of 1-2% for current investments in EEG assets
- Industry survey suggests hurdle rates to be 4-6% for PPA assets (10 year PPA) and 7.5 10% for fully merchant assets. For fully merchant assets, jumping the hurdle rate in next decade will remain challenging even for low cost projects. 10 year PPA based projects can jump the hurdle rate in case of low cost projects
- An early abolishment of EEG support before 2030 will likely put the 65 target at risk Even if the most optimistic case, merchant buildout will only lead to a RES share of 59 in gross demand if support is phased out post 2025 Without direct subsidies, a carbon price of 66 125 EUR/MWh in 2030 is necessary to spur enough merchant buildout for the 65 target
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