For anyone not closely following the renewable energy story in Germany, you may not know what EEG stands for. EEG is the acronym for Erneuerbare-Energien-Gesetz, which means German Renewable Energy Act. As the Wikipedia page currently states, EEG “was designed to encourage cost reductions based on improved energy efficiency from economies of scale over time. The Act came into force in the year 2000 and was the initial spark of a tremendous boost of renewable energies in Germany.”
In other words, EEG is the driving force behind Germany’s tremendous renewable energy revolution. If you know enough about EEG and want to skip to the latest news, skip the next section. If you’d like to learn more about EEG, don’t skip anything!
For some more details on the EEG, here’s Wikipedia’s great summary on its three main principles:
a) Investment protection through guaranteed feed-in tariffs and connection requirement: Every kilowatt-hour that is generated from renewable energy facilities receives a fixed feed-in tariff. Furthermore, the network operators must feed in this electricity into the grid preferentially to the electricity generated by conventional sources (nuclear power, coal and gas). Renewable energy plant operators receive a 20 year, technology specific, guaranteed payment for their produced electricity. In particular, small and medium-sized enterprises (SMEs) have been given new access to the electricity market, along with private land owners. The Federal Ministry for Environment, Nature Conservation and Nuclear Safety (2010) argues that anyone who produces renewable energy can now sell his ‘product’ for a 20-year fixed price.
b) No charge to Germany’s public purse: as of today, the promotion of renewable electricity is still necessary. The EEG rates of remuneration clearly show what electricity from wind, hydro, solar, bio and geothermal energy actually cost. Unlike fossil fuels, there are no external costs such as damages to the environment, the climate or human health. The remuneration rates are not subsidies as such since they are not paid for by taxes. On the contrary, the “polluter pays principle” (OECD, 2006) is distributed to the consumer: who consumes more, pays more. The remuneration rates are paid for by every consumer with the electricity bill.
c) Innovation by falling feed-in-tariffs: periodically lowering rates of remuneration for new plants (degression of 1% per year) exerts cost pressure on manufacturers. Thus, technologies are becoming more efficient and less costly.
EEG Costs & Benefits Today
I’m sure the benefits of EEG would be much greater if the value of a human life, the value of good health, the value of clean air and water, etc. were included into the accounting I’m reporting below. However, even leaving out those matters, Germany’s four biggest grid operators (50 Hertz, Amprion, Tennet, and Transnet BW) have concluded that there was a record €970 million ($1,270) EEG surplus in March 2013. And based on cumulative reports, these grid operators now have EEG at a net cost of about €450 million ($589 million). In other words, EEG could easily go into the black this month.
Previous months were as follows: February — €840 million surplus; January — €420 million surplus.
Wikipedia reports that the country saw a net benefit from EEG of €3.2 billion in 2011. However, the program crossed over into the red in May 2012, reaching a peak debt of €3 billion in October 2012.
In these analyses, the costs are the feed-in tariff payments to clean energy producers, while the benefits are avoided fossil fuel import costs. To better describe the fluctuations in the report mentioned above, my top German energy connection writes:
“The balancesheet is sort of like a national monthly heating bill. While you only heat during winter, you pay 12 monthly rates to cover those costs…. The EEG works similarly because the monthly cost increases during the summer months and if the balance sheet is negative at the end of the year, your rate increases.”
But seriously, add in some of the various societal benefits to the EEG, and I think you know where that would take us.