Policy shift allows higher payments for renewable energy


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The inland state of North Rhine Westfalia (NRW) in western Germany has announced a dramatic about-turn in its renewable energy policy. The NRW economy ministry -- which acts as the state supervisory office on electricity prices -- will now allow utilities to raise prices to both domestic and industrial customers by up to 1% if the additional income is used to support operators of renewable energy plant.

The electric utilities in NRW can either request higher payments for renewables electricity under the Electricity Feed Law or introduce other levies on the basic price of electricity. The new "framework ruling" is unique in Germany and probably the most progressive in Europe. The state's economy minister, Günther Einert, says: "The aim of the new ruling is to increase the share of renewables in electricity generation in NRW."

Discussion about the level of payment for renewables electricity was originally brought into the open by the town of Aachen, largely through the initiative of the Association for the Promotion of Solar Energy (Windpower Monthly, March 1994). An attempt by the town council to rule that the utility pay more for renewables by charging more for the electricity it sold was originally flattened by Einert; he described renewables as "a do-it-yourself shop." Since then he seems to have changed his mind, apparently influenced by NRW Minister President Johannes Rau, who supported the scheme, and an NRW parliamentary resolution in early March which decreed that no legal effort should be spared to promote renewables.

The NRW economy ministry has issued guidelines, to be reviewed in three years, on its new policy. These begin with the 1% ceiling. Wolf von Fabeck from Aachen's solar association comments: "The ministry's independent legal advisor, Ulrich Immenga, concluded that a price increase of more than 3% would be justified. The 1% limit shows how reserved the ministry still is, but at least it is a start. In Aachen, 1 MW of solar power and 3 MW of wind power can be installed before the 1% limit is exceeded." The Aachen town council has decided that solar should be paid at the rate of DEM 2.0/kWh and wind at DEM 0.30/kWh. The current national tariff for wind is DEM 0.17/kWh, although projects selected for the federal subsidy programme receive an extra DEM 0.08/kWh

The guidelines also stipulate that utilities must publish a plan for the support of renewables which includes:

¥ their existing purchase of renewable energy and their own renewables activities

¥ exact information on planned renewable capacity and investment levels whereby "a sensible mix" is required; local climate and costs must be taken into account

¥ proof that no one energy is accounting for more than 50% of the additional costs incurred

¥ description of the measures being taken to ensure the criteria of rational economic operation is being met

¥ proof that the increase in electricity prices is distributed fairly and documented.

Von Fabeck points out that because the increase in electricity prices is only minimal, industrial customers need not have been included in the guidelines. As it is, two large industrial customers are already causing trouble for the scheme. Phillips and Zentis, have complained to the town council about the enormous increase in their energy costs due to the new policy. It appears, though, that their claims of increased costs of up to DEM 400,000 a year are exaggerated. This would only be the case if three times as much electricity as that used by the whole of Aachen was involved. But the renewables lobby is having a hard time refuting the claim since the complaints have been made internally.

The requirement for a renewables development plan to be published by utilities -- a demand which has worried small municipal utilities -- is not as bad as it sounds. The guidelines could be interpreted to mean an expensive official study by a consultancy office, but the solar association assures that only a three or four page document is required. It also points out that the stipulation requiring "rational economic operation" only means that the rate of pay for renewables must cover all the costs which would be incurred by a renewable plant if it were operated by a utility. This includes capital costs. If a privately operated plant is more expensive to run than it would have been under state control, then the additional costs must be paid by the private operator. Any public subsidies for a plant must be deducted before the payment for the electricity is calculated.

Von Fabeck sums up the object of the scheme: "The aim of cost-adjusted payment is to cut the still high generating costs of solar electricity and to achieve the broad use of wind, hydro and biomass. Whether this aim is achieved depends on the number of municipal utilities and electricity companies which introduce renewable payments which are cost oriented."

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