Heat goes out of threat to cut support -- Wind versus coal controversy

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Flames of political controversy that flared up over the summer and threatened to consume Germany's renewable energy law in a conflagration with the fossil fuel lobby are subsiding to no more than a warning glow. The heat was reduced a few more degrees at a high level energy meeting on September 18. Chancellor Gerhard Schröder and the federal environment and economy ministers met with senior representatives from the major electric utilities and involved trade unions. While the main concern of the meeting was Germany's allocation plan for CO2 emission allowances, the energy leaders seemed to move towards a reconciliation that leaves room for not only the fossil fuel sector but also renewables, particularly wind energy, into the medium term.

emissions allowances

The meeting agreed that in the upcoming EU-wide CO2 emissions trading periods, 2005-2007 and 2008-2012, emissions allowances will be allocated for free, including for power station expansions, new-build, and for new capacity to replace Germany's nuclear reactors, all of which are being phased out by law. This would appear to ensure a future for coal and lignite generation in Germany and reduce the perceived threat that renewables were about to displace fossil fuels along the path towards CO2-free electricity generation. Plans for how all EU states are to allocate C02 emissions allowances are to be presented to the European Commission by March.

Federal economy minister and coal supporter Wolfgang Clement did not reiterated his radical demands to reduce support to renewables. Wind energy had been his major victim. Vehement opposition from not only the renewables lobby, but also his own Social Democrat party, seem to have changed his mind. He shocked the renewable sector early last month by airing ideas for replacing Germany's fixed minimum prices for renewables power with competitive bidding for power purchase contracts. Failing the adoption of that idea, he proposed a halving of the period for which guaranteed minimum prices are paid, to ten years, coupled with a 5% reduction in support for new wind projects each year, compared to the present 1.5% yearly reduction.

Meantime, federal environment minister Jürgen Trittin, while maintaining his unequivocal pro-wind stance, is also busy pouring oil on troubled waters. "It is an insult to our intelligence to say that I'm only for renewables and economics minister Clement only for coal," he said at last month's wind trade fair in Husum, Germany. By 2050, "Only those economies will be competitive that cover 50% of their energy needs with renewable energies. As we know this, it is wise to start preparing now," he added.

Trittin praised Germany's renewable energy support law for being "the most efficient and best mechanism" for expanding the renewables sector. He said that wind power prices under the competitive British mechanism are running at EUR 0.11/kWh onshore and EUR 0.12-0.13/kWh for offshore plant, compared with up to EUR 0.089/kWh for German onshore plant this year, dropping to EUR 0.088/kWh next year.

Shaken industry

Just how much the renewables debate has shaken not only the German but also European wind industry is revealed by the Brussels-based European Renewable Energy Council (EREC): "Germany is the locomotive pulling the renewable energy development in Europe which in turn is setting the global agenda when it comes to renewables. An unnecessary short term disturbance in the German market would send a very unfortunate signal to the surrounding world."

EREC warns that a new support framework is unlikely to function well in the first five years and also points to the European Commission's plan to propose a new, EU-wide renewable electricity framework as early as 2005, which would possibly enter force in 2012. "Changing the framework in Germany just two years before the European Union proposes a framework will have a devastating impact on investor confidence and the market as the rules would be changed twice over within a very short time," it states.

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