Passing on the cost of renewables

Next month, Germany's Network Agency will be announcing the surcharge that is passed on to power consumers in order to cover feed-in tariffs for renewables. It seems that the charge might rise instead of dropping.

For the past few years, the FIC surcharge in Germany has been forecast to rise only slightly this decade. Here, however, the experts forecast roughly a 20 percent drop for 2010. Now, a 10 percent increase seems more likely. Chart: DIW

Only six months ago, it seemed likely, as Renewables International reported, that the surcharge for 2011 might have been set too high and lead to a reduction in 2012 – after all, the surcharge increased by nearly 3/4 in a single year from 2.05 cents to 3.5 cents per kilowatt-hour. But a few weeks ago, the first reports began appearing in which a further price hike was forecast. The Frankfurter Allgemeine daily newspaper wrote that the surcharge could increase by around 10 percent, which would put it above 3.8 cents.

The surcharge is essentially based on the cost of renewable power minus the cost on the power exchange to take account of the price-reducing effect that renewables have on power markets; any difference in the current year is also carried forward. Judging from long-term trading in futures for 2016, the price on the German power market will only rise slightly from 57.75 euros per megawatt next year to 59.40 euros five years later. Clearly, market traders do not expect renewables to make electricity significantly more expensive in Germany.

The surcharge for 2012 will be based on prices from January to the end of September, so the rate is expected to be set in the next few weeks – by October 15. As a result, the last quarter of each calendar year is never included in the forecast for the surcharge. In the first half of 2011, Germany got some 20 percent of its power from renewables, but the real question is how the immediate shutdown of roughly half of Germany's nuclear power capacity last spring will affect the calculation for the surcharge. By taking so much baseload off the market, the German government may have increased prices on the power exchange.

On Monday, EU Energy Commissioner Günther Oettinger, a German, stated that the surcharge for renewables in Germany is "probably marching on to 6 cents" per kilowatt-hour, a figure that seems unlikely. But Oettinger is once again harping on his main goal as energy czar for the EU: an energy policy and market for the entire Community. Specifically, he wants solar power to come from the Mediterranean (including northern Africa, which is outside EU), where a kilowatt-hour is cheaper. If he gets his way, power may not become cheaper for German consumers, but power production would definitely remain in the hands of large power firms. (Craig Morris)