Aktuelles Stichwort: "Erneuerbare-Energien-Gesetz" Interview with Hans-Werner Sinn (in German) 11.10.2010 Media Library of the CESifo Group
In the German Renewable Energy Sources Act (Erneuerbare-Energien-Gesetz – EEG) the reception, transmission, distribution and payment for electricity generated from renewable sources is regulated with the goal of increasing the share of renewable energy in the power supply by at least 35 percent by 2020. The promotion of the expansion of renewable energy for power production is seen as a key element in climate and environmental protection.
The law promotes the generation of electricity from hydropower, landfill gas, sewage gas, mine gas, geothermics, wind energy and solar power. The promotion basically consists in ensuring prices from electricity producers that are far higher the wholesale prices for electricity. These prices are called “feed-in tariffs”. So that the network operators purchase the power in spite of the higher prices, the state has obligated them to give priority to connecting the corresponding plants on the available electricity grids (obligation to network connections) and to give priority to purchasing this power. The network operators are even obligated to expand their grids correspondingly. The network operators in turn have the right to pass on the additional costs of production to the end user. The consumer alone will thus bear the additional costs.
The amount of the feed-in tariffs is dependent on the type of electric production, the produced amount and the calendar year in which a plant went into operation for the first time, and the tariffs apply to the entire statutory remuneration period of 20 years. It is a tapering rate, that is the later a plant is put into operation, the smaller the feed-in tariff.
Since the law brings about an increase in electricity costs for the end user, it includes a compensation arrangement for power-intensive enterprises and for the railways. Upon application, the share of fed-in power from renewable sources can be limited. This limitation is intended to “reduce the electricity costs of these firms and thus maintain their international and intermodal competitiveness”. The other consumers are burdened with correspondingly higher electricity costs.
Until the beginning of the 1990s, there was no legal provision regarding a purchase obligation for privately generated green electricity. In 1991 the Electricity Feed-in Law was enacted in which the remuneration prices for electricity from water, wind and solar power were determined. At approximately 7 or 8.5 ct per KWh, the rates were already were above the then average costs for electric power production (3 ct). The Renewable Energy Resource Act of 29 March 2000 replaced the Electricity Feed-in Law. It was amended on 11 August 2010.
The Renewable Energy Resource Act stipulates that the federal government must submit a progress report. This was done for the first time in 2007 (Progress Report 2007 on the Renewable Energy Resource Act). The report maintained: “With the promotion of renewable energy in the area of electricity, approximately 44 million tons of CO2 emissions were avoided in 2006 (2005: 38 million tons CO2). Up to now no other instrument has led to comparable CO2 savings (for example, the Cogeneration Act, emissions trading, ecological tax reform, the market stimulus program for renewable energy, etc.)”. At the same time the report points out the need to continue the promotion since renewable energy is not yet competitive vis-à-vis conventional electric power production without promotion from the Renewable Energy Resource Act. “From this reason the plant operators still need the remuneration that the law ensures”.
A draft version of a further report was submitted in May 2011.
Increase of the electricity price
Since electricity from renewable sources flows irregularly, the electricity suppliers must provide reserve capacities for these electricity sources via flexible thermal power stations (for example, gas power plants). Frequently, surpluses in electricity result because the conventional power plants cannot be disconnected fast enough. Then the electricity must be exported at low prices. On some days the price of electricity at the wholesale level has even turned negative. The reserve capacities for equalising the stochastics with regard to wind and sunshine increase the costs of renewable electricity clearly above the feed-in rate, which itself is already far above the mark prices. This means that considerable costs arise for the consumer.
Ineffectiveness
It was Germany’s wish that its Renewable Energy Resource Act be implemented in the European Union in a similar form. The EU decided, however, on an emissions trading scheme that since 2005 covers 99 percent of emissions during electricity production (Emissions Trading). The EU determines the total amount of the emissions rights (the so-called caps), the states distribute this right and the electricity companies can also trade the rights. Where and how much CO2 is released in the combustion of fossil fuels during electricity production is controlled by the market. However, the total amount is fixed in Brussels for every trading period and lowered over time. National promotion measures are thus ineffective and have no influence on the total amount of CO2 that is emitted in Europe.
This also applies to the German Renewable Energy Sources Act (EEG). This law implies that more green electricity will be produced in Germany and electricity from fossil fuel will be reduced. At the same time, however, emissions rights become free to the same extent, which at falling prices are sold to other European electricity producers and increase the emissions there. In this respect the assertion by the German government that 44 million tons of CO2 emissions were prevented in 2006 is incorrect. The contention that the EEG saved more CO2 than emissions trading is also wrong. Nothing was saved because of the Act. It has only led to higher costs (Sinn 2008, 120ff).
Since by contributing to the development of a uniform price the emissions trading system already coordinates the reduction efforts at a minimal cost, the EEG can only result in an increase in production costs without a concomitant contribution to the environment. Expensive eco-electricity from German sources replaces cheap eco-electricity from countries with lots of sunshine and wind, and cheap electricity from efficient coal-fired power stations in Germany replaces expensive electricity from inefficient power stations in Spain or other countries.
It is especially problematic that research efforts are being misdirected because optimal plants are being sought for green electricity for conditions that prevail in Germany whereas the falling prices for fossil energy are hindering research in countries with abundant amounts of sun and wind.
Finally the EEG also complicates the further decrease of emissions amounts in future trading periods because it increases the costs per kilowatt of green electricity and thus intensifies the resistance to its expansion.
Bundestag beschließt Anpassung der Fördersätze für Solarstrom im EEG
FAQs on the Renewable Energy Resource Act (Federal Ministry of the Environment).
Sinn, Hans-Werner, Das grüne Paradoxon. Plädoyer für eine illusionsfreie Klimapolitik, Econ Verlag, Berlin 2008; The Green Paradox, (forthcoming from MIT Press).
Sinn, Hans-Werner, "Die Umweltpolitik muss neu definiert werden", FAZ, 04.12.2009, S. 12.
Gronwald, Marc and Jana Lippelt, "Kurz zum Klima: Regenerative Energie und Nettostromimporte", ifo Schnelldienst 63 (02), 2010, 34–35 (Abstract / Download).
Ifo Policy Issues Energy and Environmental Policy
Lists of entries the database DICE on Renewable Energy
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