‘Brussels’ vs. the German Energy Transition?

The European Commission has recently started an inquiry into German exceptions for certain industries from the renewable energy surcharge. German business leaders and politicians perceived this as an attack on the German Energiewende. Silvia Brugger suggests that instead of seeing Brussels as an enemy of the German Energiewende, Germany should try to better inform and cooperate with its European partners on the German Energiewende and take European opinions seriously.

Instead of complaining about "Brussels", Germany should try to better take European opinions into consideration. (© European Union, 2014)

Almunia and Oettinger, the two Commissioners most involved with the German Energiewende. Instead of complaining about “Brussels”, Germans should try to better take European opinions into consideration. (© European Union, 2014)

The EU’s Competition Commissioner Almunia worries that the Germans seem to go it alone with their energy transition without caring too much about the rules of the EU single market. Almunia opened the probe of exemptions for German industries from the EEG’s renewable energy surcharge. This is a challenge for the new Grand Coalition government. The European Commission has long expressed its discontent with the inflationary array of German companies that profit from this ‘green electricity privilege’, and the investigation by Brussels has loomed for some time. The need of a reform of this surcharge reduction was repeatedly discussed during the 2013 election campaign in Germany. Many German citizens – rightly so – think that broader shoulders should carry the costs of the energy transition.

It is therefore somewhat surprising that Chancellor Merkel and her ‘Energy Transition Minister’ Gabriel, disturbed by a wave of outrage about ‘Brussels’ from industry, trade unions and influential media, seem to come out of hibernation.

But is this commotion justified? And does ‘Brussels’ want to stop the German Energy Transition?

Euroscepticism and European single market

Criticism against the EU is in vogue as rarely before, not least in order to gain as many votes as possible from the Eurosceptics during the European elections in May 2014. It is easy for populists to simplify the complexity of the issues at stake and to claim that Brussels bureaucrats try to usurp national competences.

Merkel heavily criticises the EU State Aid Investigation with the words that “Europe won’t become stronger by endangering jobs in Germany”. Behind this claim lies the self-righteous view, widespread in public opinion, that Germany has already done more than enough against the euro crisis as an act of solidarity with other EU countries and therefore does not have to put up with criticism from Brussels. It is a dangerous thing, however, when the powerful Germany gives Europe the impression that might makes right and that Berlin is immune to criticism from Brussels. And this is even more dangerous against the background of history.

The Commission enforces competition in the EU single market, the centrepiece of European integration. The German economy has profited greatly from the European single market, which has created many jobs in Germany. The probe into whether discounts on renewable energy surcharges for thousands of German companies distorts competition in the European single market is by no means unusual and has also been triggered by complaints received from other EU countries.

The Energiewende in the European context

The German Energy Transition (Energiewende) is a national project with high significance that goes way beyond the German and European borders. The Energiewende is closely observed and debated. It has obvious effects on energy markets and electricity grids of European neighbour countries. For instance, the Czech complain about curtailed grid stability due to German wind power, which is being redirected from northern to southern Germany making use of Czech transmission lines. The lack of consultation with other member states and with the EU led to quite some discontent about the German solo effort.

However, while there are concrete impacts of the Energiewende across national borders, a number of influential interest groups try to discredit the German energy transition as expensive and anti-competitive populism by means of misinformation and targeted communication strategies. This is part of a deeply embedded strategy against European climate leadership that aims at securing conventional energy interests by trading climate protection off against economic growth.

The criticism against the Energiewende has already loomed for quite some time in the EU capital Brussels and is subject to numerous debates, mostly dominated by lobby interests from large industry associations. The German energy transition is often presented as an irrational and hasty reaction of the technology sceptical and anxious Germans to the Fukushima disaster. A ‘technology neutral’ climate and energy policy, that also includes nuclear power as a low-carbon energy source, is endorsed as a viable alternative. Germany is often absent at such debates in Brussels and does not manage to make a convincing case for the transition towards a renewables-based energy system, which makes both ecologic and economic sense.

National energy mix and European energy future

According to EU law the member states have the right to decide on their own energy mix. The Energiewende was therefore subject to the sovereign decision of Germany. At the same time, Germany could profit from embedding its energy transition in the European context, for instance by cross-border cooperation with regard to storage capacities and other flexibility options that can supply balancing to the growing share of variable renewable energy in the grid.

The European Union aims at completing its internal energy market by 2014. The Commission is therefore currently increasing its efforts to align the different support schemes and capacity mechanisms and to create a framework for state aid in the energy sector. Next to the European Commission guidance for the design of renewables support schemes the Commission is reviewing the rules for state support in the energy field. The Commission ultimately strives for harmonised support schemes for renewables and for an integration of renewables into the European internal energy market. The Commission has in this respect long deplored the expansion of German green electricity discounts beyond energy intensive industries towards companies that are very unlikely to leave the country due to high energy prices.

In view of the EU climate targets and the long-term decarbonisation of the European economy, attempts to ‘Europeanise’ energy policy make a lot of sense. However, the Commission’s initiatives are often based on questionable assumptions. Renewable energy cannot simply be integrated into the existing energy market, which follows a fundamentally different logic. The market is still widely dominated by the baseload characteristics of fossil fuel and nuclear power generation, but this market logic reaches its limits with a growing share of renewables in the energy mix.

A paradigmatic case is the German example, where paradoxically renewables are the reason for both decreasing wholesale electricity prices and rising consumer prices. Therefore, those companies that are given discounts on renewable energy surcharges profit twice: they do not have to pay their share to finance the development of renewable energy, and at the same time they benefit from the wholesale electricity price that fell due to the increasing share of renewables in the energy mix. As a consequence of this lack of solidarity, there is a risk of losing the German population’s strong support for the Energiewende.

Many in the Commission tend to over-rely on market forces and endorse a technology neutral climate and energy policy. This ignores existing market distortions on the expense of renewables and for the benefit of conventional energy sources. Open and hidden subsidies for fossil and nuclear power generation and externalised costs – including for nuclear waste storage and health costs – show that there is no such thing as fair competition in the energy market. Full disclosure of these costs is not in the interest of many powerful stakeholders, as can be seen in the example of censored subsidies numbers under the responsibility of EU Energy Commissioner Oettinger.

A new market design for a European Union for Renewable Energy

The EU’s state aid proceedings on exemptions from the renewable energy surcharge in Germany should be used to trigger the debate on the future electricity market design in Germany and Europe. The expansive extension of discounts on renewable energy surcharges, which were granted by the previous German government to a multitude of industry sectors, shows that rather than daring to tackle coherent reforms, lobby interests often dictate policies. But such a bold move is needed given the significant change of the energy system that is happening with the German energy transition.

Germany needs a fundamental reform of the market design which provides for flexibility in the energy market contrary to the baseload logic of nuclear and coal. The European dimension should be thoroughly incorporated and the benefits of cross-border cooperation should be used in order to enhance the deployment of renewable energy sources. A European dimension, however, does not automatically mean a centralisation of the energy supply system with wind power from the North Sea and PV from Spain. It rather means an optimised use of renewable energy sources at European scale within an internal market which should be characterized by the generation of energy from renewables and the balancing solutions that this will require.

The new German government should not start its term with an outcry against ‘Brussels’ but rather stand up for a European energy transition with corresponding electricity market reforms and promote this to its partners in other European countries and the EU institutions. While steps are taken towards an integrated European energy market, the current debate on climate and energy targets of the EU until 2030 will have a huge impact on the future European energy mix. The German government should take this opportunity to ‘think European’ when implementing its Energiewende and to advocate for a European Union for Renewable Energy.

By Silvia Brugger, Director Climate and Energy Programme, Heinrich-Böll-Stiftung European Union.


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