July 26, 2016

Legal Shake-Up Threatens Germany’s Energy ‘Revolution’

In Germany, people’s power has wrought a revolution.

All over the country, citizens have formed co-operatives to build wind farms and solar arrays, in a grassroots push that has helped to make Germany a world leader in renewables.

The change is most striking in places like Saerbeck, a village of 7,200 people in the north-west that is a pioneer in collectively-owned carbon-free power. Thanks to a €75m investment in a wind-and-solar park, it is well on the way to becoming entirely self-sufficient in energy.

Yet Germany’s people’s power experiment may have peaked. The country’s parliament adopted new legislation on Friday that will shake up the way renewables are supported. Critics say it could spell the end of citizen-owned projects such as Saerbeck’s.

“In future, only the big corporations will be able to build wind farms,” says Wilfried Roos, Saerbeck’s mayor. “For everyone else, the economic risks will be too high.”

Germany’s Energiewende, or energy transition, is one of the most radical pivots attempted by a modern industrialised economy. The country is shunting aside polluting fossil fuels and nuclear power in favour of wind, solar and biomass, which by 2050 are to provide 80 per cent of its electricity, if targets are met.

The change was underpinned by the Renewable Energy Law, known in Germany as the EEG, which set guaranteed prices or “feed-in tariffs” for electricity generated from carbon-free sources. In the years that followed, dozens of energy co-operatives and “citizen’s initiatives” sprung up to take advantage of what quickly became an attractive investment opportunity. Roughly half of Germany’s total renewable energy capacity was installed by such entities, which now number close to 1,000.

“Energy for Saerbeck” is one of them. Founded in 2009, it now has 384 members, who collectively own a solar array and a massive wind turbine on a former munitions dump on the outskirts of the village. On an average investment of €9,000 each, they earn nearly 9 euro cents for every kilowatt hour of wind energy they produce — and 20 cents/kWh for solar - guaranteed over 20 years, 

according to Ansgar Heilker, the co-operative’s chairman. “It really reduces risk,” he says.

Average return on equity since 2011 has been 5.2 per cent — an attractive yield at a time of negative interest rates, Mr Heilker adds. Members each received a dividend of nearly €500 for 2014, up from around €250 the previous year.

But many now believe the subsidies that have proved such a money-spinner for Saerbeck have spun out of control. German consumers pay for them through a surcharge that has left them with some of the highest household energy bills in Europe: it currently stands at about €200 per year for a four-person household.

Rising bills and pressure from the EU — which wants to see a more market-based method of supporting carbon-free power — have prompted the government to pass a big reform of the EEG, which was voted through by the Bundestag on Friday. From next year, feed-in tariffs will be replaced with a system of competitive auctions: anyone can bid, but the developer offering the cheapest electricity wins. Only small photovoltaic arrays — anything below 750 kilowatts — will be exempt.

The reform also carefully calibrates the amount of new wind and solar capacity Germany will tender out over the next few years, amid concerns that the massive expansion in green power over the past few years put too much of a strain on the country’s electricity grid.

In presenting the reform last month, Sigmar Gabriel, Germany’s economics minister, said renewables projects were “no longer young puppies that need to be protected, but quite agile hunting dogs”. Clean energy was mature enough, he said, to be exposed to market forces.

But it is feared the new system will squeeze small grass roots initiatives and co-operatives out of the renewables game.

At issue are the high upfront costs of preparing a bid and the large security deposit companies have to pay to take part in the auction, which they forfeit if the project doesn’t happen.

“If it later turns out that I can’t build my wind farm, if, say, I don’t get planning permission or environmental consent, then I effectively have to pay a big fine,” says Andreas Wieg of the DGRV, an organisation which represents Germany’s co-operatives.

Experts say big renewables developers such as Belectric and Juwi will be the winners.

Shortly before Friday’s vote, the government introduced last-minute concessions that should make it easier for co-operatives to compete by ensuring they are awarded the most expensive offer bid at auction. But campaigners say that doesn’t go far enough.

“Co-operatives will simply not proceed towards pre-development because they’ll say it’s too risky,” says René Mono, head of the BBEn, the Alliance for Citizens’ Energy.

Standing by one of Saerbeck’s big solar arrays, Mr Roos, the mayor says the Energiewende “turned us all into small businessmen”.

“This was a revolution from below,” he says. But now, he adds, “the little people will be left behind”.

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