Germany

Germany

Fierce wind policy battle in Germany -- Minister favours C02 credit trade

Germany should ditch its support mechanism for renewable energies once CO2 certificates trading gets underway from 2005, the federal economy ministry's scientific advisory committee recommended last month. It says the renewables law, the Erneuerbare-Energien-Gesetz (EEG), will become "an ecologically useless and economically expensive instrument and, as a consequence, should be abolished."

While the renewables support mechanism has until now made a contribution to CO2 emissions reductions "if at very high cost," its overall effect once carbon trading starts "will be zero," claim the scientists advising the ministry. The release of the caustic report coincided with a parliamentary debate on proposed substantial amendments to the EEG that government hopes to have in force by early June. With investment by several hundred thousand citizens in wind plant, the debate has attracted considerable media attention.

The report's drastic conclusions are built on three main arguments, all of which were promptly shot down by the German renewable energy lobby. The scientists say that CO2-free generation by renewable energies will lead to a surplus of CO2 certificates (representing emission offsets) in the electricity sector. Higher liquidity in the CO2 trading market will lower the price of CO2 certificates, making it cheaper for utilities to buy certificates to offset emissions rather than investing in measures to reduce CO2 output, presumes the report. It concludes that just as much CO2 will be emitted in the present scenario of providing support for renewables as would have been emitted if renewables did not play a role in the energy sector. Not so, says the green lobby. Renewable energy generation supported under the EEG is excluded from the CO2 emissions trading system, it points out. That means renewables cannot contribute to the pool of CO2 emission offsets for sale or the dilution of certificate prices.

Secondly, the scientists claim the rising cost of supporting renewable energies forces up electricity prices and will eventually cause German industry to migrate to countries where CO2 trading is not implemented and energy is cheaper. But exactly this danger has been side-stepped by allowing rebates on the renewable levy component of electricity prices to industry with high power consumption, points out the renewables sector.

And whether it is cheaper to save CO2 by improving efficiency of coal or lignite stations than investing in wind, as the scientists state, loses relevance as electricity and energy consumption rises around the world. "We urgently need more C02-free sources of energy," says Peter Ahmels, president of German wind energy association Bundesverband Windenergie.

Indeed Germany's CO2 emissions increased last year by 0.4% to 837 million tonnes, although this was still 15% lower than the 1990 figure from which emissions reduction targets are sourced, reports the Deutsche Institut für Wirtschaftsforschun in Berlin. The increase would have been higher were it not for the 53 million tonnes of CO2 emissions saved through use of renewable energies, according to a new group issuing renewable energy statistics, Arbeitsgruppe Ernbeuerbare Energien Statsitk (AGEE-Stat), at the federal environment ministry.

Environmental defence

For its part, the environment ministry responded with publication of the results of a three year study on how to ensure that 50% of Germany's energy needs come from renewables by 2050. The study recommends retaining the principles of the EEG and supplementing it with a "solid concept for transmission network connections and expansion," in particular for offshore wind energy. "Within the foreseeable future there is barely a sign of alternatives to the EEG. Emissions trading will initially not develop sufficient stimulus to replace the EEG," states the report, titled "Ecologically optimised expansion of the use of renewable energies in Germany."

The report proposes that electricity generators consider replacing some of their fossil fired power station output with renewable energies outside of the EEG's remuneration system. The CO2 certificate price would, however, have to rise to about EUR 60/tonne by about 2010 to unleash a stimulus similar to the effect of the EEG. Looking to 2010-2020, when the price of renewables will have dropped thanks to technology advances, a certificate price of EUR 30/tonne of CO2 would be sufficient. The report further suggests requiring all electricity generators to base a percentage of their new power station construction on renewable energies. Germany will require a huge expansion of its generating capacity after 2010 as ageing coal units are retired and nuclear power stations are slowly phased out.

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