In accepting the recommendations of a positive report on the EFL by the Federal Ministry of Economic Affairs (FMEA), the federal government is clearly backing the law. The EFL, which came into force at the beginning of 1991, obliges utilities to take renewables generated electricity onto their grids and to pay a premium price for it. The result has been a boom in the use of wind energy in Germany.
The FMEA recommends that the EFL continue without alteration and that a new report should be laid before parliament on the law "É as soon as this is necessary." Nevertheless, the ministry identifies areas for improvement. It recognises that the boom in wind energy is concentrated largely in the north German coastal regions, threatening to bring about higher electricity prices in that area. However, says the FMEA, a "hardship clause" built into the EFL provides a short term solution to this problem and "talks are planned with utilities and state governments on the matter." Furthermore, the FMEA intends to investigate whether larger wind turbines using state of the art technology could be operated economically if the electricity they produce was bought at a lower rate than currently stipulated by the EFL.
On the legal aspects of the EFL, the ministry declares in bold print: "The FMEA report expressly confirms the government view that the EFL conforms with the constitution -- contrary to the view of the Karlsruhe District Court."
While supportive of the law the FMEA is also concerned that it is not abused. The fixing of minimum prices in a market economy should be the exception rather than the rule "so that the necessity and effects of the law must be examined particularly carefully and continually. Should it prove necessary to amend the law in the future, then it will be necessary to give already executed investments the appropriate protection," states the ministry.
Utilities celebrate
Meantime, utilities have been celebrating their success in getting the EFL before the constitutional court. In an appeal brought by a small hydro plant operator against utility Badenwerk for failing to pay the proper EFL rate per kWh, the Karlsruhe District Court decided on September 29 that the EFL must first be put before the FCC for a ruling on the fundamental question of the law's legality.
Revealing the starkly contrasting views over the EFL within the legal profession, the District Court of Freiburg reacted quite differently to the Karlsruhe court in its handling of a separate, but similar case. This involved the utility Kraftübertragungswerke Rheinfelden which had also stopped proper payment to another hydro operator. The Freiburg Court did not feel it was necessary to pass the EFL to the FCC. In a ruling at the beginning of September, it simply ordered the utility to pay the money it owed.
Nevertheless the Karlsruhe Court judgement is sufficient to place the utilities, led by their powerful association VDEW, where they want to be: the legal integrity of the EFL is now under grave suspicion.
Ironically, the utilities claim they are in favour of support for renewables, but reject the EFL as the wrong means of providing that support. Hogwash, says the renewables sector, apparently also backed by the government. The utilities aim, they feel, is to break the pace of renewables development, preferably stopping it in its tracks. Indeed, the obligations imposed on the electricity companies by the EFL threaten to promote renewables to such a degree that the long standing utility monopoly on electricity supply is beginning to look decidedly fragile.
Both the VDEW and the wind lobby are now calling for a clear ruling from the FCC to clear up the uncertainty for investors. But this would not necessarily be a good thing. Living with uncertainty can be better than not having a living at all. The VDEW is basing its arguments against the EFL on what it sees as parallels with the "kohlepfennig levy" -- a levy on electricity prices to raise cash for the ailing coal industry, since declared unconstitutional. This was nearly a decade after the case was originally brought before the court by an electricity consumer who also happened to be a lawyer. In those ten years, the system of raising enormous amounts of cash (DEM 4 - 7 billion a year) to support German coal production continued without pause. When the court finally passed judgement, it even allowed the system to continue for one last year to the end of 1995.
A long drawn out case before the FCC could allow the EFL to run for the few more crucial years needed for wind to firmly establish itself in the electricity market. It would also allow the government time to think about how it will promote sustainable electricity generation. If the EFL should collapse now, the economically pressed government will be hard put to find cash to keep the renewables market going. The currently friendly climate for the market introduction of renewables within the framework of the EFL could suddenly become disastrously frosty. The government may think of another route towards its goal of encouraging the use of renewables. But it is unlikely that a path will be found which is as benevolent to the growth of a new breed of independent and efficient renewables generators as the EFL has proved to be.
It is not for nothing that the ministry appeals to all involved to "use to the full the chances provided by the law to increase the use of renewable energies and thereby contribute to saving resources and to protecting the environment and the climate."
