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How the German RE surcharge should be redesigned

A study published yesterday by Greenpeace finds that the German surcharge to cover the cost of renewable power could be redesigned to prevent it from rising inordinately for retail power consumers. On Monday, the charge for 2013 is expected to be announced at nearly 50 percent higher.

German media are already full of anticipatory reports, with the nightly news warning that the price increase to be announced on Monday could be as high as 50 percent, rising from the current 3.6 cents per kilowatt-hour to 5.4 cents. In the run-up to the announcement, a growing number of organizations are providing information about how to understand what's happening, and Green Budget Germany's latest publication (only in German) created for Greenpeace is the latest.

Green Budget Germany (GBG) recently drew a lot of attention for its excellent study on subsidies for all sources of energy, which showed that renewables have yet to get their fair share. Now, the environmental taxation experts say that the surcharge could actually be reduced next year instead of increasing by 50 percent even as the share of renewable power continues to grow. GBG identifies five main reasons why the renewables surcharge is higher than it needs to be:

  • more industrial firms are exempt from the surcharge
  • wholesale power prices for industry are lower
  • the price of carbon emission allowances is lower than expected
  • the "market bonus"
  • and taxes on renewables.

Renewables International has already written about the first two items, which are two sides of the same coin in a way; industry firms were to be protected from rising power prices brought about by renewables, so many of them are largely exempt from the surcharge – but actually, renewables have made power cheaper for industry (we recently put the figure at an 18 percent decrease over the past year, but GBG puts it at 20 percent).

 - Every power bill in Germany, such as this one for nearly 100% green power from Schönau, shows the composition of power sources.
Every power bill in Germany, such as this one for nearly 100% green power from Schönau, shows the composition of power sources.
EWS Schönau

The next item is emissions trading, which has largely failed to make coal power more expensive, primarily because too many allowances were handed out for free so that, as German emissions trading expert Felix Matthes of the Institute of Applied Ecology recently put it, the firms had a chance to get to know the system on friendly terms – and not be scared into opposing it. Here, however, there may soon be improvements. In 2013, all allowances are to be auctioned off, rather than handed out for free, and the reduction of nuclear power has removed that option for low-carbon electricity, so the pressure will be on coal plants – provided the German government does not exempt its firms from the impact of emissions trading, which is currently being discussed.

The "market bonus" is intended as a transitional mechanism to entice sellers of renewable power away from feed-in tariffs and into the power exchange. But because these power producers can retroactively choose the other option if it turns out to have been better – again, probably to entice these firms to participate rather than oppose the change – the policy has made renewable power more expensive without providing any additional clean electricity. Here, however, there is also likely to be changed as practically everyone agrees that the current policy is poorly designed.

Finally, there is the issue of taxes on renewable energy – an area that Green Budget Germany specializes in; after all, the organization played a crucial role in the design of Germany's eco-tax over a decade ago. And as the organization points out, the general tax on electricity is charged for all types of electricity because it was not possible when the tax was designed to determine what the particular composition of the a business or household's power was. In the meantime, however, power providers are required to report the composition of their power, so exempting green power from this tax would be easy.

Overall, all organizations that support renewables point out that the actual cost of renewable power only makes up a fraction of the surcharge, which is also only passed on to a fraction of power consumers. And lest we forget the big picture, German renewables research organization FVEE points out in a press release today that Germany's Environmental Agency believes the country's energy transition will save the country 570 billion euros by 2050. (Craig Morris)

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1 Comment on "How the German RE surcharge should be redesigned "

  1. Greg - 15.10.2013, 00:57 Uhr (Report comment)

    "In 2013, all allowances are to be auctioned off, rather than handed out for free"
    Does anybody have a link handy? I'd like to know more about this. (German language is fine).

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