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Germany

Germany

European Commission launches attack on German REFIT law

The European Commission is proceeding against Germany for unlawfully granting extra state aid for renewable energies by introducing a new electricity tax. The spin-off effect of the tax is to raise the Renewable Energy Feed-In Tariff (REFIT) for all wind power in the country. "The key word is over-compensation. It is a question of whether wind operators are receiving overly high payments," says an spokesperson.

The executive of the EU, the European Commission, is proceeding against Germany for unlawfully granting extra state aid for renewable energies by introducing a new electricity tax. The tax inadvertently boosts the country's Renewable Energy Feed-In Tariff (REFIT), which is set at a fixed percentage of the price for which electricity is sold to consumers. On July 28 the commission officially opened proceedings alleging that Germany has breached Article 88 of the EC Treaty.

The German government now has one month to respond. If the commission's allegations are upheld, Germany may have to abolish the REFIT law and ensure recovery of any additional payments made for renewables power as a result of the new tax. The boost to the REFIT rate caused by the tax, however, will not take effect until 2001, by which time the matter may well have been resolved.

Overly high payments

"The key word is over-compensation. It is a question of whether wind operators are receiving overly high payments," says a spokesperson for the EC's Directorate General for Competition. The directorate has been shaking its fist at the REFIT mechanism for the past three years for blocking the free trade of electricity. Its first assault was launched in 1996 (Windpower Monthly, December 1996).

The German economy ministry appears unconcerned by the EC's latest salvo. "There is no hurry," says a spokesperson, who points out that a new system of support is being discussed and could be introduced before 2001. One proposed mechanism is for a fixed kilowatt hour rate for all renewables which would do away with the link to the selling price of electricity in Germany.

The ministry has known for some time that the commission was on the warpath. On March 15 Germany was warned that the EC would take action unless steps were taken to ensure that the country's new ecotax of DEM 0.02/kWh, which from April raised the overall price of electricity, did not also raise the REFIT rate. The rate at which wind power plant operators sell their power is equivalent to 90% of the kilowatt hour price consumers pay for their electricity.

The commission argues that the REFIT payments are a form of state aid and that Germany is bound by EU law to notify the commission of any increase in electricity subsidies. Although the increase in the REFIT may be partly countered by the drop in overall electricity prices stimulated by market liberalisation, Germany still acted unlawfully, charges the Commission.

Reprieve unlikely

On the other hand, the subsidy may be allowed if it is deemed to conform with EU guidelines on state aid for environmental protection. Wind power, however, is so close to the market price of electricity that permission for a blanket increase of its existing subsidy, with no regard to how profitable some windy sites have become, is unlikely, warns the commission. Other member states that also support wind energy through a fixed price tariff have achieved growth rates based on lower kilowatt hour payments, it tells the ministry.

The commission stresses that the just launched proceedings are in addition and not instead of its long running battle over the legality of the REFIT. The most recent complaint is only directed at the introduction of the electricity tax on April 1. Ongoing proceedings, first started in 1996 (Windpower Monthly, December 1996) over the legality of the REFIT are being examined separately.

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