06 Oct 2014 | Kerstine Appunn

Positions of key stakeholders on the EEG 2.0: Business and consumers

This Factsheet lists views and positions of the the renewables sector, the industry sector and consumers on the new Renewable Energy Act (EEG) which came into effect on 1 August 2014.

German Renewable Energy Federation (Bundesverband Erneuerbare Energien – BEE)

Growth corridors for renewables: The BEE considers the targets in the prescribed growth corridor in the new EEG a mistake. The group says that the corridors are set too low and will lead to Germany failing to meet its national climate protection target of reducing greenhouse gas emissions by 40 percent by 2020. The renewable development will not be enough to compensate for the reduction in nuclear energy produced in the years before 2022. Rather than having growth corridors determined in the EEG, the BEE suggests that common planning-procedures and agreements between States should govern the “where” and “how much” of renewable development. The BEE is adamant that renewable energies are already supplying cheaper electricity than conventional power stations and should therefore not be restricted in growth.

Direct marketing of renewable energy: The BEE opposes the new rule that requires all renewable power producers to market electricity themselves. This would be costly and difficult particularly for small producers, the BEE argues. Small facilities should therefore be exempt from the direct marketing rule. Furthermore, producers should receive some form of guaranteed payment, in case their marketing provider becomes insolvent.

Competitive bidding: The BEE lists loss of investment security, rising prices, less development, loss of acceptance for renewable energies, and disadvantages for small and medium sized businesses / projects, as the main objections to a process of reversed auctions. The group says that it is very important that several rounds of testing are used to evaluate whether and how the bidding process could work. The BEE criticises that the new EEG already stipulates that reverse auctions are going to be used from 2017 onwards but does not specify how lessons learned from the pilot phase are going to be implemented. It is moreover not clear, how the experience from ground-mounted solar can be used to design the auction process for wind energy with its different conditions, the BEE argues.

Self-supply: Obliging renewable energy facilities to pay the EEG-surcharge does jeopardise the incentive to invest in renewables, according to the BEE. The group considers it the wrong signal in general to hinder renewable production for own or nearby use. If the EEG-surcharge is imposed on self-suppliers of RE, there should at least be an exemption for small facilities.

Industry reliefs: The BEE advocates that only businesses and industries that face international competition should be allowed an exemption from the EEG-surcharge. All companies should pay at least a levy of currently 1 cent per kilowatt-hour as this is the amount they save because of very low prices on the electricity exchange (Merit-Order effect) thanks to renewables. Furthermore, only companies that improve energy efficiency and are prepared to adapt energy consumption to the requirements of the national grid, should be granted reliefs, the BEE argues.

 

German Wind Energy Association (Bundesverband Windenergie – BWE)

The BWE wants the Energiewende to continue and wind power to expand. It supports feed-in tariffs, which it hails as the key to the rise of renewables in electricity production.

Growth corridors and floating caps: The BWE says growth corridors are not the right tool for promoting a targeted and sustainable development of onshore wind energy. Onshore wind energy as the most cost-efficient of the green energies in Germany should not be capped, the BWE says. The association argues that even though a cap has been used before on photovoltaics, it would not be suitable for wind power, with its considerably longer and more complex planning process. As the cap and with it remuneration expectations are “floating” (they depend on how much capacity has been built before in a year), investment in new wind farms becomes less secure. This would put off small co-operatives and citizen funded projects, the BWE warns.

Reverse auctions: The BWE says a competitive bidding process is an inappropriate instrument that will not make renewables development more efficient. If solely determined by market processes, wind energy would only be developed in the best locations. If on the other hand development is desired in other regions as well, there would have to be an authority that decides how much capacity is built where and when. The BWE argues that many projects will not be realised, especially in the beginning of the new process, causing development of wind energy to fall short of targets. High costs for auctions, strategic bidding to harm competitors and the crippling effect that stalled projects would have on producers and suppliers of wind energy technology are on the BWE’s list against the process. The association is extremely worried that small and medium sized companies and particularly wind-farms owned by groups of private individuals cannot compete with bigger investors in a bidding process. The BWE says that the experience from the pilot programme for reverse auctions on ground-mounted solar is hardly transferable to wind energy.

 

German Solar Industry Association (Bundesverband Solarwirtschaft, BSW)

The BSW wants to make solar power more cost-effective; it promotes the Energiewende and wants investment security for potential solar power producers.

Growth corridors: The market for photovoltaics has more than halved in 2013. The BSW attributes this to the decrease in feed-in tariffs by 54 percent while prices for solar power systems only decreased by 27 per cent. The cap on installed capacity is not the right instrument to make photovoltaics cheaper or increase competitiveness, says the BSW. The group says that changes made to the EEG will “not shape a sound basis for further development of photovoltaics and endanger the existence of the solar industry in Germany”. The BSW wanted to see the overall cap on photovoltaics (52 gigawatt) abandoned as it would make solar investments less safe.

Electricity for own consumption: The BSW is against imposing the EEG-surcharge on solar energy produced for personal use, arguing this would make photovoltaics investments unattractive for small and medium sized companies. The income from the EEG-remuneration would – without the exemption from the surcharge – not be enough to make the installations of solar roofs or ground mounted arrays profitable, claims the association. It says it is unfair if solar producers of energy for own consumption have to pay a higher share of the EEG-surcharge than enterprises using their own coal fired power stations.

 

The German Biogas Association (Fachverband Biogas e.V.)

The German Biogas Association represents mostly operators and manufacturers of biogas plants. It argues that biogas is the only renewable energy that can be switched on and off when it is needed and thus provide system stability. With regard to the new EEG, the Biogas Association fears a massive loss of investment into the biomass sector (1.3 to 1.5 billion euros) as both total capacity (growth corridor of 100 Megawatt) and feed-in remuneration are curtailed in the new law.

German Association of Energy and Water Industries (Bundesverband der Energie- und Wasserwirtschaft - BDEW)

The association is one of the major players in German energy policy and is generally a proponent of freemarket designs. During the EEG-reform debate the BDEW supported the integration of renewables into the market. The group also said renewables should take on more responsibilities when it comes to energy security. The BDEW is particularly keen on securing the interests of power producers and grid operators to ensure safe investment in the energy sector.

Here are some positions of the BDEW in the current EEG-reform process:

Privileges for producers of electricity for own consumption: The BDEW supported initial plans to end exemptions for small producers of electricity for own consumption (i.e. owners of photovoltaic installations with less than 10 kilowatt capacity). Hildegard Mueller, Chairwoman of the General Executive Management Board of the BDEW, stressed that all consumers connected to the national grid, should pay their share of the costs of the Energiewende.

Direct marketing: The BDEW is in favour of mandatory direct marketing for all renewable energy installations. It wanted small facilities (100-500 kilowatt) included in the new scheme. According to the association, the value of renewable energy will increase if its production is shaped by market and system requirements. The BDEW suggested the direct marketing element in the run up to the new EEG.

Competitive bidding: The BDEW supported a reverse auction system to define payments to renewable facilities from 2017 on. The group favours the greatest possible competition between bidders, saying that auctions are a good instrument to steer the amount of new renewable power and will also foster higher cost-efficiency. However, the BDEW concedes that auctions must be thoroughly tested and carefully designed to ensure meeting renewable targets and to let a wide range of actors (small utilities, peoples wind-farms, farmers etc.) participate in the Energiewende.

Growth corridors and floating caps: The BDEW supports the plan to have growth corridors for different renewable technologies, saying this creates planning reliability. It is opposed to the notion of a “floating cap” for other technologies than solar. Planning wind farms takes considerably longer than installing photovoltaic arrays. Submitting wind parks to a changing feed-in allowance (depending on the number of previously built facilities in a year) would make it hard for investors to tell how much a facility would earn, at the time of planning. This would lower the willingness to invest.

Biomass: The BDEW opposes the annual limit of 100 megawatt for new biomass. It argues that this would almost stall development of biogas plants and thereby effect the development of waste-to-energy technologies.

 

Federation of German Industries (Bundesverband der Deutschen Industrie - BDI)

The BDI calls the current design of the energy transition a “hazard scenario” for electricity intensive industries. It fears considerable damage to the international competitiveness of its members. With the new EEG, industry will bear an “even heavier burden”, the BDI says. In early 2014, it predicted a loss of 900,000 jobs if exemptions from the EEG-surcharge for energy-intensive businesses were ended. In the reform-process, the BDI argued against rules for future efficiency standards for businesses, which the government had planned for energy intensive industries that are exempt from the EEG-surcharge. The government’s goal was to deter them from using more energy than needed in order to become “electricity intensive”.

Reliefs for self-suppliers and companies: The BDI is opposed to companies paying the EEG-surcharge on electricity produced for own consumption, saying this would breach the principle of “the perpetrator pays”. The BDI insisted on existing rebates for small power plants run by companies to remain the same under the EEG. The government dropped plans to consider refurbished power stations as new and charge them with the EEG-surcharge. The new EEG now allows existing combined-heat-and-power plants to be modernised and still profit from the old relief-rules. The BDI wants to keep criteria for electricity-intensive companies generous and the number of exempted sectors and businesses high. In its newsletter, the BDI boasts that it succeeded to “temper very considerably the high additional costs and reimbursement obligations originally foreseen for industry […] and reduce the minimum amount [of EEG-surcharge] for all companies from 20 percent to 15 percent of the EEG levy” in “negotiations with the European Commission on industry reliefs”.

 

Association of municipal enterprises (Verband Kommunaler Unternehmen – VKU)

Hans-Joachim Reck, Chief Executive of the VKU, wants the political and legal framework of the Energiewende to become more predictable in order to make investments by the many regional utilities in Germany more secure. He says that many utilities have already invested in flexible gas stations  (in order to assist fluctuating renewables) but feel that the current energy policy and regulatory framework meant that these power stations were not profitable. The VKU is in favour of mandatory direct marketing for renewables and the introduction of competitive bidding. Reck says the renewable energy development has been far too uncoordinated and has to be better planned and controlled in the future. As a next step it is very important to align the electricity market design and the development of the grid with the changes made to the EEG.

Transmission System Operators (TSO) and Distribution System Operators (DSO)

The Renewable Energy Act obliges grid operators to connect new renewable facilities with the network and if necessary expand the existing grid to accommodate more input from biomass, photovoltaics and wind turbines. The renewable boom has been a challenge for grid operators for two reasons: Firstly they had to connect many new renewable producers within a rather short time and these facilities are often located in areas that are not well developed when it comes to high-voltage transmission systems. Secondly, they have had difficulties maintaining a stable power system whilst incorporating the fluctuating input from wind and solar power. Grid operators are entitled to a network-remuneration that reimburses their investments. Grid operators are vocal supporters of the newly introduced growth corridor for renewable facilities, which they see as a mechanism to better synchronise renewables development with grid expansion. More so than by the EEG, grid operators are affected by the Energy Industry Act (Energiewirtschaftsgesetz, EnWG) which is due to be amended in 2015.

 

Federation of German Consumer Organisations (Verbraucherzentrale Bundesverband, VZBV)

Attempts by the government to reduce the EEG-surcharge burden on consumers have failed, says the VZBV. Imposing the EEG-surcharge on electricity produced for own consumption by households and maintaining reliefs for energy-intensive industries will cause prices for consumers to rise, rather than fall. The VZBV suggests a different mechanism for promoting renewables. Part of the costs for renewable technology development should be covered by a state fund, financed by taxes, in order to lower the EEG surcharge paid by consumers.

 

Association of Energy Consumers (Bund der Energieverbraucher)

On costs and industry reliefs: The Association of Energy Consumers wants to see a fast development of renewable energies in Germany, but complains that the current distribution of the costs for the Energiewende is unfair. While consumers are paying 6.24 cents per kilowatt-hour as an EEG-surcharge, energy-intensive enterprises face costs of just 0.05 cents. When the EEG was amended, the Association demanded an end to industry rebates on the surcharge. They are adamant that the exemptions are in breach of the EU state aid rules. The association submitted a complaint to the European Commission in 2011. Competition Commissioner Joaquin Almunia – explicitly citing the Associations input – opened an investigation into the compliance of the EEG with EU law which did label the industry exemption unfair state aid in 2013. The German government has since resolved the issue in talks with Almunia and industry reliefs are again incorporated in the new EEG.

On growth corridors / direct marketing / competitive bidding: “Growth corridors and caps for photovoltaics and wind energy have to be deleted without replacement”, the association’s statement on the EEG-draft reads. The same applies to the new direct marketing for renewable energies. They also call a competitive bidding system that disadvantages co-operatives and small businesses unacceptable. Producers of energy for own consumption that use their own renewable or combined heat and power electricity should not be subjected to the EEG-surcharge.

 

Trade unions

The German Trade Union Association (Deutscher Gewerkschaftsbund Bundesvorstand – DGB) is in favour of mandatory direct marketing for new renewable operations as long as they help to reduce the EEG-surcharge and still allow safe investment into renewable technologies. A growth corridor for renewables, as long as it is flexible (floating cap), is also acceptable to the DGB. The DGB supports the scheme of reliefs for energy-intensive industries and production of energy for own factories and strongly opposes any change made to the amount of EEG-surcharge that companies pay. It fears that if rebates for industry are discontinued, the value creation chain in Germany would suffer and jobs would disappear.

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