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Germany

Germany

DEATH THROES OF A MONOPOLY

In its battle against the Electricity Feed Law (EFL), the German electricity establishment has a hidden agenda. Ostensibly it is fighting the law because it feels the premium payments demanded of utilities for renewables' power are too high. Three utilities are even trying to force the matter before the courts by refusing to make the required payments. But it seems the real reason for utility opposition to the EFL is the clause requiring them to buy all renewables power generated. This fear is linked to the fact that wind plant are increasingly earning capacity credit on the German power system, lessening the need for other forms of generating plant. The utilities fear -- with development of renewables snowballing -- that third party access to the grid is being allowed in through the back door.

Germany's electricity utilities are truly in desperate straits. They have had to resort to stepping outside the edicts of the Electricity Feed Law in a last ditch attempt to undermine the market for renewables (page 18). Fortunately for wind energy, the episode seems to have backfired badly on the utilities. Support for renewables has since strengthened across the whole political spectrum and changes are likely to be made to the law which will not meet with utility favour. The electricity establishment apparently completely underestimated the likely effects of the EFL when the law came into being in 1991. At that time, the 12 month limit for appeal went by without a utility murmur.The EFL does two things -- it requires utilities to take renewables electricity on to their grids and it obliges them to pay premium rates for the power received. Although it is the premium payments the utilities have moaned most loudly about, it is the obligation on them to buy all renewables electricity generated which poses the greatest threat to their comfortable status quo. This obligation gives a whole new breed of independent generators legal access to the monopoly-owned grids of the utilities. The only way to prevent the rapid expansion of independent wind generators is to reduce rates of payment so that only a few, very windy sites are economically viable.For the utilities, there is no hope of stopping the renewables tide while the EFL is in force. The electricity price supervisory authorities have made it clear that the utilities are free to pass on any higher costs associated with the EFL to their customers. The only condition is that the renewables projects are operated as efficiently as if the utility itself were operating such plant.

With the EFL so well fortified, the utilities are proceeding with a flanking manoeuvre. They are trying to move the account from which payments for renewables are made away from electricity consumers and over to the cash-starved budgets of national or state government. Here the purse strings are likely to snap tight very fast indeed -- cutting off the fertile market for renewables in its prime. This, rather than the relatively small financial burden of the EFL, is widely believed to be the real reasoning behind the law-breaking efforts of the utilities to get the EFL put before the German Constitutional Court.

Appealing to the court could be the utility sector's last chance to retain its control over power generation. Parts of the renewable energy sector are growing so fast that they may not even need the EFL's premium rates. Following the recognition that capacity factors can be vastly improved when renewables technologies operate together, some forms of hybrid plants will soon be so competitive that guaranteed access to the grid is all they need. Jens Peter Molly, from the German wind institute DEWI, has noted that several smaller utilities in the north of Germany now publicly accept that wind has a capacity credit of around 10% -- it can replace one in every ten megawatt of conventional generating capacity. Although the wind lobby would maintain this is on the low side, a principle has been established. If wind plant are displacing some of the need for other power plant in Germany, operators are already entitled to payment in recognition of this fact. According to Molly, this should be DEM 200-300 for each kilowatt of recognised capacity credit, or an additional 5-8% of yearly income earned by a turbine.

Wind operators are now seeking ways of complementing their wind plant with other technology, such as battery systems, biodiesel generators or biomass plant. Not only does this increase capacity credit, it can also be regulated at will -- something that nuclear power cannot do. If the utilities are obliged to feed their grids with this clean power, in preference to coal or nuclear, their monopoly is gone for good. In a deregulated market of the future, with free access to the grid, a block of independent renewables generators could even snap up choice customers from the ranks of heavy industry.

In the medium term, the renewables lobby wants the necessary market support for renewables to be sourced from an energy/CO2 tax rather than through the EFL. While the wind sector is close to competing with conventional power stations, photovoltaic in particular needs considerable support and only an energy tax can provide the volume of funds necessary. In addition only a market penetration of the whole cross-section of renewables technologies will give them enough combined capacity credit to displace a good portion of fossil and nuclear capacity.

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