German debate over renewables gets chaotic
It's hard to know where to begin if you want to explain the energy debate in Germany to outsiders. Let's start with the news that an estimated 200,000 welfare recipients in Germany had their power cut off because they could not pay their electricity bills, as a German TV news program reported at the end of May.
The power firms that cut these people off called on the government to provide welfare recipients with a bonus for power bills, which the government says it will not do; Economic Minister Philipp Rösler responded by saying that the negative impact of one subsidy would then be remedied with another one. Some politicians in the opposition voiced their outrage at these companies for having the gall to cut off the poorest of the poor and then ask the government for more money. But Germany chooses to have private firms run its grid, and they are beholden to shareholders. It's not an ethical issue; it's a question of market design.
But not all opposition politicians oppose making power cheaper for the poor. Green party whip Renate Künast is now calling for lower prices for a minimum amount of power and natural gas per person. The policy is quite common around the world, but it is nonetheless surprising to hear such a proposal from the German Greens. After all, when they implemented their eco-tax 13 years ago, they argued the exact opposite – that artificially low rates for the first chunk of energy consumed make investments in efficiency unaffordable.
So how should the market be redesigned? That is the question that defies consensus at the moment. Almost everyone is calling for the one or the other governmental intervention – not only subsidies for the poor, but also capacity payments for dispatchable power plants. The government is now also talking about requiring investor-owned utilities to report their plans to switch off a power plant to Germany's Network Agency, which would then be authorized to reject those plans if it fears the shutdown would make power outages more likely. It's just an idea right now, not even a proposal – and we still do not know how these private firms would be compensated.
But all of these calls for the government to act have led to a debate about Germany's commitment to free markets. Up to now, Germany has been fiercely pro-market in its power sector; all consumers can switch utilities, which all compete with each other, and the government does not set retail power rates – an unimaginable situation in the United States, for instance, where utilities generally still have government-regulated monopolies.
Nonetheless, there is the old debate about quota systems (like the old Renewable Obligation Certificates in the UK or Renewable Energy Credits in the US) being more market-based than German feed-in tariffs – and that debate has reentered the foreground in Germany. Newly elected German president Joachim Gauck opened that barrel of monkeys when he stated on June 5 (transcript of speech in German) that Germany's energy transition will not be possible with "planned-economy ordinances" and "excessive subsidies" alone. Though he did not mention solar feed-in tariffs, that's what everyone heard. The Libertarian FDP, the party that has historically opposed feed-in tariffs the most, applauded, while the SPD insinuated that Gauck doesn't know what he's talking about: "The President is apparently starting to become familiar with environmental policy, but he needs to keep going," one SPD environmental expert stated. Another SPD politician claim that the comment had more to do with Gauck's opposition to planned economies from his time as an activist in East Germany than with Germany's current energy policy.
Whatever the solution is, the problem is clearly twofold: first, Angela Merkel's decision to shut down a nuclear plants changed the playing field too quickly; and second, though solidarity among proponents of renewables prevents most people from saying it, solar grew too fast in 2010 and 2011 and continues to exceed the government's target in 2012. Back in 2010, when the government stated its goal of 52 gigawatts of PV by 2020, the solar sector did not complain; after all, that was equivalent to around 3.8 gigawatts per year of growth, which the sector had just reached in 2009. Now, the sector has sustainably doubled that growth rate, so the market would have to be cut back to less than three gigawatts per year if 52 gigawatts is understood as the maximum. Furthermore, this PV boom came at a time when feed-in tariffs for solar were still high, though plummeting.
52 gigawatts is not a limit, however, but a target. Germany has blown past its targets for renewables up to now. Feed-in tariffs have created a large market on which private firms compete, whereas quota systems are only nominally based on "competition" – actually, with quotas governments decide everything about the market except the price, and bids are not open, making quotas easy to manipulate and a good way of closing markets to foreign competition, for instance.
But as the current debate shows, terms are being confused, and the issue is chaotic. The combination of a rushed nuclear phaseout and a PV boom has changed the power market too much, too quickly, and now everyone is rushing to react to events they no longer shape. (Craig Morris)