Altmaier proposes freezing renewables surcharge at current level
On Monday, German Environmental Minister Peter Altmaier announced some changes that he thinks can be implemented by August 1. The opposition is not impressed, and Industry Minister Rösler says the proposals do not go far enough. In fact, the proposal is probably a reaction to the new political reality, for the government previously did not wish to make any drastic changes before the elections.
The writing is on the wall for Angela Merkel's current governing coalition. This month, her CDU/FDP coalition lost the state elections in Lower Saxony, which now has a Social Democrat and Green government. Up until then, the official plan had been to fundamentally revise the country's Renewable Energy Act (EEG), but not necessarily before the parliamentary elections this fall. As Altmaier himself put it in October, "quality is more important to me than speed."
The elections in Lower Saxony, where the Social Democrats and the Greens now govern, may have changed the situation. The CDU and FDP are now not expected to go into the elections this fall as partners as the current coalition is unlikely to win the election. Merkel's coalition may have been reluctant to fundamentally change the EEG before the national elections lest they rock the boat too much, but now Altmaier and the CDU probably believe they have nothing to lose and everything to gain.
The proposals made on Monday not only surprised the general public, but even the FDP, which nonetheless praised Altmaier, with Industry Minister Rösler calling the proposal a "step in the right direction." In contrast, the Social Democrats reject the proposal outright, and Green Parliamentarian Hans-Josef Fell – one of the original authors of the law from 2000 – has said investor confidence will be undermined.
Essentially, Altmaier wants to keep the EEG surcharge in check. Last year, the surcharge passed on to ratepayers to cover the cost of renewables rose by nearly 50 percent, thereby raising the retail rate by around seven percent on average (German power consumers can change our providers with one month's notice, and there is no single retail rate). Altmaier now wants to freeze it at the current level of 5.3 cents per kilowatt-hour for the next two years and only allow to rise by 2.5 percent a year after that.
No one doubts that it is important to keep the surcharge from rising further, but the actual cost of renewable power has fallen below 50 percent of the surcharge, with the bulk now coming from industry exemptions and the falling price of power on the exchange. Altmaier therefore proposes to limit these exemptions for industry.
In return, the proposal also requires previous investors in renewables to fork over some cash. Similar ideas have already been implemented in other countries, such as Spain and the Czech Republic, where "solar taxes" were retroactively imposed. Such practices are clearly unconstitutional in Germany, however, which is why they have not been tried before.
Altmaier has thought of a way to make the proposal palatable, if not legal. The Energiewende is increasingly being compared to the "Wende," the Fall of the Wall. Both represent monumental tasks that the country had to pull together for. For the Wende, a "solidarity tax" was imposed on income tax to provide extra revenue for the decrepit infrastructure in the former communist East Germany. Perhaps hoping that his proposal will meet with similar acceptance, Altmaier is calling his new retroactive tax on renewables the "energy solidarity tax."
This is where Fell's criticism becomes clear. The mere announcement of such changes is likely to bring investments to a standstill. And even when the new policy rules take effect, investors still will not be able to rely on 20 years of stable revenue because the new EEG surcharge would be based on a budget, which Germany has never had for renewables. Accountants would therefore have to calculate how much money is available and is somehow prioritize not only individual projects, but also technologies – to decide whether a particular solar roof or a wind turbine should go up. Investors would be left in the lurch waiting for the government to give them the go-ahead.
It all seems like a disaster in the making, but it is actually in line with the Merkel coalition's previous energy policies. For instance, nuclear plant operators charged that they had been expropriated in 2011, when eight of their 17 nuclear plants were shut down within a week just six months after Merkel had extended their commissions by another eight years. Yesterday, just a day after Altmaier proposed to partially expropriate investments in renewables, German power giant and nuclear plant owner Eon had its charges passed up from Hamburg's Finance Court to the Constitutional Court – an indication that the charges are not groundless.
The proposal seems all the more political when we keep in mind how unlikely it is to become law in August. The current CDU/FDP coalition now has even fewer seats in the Bundesrat, which rejected drastic cuts to solar in 2012, when Merkel's coalition had more support in that chamber of Parliament.
Why would Altmaier make proposals that are unlikely to pass the Bundesrat and will be challenged in court even if they do? It's all just positioning for the upcoming parliamentary elections. Altmaier wants to set the stage and show that both sides will have to give up something. He has started a discussion, and it should be taken as an opportunity.
Freezing the EEG surcharge is not in itself a bad idea; limiting the cost impact would certainly raise public acceptance, which remains very high. There is a lot of talk about producers of renewable power consuming it directly and about time-of-day payments; more would be paid for green electricity when the grid needs it – and less when this power cannot be used. The idea is not new; Spain has had such a bonus on top of its feed-in tariffs for wind power for roughly the past decade.
But why are such variable rates only discussed for owners of solar roofs, for instance? Most households in Germany do not have a solar roof, but if they had incentives to shift consumption even slightly based on power production, the result would be much greater than what can be achieved simply by shifting consumption in households with solar roofs. Yet, no one in Germany is proposing to have German power consumers shift power consumption ever so slightly to facilitate the uptake of intermittent solar and wind. If you want "energy solidarity," why not ask everyone to play a part? (Craig Morris)
