06 Oct 2014, 00:00

Positions of key stakeholders on the EEG: Government and federal states

This Factsheet lists views and positions of Germany's federal government and the 16 states (Bundesländer) on the new Renewable Energy Act (EEG) which came into effect on 1 August 2014.

Federal Government, Berlin

Since the first Renewable Energy Act in its current form came into effect in 2000, all German governments have in principle supported the increase in renewables, mostly by giving their continuous support for feed-in tariffs. Feed-in tariffs granted to renewable producers under the EEG were decreased in 2002, 2003, 2004, 2009 and 2012. This process was intended to provide an extra incentive for the renewable industry to increase efficiency and produce technology more inexpensively. Other elements, e.g. the market premium payment when renewable producers sell their electricity themselves rather than taking the set feed-in fee (EEG 2012) were introduced when government wanted to make renewables more compatible within the existing energy market. Whilst there had been discussions on how much feed-in tariffs should decrease for the different technologies and about different ways to integrate renewables into the national grid and power market before, the first time that the existence of the EEG and its principles were seriously contested was in 2012/2013. The then Minister for the Environment Peter Altmaier (Christian Democrats) concluded in an interview in February 2013 that support for renewables was getting too expensive, claiming that the programme would run up costs of 1 trillion euros by 2040, and called for a freeze of electricity prices (Strompreisbremse). His calculations were widely contested – the ministry itself, after being challenged by the Green parliamentary group had to admit that Altmaier’s statement “was not based on a specific calculation but indicated an order of possible magnitude”. The minister was criticised for not incorporating falling prices for renewable technologies, for not considering costs of conventional power stations and their (fossil and nuclear) fuel and for not taking into account the costs for environmental and climate damage, avoided by the use of renewables. Other politicians estimated costs of 600 billion euros. Professor Michael Frondel from the Rheinisch-Westfälisches Institut fuer Wirtschaftsforschung (RWI) said that at this point in time, nobody could legitimately assess the actual costs for the energy transition. Nonetheless, Altmaier’s statement triggered an ongoing public debate about who was paying for the Energiewende and how much. It put a reform of the EEG firmly on the agenda of a new government elected in autumn 2013. The coalition government of Social Democrats (SPD) and Conservatives (Christian Democrats, CDU) headed by Chancellor Angela Merkel (CDU) presented a draft of the reformed bill in March 2014. It was approved by parliament and the upper house in July and comes into effect on the 1 August 2014.

What government wants and why: The EEG is the tool to raise Germany’s share of renewables in electricity consumption. In 2050 at least 80 per cent should be covered by renewable energy. One of the main objectives of the new EEG, according to the German government, is reducing the cost of the Energiewende (both for consumers and the economy). It admits that costs of the EEG-surcharge are only partially influenced by rules in the EEG (mainly by the level of feed-in remuneration, the amount of new renewable installations built and the amount of consumers exempt from paying the surcharge) whilst other factors such as the price for electricity at the exchange or prices for conventional power and for carbon emissions (European Union Emission Trading Scheme) cannot be controlled by the EEG. Another important function of the EEG 2014 is ensuring planning security for the energy industry.

Growth corridors for renewables: In order to better plan the development of renewables and keep costs down, the government wants to limit renewable growth (floating or absolute caps, also called growth corridors on wind, solar and biogas). It believes that this will achieve a concentration on the most cost-efficient technologies. The cap also includes a degression mechanism for renewables-remuneration which again is supposed to lower costs. The government says that by controlling renewables growth the development can be better synchronised it with the necessary expansion of the power grid. The government justifies the cutback of biogas development with the limited potential of this technology to further lower cost and with pressure from the European Commission to phase out food-based biogas fuel.

Direct marketing: Renewables are to be integrated better into the electricity market by introducing mandatory direct marketing of renewable power.

Competitive bidding: After 2017, remuneration paid to new renewable installations will be defined by “technology-specific” tenders. Government stresses that all other alternatives such as a quota-model have been considered and discarded. Apart from feed-in tariffs, only the tender-system is seen as viable and will be tested for solar farms in the next three years. Ground mounted solar arrays have short planning and permission periods and are comparatively cheap in the planning process, government states in its justification for the EEG 2014. The Ministry of Energy and Economy gives two main reasons for abandoning feed-in tariffs for the auction model:
1) Tenders are the instrument favoured by the European Commission in their Guidelines on state aid for environmental protection and energy 2014-2020 and Germany wants to follow these in order to avoid investigations by the EU;
2) Establishing renewable remuneration through competitive bidding is supposed to lower the overall costs of the Energiewende. A new legislative procedure will be required in order to implement the competitive bidding process into the EEG. This work will start as soon as the pilot scheme on solar farms provides results.

Industry reliefs and auto-producers: All consumers of electricity should pay their adequate share for the development of renewable energies – but without compromising electricity intensive industries, says the government in its justification for the EEG 2014. To ensure reliefs for industries, Sigmar Gabriel, Minister of Energy and Economy, had to negotiate extensively with the European Commissioner for Competition, Joaquin Almunia, to keep exemptions from the EEG-surcharge for German enterprises from being branded unfair state aid. To guarantee that a larger number of households and companies pay the EEG-surcharge, conditions for the exemption of self-suppliers of electricity are tightened. However, producers that use electricity in their own factory will continue to be exempt.

Federal States (Bundesländer)

Different parts of federal Germany disagree on questions such as which renewables to promote and where. Traditionally, the coastal states of Niedersachsen, Schleswig-Holstein and Mecklenburg-Vorpommern want onshore wind power to continue to receive as much assistance as possible. In the preparations for the new EEG, Torsten Albig, prime minister of Schleswig-Holstein, called it “economically misguided” to impose a cap on onshore wind, as this particular renewable energy is “the most cost-efficient” and keeps the EEG-surcharge down. Albig and others managed to negotiate an extension to the cap on onshore wind (2.5 gigawatt newly installed capacity per year) which will now exclude the capacity added when old turbines are exchanged for new, more powerful ones (re-powering). The windy and rural North and North-East has seen a wind power boom in recent years, with 26,439 megawatt or three quarters of the total capacity installed in six of the 16 German states (in 2013). The North regards itself as the new powerhouse for the whole of Germany, particularly for the industries in the West and South of the country, and supports the reformation of the power network in order to transport electricity to the South. Rather than centrally controlling the expansion of renewables, Albig suggests that payments for renewable power should be further reduced, thereby guiding exploitation towards the most cost-efficient technologies and locations, i.e. onshore wind power near the coast.

This, however, would not be in favour in the south of Germany, where wind parks are in demand to power big industry – even though wind conditions are less favourable than in the north. Politicians in Bavaria, such as prime minister Horst Seehofer, also want to avoid large overland grids, using the vocal concerns in some affected villages for building a case against effects of the Energiewende. Bavarian MPs were also concerned about the limit of 100 MW on new biogas plants, which they hail as the “most flexible renewable energy” and which are the most important renewable sources in the south. They did not succeed in making changes to the EEG’s biogas provisions though.

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