German Feed-in Tariffs - Neither Contribute to Technological Innovations nor the Fight Against Climate Change?
Policy Criticism Without Scientific Perspective
Germany’s renewable energy policy, which is purported to be the most successful renewable energy policy in the world, increased the share of renewable energy consumption from 6% to 25% in just over a decade from 2000 to 2013 ⅰ . While it is achieved through rational policy mixes which have been initiated one after another since the 1990s, what produced the biggest effect should be the feed-in tariff scheme (the “EEG” in German). It is a method to guarantee access to the grid and power generation of renewables and to purchase electricity at a predetermined price in order to assure the stability of the business or to give an incentive for power generation not through old-fashioned blanket subsidies for installation. Feed-in tariffs or similar policies have now been introduced in nearly 100 countries and regions worldwide. Such policies brought about significant results in Japan since July 2012, increasing the cumulative amount of photovoltaic power generation by 2.2 times in 17 months from the introduction of such policies in the country.
However, there seem to be some people who want to claim at any cost that it was a failure.
What (Japanese) critics of feed-in tariffs or German energy policy recently take up is the report titled “Report 2014 on Research, Innovation and Technological Performance in Germany” ⅱ (in German). It is an annual report that the Commission of Experts for Research and Innovation (hereinafter, “EFI”. Expertenkommission Forschung und Innovation) which is entrusted by the German Bundestag presented to the German chancellor Angela Merkel on February 26th, 2014.
In Germany, there exist various commissions by groups of independent experts, including advisory bodies to the chancellor. There are many commissions which are very authoritative and they submit a number of important analyses or recommendations to the government. The EFI is a new commission established in 2008, to provide advice on scientific research in Germany. The above report overviews researches, technological innovations and technological performance in general in Germany. In this report of 260 pages in total, the part mentioning the renewable energy policy, particularly feed-in tariffs, includes just a few pages but it drew an opposite conclusion to those in numerous other reports and analyses specialized on the energy policy. It concluded that the EEG (feed-in tariffs) had no effect and should be abolished.
According to the EFI report, as the German feed-in tariff scheme “brings about no technological innovation in the area of renewables” and “does not contribute to measures against the climate change”, the country should “shift to the system of green certificates”.
As the effects of German feed-in tariffs in the last decade (in 20 years if we date back to the Electricity Feed-in Law 1992) have been already recognized far and wide, normally, it is not necessary to discuss it again at this point. However, it seems that the report created some uproar because it was timely published when the new coalition government was about to announce its new renewable energy policy. I heard that even the Commission of Experts, the author of the report, was surprised to receive many questions on the part related to the feed-in tariffs in the press conference.
First, on February 26th, the Federal Ministry for Economic Affairs and Energy issued a statement (in German) that it is not a comprehensive study and Germany’s feed-in tariffs brought about significant effects ⅲ . Federal Minister for Economic Affairs and Energy Sigmar Gabriel also made a same comment (in German).
Likewise, the part related to technological innovations was immediately rebutted. The EFI used the number of patent applications as an important indicator for the effect of technological innovations and the report was based on the studies of 1990−2005 and of 2000−2009. However, according to a document by the German Renewable Energies Agency (Agentur fur Erneuerbare Energien, AEE), in Germany, the number of patent applications in the field of renewable energy has risen sharply since 2008 (in English). That is, the EFI report completely ignores the situation of the last five years.
What should be noted is the statement signed by 17 prominent German and international researchers of Fraunhofer ISI, which is a globally known research institute in the energy sector, and other institutes such as ETH Zürich, DIW Berlin, the Vienna University of Technology, and University of St.Gallen. This statement which was issued on March 3rd, 2014 ⅳ against the EFI report (in German. Press release ⅴ in English) explains that German feed-in tariffs successfully diffused renewable energy technologies and elevated it to an industry. In order to analyze complex effect factors such as the development of policies and technologies or the diffusion to the society, it is necessary to make analyses from various aspects based on facts and if we make a judgment based on one factor, we will not be able to capture the entire picture. As the effects of technological innovations by feed-in tariffs, it has been specifically pointed out that the average output of wind power generators has more than doubled from 1,100kW to 2,600kW since 2000, and that the cost of photovoltaic power generation facilities decreased to one third only in the past seven years while the efficiency of power generation has significantly improved. The rising demand by feed-in tariffs triggered economies of scale and learning effects and it became a crucial factor for such developments. Furthermore, the German feed-in tariff scheme has contributed not only to technologies but also to institutional or structural reforms, and particularly as a system to facilitate financing and investment in the financial sector, it brought about reforms which enable ordinary citizens and small-scale cooperative associations or farmers to participate in the renewable energy business. The statement also explains that German feed-in tariffs brought significant innovations in Asia and other regions as the policy spreads globally as a successful experience. The statement has a strong impact as it is one made by experts who have been engaged in analyses of European renewable energy policies for more than 20 years.
In terms of the issue of climate change, the EFI report triggered criticism that it shifts blame related to problems in the dysfunctional EU Emissions Trading Scheme to feed-in tariffs. In the first place, can we say that the renewables, which is providing 25% of electricity and is rapidly expanding also in the heat sector, does not achieve any greenhouse gas reduction effect?
Please also refer to other documents that have been published in this regard, such as the position paper ⅵ (in German) of the Renewable Energy Research Association (ForschungsVerbund Erneuerbare Energien).
Finally, what surprised the author is the “recommendation” to end feed-in tariffs and shift to the trading of renewable energy certificates. The author has been engaged in studies on efforts such as green power pricing or certificates in other countries since the late 1990s, and has been involved in the design of the Japanese green certificate system. The current green certificate system in Japan is a totally voluntary scheme and in terms of policy classification, it can be said that the RPS system, which had been implemented prior to the introduction of feed-in tariffs, introduced the oversea notion of green certificate trading as a policy. Viewed in this way, it seems apparent that feed-in tariffs which achieved the introduction of renewable energy of 7,000 MW in a mere 17 months is better as a promotion measure or an industrial policy than the RPS system which introduced less than 10,000 MW in the past 10 years.
ⅰ The percentage that the renewable energy accounts for in the power consumption. Its percentage in the energy supply was 3% in 2000.
ⅱ Gutachten zu Forschung, Innovation und Technologischer Leistungsfahigkeit Deutschlands, Gutachten 2014, Expertenkommission Forschung und Innovation, 2014
ⅲ Kritik an EEG nicht nachvollziehbar, Bundesministerium fur Wirtschaft und Energie, 26 February 2014
ⅳ Wirkung des EEG – was ist die empirische Evidenz?, 3 March 2014
ⅴ Press Release: The results of research by the Fraunhofer ISI confirm that the German Renewable Energies Act has a positive effect on innovation, Fraunhofer Institute for Systems and Innovation Research ISI, 3 March 2014
ⅵ FVEE-Presseinfromation: ForschungsVerbund Erneuerbare Energien widerspricht EFI-Gutachten: Hohe technologische Innovationsdynamik in den erneuerbaren Energien, ForschungsVerbund Erneuerbare Energien, FVEE/Renewable Energy Research Association, 27 February 2014