06 Oct 2014 | Kerstine Appunn

Positions of key stakeholders on the EEG: Research Institutes

This Factsheet lists views and positions of some German research institutes on the new Renewable Energy Act (EEG) which came into effect on 1 August 2014.

Institute for Applied Ecology (Öko-Institut)

Industry reliefs: In the reform process of the EEG, the Öko-Institut (on behalf of Agora Energiewende) has examined ways to distribute costs for the EEG-surcharge more evenly between electricity consumers. It concluded that the EEG-surcharge could decrease by 20 per cent or 1.2 cents per kilowatt-hour if electricityintensive industries are limited to the 15 sectors named in corresponding EU directives (i.e. the EU Emissions Trading Scheme). The paper points out that any increase in EEG-surcharge for industry would be offset by the merit order effect (decrease of the wholesale price on the electricity exchange resulting from the expansion of renewables). Government included auto-producers in the group that have to pay the EEG-surcharge, but it did not reduce the amount of industry rebates as envisaged by the Öko-Institut. The institute calculates that amendments to the new EEG will not lead to a decrease in the EEG-surcharge in the years 2015-2018.

Direct marketing: The Öko-Institut sees it as a positive development that the new direct marketing rules allow renewable producers to market their electricity anywhere and not only on the electricity market. It doubts, however, whether mandatory direct marketing will make the integration of renewable power into the electricity market more efficient.

Growth corridors for renewables: growth corridor as steering mechanism for the amount of renewables capacity added per year has to be aligned with the overall targets for renewable development, the Öko-Institut points out. The new caps on wind and solar power would cause these targets to be missed, if not adapted in the coming years.

Competitive bidding: The Öko-Institut criticises that testing tenders on solar farms only would very likely fail to produce the insights needed to create a robust system of competitive bidding.

 

Dena

Dena has repeatedly criticised the speed and lack of coordination of the energy transformation in Germany. The agency says that too much capacity has been added in the North and not enough grids built to transport the power to the South. Dena’s Chief Executive, Stephan Kohler, largely agrees with the reform of the Renewable Energy Act by the German government. He wants to see a better synchronised and more efficient energy policy and believes that the direct marketing of renewable electricity and the implementation of a new system of tenders instead of feed-in tariffs will achieve this. He also calls for the use of power storage systems and a fast development of the national grid.

 

Rheinisch-Westfälisches Institut fuer Wirtschaftsforschung (RWI)

The RWI suggests a quota model instead of the EEG. In a quota mechanism utilities are obliged to buy a certain amount (quota) of electricity from renewable sources. The authors of a study on the connection between electricity prices and the renewable development, Professor Manuel Frondel and Stephan Sommer, suggest that the quota model as a “more market-oriented mechanism” would make renewable development cheaper.

Competitive bidding: With regard to the new EEG, Frondel argues that a system of tenders would make the renewable development more cost-efficient and should therefore be implemented sooner rather than later.

Growth corridors: Professor Frondel believes that the caps put on additional renewable installation should have been lower than now decided. This would have reduced costs for consumers (EEG-surcharge) and enabled amore synchronised grid development.

Self-suppliers: Small installations (less than 10 kilowatt) should not have been exempt from paying the EEG surcharge, says Professor Frondel.

German Institute for Economic Research (DIW)

Professor Dr. Claudia Kemfert, Head of the department of Energy, Transportation, Environment at the DIW, criticises the decisions taken by the government in the new Renewable Energy Act. She predicts they will cause renewable development to slow down and will not succeed in reducing costs for the energy transition. Obliging new renewable power producers to pay the EEG-surcharge when they consume their own electricity is not a constructive approach, according to Kemfert, since this means extra costs for clean power while existing conventional power stations continue to be exempt from the surcharge. As conventional power plants struggle with low electricity prices at the exchange (partially due to renewable expansion) she strongly suspects that the government has made concessions to the big utilities by granting them exemptions from the EEG-surcharge. The same applies to energy intensive industries: reliefs granted to them should have been reduced but are instead maintained in the new EEG.

 

Ifo Institute – Leibniz Institute for Economic Research at the University of Munich 

Professor Hans-Werner Sinn, president of the Ifo Institute, has voiced opposition to the Renewable Energy Act and the expansion of renewables. He calls renewable energy “electricity by chance”, stressing that wind an solar power is inferior to fossil and nuclear energy because it depends on the weather. Sinn assumes that Germany would need 3500 pumped storage hydropower stations (it currently has 35) to provide reliable electricity when renewable energies fluctuate. He wants Germany to dispose of the EEG and feed-in tariffs due to high costs and the failure to integrate renewables into both the electricity system and the market. Sinn favours nuclear energy and a cap and trade system with emission certificates in order to reduce emissions from fossil power generation. In a paper published in March 2014, researchers from the Ifo Institute concluded that feed-in tariffs do not significantly enhance innovation in renewable technologies while causing a substantial rise in electricity prices.

 

Agora Energiewende

The think tank Agora Energiewende provided preparatory policy analysis in the run up to the EEG reform. In its paper “A radically simplified EEG 2.0 in 2014 and a comprehensive market design process” (October 2013) Agora proposed a range of amendments aimed at facilitating renewable growth while reducing energy costs. It – amongst other things – suggested: a basic maximum feed-in tariff of 8.9 cents per kilowatt-hour for all renewable energy sources, feed-in tariff degression based on installation rates, no unnecessary expansion restrictions for photovoltaics (no 52 gigawatt cap), reduction of industry exemptions, direct marketing for all new installations of 1 megawatt or larger and the inclusion of self-consumption/production in the EEGsurcharge payments. The government principally embraced the last two suggestions (direct marketing for new installations with more than 100 kilowatt).

Competitive bidding: It is not clear whether the proposed tender system will be applicable and meaningful for different kinds of renewable technologies, Agora Energiewende concluded in a paper published in June 2014.12 The think tank warned that piloting a competitive bidding approach would have to include thorough testing of auction methods, qualification rules and location aspects. Otherwise a flawed auction design could lead to increased costs and compromise expansion targets. Onshore wind energy should therefore be included in the pilot scheme (not only ground-mounted PV arrays). Participation of small producers and investors has to be ensured.

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