First Energy Results of German Coalition Talks

Coalition talks between the CDU and SPD are entering their critical phase. Matthias Lang sums up the current state of debate on renewables and the energy market.

Coalition talks between SPD and CDU (Photo by CDU Deutschland)

Coalition talks between SPD (left) and CDU (right). (Photo by CDU Deutschland)

Another round of coalition talks between the conservative CDU and CSU sister parties and the Social Democrats (SPD) brought further convergence on energy policy matters, the CDU secretary-general Hermann Gröhe said. Negotiators agreed that the energy policy shift of 2010/2011 towards a renewable energy supply could only become a success and role model for others if it did not harm but strengthen German industry. Hence, financial support should help renewables to penetrate the market, but should not be granted indefinitely. Support for renewables should be declining over time. Growth should occur within fixed corridors, leading to predictable and speedy, but not excessive growth. Climate and environmental compatibility, security of supply and the affordability of electricity prices were considered equally important. In light of the above, various aspects of a reform of the Renewable Energy Sources Act (EEG) that curbs EEG-related costs have emerged. Amendments shall in particular be made with regard to onshore and offshore wind power as well as biomass.

1. Existing Renewable Power Plants and Futur Reduction of EEG Support

While existing renewable power plants shall not be affected by an EEG reform, support for new renewable power plants across all technologies shall be subject to a steady reduction, Frankfurter Allgemeine Zeitung (FAZ) writes. As currently all technologies apart from solar energy are subject to an annual reduction of the applicable feed-in tariff for the various types of renewable energy pursuant to Section 20 EEG, it is not yet clear what this shall mean in practice. However, for geothermal and offshore wind power feed-in tariff reductions presently are scheduled not to start before 2018. Solar power has a special feed-in reduction scheme with a monthly feed-in tariff reduction of 1% that increases or falls depending on the amount of solar growth (for more information, please see Section 20b EEG).

2. Onshore and Offshore Wind Power

Reportedly onshore wind power turbines in locations with a high wind yield shall receive less support, but the changes shall not make the operation of wind power plants in such locations unprofitable. In view of the currently installed offshore capacity (520.3 MW) the potential coalition partners want to adapt the national target for offshore wind power  to 6.5 GW by 2020 (presently 10 MW) and 15 GW by 2030 (presently 25 GW).

3. Biomass

To be eligible for support, new biomass power plants shall use waste and residue in order to avoid competition for land with food crops. This aspect has already been confirmed by the SPD (please see link below).

4. Photovoltaics

No plans for further cuts have emerged to so far. The latest data for new solar capacity show that solar growth is reaching the upper level of the national target of 2,500 to 3,500 MW per year after three boom years that contributed to a steeply increasing renewables surcharge (EEG surcharge).

5. Market Premium Instead of Feed-in Tariffs

According to Tagesschau news, new renewable power plants shall be obliged to sell their power directly. When exactly this shall happen is yet unclear, as are the details of a revised market premium model. Presently operators can choose between fixed feed-in tariffs and a market premium in addition to the revenue obtained by the sale of the electricity (Section 33g EEG). To date the market premium basically provides the same revenue for operators, due to a so-called management premium it includes, it can even exceed feed-in tariffs. Making the market premium mandatory had already been a proposal made by the acting Environment Minister Peter Altmaier during the former coalition government. Last week the European Commission had called on the national governments to phase out feed-in tariffs in favour of market premiums, quota and similar schemes that provide more incentives for renewable power to adapt to the markets.

6. EEG Surcharge Reductions for Large Energy Consumers

The partial reductions of the EEG surcharge for which large energy consumers can apply pursuant to Sections 40 to 44 EEG shall be reviewed, the newspaper Die Welt writes, quoting the SPD chief energy negotiator Hannelore Kraft as saying the international competitiveness of energy-intensive sectors should not be harmed, international competition should be a main criteria for a reduction in the future. The reductions of the EEG surcharge have reportedly been seen critically by the European Commission on grounds of potential state aid. Last week Mrs Kraft and the still acting Environment Minister Peter Altmaier (CDU) were in Bruxelles to discuss the matter with the EU Commissioner responsible for competition, Joaquin Almunia. FAZ quotes Energy Commissionar Günther Oettinger as saying reductions of that size did not exist elsewhere in the European Union.

7. Contribution of Self-Consumed Energy to the EEG Surcharge

Conservatives and Social Democrats reportedly think about making producers of energy that they consume themselves contribute to the EEG surcharge. Presently they are exempted pursuant to Section 37 EEG if they fulfill certain requirements.

8. Conventional Power Plants

The potential coalition partners agree that flexible conventional power plants are needed to back-up the fluctuating renewable power input as long as other options like storage facilities and demand side management are not sufficiently available at reasonable prices, FAZ says. Therefore a number of measures were necessary: Firstly promotion of more flexibility on the supply and the demand side. Secondly, the procurement of grid reserve capacity through auctions held by the transmission system operators shall be further developed. Thirdly, based on the Ordinance on Reserve Power Plants (ResKV) the Federal Network Agency shall examine the need for the construction of new power plant capacity (in particular in Southern Germany) to avoid short-term risks for the security of supply. While capacities suffice at the present date, the Conservatives and Social Democrats differ concerning the future FAZ writes. The paper quotes the CDU/CSU as saying the creation of a capacity market should be examined with the aim to come to a cost-efficient legal solution by the end of 2015 if necessary. The SPD on the other hand wanted to develop a capacity market in the medium-term that did not primarily incentivise new capacity, FAZ says.

Currently conventional power plants suffer from the feed-in priority of renewable power plants in the grids and falling energy prices at the electricity exchange that also result largely from a growing input of renewable energy. Hence, a number of utilities have announced to close down conventional power plants.

9. Energy Efficiency

A National Action Plan Energy Efficiency shall be drafted that describes the targets for the various sectors, the measures to be taken, financing and responsibilities. The plan shall be adopted by the federal government in 2014.

Inter alia the potential coalition partners want to increase the funds provided by the state-owned KfW Development Bank for energy-efficient renovations and promote energy-efficient renovations also by granting tax relief. In the past legislative term the Conservatives had already brought a bill granting tax relief for energy-efficient renovations through Parliament, but failed to get the necessary majority in the Federal Council where the SPD has the majority (often ruling in coalitions with other parties).

10. Open Issues

The potential coalition partners have not yet agreed on growth targets for renewables. While the SPD advocates for a share of 40% by 2020 and 75% by 2030, the CDU/CSU want a flexible range of 35% to 40% by 2020 and of 50% to 55% by 2030, Tagesschau reported.

Rheinische Post points out that the potential coalition partners have also not agreed on a reduction of the electricity tax so as to reduce electricity costs, a demand by the SPD, which was a central aspect of their energy policy agenda in the last election.

In view of the fact that the potential coalition partners reportedly want to wrap up the coalition agreement by 27 November 2013, there is still work to be done in the remaining German coalition negotiations.

Sources: Press statement CDU secretary-general Hermann GröheSPD; Tagesschau; Welt; FAZ 11 November 2013, page 17, FAZ 12 November 2013

This post first appeared on German Energy Blog and is reposted with the kind permission of its author Matthias Lang.

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