New law aims to double renewables -- Jubilant wind lobby and mixed utility response in Germany

A new renewable energy law passed in Germany has been greeted positively by the country's wind lobby, which has won its battle for a continuation of the Renewable Energy Feed in Tariff (REFIT). The law extends and strengthens the old Electricity Feed in Law while at the same time attempting to avoid conflict with both European Union competition rules and the free trade aims of Europe's Internal Energy market. Utility response to the legislation is mixed.

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Germany's new renewable energy law aims to "significantly increase" the contribution of green power to the national energy supply by "at least doubling" the output from renewables plant by 2010. The law -- greeted positively by the country's wind lobby which has won its hard fought battle for a continuation of the Renewable Energy Feed in Tariff (REFIT) -- was passed by parliament on February 25. It takes effect on April 1. Hans-Josef Fell, energy expert for the German Green party, has dubbed it the "birth certificate of the solar age."

The Gesetz für den Vorrang Erneuerbarer Energien, also known as the Erneuerbare-Energien-Gesetz (EEG) was passed by a comfortable majority -- 328 votes in favour, five abstentions and 217 votes against. It extends and strengthens the old Electricity Feed in Law while at the same time attempting to avoid conflict with both European Union competition rules and the free trade aims of Europe's Internal Energy market. Painstaking explanation from the German government of how it believes the law conforms with EU rules accompany the law. In particular, an inbuilt annual decrease in tariff payments of 1.5% for wind power, 1% for biomass and 5% for photovoltaic power forms a central part of the argument for EU conformity. The decreasing tariffs take account of the inevitable fall in power production costs that technological progress will provide, thus the law does not contravene EU market rules, claims the government.

The law has yet to receive the approval of the EU Commission. The EC is in the process of devising a renewable energy trading mechanism to open a Europe-wide market for renewable energy. Countries like Germany with price subsidy systems for renewables seemingly lock themselves out of this market.

Four pillars

The new German law rests on four pillars, slightly re-shaped from previous drafts: an obligation on electricity grid operators to give priority access to all renewable electricity; a fixed tariff for each renewable, including wind (box); rules on grid connection and grid reinforcement; and a mechanism to spread the tariff costs equally across all grid operators, in effect a renewables quota arrangement.

Utility response to the legislation is mixed. Wolf Hatje of PreussenElektra, the utility which until now has carried most of the cost of the existing REFIT because of the concentration of wind plant in the utility's wind swept supply regions, describes it as "practical, legally viable and long overdue." But Ulrich Beyer of RWE Energie, Germany's largest utility, says a mechanism by which the costs of the REFIT can be spread equally across all utilities "can not be put into practice in the short term." He calls for a two year transition period so that "long term contracts can be adjusted."

He is backed by his chairman, Manfred Remmel, who on February 24 said that "renewable energies have limited possibilities both technically and economically." Remmel doubts the law will prompt RWE Energie to "adjust its renewable energy activities."

For its part, Germany's utility umbrella association, Verein Deutscher Elektrizitaetswerke (VDEW), says it would have preferred a market for renewables based on "green pricing" systems -- under which customers voluntarily agree to pay a green premium for renewables power -- or some form of green power trading mechanism. This would have been more competitive and efficient than the arbitrary tariff decrease contained in the legislation, says VDEW.

Germany's powerful engineering association, VDMA, and the metal workers trade union together highlight the employment benefits to be expected from the new law. In the wind sector, IG Metal is anticipating 50,000 new jobs in manufacturing and 30,000 jobs in operations and maintenance, while the VDMA expects exports to rapidly increase from the current 20% of wind turbines made in Germany to 80%.

Sharing the cost

Costs for grid connection are to be paid by wind plant developers, but necessary grid expansion and reinforcement is a utility cost, states the law. A grid operator must meet this cost from the levies it charges for grid use. A clearing office is to be set up at the economic affairs ministry to settle any disputes.

The mechanism for spreading the costs of the REFIT equally across all high voltage transmission grid operators has been further fine tuned from earlier drafts of the law. By the end of March each year, grid operators must calculate the volume of renewables power fed into their grids and the proportion it represents of their total supply portfolios. They must then "virtually share" the renewables power so that the proportion of renewables is the same in each utility portfolio.

Operators whose portfolio quota of purchased renewables is less than the average must buy the excess held by a utility with a higher than average renewables quota. The price is fixed as the average paid by all grid operators for renewables during a three month period six months previously.

A report to parliament on the workings of the law is to be made every two years by the economy ministry.

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