Germany: RE law reform threatens energy transition

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In the weeks leading up to Germany’s federal election on Sunday, organizations and institutions have been tripping over themselves with proposals for a revamped funding model for renewable energies.

The German renewable energy law, known locally as the Erneuerbare-Energien-Gesetz, or EEG, is often wrongly used as a scapegoat for the sharp rise in electricity prices for both domestic consumers and small and medium enterprises. Politicians from nearly all parties are calling for fundamental reform of the law after the election.

A current analysis shows that all of the current reform ideas would hinder the country’s energy transition (or Energiewende), at the grass-roots level while making institutional investors the real beneficiaries.

There are many different ideas as to what form funding of renewable energies should take. The elimination of feed-in tariffs and the introduction of a premium market model are most often called for, as this supposedly offers a more affordable alternative, according to the proponents. To what extent reality and desire mesh with the goal of a further expansion of decentralized photovoltaic, wind and biomass energy generation has now been analyzed by the campaign The Transition — Energy in the Hand of the People.

To this end, the campaign has examined six different models submitted by political advisers and industrial associations, including the Monopolies Commission, the Association of Municipal Enterprises (VKU), the Federal Association of New Energy Suppliers (BNE), Mannheim-based energy group MVV and the Institute for Applied Ecology.

"The prospect of community energy plays no role in any of these reform proposals," says the campaign. "On the contrary, the particular interests of energy corporations and large companies, which have often thwarted energy transition in the past, are foremost. All models lead to a significant deterioration of those criteria that are fundamentally important for community energy: market freedom and investment security," reads the sobering conclusion of the analysis.

The models aim primarily for the elimination of feed-in tariff, adds Rene Mono, chief executive of the Berlin-based 100 Percent Renewable Foundation.

If many of the participants had their way, the renewable energy law would be replaced by a premium market model whereby the operators of photovoltaic and wind power facilities would market their electricity themselves via the stock exchange.

According to Thorben Becker, head of energy policy at Friends of the Earth Germany (BUND), this would, much like the introduction of a quota or a capacity cap, only lead to further uncertainty. "Any reform of the renewable energy law should not be allowed to lead to further investment insecurity," says Becker, noting that there are already enough risks involved in the building of community-operated wind and solar parks. BUND therefore insists that any reform must retain the feed-in priority as well as a guaranteed, fixed payment rate for photovoltaic and wind power facilities.

From the campaign’s standpoint there are indeed some differences in those reform proposals already analyzed. Uwe Leprich, professor at Germany’s Institute for Future Energy Systems (IZES), differentiates between technology-neutral and technology-open models. Belonging to the first category, the quota model, in his opinion, is problematic from the perspective of community energy proponents. Moreover, it is not cost-efficient as is claimed by the Monopolies Commission and the liberal Free Democratic Party (FDP). In the technology-open models, Leprich can definitely see starting points worth considering. He is of the opinion that auctions should be appraised, although he considers them to be risky due to their complexity. Experience with auctions shows that larger investors are preferred and that many successfully winning projects are never completed, says Leprich. In his view, these models could, however, lead to improved prospects for the supply of renewable electricity as well as innovative marketing models. Leprich considers it sensible to bid farewell to one standard model for the funding of renewables. Offshore wind power and biomass facilities would thus be much more manageable than photovoltaic and wind power facilities on land.

Mono adds that the renewable energy law faces the same problems as the current electricity market. In his view, it could well be that after the election that politicians adopt the German Association of New Energy Providers (BNE) proposal in preparation for a comprehensive renewable energy law reform. BUND’s Becker points out that the "current reform euphoria" will not solve the basic problem – rising electricity costs. In order to achieve that, politicians must utilize the basic mechanisms of the law.

Translated by Kevin Campbell