Germans, as everyone knows, are an efficient lot. Once they put their mind to it, they deliver results. For some time, Germany has been on the path of increasing its reliance on renewables – the marching order was further fortified when Chancellor Angela Merkel decided to immediately shut down half of the country’s operating reactors following the Fukushima disaster in 2011 and hastily phase out the remaining ones by 2022.
The impact of Energiewende or energy turnaround is being gradually felt, not only in the impressive growth of renewables but also some of its unpleasant consequences – falling wholesale prices due to the glut of capacity and, ironically, rising retail tariffs because the wholesale and retail prices have become virtually decoupled.
Germany now routinely experiences episodes when renewables easily exceed 50 of total generation. As illustrated in graph on page 6, on 3 October 2013, a sunny and breezy day, renewable production reached 59.1% of total generation around noon. For the day, renewable generation exceeded 36% of total production. In sunny August 2013 Germany, which has over 35 GW of installed solar capacity, set a new record for solar generation producing 6.5 times the US solar output.
No wonder thermal generators are complaining. Not only are wholesale prices low, the number of hours they get dispatched is shrinking as time goes on. In the absence of a capacity payment scheme, their survival is threatened.
To pay for the renewables, Germany’s grid operators raised the surcharge consumers pay for renewable energy by 18%. While Germans support the nuclear phase out and favor more renewables, the rising retail tariffs are beginning to pinch, not just the domestic consumers but also small to medium size businesses. Since a number of large, energy-intensive and export-sensitive industries are exempt from paying the renewable levies, more of the cost burden is born by smaller consumers.
According to TransnetBW, one of the 4 grid operators, the renewable levy, which is added to retail tariffs, will raise to 6.24 euro cents/kWhr (8.5 US cents) starting in 2014 from the current 5.28 euro cents/kWhr. The levy has more than quintupled since 2009, making German domestic tariffs the third-highest in the EU. Export-sensitive industrial customers are largely exempt from the levies.
Being a good politician, Merkel is looking for ways to modify the 13-year-old EEG law while maintaining the goal of meeting 80% of German electricity from renewables by 2050 from about 23% today. The total EEG subsidy, which is collected through consumers’ bills along with an assortment of taxes and other levies, is projected to reach about €23.6 billion ($32 billion) in 2014. The fee increase will raise the bill of the average German household using 3,500 kWhrs by about €34/year in 2014.
The BDI, an industry federation representing about 100,000 companies, has proposed a radical reform of EEG to reduce industry costs. The Green party is often blamed for runaway retail prices. Deflecting the criticisms, Oliver Krischer, energy policy spokesman for the Green party, however, explains that the renewable levy is rising “because the power market isn’t working and the old government has piled more and more industry aid onto non-privileged (i.e., non-exempt) electricity consumers.”
It is a zero sum game. If large, export sensitive industry is exempt from paying the levy, others have to shoulder more of the costs.
This post is extracted from EEnergy Informer, October 2013 issue.