Whither Energiewende after dismantling the philosophy of the Renewable Energy Act (EEG)

By Volkmar Lauber

One of two succinct and hard-hitting presentations by Volkmar Lauber explaining the abrupt U-turn of the German government on the use of feed-in tariffs to drive the Energiewende.

Lauber has been observing and writing about Germany’s use of feed-in tariffs for more than a decade (see below) from the other side of the German-Austrian border in Salzburg. His presentations will resonate with those of us in the English-speaking world who have stared in disbelief as Germany has unraveled the world’s most successful renewable energy policy—and one that granted opportunity to all German citizens not just corporate titans in Frankfurt and Berlin.

The presentations confirm a truism: elections do make a difference.

The SPD is the Social Democratic Party, equivalent to the Democrats in the US and the Liberal Party in Canada. The CDU is the Christian Democratic Party, more akin to the right wing of the Democratic Party (Blue Dog Democrats) in the US and the Liberal Party in Canada. The FDP is the Free Democratic Party, Germany’s official neoliberal party. They resemble the Republican Party in the US and the Conservative Party in Canada. The current German government is composed of a grand coalition between the CDU and the SPD. Whereas there have been CDU-SPD coalitions in the past, this one is quite different.

Below are some highlights adapted from Volkmar Lauber’s presentation for the Free University of Berlin, 7 June 2014.

Brief Summary or Take-Away

Efforts of EU Commission and U-turn by SPD in 2013/14 terminate EEG philosophy

What was so special about EEG’s philosophy?

  •  A strategy for the long haul
  •  How? By breaking the cycle between low demand of RE and its high cost
  •  Stable demand will lead to mass production
  •  Investing in learning-by-doing
  •  Not paid from state budget, but by consumers
  •  “Fair” price for RE, predictable 20-year revenue stream
  •  Different price for different technologies
  •  Planned price degression
  •  Implemented by two successive red-green governments and CDU-SPD

Neoclassical Critique

  • EU Commission and FDP offer classical neoliberal critique
  • Preferred quotas and opposed solar PV in particular          

CDU Ecological Wing Ascendent

  • CDU position more nuanced
  • Bragged about early support of 1990 StrEG
  • Ecological wing cooperates with SPD across party lines

Impact of RE on Incumbents

  • PV surge reduces daily peaks—coal’s most lucrative market
  • Volume and price of coal seriously affected—profits decline
  • Coal plant overbuild and booming RE generation creates over capacity
  • RE dramatically cuts wholesale price—utilities begin closing coal plants

RE Paradox

  • Lower wholesale prices increase EEG cost to consumers
  • Increases in industry “exemptions” from EEG surcharge

Clash of storylines/Misleading the public

  • SPD’s Gabriel defends bidding by saying EU requires it
  • But EU said EEG is not state aid, but “exemptions” were
  • Did SPD’s Gabriel trade “exemptions” for the EEG at the EU?

CDU & SPD Hand Over RE Sector to Incumbents

  • CDU’s business wing beats its ecological wing in 2012
  • SPD’s coal wing wins in 2013 election
  • Coalition agreement redefines Energiewende to mean something different
  • Caps on RE/year
  • Introduce bidding redefined as auctions
  • Eliminates priority dispatch to prevent losses to incumbents from fall of wholesale price
  • No significant reductions of “exemptions” for major industries

Lasting Effects of EEG

  • Broke up structure of generation, something that “market liberalization” didn’t accomplish
  • Will be hard to put the RE genie back in the bottle

More by Volkmar Lauber

Switching to Renewable Power by Volkmar Lauber–A Review

Three decades of renewable electricity policy in Germany by Volkmar Lauber

European Union Policy on Support Schemes for Electricity from Renewable Energy Sources

Einspeisetarife und Quoten-/Zertifickatsysteme by Volkmar Lauber und David Toke