Renewables Update

Germany’s Energiewende under pressure – not because it’s not working but because it’s too successful! But the global transformation towards renewables will gain pace! in Japanese

11 July 2014 Stefan Schurig, Director Climate Energy, World Future Council

It has been a crucial moment for the German Energiewende. On Friday June 27th the Bundestag, Germany’s national Parliament decided over a draft reform of the EEG (Germanys renewable energy act) by Energiewende Minister Sigmar Gabriel. The so called EEG-Novelle includes a variety of amendments which all serve only one goal: To slow down the pace of transformation of the energy market towards renewable energy. Not because of any technical problems or insurmountable challenges for the grid. It’s because Minister Gabriel seems to take the interests of the coal and nuclear energy companies more seriously than the public’s interest.

During the last 15 years, renewable energy experienced a massive price drop and an astonishing increase in efficiency, availability and practicability thanks to the EEG. Germany increased the electricity share from 3% in 2000 to almost 27% today. On Sunday, May 11th Germany’s renewable electricity producers provided some 75% of the total power needed on that day. New record! The German Feed-in tariff also resulted into 370.000 jobs and remarkably high revenues for communities and regions. These regions create local value by saving high costs for energy imports, creating local jobs and generating tax income.

The recent boost of renewable energy sparked public and policy discussions about grid development, market integration and financial instruments needed for Germany to reach its policy target of 80% renewable electricity by 2050. And yes, these are exactly the innovations we need for the transformation of this size.

Unfortunately, the EEG-Novelle fails to address any of these questions. Instead, it strengthens the corporations and energy utilities that have failed to integrate renewables into their business model in the past decade. Instead the EEG-Novelle would rather create deficits for communities and regions. In fact, the reform is a collection of compromises that shields fossil autocracy and large energy utilities at the expense of energy consumers, citizen cooperatives and the renewable energy sector in general.

There are various points in the reform which are in urgent need of revision – too many for this editorial. The three main weaknesses are:

Exemptions for energy intensive industry

The reform continues to shield major industrial users of power from a renewable energy surcharge, which currently adds 6.3 euro cents per kilowatt-hour to the electricity bill of consumers. Exemptions for energy intensive industry are the main driver of the increasing electricity prices in Germany. Changing this was the key intention of the reform process and one of the main election promises of both governing parties CDU and SPD. However, despite these promises and contrary to the fact that the European Commission has asked to stop the exemptions due to European competition regulation, the German Energy Minister has helped to ensure that 1,600 industry users are likely to continue benefitting from the exemptions, saving them some 5.1 billion euros per year, which private households now have to pay for.

The Solar Tax- Taxing self-consumption of solar PV

The reform applies a Feed-in Tariff (FiT) surcharge to direct self-consumption. All renewable power generators larger than 10 kilowatts are now subject to a fraction of the surcharge. The additional roughly 2 cents per kilowatt-hour can hinder emerging innovative business models such as direct sales of solar power from landlords or citizen cooperatives. So far, owners of solar photovoltaic (PV) systems who use the electricity themselves and do not sell it to the grid, did certainly not have to pay the FiT surcharge, which resulted in new business models for energy cooperatives and regional energy providers. NGO’s in Germany have dubbed this absurdity the Solar tax!

Direct marketing

While the Renewable Energy Act have provided investment security by ensuring a fixed Feed-in Tariff for 20 years, the government now wants to implement mandatory direct marketing. The reform foresees the mandatory direct marketing first for renewable energy plants with a capacity of over 500 kW (from August 2014 onwards). From 2016 onward, this will also apply to installations of over 250 kW and from 2017 to installations of over 100kW. Hence, owners are forced into a marketing system with immense bureaucracy and increased risk. This disadvantages energy cooperatives and private investors from the market – which have hitherto been the backbone of the energy transition.

Personally I think this EEG-Novelle falls short in many points and, as described, can slow down the Energiewende in Germany. At least until a new government will remove the brakes and strengthen the Feed-in tariff mechanism again.

Why am I still hugely optimistic about the future of renewable energy? Because ‘the train has left the station’! Small and big scale investments in the renewable energy as well as plenty of innovations will come along no matter what Germany is doing. This EEG Novelle can indeed slow down the Energiewende in Germany, but by no means will it slow down the renewable energy uptake globally. The main reason for that is very simple: Renewable energy has become cheap and will become even cheaper! In fact it’s already the cheapest option to produce electricity in many parts of the world. And it’s coming from reliable and domestic sources without fuel costs. Furthermore, more and more people understand that the most expensive part in the energy transformation is to not use renewable energy today despite the fact that the technology is available. Because the sun and wind of today can not be used anymore tomorrow.