Germany’s renewables support under threat

Berlin, 1 October: Germany’s incoming government has signalled that it is to extend the life of nuclear power plants and tighten the country's generous renewable energy subsidy law (the EEG).

While the junior coalition partner, the business-orientated Free Democrats (FDP), has moderated more radical plans for reforming the EEG, it wants more stringent EEG reviews, to be carried out every two instead of four years. It also wants road transport and the heating sectors to be drawn into the EU Emissions Trading Scheme (ETS).

Meanwhile, Chancellor Angela Merkel’s CDU/CSU party has on the one hand supported a recent Monopolies Commission report saying feed-in tariffs should be abolished in favour of emissions trading. On the other hand, the Chancellor recently promised to retain the status quo – citing the adverse effects on Germany’s biofuel industry of changes to biofuel quotas this year – but promising to keep a closer eye on EEG reviews.

Germany has long offered one of Europe’s most generous renewable energy support policies, with onshore wind energy plants built this year guaranteed prices of €0.092/kWh ($0.134) for their power and solar plants €0.25-0.43/kWh

In its most recent country attractiveness index, consultancy Ernst & Young named Germany the most attractive European country for wind energy investment. Its Berlin renewable energy analyst Robert Seiter said: “There is a political expectation now that feed-in tariffs will be examined more closely and [reduced over time] more for solar than would have normally occurred, but that it is far too early to replace it with a market mechanism. This would introduce too much instability both in terms of carbon price fluctuations and power prices, and reduce investor leverage.”

Solar cell producers’ shares led this week’s minor renewables’ slide, and there has long been grumbling from consumer groups and some politicians over the cost-effectiveness of the subsidy for photovoltaic plants. These concerns have been exacerbated by the success of Chinese manufacturers in winning market share – and therefore benefitting from the subsidy. The FDP has criticised this as export of industry assistance and, just before the election, Solarworld chief Frank Asbeck called for EEG solar subsidies to be reduced to undermine Chinese competition.

Both parties confirmed this week that the phase-out of nuclear generation would be extended beyond the previously-agreed 2021, with the FDP saying it should be delayed until renewable energy or coal with carbon capture and storage becomes sufficient to support baseload demand. Landesbank Baden-Württemberg estimates that if utilities are able to run their nuclear plants for an additional 25 years, taking account of expected high power prices, additional profits could reach €200 billion. However, the government will require utilities to plough back perhaps 50% of their extra profits into renewable energy research, with FDP focusing particularly on storage technology in this regard.

Clarity around the new government’s energy policies is expected by the end of this month, once its coalition agreement for the four-year life of this legislature is struck.