Environment ministry bullish on renewables -- Sustaining German market dynamism a top priority say experts

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Renewable energies have reached such an advanced stage of development that a doubling of their contribution from 5% of German electricity generation in 1998 to 10% by 2010 and expansion to 50% by 2050 is possible, states the country's environment ministry. Its confident forecast is drawn from a study titled "Climate Protection Through Renewable Energies" commissioned from five renowned organisations. This recommends a premium electricity tariff for renewables as the swiftest and most reliable option for their expansion.

According to environment minister Jürgen Trittin, the study "confirms that we have set challenging but realistic aims." But it also shows that "renewables technologies will need our help within the foreseeable future." The study's aim is to encourage a combination of measures that would ensure the development of an independent market for renewable energies, but which would "promote competition between the renewable technologies and with conventional energies, while being compatible with competition rules in the liberalised European markets and at the same time using as little in the way of public support as possible."

After examining the different mechanisms already used in the EU, the study recommends that electrical energy and heating energy (district heating, space heating and process heat for industry) should be treated differently. A renewable energy feed-in tariff (REFIT) and marketing of green power are recommended as the main instruments for the electricity sector. In the heating market, capital subsidies for small plant and an obligation for a fixed quota of heat from large plant is deemed the best approach. The ministry claims that neither a renewables tariff nor a quota arrangement will burden the state budget.

Keeping it rolling

The study places special emphasis on avoidance of any regulatory changes that could cause a "collapse in the current market dynamic." It also wants to maintain and secure the existing market separation between plant manufacturer and plant operator and to create sufficient stimuli for all parts of the economy, from individuals to big business, to invest in renewable energies. The study acknowledges that the much-discussed "quota model" for obliging fixed percentages of renewables in the national electricity portfolio is attractive, notably in its conformity with competition rules and the aims of the European Commission for a single renewables market in Europe. "But on the other hand, it requires a significant change to the current situation in Germany." Mechansims for inducing market efficiency would with "high probability" lead to a concentration in the number of market players. Security of investment would decrease and small private investors would be squeezed from the market.

Although an efficient market would lead to cheaper wind power, "the stimulus to manufacturers to reduce prices is small because they can orientate themselves in the long term to a steadily growing market."

Testing green trade

Obliging the uptake of fixed quotas of renewables sourced power -- in combination with tradable green energy certificates -- as a means of supporting large renewables heat plant is discussed. The study sees such an obligation as a testing ground before possibly expanding the mechanism to other areas. This offers the chance of gathering experience with the instruments in a limited market sector which can then be extended to cover the whole heating market and possibly the electricity power market as well, the study says.

It concludes that the success of the green market and renewables obligation market over the coming years will determine the point at which the REFIT and capital subsidies can be reduced or even abandoned. It has several original proposals for the marketing of green power as a premium commodity.

The potential for cheaper grid transmission charges for renewables -- which have priority status -- should be examined, and the environmental and embedded generation qualities of renewables power should be taken into account on the country's new power exchanges, being set up by two companies, EEX and LPX, in Frankfurt and Leipzig.

Green power supplied to end consumers should be freed from Germany's eco tax on electricity, the study continues. State enterprises should also stimulate the green power market by regulating for renewables quotas in the electricity portfolios of public organisations. Private initiatives to certify green power to create a single standard should be encouraged. And as soon as fair grid access is achieved, the state should ensure that renewables electricity paid for at premium rates under the REFIT is not also sold for a premium as "green power."

The organisations responsible for the report are the Institut für Technische Thermodynamik at the Deutsches Zentrum für Luft und Raumfahrt in Stuttgart, the Wuppertal Institut für Klima, Umwelt Energie, the Zentrum für Sonnenenergie und Wasserstoff-Forschung Baden-Württemberg, the Internationales Wirtschaftsforum Regenerative Energien in Münster, and the Forum für Zukunftsenergien, based in Bonn.

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