Wind energy has been a success story in Germany up to now. In 2018, Germany's wind power generation, both onshore and offshore, totaled nearly 60,000 MW, accounting for more than 20 percent of German electricity production. As discussed in a recent Jones Day Talks podcast, both operators of and investors in wind farms should be aware, however, of a recent amendment to the German Renewables Energies Act ("EEG"), which will increase costs of operations for many wind farms in Germany.
On December 21, 2018, the seventh amendment to the EEG was enacted. The most relevant change to come out of this amendment is the new obligation to equip wind turbines with need-controlled nighttime identification. Prior to this amendment, wind turbines in Germany with a height of 100 meters or more were required to be marked by flashing signals at night for aviation security reasons. However, the amendment requires that after July 1, 2020, plant operators will be obligated to install need-controlled nighttime identification to ensure that the signals only start flashing at night when an aircraft actually approaches. This obligation applies to both new and existing installations and therefore will require that existing wind farms be retrofitted. Moreover, it applies not only to onshore wind farms, but also to certain offshore farms, namely those in the territorial sea, in zone one of the exclusive economic zone of the North Sea and those in the exclusive economic zone of the Baltic Sea.
This obligation is not to be taken lightly. First, the penalty for noncompliance is costly. During any period of noncompliance, the feed-in tariff will be reduced to the monthly market value for the period that the operator of the wind farm remains in violation, meaning that the operator will lose the right to receive the so-called "market premium" for the power generated during any period of noncompliance. Next, this new requirement affects a majority of the wind turbines currently in operation in Germany. Indeed, according to estimates, it will affect approximately 18,000 wind turbines in Germany. Put another way, 60 percent of the approximately 30,000 wind turbines currently operating in Germany will need to be retrofitted to comply with this obligation.
The costs of retrofitting will depend on which technology is used. Until now, only rather expensive radar systems were legally permitted, at a cost of around 100,000 per turbine. The amended EEG expressly provides...