Parliamentarians can revive German Energiewende

Last week, the German government approved some fundamental amendments to the renewable energy law (the EEG 2016). After the 16 States adopted an overhaul of the famous German Renewable Energy Source Act (also referred to as the German Feed-in Tariff law) in May, the cabinet has now also given the green light. Minister for Economic Affairs and Energy Sigmar Gabriel and his colleagues have pointed to a paradigm shift. Indeed, the events mark the beginning of a new phase of the Energiewende. However, contrary to the government, I do not see any reason to applaud. In fact, the EEG 2016 hampers any further renewable energy development in the country. It is the paradigm of slowing down installations; handing back the energy system to the corporate utilities and making sure renewable energy does not become too successful in pushing fossil energy out of the system.

While amendments to the German renewable energy law have been a controversial topic in recent years, the latest changes fundamentally threaten Germany’s leadership position within energy and climate politics and will result in significant job losses and the decline in business opportunities for entrepreneurs. And, for the first time in the history of the Energiewende, industry, consumer groups, politics, trade unions and science share the same opinion.

Let’s take a look at the approved amendments which were meant to facilitate Germany’s transition to 40 – 45% renewable electricity by 2025, 55 – 60% by 2035 and 80% by 2050:

Germany’s paradigm shift

For the first time, the German government is capping the amount of eligible new renewable energy installations, hereby putting the breaks on the Energiewende. The limitations for allowances are set per technology:

  • 2,8 GW Onshore wind power per year (which is 27% less than 2014/2015)
  • 15 GW Offshore wind power until 2030 (which is about 0,8 GW per year)
  • 2,5 GW solar PV power per year
  • 150 MW biomass per year until 2020, and then by 200 MW per year until 2022

Apart from slowing down current developments, the plans leave Germany behind at a time when RE investments are skyrocketing and technological as well as economic trends are allowing tremendous benefits. The new framework also discourages necessary investments in grid and energy management infrastructure, which would be needed to integrate higher shares of renewable electricity. Instead of exploring reasons for grid bottlenecks, the government wants to throttle back the construction of generation capacity in regions where there are transmission-grid bottlenecks, until grid expansion has had time to catch up.

Further, the government has changed the instrument used to support renewable energy installations:  While so far, the Feed-in Tariff (FiTs) have provided investment security for everyone, allowing all renewable electricity producers to connect to the grid and guaranteeing a price per produced kWh, from January 2017 onwards, the country will operate competitive bidding systems. Here, the right to develop a particular renewable energy project will go to whichever credible bidder agrees to accept the lowest revenue per kWh as part of a 20-year contract. Several studies have shown that bidding or quota systems are more expensive and less efficient for developing RE in Europe than FiTs. This is mostly related to the fact that risks inherent to tenders outweigh the respective risks under feed-in tariff systems. Bidding systems hereby exclude certain stakeholders who were particularly decisive for Germany`s success.

Curbing the “Akteursvielfalt” (= diversity of actors)

Due to its inclusive design, the German FiTs have enabled new stakeholders to enter the market and have thereby leveraged private investment over the past decade. More than 800 energy cooperatives as well as private investors, farmers, banks and enterprises own about 95% of total installed RE capacity. Citizens are essentially the backbone of the energy transition in Germany. Energy cooperatives alone have invested about 1.3 billion euros in RE projects, thus generating revenues for communities, regions and citizens. The other 5% is owned by the “big four” energy providers. They belong to the group that has chosen to not participate in the transition from harmful fossil resources. For decades they have enjoyed an oligopoly in the energy supply chain — from extraction to refining and distribution.  While renewable energy has entered the market, their business models still rely on highly subsidized fossil fuels. As a consequence, these energy utilities are not only missing out on the benefits of renewable energy but also losing significant market shares.

Instead of protecting the interest of the public and common goods, the policy changes in EEG 2016 strengthen exactly these corporations and energy utilities. Recommendations to ensure the “Akteursvielfalt” was preserved were mostly disregarded in the bill. Further, the proposal of Germany`s finance minister Schäuble to add a tax on self-consumption from solar PV highlights that the government has different priorities. At a time when solar electricity has become most competitive, especially for house owners and enterprises, the government is taxing it to slow down the decentralization of energy production and hinder distributed generation.

The new policy framework therefore creates deficits for citizens, communities and regions and instead protects the interests of the fossil fuel industry. In fact, the reforms are a collection of compromises that shields fossil autocracy and large energy utilities at the expense of energy consumers, citizen cooperatives and the renewable energy sector with its employees. The amendments thus threaten climate protection and planetary habitability – all for short-term profit.

For the bill to come into force in 2017, it is now up to the parliamentarians to save and revive the success story of the German Energiewende. The proposed EEG 2016 has been agreed by Germany’s federal cabinet, and will be discussed in the Bundestag, Germany’s parliament, in the coming weeks. It is expected to be decided before the summer recess starts on July 8.