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Germany Must Manage Growth and Costs of Renewable Power, IEA says

While there is much to celebrate about the current direction of Germany’s energy policy, the nation must take steps to manage both the growth and the cost of its renewable power capacity, the International Energy Agency (IEA) said in its new country report.

IEA executive director Maria van der Hoeven, launching the report at the German Ministry of Economics and Technology in Berlin, called parts of the nation’s progress on energy policy since the agency’s last review in 2007 “impressive” and “a remarkable achievement”. But she said there are still significant issues that must be worked out in order to ensure the success of Germany’s energy transition, or Energiewende.

While the feed-in tariff (FiT) support offered by the Renewable Energy Sources Act (EEG) has enabled dramatic expansion of renewable power coupled with significant cost reductions, the federal government has been “less successful” in managing the volume of new renewable capacity, van der Hoeven said. She lauded the recent growth of German photovoltaics (PV) at more than twice the annual capacity set out in the National Renewable Action Plan (NREAP). But she said rapid and uncontrolled PV deployment has become a major policy concern for Germany, and represents a significant cost for consumers. PV must grow in parallel with grid development and in a controlled manner in order to bring new capacity closer to market needs, the IEA cautioned. PV produced 27.6 TWh in 2012, or 4.6 percent of total electricity production — a 47 percent rise from the previous year. (Wind produced 46 TWh in 2012, or 7.3 percent of total electricity production; biomass accounted for 5.8 percent and hydropower made up 3.3 percent. Renewables in total accounted for 21.9 percent of Germany’s energy mix in 2012.)

The political debate currently raging over the Energiewende raises necessary questions about the cost of the EEG and who pays, said van der Hoeven. In 2013 the surcharge supporting the EEG will add €60 to the average annual household electricity bill; this cost will especially affect low-income households. Large energy-intensive industries that use more than 10 GWh/year are granted a significant exemption: they pay €0.0005/kWh on 90 percent of the electricity they consume, and the full surcharge on the remaining 10 percent. Industries that generate more than 100 GWh/year pay the reduced surcharge on 100 percent of the electricity they use. It is rumoured in Germany that some plants are increasing their energy use at the end of the year in order to qualify for the reduced rate for the following year.

Van der Hoeven called current energy costs for households and small businesses “too large” and “unsustainable." The IEA says the government must reduce the costs of the EEG, distribute those costs more equitably, and ensure that grid investments deliver the most efficient outcome for consumers. Van der Hoeven stressed the need to reform the exceptions for large energy-intensive industries, but she cautioned that this should be done in a way that avoids driving industry elsewhere. In February 2013, the Minister of Economics and Technology and the Environment Minister jointly announced a short-term amendment designed to rein in the rising EEG surcharge; the IEA encourages Germany to maintain this path.

Germany's electricity networks have been under pressure since the nuclear phase-out began, especially during the winter of 2011-12. Van der Hoeven stressed that expanding the transmission and distribution networks is the most important means of transforming the nation’s energy supply, although new grid construction has been “patchy” and consenting procedures are a major stumbling block. The Network Expansion Acceleration Act will streamline these procedures, but it will cost €70 billion at a time when public opinion is divided on paying more for the Energiewende. The IEA points to recent legislation assigning the authority to issue planning approval to the Federal Network Agency rather than, as is currently the case, leaving approval to the states — at the borders of which, van der Hoeven says, many projects are stopped due to planning hurdles.   

The IEA also called for Germany to use natural gas as a flexible medium-term power source and a way of balancing variable renewables along the road to a future low-carbon power sector. Gas can also help Germany meet its European 2020 climate targets without the 8.4 GW of nuclear capacity it has shut down so far. A 10-year national gas grid plan was provisionally approved in 2012 (with a request for changes) by the Federal Network Agency. The IEA also recommended a focus on electricity storage.

Lead image: Berlin's Reichstag is powered by renewable energy. Credit: edb on Shutterstock

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