Market premium scheme

The market premium model is a subsidy program for operators of photovoltaic systems that allows them to sell their generated solar power at a market-based price while simultaneously receiving a premium from the government to cover the difference between the market price and a guaranteed minimum payment. It represents a flexible alternative to the traditional feed-in tariff and offers solar system operators the opportunity to participate in the electricity market while benefiting from a stable, additional source of income. This article explains everything you need to know about the market premium model, how it works, and why it is an attractive option for many solar system operators.

What is the market premium model?

The market premium model is a support instrument that allows operators of photovoltaic systems to sell their electricity on the open market while simultaneously receiving a premium. This premium is paid as compensation to cover the difference between the market price of the electricity and a guaranteed minimum payment. Essentially, operators receive a market premium that stabilizes their income even when the market price for electricity fluctuates.

The model was introduced as part of Germany's energy transition and is enshrined in the Renewable Energy Sources Act (EEG). It promotes participation in the electricity market without distorting market mechanisms, as solar plant operators can achieve the price for their electricity on the open market. At the same time, it ensures that they have a certain degree of predictability and income security even during periods of low market prices.

How does the market premium model work?

In the market premium model, the generated solar power is initially sold on the open electricity market. The operator of a photovoltaic system can decide whether to sell the electricity through a direct marketer or to arrange for self-consumption. However, to benefit from the market premium, the operator must handle their electricity production and marketing through a recognized direct marketer.

The amount of the market premium depends on the current market price of electricity. If the market price is lower than the guaranteed minimum remuneration, the operator receives a market premium to compensate for the difference. However, if the market price is higher than the minimum remuneration, the operator receives only the market price and no additional market premium. Thus, operators benefit directly from the market during periods of high electricity prices, while receiving additional support through the market premium during periods of lower prices.

Requirements for the market premium model

In order to benefit from the market premium, operators of a photovoltaic system must meet certain requirements:

• Direct marketing: The generated solar power must be sold through a recognized direct marketer. This marketer handles the marketing of the electricity on the market and ensures that the market premium is calculated and paid out.
• Registration in the market master data register: The photovoltaic system must be registered in the market master data register of the Federal Network Agency in order to receive the subsidy.
• System size: Participation in the market premium scheme is mandatory for systems with a capacity exceeding 100 kWp. Smaller systems can participate voluntarily but may receive a higher feed-in tariff.
• Contract conclusion: A contract must be concluded with a direct marketer who sells the electricity and pays the market premium to the operator.

Advantages of the market premium model

The market premium model offers a number of advantages, both for operators of solar power plants and for the electricity supply as a whole:

1. Market-based pricing

The market premium model allows operators of solar power plants to sell their electricity at a market-based price. Unlike a fixed feed-in tariff, operators can benefit from market mechanisms and generate higher revenues during periods of high electricity prices.

2. Planning security through the market premium

Even though the market price for electricity fluctuates, the market premium ensures that operators have a certain degree of planning security. If the market price falls, the market premium compensates for the difference, so that the operators' revenues remain relatively stable.

3. Flexibility in electricity marketing

Operators can decide how they want to market their electricity. They can sell it directly through a direct marketer or consume some of the generated electricity themselves. The market premium model thus offers flexibility in marketing and using solar power.

4. Support for the energy transition

The market premium model promotes the integration of renewable energies into the electricity market. It helps to strengthen market mechanisms and make solar energy more competitive, which has a positive impact on the energy transition.

Challenges of the market premium model

Despite the many advantages, there are also some challenges associated with participating in the market premium model:

1. Market risks

Since electricity prices can fluctuate on the open market, operators of solar power plants are at risk of earning less revenue during periods of low market prices. While the market premium compensates for some of these fluctuations, operators must still be prepared for market risks.

2. Complex administration

Participation in the market premium scheme requires close cooperation with direct marketers and precise management of electricity marketing. Operators must ensure that their solar power plant is correctly registered in the market master data register and that all necessary contracts and registrations are completed in order to receive the market premium.

Conclusion: The market premium model as a flexible funding option

The market premium model offers a flexible and market-oriented way to promote the participation of photovoltaic systems in the electricity market. It gives solar system operators the opportunity to benefit from high market electricity prices while simultaneously ensuring a certain degree of income security. With the right conditions and sound planning, photovoltaic system operators can benefit from the market premium model and operate their solar systems economically while actively contributing to the energy transition.