Last week, German Environmental Minister Peter Altmaier (CDU) and Industry Minister Philipp Rösler (FDP) reached an agreement to scale back industry exemptions to the renewables surcharge, slow down new wind and solar projects, and take money back from existing renewable power generators.
Other countries, most prominently Spain and the Czech Republic, have implemented some kind of retroactive “solar tax,” which is generally considered unconstitutional in Germany (international investors are also suing Spain). Nonetheless, on Thursday, Environmental Minister Altmaier’s spokesperson announced that existing renewables projects will be expected to help keep the level of the renewable power surcharge stable.
The government argues that industry is also taking a hit, and so should the renewables sector. Specifically, industry exemptions for the renewables surcharge are to be scaled back. Energy-intensive industry that faces international competition pays only a surcharge of 0.05 cents per kilowatt-hour instead of the full 5.28 cents.
On the other hand, these firms already benefit from 20 percent lower wholesale prices (year over year) thanks to wind and solar power, and many of them are exempt from grid fees altogether. Furthermore, the number of firms asking for exemptions has risen from 800 to around 2,000 under the current coalition, though many of these firms do not face international competition – such as municipal streetcar operators.
The specific changes for renewables
Altmaier and Rösler have reached an agreement to retroactively reduce feed-in tariffs by 1.5 percent. New wind and biomass systems connected after July would initially receive simply the market price for electricity in the first five months instead of whatever feed-in tariffs are offered. Perhaps to limit opposition to the proposal, systems smaller than two megawatts are exempt, meaning that practically all of the solar arrays in the country will not be affected. But a lot of wind power and biomass will, which is unfortunate because onshore wind power remains by far the cheapest source of renewable power, and the biomass market has been stop-and-go in recent years already.
Strangely, the proposal does not take account the profitability of projects. While feed-in tariffs are guaranteed prices for power produced, the law does not guarantee that the sun will shine or the wind will blow. Some wind farms, for instance, have struggled to be profitable in recent years of little wind, which is why the German Wind Energy Association (BWE) criticizes the proposal for putting pressure on struggling projects.
In addition, feed-in tariffs would be reduced for wind turbines from the maximum of 9 to 8 cents per kilowatt-hour, and the bonus currently paid for “reactive power” (which power plants provide to stabilize the grid) from wind turbines would be done away with altogether, though the requirement that wind turbines provide reactive power as the grid needs it would remain. “All other systems” would see their feed-in tariffs cut by four percent.
The reduction in feed-in tariffs for new wind power will produce exactly the opposite outcome of what is needed; only sites with a lot of wind will be profitable, whereas the country now needs to focus on spreading turbines more around the country to limit the cost of grid expansion.
Farmers who set up units that produce biogas from manure in the period from 2004-2008 will have to forgo their bonus, and the bonus paid for “direct sales” of all types of green power is also to be cut. The latter is at least one thing that the opposition Social Democrats and Greens will applaud, though it is probably the only thing.
Overall, the policy changes are expected to reduce the budget for renewable power by 1.86 billion euros, with roughly 700 million of that coming from reductions in industry exemptions. In other words, for every euro that industry chips in, the renewables sector will chip in one and a half.
Changes politically unviable and likely to be challenged in court
The government is at a stalemate now anyway with its proposals. Any changes to the Renewable Energy Act that the Bundestag passes would need to be submitted to the Bundesrat, where the political opposition now holds a majority. Technically, the Bundesrat does not have a right to veto proposals, but they can refuse to sign off and ask for revisions and consultation, essentially dragging the process on into the September elections, which the current governing coalition is unlikely to win. While some reports in German actually question whether the Bundesrat has any say at all, this “upper chamber” of Parliament representing states’ rights has repeatedly postponed amendments to energy policies from the Bundestag.
These proposals are therefore probably dead in the water, and that may be the best news for the government itself. Were such retroactive changes to be implemented, the German government – and hence taxpayers – would not only face damage claims from the nuclear sector, but also from investors in renewables.
On Thursday, state governments rejected the proposal, which has now been passed on to a subcommittee to propose a compromise at an energy summit scheduled for March 21.