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Glossary · Energy industry & energy transition

Feed-in Premium

feed-in premium Feed-in Premium market premium renewable energies support scheme electricity market

Feed-in premium, in German usually called Einspeiseprämie, refers to a support payment for electricity fed into the grid, paid in addition to the market revenue. The operator therefore does not receive a purchase price set by the state. It sells its electricity itself or via a service provider on the market and receives a premium on top. In German renewable energy law, the most important form of this model is called the market premium.

The premium is paid per quantity of energy generated and actually fed in, as a rule in cents per kilowatt-hour or euros per megawatt-hour. It therefore relates to electrical energy and not to installed capacity. A five-megawatt wind turbine does not receive the premium for its rated capacity, but for every kilowatt-hour actually fed in. This matters: support costs, market revenues and incentives depend on the quantity of energy generated. Grid connection, land requirements and the contribution to firm capacity, by contrast, depend on other variables.

Distinction from the feed-in tariff and the contract for difference

A feed-in premium lies between a fixed feed-in tariff and purely market-financed electricity generation. Under a fixed tariff, the operator receives a rate set in advance for every kilowatt-hour, and the market price hardly matters for its revenues. Under a feed-in premium, by contrast, the market price remains part of the revenue calculation.

  • Fixed premium: A constant surcharge is added to the market revenue. If the market price rises, total revenue rises too. If it falls, total revenue falls. The operator thus bears a considerable price risk.

  • Sliding premium: A target value is set, in the EEG the anzulegender Wert (the "applicable value"). The premium compensates the difference between this value and a reference market value. If the market value rises, the premium falls; if it falls, the premium rises. Such a model is also called a sliding market premium.

  • Two-sided contract for difference: Under a two-sided CfD, payments flow in both directions. If the reference price is above the agreed value, the operator must pay back excess revenues.

Not every feed-in premium is therefore a contract for difference. The German market premium under the EEG 2023 is one-sided. Annex 1 to the EEG calculates it as the applicable value minus the monthly or annual market value. If the result is below zero, the premium is set to zero; there is no repayment. A simplified example: with an applicable value of 7 ct/kWh and a market value of 5 ct/kWh, the premium is 2 ct/kWh. If the market value is 9 ct/kWh, the premium is zero, and the operator keeps the higher market revenue. Which reference value applies depends on the date of commissioning or of the award. Installations commissioned or awarded before 1 January 2023 generally settle on the basis of the technology-specific monthly market value and on a monthly basis. Other installations settle on the basis of the annual market value and on an annual basis.

Why the premium matters for the electricity system

Fixed feed-in tariffs greatly accelerated the ramp-up of wind, photovoltaics and biomass because they offered predictable revenues. As the share of these installations grew, however, it became clearer that the electricity system needs not only enough electricity over the year. Generation, consumption, grid capacity and balancing energy must also match in time. The feed-in premium is therefore intended to bring operators closer to the electricity market, usually via direct marketing. In this case, a direct marketer or the operator itself sells the electricity on the exchange, over the counter or via supply contracts. This requires forecasts, marketing and balancing group responsibility. If actual generation deviates from the forecast, balancing costs arise. Under the fixed-tariff system they were spread more strongly across the general public; under the premium model they are borne, at least in part, by marketers and operators.

The physical characteristics of generation do not change as a result. A photovoltaic installation still depends on solar irradiation, a wind turbine on wind availability. Market exposure improves forecasting, marketing and the response to prices. It does not replace storage, grid capacity or firm capacity. Commercial marketing is therefore something different from technical controllability.

Incentives at low and negative prices

The design becomes particularly important at very low or negative electricity prices. With a sliding premium based on a monthly or annual average, the premium per kilowatt-hour is fixed within the settlement period. Without a counter-rule, feeding in then pays off even at a negative exchange price, as long as the premium is higher than the amount the operator has to pay for the offtake. The installation thus continues to feed in even though the price signals a surplus.

Germany has responded with the gradual tightening of Section 51 EEG. Which rule applies depends on the date of commissioning or of the bid deadline:

  • Until the end of 2015: no reduction.

  • 2016 to 2020: 6-hour rule. Support lapses only after six consecutive hours of negative prices.

  • 2021 to 2022: 4-hour rule.

  • 1 January 2023 to 24 February 2025: staggered 4-3-2-1-hour rule.

  • Since 25 February 2025 (Solarspitzengesetz, the "solar peak act"): The applicable value falls to zero from the first quarter-hour with a negative spot market price. In return, the support period is extended by the quarter-hours concerned, for PV installations via a seasonally weighted time allowance. For installations below 100 kW, the new rule applies only after an intelligent metering system has been installed.

  • A special rule applies to certain biogas installations subject to tendering: support lapses already at spot market prices of up to 2 ct/kWh.

Existing installations can switch to the new rule voluntarily. The prerequisites are an intelligent metering system and a declaration in text form. In return, their applicable value increases by 0.6 ct/kWh. Such rules determine whether installations voluntarily curtail output in times of surplus and whether flexibility pays off.

In the case of wind and photovoltaics, there is also a simultaneity effect. If many similar installations feed in at the same time, their average market value falls. This is called the cannibalisation effect. With a sliding premium, the support compensates for this loss of value. While this sustains the build-out, it does not answer the question of how storage, flexible demand, grid expansion and dispatchable generation will grow alongside it.

Distribution of risks and costs

A feed-in premium above all distributes risks. More predictable revenues lower the cost of capital. This is particularly important for wind and solar installations because they have high upfront investments and hardly any fuel costs. If revenue risk rises sharply, capital providers demand higher returns. A model that appears closer to the market can thus become more expensive overall. The other side is borne by consumers, the public budget or levy systems, depending on the financing. With a one-sided sliding premium, falling market values increase the support payments. Rising market values do relieve the support system, but excess revenues above the applicable value remain with the operator. This is exactly where two-sided contracts for difference come in.

Responsibilities are also divided. Legislators and regulators determine eligibility for support, reference values, tenders and the rules for negative prices. Grid operators remain responsible for connection and grid security. Direct marketers take on marketing and the balancing group. Installation operators bear investment and operating risks as well as, depending on the model, part of the revenue risk.

Legal developments: EU requirement for two-sided CfDs

With the 2024 electricity market reform, Article 19d was inserted into the EU Electricity Regulation 2019/943. The amended version is based on Regulation (EU) 2024/1747. Under it, direct price support schemes for investments in new installations must be designed as two-sided contracts for difference or as models with equivalent effect. This concerns, among others, wind, solar, geothermal, run-of-river hydropower without reservoir and nuclear energy, and applies to contracts from 17 July 2027. For hybrid offshore projects connected to several bidding zones, 17 July 2029 applies. The European Commission has published guidance on the design. According to it, such contracts should preserve as far as possible the market incentives of comparable unsupported installations.

For Germany, the Federal Cabinet adopted a government draft for the EEG 2027 on 29 July 2026. It provides for two-sided contracts for difference for supported direct marketing. A cabinet decision is not yet applicable law. Until a new regulation is adopted and enters into force, the one-sided market premium under the EEG 2023 applies. For existing installations, the rules that were decisive at the time of commissioning or award generally continue to apply.

Typical misunderstandings

  • The premium is independent of the market price: In sliding models, its amount depends precisely on the market value.

  • Direct marketing means full system responsibility: Selling on the exchange does not mean that an installation contributes to peak load or that its feed-in follows demand.

  • Low support payments mean high profitability: At high market prices, the premium can be low even though the installation remains secured by the support framework. High premiums often result from low market values, not necessarily from high installation costs.

  • Every market premium is a CfD: The German market premium under the EEG 2023 does not provide for repayment of excess revenues.

Feed-in premiums show that support is not only a question of the quantity of electricity. They determine how market revenues, price risks and investment security relate to one another. The term thus denotes less a single payment technique than an interface between generation support, direct marketing and short-term price signals.

Sources

Related glossary entries

Edited by eCMS on 11.11.2026 19:47

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