Germany’s Federal Environment Minister cannot halt solar development

05. February 2013 By:  Sandra Enkhardt/Michael Fuhs, photovoltaik

Last week, the German Federal Minister for the Environment announced the surprise proposal to introduce a so-called "electricity price protection". This would be catastrophic for the development of renewable energies. However, the chances of success for his proposal are quite limited.

Peter Altmaier

Altmaier surprised many with his proposal.

Last week, there was both good news and bad news from Germany. The bad news was that the German Federal Minister for the Environment Peter Altmaier caused a commotion on January 28 with a concept that calls the further development of photovoltaic technology into question. The good news is that he encountered overall resistance. Presumably he won’t succeed with it.

The plan, titled "Proposal for Introduction of Electricity Price Protection in the Renewable Energy Sources Act [EEG]" was sloppily prepared – a fact that the wrong date on the paper already indicates (2012 instead of 2013) – and is illogical.

What is logical at best is the fact that Altmaier aims to engage in election campaigning with the price of electricity, since he plans to push through his changes even before August. Elections in Germany will be held in September or October and the coalition government of the CDU, CSU and FDP, in which Altmaier (Christian Democratic Union) is a member, has to be concerned with its reelection.

Until now, it was the politicians from the co-governing FDP (Free Democratic Party) who purported to be advocates of low electricity prices and who attempted to impede the development of renewable energies. The fact that Altmaier aims to wrest this campaign topic from his coalition partner should be seen against this backdrop. The coalition partners have long since behaved as competitors.

The main point of contention is the so-called EEG reallocation. It pays for the feed-in tariff (FIT), which has so successfully led to the development of wind, solar and bio energy in Germany. Consumers of electricity have to pay it; although the present government has widened the exemptions.

According to the definition, companies requiring large quantities of electricity are excluded. This in turn increases the reallocation for small-scale consumers. The reallocation is specified in autumn of each year for the following year – thus this year during the election campaign.

In order to limit the cost of electricity, the CDU Federal Minister for the Environment wants to freeze the EEG reallocation for 2014, and in 2015 it is to increase by a maximum of 2.5%. Currently the reallocation amounts to €0.5277/kWh, approximately 20% of the entire price of electricity. It must be paid by small and medium-sized consumers of electricity in particular. It finances the feed-in tariffs for electricity from all renewable sources of energy.

Altmaier’s electricity price fuse should blow as soon as there insufficient funds available in the reallocation till that is constantly being replenished. With a blown fuse, the electricity from new solar and wind-powered plants would simply not be remunerated for a certain period. Payments would resume again only if enough money has been accumulated on the reallocation account.

If, for example, offshore wind installations are developed – which to a certain measure makes sense –the till could quickly empty, and then the operators of new solar plants would not receive any more money for a period.

In order to prevent the fuse from blowing so quickly, Altmaier proposes that the companies requiring large quantities of electricity be a little less exempt, that a "minimum reallocation" also be applied to private consumption of electricity (which makes private consumption even less attractive) and to collect an "energy solidarity tax" from operators of existing plants.

What is new about his suggestions is above all that it affects all renewable sources, including offshore wind installations. Additionally, the priority measure does not represent a cut in remuneration, but rather conditions are worsened through the back door.

What is also new is that the terms and conditions for operators are to be worsened retroactively. Even if he is able to muster a political majority, it remains unclear whether such a law is constitutional and may not be challenged before the constitutional court.

Tactical election maneuver

On one hand Altmaier’s approach is clever. The closer the election day, the sooner the announcement of the EEG reallocation for next year. It is certainly possible that it will increase again and discussion about the price of electricity would also begin again.

In fact, the reallocation does not increase as a result of additional photovoltaic installations (per gigawatt of installed output there are in principle only approximately €0.0015/kWh in higher reallocation costs), and he presumably will not succeed with his proposal. However, this does not seem to matter. He can claim that he wanted to do something against the increase in the price of electricity.

Nevertheless, the collateral damage that he is prepared to accept or perhaps even intends to provoke is considerable. Thus the opposition politician Hans-Josef Fell (Alliance ‘90/The Green Party) and the German Renewable Energy Federation (BEE) rightfully criticize the devastating effect this will have on investors if the FIT for new installations is suspended and existing plant operators are forced to make back payments.

"This would rob all of those who invest in the environmentally-friendly reconstruction of our power supply of any planning security," remarks Dietmar Schütz, president of the German Renewable Energy Federation. Altmaier has also met with resistance even within his own ranks.

How lacking in structure and planning the paper really is can be demonstrated by looking at the causes of any possible increases in the price of electricity. The actual problem behind the currently increasing EEG reallocation is in fact not the construction of additional solar electricity plants, but the method according to which the reallocation is calculated.

The reallocation is derived from the difference between the FIT and the purchase price on the spot electricity market. The more electricity is fed in from renewable energy sources, the more the purchase prices on the spot electricity market decline and the reallocation increases through the difference. Thus Altmaier does not solve the problem of unfair calculation of the reallocation, but rather messes around with the symptoms.

It is certainly welcome news to the renewable energy industry and the opposition that Altmaier wants to reduce and limit the much criticized special arrangements for companies requiring large quantities of electricity. But the fact that there is something in the proposals that every interest group may welcome does nothing to change their haphazardness.

Even if Altmaier is unable orient his politics on the rejoicing from one clientele, the reverse conclusion is likewise wrong – that is, he inflicts a little pain on everyone, and so what he does is correct.

The evaluation of Altmaier’s proposals is accordingly more than negative. Thus the opposition politician Hans-Josef Fell (Alliance ‘90/The Green Party) and the German Renewable Energy Federation (BEE) rightfully criticize the devastating effect this will have on investors if the feed-in tariff for new installations is suspended and existing plant operators are forced to make back payments.

"This would rob all of those who invest in the environmentally-friendly reconstruction of our power supply of any planning security," remarks Dietmar Schütz, President of the German Renewable Energy Federation. The proposals have nothing to do with the necessities of energy policy and contradict Altmaier’s declaration of wanting to make a successful project out of the change in energy policy. Altmaier has also met with resistance even in his own ranks.

It cannot be stated often enough: The debate on the price of electricity only scratches the surface. According to an analysis carried out by Fraunhofer Institute for Solar Energy Systems (ISE), the price of electricity rose from the year 2000 to the present by €0.13/kWh. Thus the EEG reallocation does not account for even as much as half.

Furthermore, of the €0.5277reallocation, only a good two cents account for the pure costs of subsidies for renewable sources of energy, while the privileges for companies requiring large quantities of electricity cost €0.122. A total of €0.067 must be paid this year, because too little was reallocated last year.

Without this increase, without the increase for the industry privileges and without the increase for the so-called liquidity reserve, the reallocation for 2013 would hardly be higher than for 2012. Moreover, electricity only constitutes a smaller share of the energy costs of a household. The price increases for heating oil, gas and gasoline have increased much more sharply in recent years.

A hopeless proposal

It is still unclear how Altmaier plans to cast his proposal in the form of a law and introduce a draft into the parliamentary process. Even if the German Bundestag or Lower House of Parliament should approve it, questions remain over the second chamber of parliament, the Bundesrat or German Upper House of Parliament. There the government coalition lacks a majority.

In formal terms, it may be that the Upper House of Parliament is not required to approve it at all. In any case, it may appeal to a so-called mediation committee and postpone the project with relative ease until after the parliamentary elections.

However, since the change in energy policy enjoys a large consensus among the population in all of the surveys to date and Altmaier not only undermines the FDP with his proposals, but also does harm to his own credibility, the chances for his proposal are quite limited.

Translated by Alan Faulcon.

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Sylvia Minton | http://www.minton-associates.com

Tuesday, 05.02.2013 18:39

In the solar market, as in any industry, success is tied to continuity. Germany will succeed with its Energiewende, but it will take a level of political continuity to accomplish this tremendous task.

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