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Germany

Germany

PRICING PRECEDENT RECOGNISES FULL ENVIRONMENTAL BENEFITS

The electricity pricing authority in North Rhine Westfalia has agreed that electricity bills in the state may be increased by a maximum of 1% to enable utilities to meet the full cost of producing electricity from renewable sources. The Tariff Supervisory Office has set up certain rules for the new policy such as no one type of renewable energy is allowed to account for more than 50% of the increased costs. As an alternative to premium rates of pay, subsidies of the capital cost can be awarded to renewables projects, subject to certain limits.

The sweat and tears expended by the renewable energy lobby in the German town of Aachen -- which spent months fighting for prices high enough to meet the full cost of producing electricity from renewables -- has paid off. The electricity pricing authority in North Rhine Westfalia has agreed that electricity bills in the state may be increased by a maximum of 1% to enable utilities to pay a fair price for power from renewable sources. Payment for renewables power in Germany is otherwise governed by the Electricity Feed Law, which establishes only a minimum tariff.

With a precedent set in Aachen, town councils throughout North Rhine Westfalia can now require their municipal utilities to meet the full cost of generating from renewable sources and feeding power the to grid. For their part, the utilities can choose whether to pay a premium rate per kWh, whether to subsidise the capital cost of wind plant, or whether to mix the two.

The Tariff Supervisory Office has issued certain rules to be followed in implementing the new policy: no one type of renewable energy is allowed to account for more than 50% of the increased costs. Wind energy projects without an expert report on wind speeds can receive up to DEM 0.24/kWh for a period of 15 years, while projects with an official wind speed report can receive up to DEM 0.35/kWh, again for 15 years. Photovoltaic electricity generators can receive up to a maximum DEM 2.0/kWh for 20 years.

As an alternative to premium rates of pay, subsidies of the capital cost can be awarded to renewables projects, subject to certain limits. Wind projects can receive up to 40% of the total investment figure, while photovoltaic plant can receive up to 100% of the capital investment, with a ceiling set at DEM 16,000/kW, but nothing towards operating costs. No rules have been set on paying for power from biomass, hydro and other forms of renewables -- payment can be decided on a project by project basis.

Although the decision by the tariff supervisory office is viewed as a political breakthrough, sceptics point out that the rules also apply to renewables plants owned by utilities. These could start installing their own plant, swiftly eating up the quota of finance allowed before the 1% tariff-increase cap is reached. Private operators could soon find themselves out in the cold once more.

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