On 21 September 2023, the German Parliament passed the heavily discussed German Federal Act on the Increase of Energy Efficiency (Energieeffizienzgesetz – EnEfG) that aims at significantly increasing energy efficiency requirements for companies and data centers in particular.
Besides its major impact on companies’ and data centers’ obligations to turn to a higher degree of energy efficiency, including the treatment of waste heat, the EnEfG is also accompanied by extensive reporting, publication and trans-parency obligations. Due to the expected material consequences of this new law to companies and data centers alike, we have published a first Client Alert illustrating the most important regulations of the initial draft version of the law (“Initial Draft”)1 in May 2023.2 With the EnEfG now being passed by the Parliament, it is time to highlight its key regulations to be complied with by companies and data centers in Germany.
Introduction
Energy efficiency requirements applicable to companies and data centers operating in Germany shall be tightened by additional requirements introduced by the EnEfG.3 This act will build on, and supplement, the already existing regulations set forth by the German Federal Act on Energy Services and Other Energy Efficiency Measures (Energiedienstleistungsgesetz – EDL-G).4
The EnEfG particularly aims at transposing European energy saving and efficiency requirements into German law. As the EU published its new Energy Efficiency Directive 2023/1791 in the Official Journal of the European Union on 20 September 20235, the legislation on energy efficiency has not only in Germany been subject to new developments which will most probably have significant influence on the market.
In any case, further developments should still be monitored by market participants, especially as the German legislator already announced that the EnEfG may have to be amended in due time in order to comply with the new European energy efficiency targets.
Companies
In high-level terms, companies in Germany will have to comply with the following requirements according to the EnEfG proposal:
- Companies with an energy consumption of more than 7.5 GWh on average throughout each of the last 3 calendar years will be obliged to establish either an Energy Management System (EnMS) that complies with the German industry standard DIN EN ISO 50001 or an environmental management system, the latter in accordance with the European Regulation (EC) No 1221/2009 on the voluntary participation by organisations in a Community Ecomanagement and Audit Scheme (EMAS). Insofar, the law provides for a transitional period of 20 months. The German government estimates that c. 3,500 companies in Germany will have to implement an EnMS or an EMAS for the first time as a result of the new legislation.
- Companies with an energy consumption of more than 2.5 GWh on average throughout the last three calendar years shall establish precise and practicable plans to implement energy saving measures on the back of the data generated through an EnMS or EMAS or on the basis of energy audits conducted pursuant to the EDL-G. Such plans have to be certified by third parties and subsequently be published. Insofar, the law provides for a transitional period of three years.
- Companies with an energy consumption of more than 0.5 GWh per year are obliged to conduct energy audits in accordance with the German industry standard DIN EN 16247-1 if they do not implement a more complex EnMS or EMAS. In any case, such obligation applies to those (large) companies only that does not qualify as small-medium enterprises (SME) in terms of the criteria under EU regulations.6
- Companies with an energy consumption of max. 0.5 GWh are not subjected to any specific regulations, except (large) companies that do not qualify as a SME: such companies have to report a rather limited set of data to the competent authority.
- In addition, as regards waste heat, companies with an energy consumption of more than 2.5 GWh on average throughout the last three calendar years will be obliged to consider measures that aim at avoiding and reducing waste heat. Where waste heat cannot be avoided, it shall be re-used, either by the company or by a third party. Upon request, such companies have to disclose a set of information vis-à-vis operators of heat grids who may be interested in re-using waste heat. Further, such companies will have to report waste heat related data on a yearly basis to the authorities.
At this stage, the following seems us to be most noteworthy:
- Companies operating in Germany will have to invest in order to meet the new energy saving and efficiency requirements.
- A number of companies will face the burden to publish plans and data. It is neither clear where such plans are to be published (likely on the companies’ websites) nor is it possible to determine to which extent such documents can be redacted to protect business secrets.
- Last but not least: The definition of “company” is unclear. In particular, there are no rules at all for the time being dealing with companies groups (holding structures, Private Equity structures etc.). There will be a high degree of legal uncertainty in determining the addressees of the new rules if this is not clarified in the course of the further legislative process.
Climate neutral companies
The German government will be empowered to define by way of a separate federal ordinance those criteria that are to be met by companies that want to denote themselves as being “climate-neutral companies”. This seems to be a helpful approach to avoid misleading statements and advertisements – as well as relating litigation that already occurred in front of German courts.
Data Centers: New detailed framework
The EnEfG provides for a highly detailed framework governing energy and waste heat related features of data centers in Germany.
Key principles and objectives of the new regulations may be summarized as follows:
- EnEfG established rules applicable to both the operator of a data center and “the operators of IT technology” (Betreiber von Informationstechnik), the latter meaning the users of co-location data centers.
- The new rules will apply to new data centers as well as to existing data centers. By way of example, even existing data centers will have to provide for a power usage effectiveness (PUE) of max. 1.5 by 1 July 2027 at the latest. By 1 July 2030, existing data centers must even comply with a PUE of max. 1.3 on a permanent average over the year (current average PUE in Germany is 1.7 according to the German Government).
- More urgent is the need for all data centers (including already existing data centers) to procure by 1 January 2024 at the latest a quote of 50 % of electricity from renewable energies. From 1 January 2027, even 100 per-cent of electricity from renewable sources must be procured.
- Operators of data centers shall be obliged to implement either an EnMS or an EMAS as of 1 July 2025 at the latest. The results of such assessment shall be certified by a third party.
- Energy efficiency related data shall be published in an “Energy Efficiency Register” (Energieeffizienzregister). It is the legislator’s explicit intention to foster competition between data centers by making energy related data accessible to both private and public customers who may want to consider such data when procuring data center services.
- Customers shall be entitled to receive their energy related data from data centers so that such data can be considered in the customers’ ESG and CSR reportings.
Data Centers: Use of waste heat
A focus of the EnEfG is, however, the use of waste heat of data centers. In general, such waste heat shall be re-used more frequently. Consequently, operators of data centers shall be obliged to record data and to transfer data to the authorities that make such data publicly available by way of a dedicated tool (“Plattform für Abwärme”).
Further, strict requirements dealing with the re-use of waste heat are explicitly meant to have an impact on the decision of investors to allocate data centers in areas where local, regional or industrial heat grids can be accessed that offtake waste heat.
In this context, the German legislator is likely to expect synergies with the currently discussed Heat Planning Act (Wärmeplanungsgesetz), for which a corresponding draft law was published in August 2023. This draft law is intended to oblige communities to carry out heat planning in their municipal area and to set up appropriate heat networks. Such setup of heat networks may also create opportunities for data center operators, in particular with regard to possible re-use options of their waste heat.
Legislative procedure – next steps
As a next step, the Second Chamber of the German Parliament (Bundesrat) will now review the EnEfG and is given the opportunity to raise any objections. If the Bundesrat does not raise objections, the EnEfG will ultimately enter into force after its announcement in the Federal Law Gazette (Bundesanzeiger).
Given the time schedule of the Bundesrat’s next meetings, we would expect the Bundesrat to review the EnEfG in its scheduled meeting on 20 October and consequently, the EnEfG to enter into force in course of November at the latest.
EnEfG vs. Initial Draft
In comparison to the Initial Draft, the EnEfG has again tightened energy efficiency requirements for companies and data centers:
- Companies: According to the EnEfG, companies with an energy consumption of more than 7.5 GWh on average throughout the last 3 calendar years will be obliged to establish an EnMS or an EMAS. The Initial Draft, however, foresaw such obligation only for companies with energy consumption of more than 15 GWh. The German legislator therefore extended the scope of the law for companies.
- Data centers – electricity supply: In contrast to the Initial Draft, the EnEfG does not provide for the obligation to procure electricity from non-subsidized renewable energy sources anymore. Rather, the procurement of electricity from subsidized renewable energy sources is also feasible under the EnEfG. This may lead to less bureaucracy and the opportunity to benefit from a broader market to procure electricity.
- Data centers – PUE requirements: Operators of such data centers that are commissioned from 1 July 2026 must pursuant to the EnEfG ensure a PUE of max. 1.2 instead of max. 1.3 as proposed by the Initial Draft. The EnEfG therefore tightened the PUE requirements for certain data center operators.
Outlook
Energy efficiency and energy saving requirements will be the new “hot topics” for companies and data center operators.
Additional obligations and on-going legal developments in those fields will likely raise the need for detailed legal expertise and will trigger additional investments for companies and data center developments in Germany.
Footnotes
1. The Initial Draft can be found here.
2. Our Client Alert dated May 2023 can be found here.
3. The passed version of the EnEfG, as well as information on the legislative process can be found here (in German only).
4. EDL-G can be found here (in German only).
5. The new EU Energy Efficiency Directive 2023/1791 can be found here.
6. SME criteria can be found here.
