Critics of Germany’s reform of the Renewable Energy Act (EEG) have warned that the abolition of Feed-in Tarrifs (FITs) will “make the country’s once vaunted Energiewende policy run out of steam”. From the start of 2017, FITs will be replaced with a competitive auction system as Berlin seeks to keep costs for renewables under control. Caps on new-build wind and solar power will limit the deployment of intermittent power sources.
Under the Renewable Energy Act, any renewable power investor in Germany could sell their green electricity at a guaranteed price above wholesale market price, fixed in advance for 20 years. Feed-in tariffs (FITs) boosted the share of renewables in the energy mix from 3.6% in 1990, when the law was enacted, to 30% in 2015.
Shift to market-based RES support
Yet – costs escalated with the differences between FITs and falling wholesale power prices being passed on to consumers via a surcharge on their electricity bills. Mounting criticism now led to the introduction on both a cap in renewable deployment and a market-based mechanism for renewable support.
With these new measures, policy makers in Berlin seek to steer the power sector’s growth and avoid overshooting the target range of 40-45% of power consumed in 2025 coming from renewables. Hailed as a “paradigm shift” by energy minister Sigmar Gabriel underlined that renewables have matured and can no longer claim the “fledgling status” that required FIDs to insulate them from market forces.
The leader of the CDU parliamentary group, Volker Kauder, wants to adapt the speed and volume of wind and solar power deployment to power grid extensions. New installations, in his view, should no longer receive compensation if they have to be switched off at times of grid overload.
Paradigm shift or failure?
Critics, like energy policy expert Claudia Kemfert, say the reforms will be a “double failure”. The DIW division head argues that auctions will not lower costs, and will fall short of meeting growth corridors. “Auctions reduce planning security and increase financial risks for investors. The corresponding risk premium increases the cost of the Energiewende. Additionally, growth corridors will be missed, if companies win an auction but postpone construction for whatever reason.”
Trial auctions for large-scale photovoltaic arrays started in mid-2015. The government claims that high participation and falling prices at each round proved their success – but critics warn that the system does not guarantee how many winning projects will ultimately be realised.