Monday, November 11, 2013

Reforming The Renewable Energy Law... Again

We still don't have a coalition contract for the next government, but today we learned more about the plan to reform the Renewable Energy Law. Merkel has realized that offshore wind energy is quite expensive after, well, Merkel massively increased (from under 9 €ct/kWh to around 15 €ct/kWh - depending on location - for 12 years plus 8 more at a lower level) the subsidies in the form of an allocation fee paid by consumers in 2009.  This new "reform" will not lead to any significant improvements to the consumers.

I have written about renewable energy and showed why it is so expensive for the consumers in Germany. The main reason is the extremely high subsidies for solar power in the last decade for which the consumer has to pay for through a allocation fee, while the producer gets a guaranteed feed-in tariff for a certain time, which depends on size and type of the renewable energy. For example, somebody who installed solar power on a building in 2004 got between 54 €ct/kWh and 57.4 €ct/kWh for 20 years. For onshore windpower the tariff is at a much more reasonable 8.93 €ct/kWh for the first 5 (though that is a theoretical number) to 14 years and 4.87 €ct/kWh therafter for a total of 20 years.

So what does the future production and feed-in tariff situation look like?

Solar energy will see almost no growth anymore after 2015, while offshore windparks are - according to r2b Energy Consulting - going to see massive increases from around 2500 GWh to 28500 GWh by 2017. Of course, the governments decision to increase the tariffs in 2009 is to blame for that; and it will lead to massive and unproportional fees paid to offshore wind power producers, which will reach the level of onshore installations by 2017, eventhough the production will not even reach half of the onshore systems.

The new "reform" will for the most part just scratch at the surface of the mistakes made in the past. The main problems are:

  • The whole system is a boom and bust machine. First politicians decide to that firms should receive very high tariffs for a certain type of energy. This leads to strong growth in that sector, through high investment.The politicians after a few years suddenly realize that this actually costs money for consumers, which leads to massive cuts. This cycle has happened in the solar power sector. Many of those companies are now insolvent. It is now happening again with offshore windpower.
  • The sudden cuts come too late, so the consumers actually don't save any money because of the long period (total of 20 years) of guaranteed fees for installed and planned installations.
  • The system burdens the poor, who pay a much higher percentage of their income for energy, while the wealthy, who have solar power installations on their buildings profit. It is a redistribution from the weakest to the strongest.
  • Many companies even those that are competing with foriegn companies (e.g golf courses) do not have to pay the allocation fee.
The "reform" does not solve any of the issues. It will reduce the number of firms excempted a bit, but for the most part it is just another boom-bust iteration, with a focus on slashing subsidies for offshore windpower this time. The guaranteed period which is actually the most pressing issue since consumers have to pay for incompetent political decisions for 20 years, will not be touched. A huge chunk of the "reform" will be comprised of rebranding. It is planned that the producers have to sell their power themselves for the same tariff in the end, which is just laughable since that will do nothing more than create another middleman and will therefore be less efficient and potentially more expensive.

Theoretically, the energy transition is a good idea, but the way it is done at the moment is absolutely unfair, eypensive, almost completely unplanned and leads to unintended consequences everywhere. It seems unlikely that the social democrats who came up with this idea actually wanted to create a redistribution scheme from the poor to the rich, but the complete lack of any skills within German governments has created massive chaos with sectors growing exponentially for a few years before completely collapsing within a even shorter time afterwards. And the consumers have to pay for this incompetence for two decades. Additionally, there is almost no reduction in carbondioxide from electricity production, since Fukushima brought the sudden realization that nuclear energy might actually have a few risks, so today renewables are supposed to substitute nuclear power, which has actually lead to an increase in electricity produced with lignite and coal in the last three years, while new natural gas power stations are being taken off the grid or never start to produce any energy. None of those issues are being tackled.

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