German consumers face sharp renewables levy hike

Germany report: As the bells were ringing in the new year, Germany was ramping up the charge to support its renewables sector. The country's renewables levy will rise 75% this year, compared with last year. Instead of EUR11.7/MWh, the forecast for 2009, electricity bills will include a fee of EUR20.47/MWh to support wind and other renewables.

Yet the 2010 renewables levy is not directly comparable with 2009. From the start of this year, the levy will be more transparent about the level of financial support it gives to the renewables industry. Up to now, some costs associated with renewables have been tucked away in network usage charges, a separate component of electricity bills. "From 2010, virtually all the additional costs of renewable energy in the electricity sector are included in the new levy," says Matthias Reichmuth of energy consultancy Leipziger Institut fur Energie in Leipzig.

Growing output

The four German transmission system operators (TSOs) responsible for calculating the levy set out three main reasons for the sharp rise. About 40% of the increase (EUR8.77/MWh) is attributable simply to the expanding amount of renewables electricity that will be generated in 2010 as new plants come online. Assuming a normal wind year, onshore wind generation is expected to reach 47.7 TWh in 2010, compared with a disappointing 38 TWh in 2009, which turned out to be a poor wind year.

Offshore wind output will probably rise to about 0.65 TWh as new capacity is brought online in 2010, from just 0.06 TWh in 2009, according to figures presented by Germany's four TSOs. All renewables together are predicted to generate 90 TWh in 2010, a substantial increase on the estimated 77 TWh for 2009.

The second reason for the increase is the economic crisis, say the TSOs. The levy is, in the main, determined by the difference between the guaranteed premium payments paid to renewables operators for their power and the expected income from selling the renewables electricity on the energy exchange (see previous story). Due to the crisis, customers' electricity use is expected to be lower, so renewables costs must be spread over a fewer number of kilowatt hours sold. At the same time, reduced demand for power results in a drop in price, increasing the difference between the price paid for power to renewables operators and the market price. These factors account for about 39% of the levy rise.

Third, the costs for smoothing the varying output of wind and other renewables power into an electricity product that can be marketed have in the past been hidden in network usage charges, but in future are included in the renewables levy. This aspect accounts for about 21% of the levy increase.

Waiting for economic recovery

All that said, the actual size of the levy may change. "The levy for 2010 is pitched very high," says Bjorn Klusmann, managing director of the federal renewables association, Bundesverband Erneuerbare Energien. The forecast for the renewables levy is based on wholesale electricity prices for 2010 as traded on the electricity exchange in 2009, he points out. "These prices have been much lower than in the past due to the economic crisis," Klusmann says. "As the economy recovers, electricity prices will increase and thereby reduce the difference between the energy exchange price and the average payment for renewables power and thus reduce the renewables levy."

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