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Germany Moves to Tackle Rising Renewables Costs

Proposals for reforms to Germany's renewable energy support policy have been tabled by the country's conservative federal environment minister Peter Altmaier.

At a round table meeting on measures to curb the rising costs of the Renewable Energy Sources Act (EEG), Altmaier and Federal Economics Minister Philipp Rösler jointly presented a proposal.

The two ministers agreed that short-term adjustments to the EEG are necessary to curb immediate costs and, in the longer term, that the EEG needs to undergo fundamental reform.

Short-term Measures

The ministers have proposed a range of short-term measures including freezing the EEG at its current level until the end of 2014. If confirmed, the proposals would subsequently impose a maximum annual tariff rise of 2.5 percent.

The ministers also revealed plans to ensure that new and existing solar and wind parks contribute to the costs of the support program, and that energy-intensive corporations provide a greater contribution.

The short-term measures are anticipated to come into force as of 1 August, 2013.

Feed-in tariffs (FiTs) for new plants commissioned as of 1 August will be equal to the market value of electricity for the first five months following commissioning, with the exception of PV power plants. After six months the FiTs payable will be lowered for new plants with, for example, the onshore wind tariff reduced to  €8 cents/kWh from the current  €8.8 cents/kWh. However, no changes are planned for PV other than lowering of the tariffs according to the degression model. All other plants commissioned after the cutoff date will see a one-time reduction of 4 percent, while for all other existing plants commissioned before 1 August a 1.5 percent flat-rate reduction will apply in 2014, limited to that year.

Power plants commissioned before 1 August remain entitled to chose between the fixed FiT and a direct marketing option, but plants above 150 kW that start operating after the cutoff date are obliged to market electricity themselves.

The proposals also contain a provision for a one-time EEG surcharge (the so-called EEG-Soli) which is to be paid by the operators of existing renewable power plants.

A number of bonus payments will also no longer be available. For example, a liquid manure bonus payment (Gülle Bonus), which was retroactively introduced in 2008, will also be abolished.

Longer-term Reform

For the longer term, EEG costs related to the special Equalization Scheme for Energy-intensive Companies (resulting in a reduction of the surcharge for heavy electricity users) are set to rise as of 1 January, 2014, although sectors which do not face significant international competition will no longer get the support. Compensation for feed-in management measures by the grid operators will remain the same under the new proposals. Overall, the surcharge for 2014 will equal the 2013 figure of €5.227 cents/kWh.

The Industry Reacts

Inevitably, renewable energy advocates have slammed the proposals with, for example, Herman Falk, CEO of the German Renewable Energy Federation (BEE), citing a recent study by the consulting firm Consentec and the Fraunhofer Institute for Wind Energy and Energy System Technology (Fraunhofer IWES) on behalf of Agora Energy. This report apparently shows that by 2023 Germany could save some €2 billion annually if significantly more onshore wind turbines were built. “Right here, however, the Federal Environment Minister wants to put on the brakes,” said Falk.

In addition, the German Solar Industry Association has slated the proposed Energie-Soli charge, saying in a statement: “This is not only absurd, it is also legally questionable. Furthermore, it would send an entirely wrong signal to new investors by adding to the already high degree of uncertainty created by the freezing of the EEG apportionment.”

Instead of requiring operators of solar and wind power plants to pay more, they argue, the financing of the Energiewende should be distributed to environmentally harmful industrial on-site electricity generation from fossil fuels.

“In the fall of 2012, the Federal Minister for the Environment launched a broad dialogue aimed at the further development of the EEG. Now, before this dialogue could even yield results, he wants to create a fait accompli,” they conclude. Meanwhile Henning Dettmer, German Wind Energy Association (BWE) executive director, said: “Altmaier and Rösler's proposal is an embarrassment for the German government. It endangers the entire energy transition with arbitrary ideas not in line with the way the energy sector works.”

He argues that the reduction in FiTs for onshore wind power will only save €30 million. And, furthermore, he says other proposals - such as a ceiling on the renewable surcharge, a reduction in compensation for feed-in management, and FiT retroactive changes - make investments in wind power projects impossible to calculate for financing. “I expect the industry to challenge these proposals in court if they become law,” Dettmer concluded.

Similarly, the country's Biogas Association said it would “resist this brazen attempt to undermine the EEG and jeopardize the success of the energy transition”.

An Uncertain Future

Initial estimates from the German Association of Energy and Water Industries (Bundesverband der Energie- und Wasserwirtschaft, or BDEW) for 2012 show that while overall power consumption dropped by 1.4 percent over the year, renewable energy's share in gross electricity generation totaled approximately 21.9 percent, a modest step up on the 2011 figure of 20.3 percent. Meanwhile, PV's increase was remarkable: it grew from 3.2 percent to 4.6 percent in just a year.

“We should make use of the scope available within the EEG in order to adjust development targets to efficiency and security of supply criteria,” declared Hildegard Müller, chair of the BDEW general executive management board.

With federal elections looming in September it seems unlikely that these proposals will be passed into law before then.

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