RWI: Market-Oriented Renewable Funding Scheme Would Save EUR 52 Billion

WEE instead of EEG, a new study by the economic research institute Rheinisch-Westfälisches Institut für Wirtschaftsforschung (RWI) on the most cost-effective support scheme for renewable energies can be summed up. RWI proposes to replace the Renewable Energy Sources Act (EEG) that currently promotes renewable energy through fixed feed-in tariffs by a “Wettbewerbsmodell Erneuerbare Energien” (WEE) that would oblige utilities to buy certain quota of renewable energy. This would lead to savings of up to EUR 52 billion over the next eight years, RWI claims.

Under the EEG in its current form, consumers would be faced with costs of approximately EUR 59 billion until 2020, while a WEE support model would only result in costs of about EUR 6.8 billion, as the least expensive renewable energy form, onshore wind power, would prevail, the authors say.

Due to the high EEG feed-in tariffs intended to incentivise large investments in the offshore technology, offshore wind power would become the greatest cost driver, producing costs of more than EUR 23 billion, should the EEG remain unchanged, the authors say. According to their calculations, biomass and photovoltaics support would result in additional costs of EUR 17 respectively 13 billion.

With the proposed WEE model, utilities would be obliged to supply consumers with a certain fixed share of renewable energies. Since renewable energy will account for approximately 25% of the electricity supply by the end of 2012, RWI suggests to increase the quota for green energy between 2013 and 2016 by 0.5% so as not to affect grid stability any further. Between 2017 and 2020 the quota could rise by 2%, thus reaching the government target of a 35% share of renewables in the energy mix by 2020.

The RWI paper was commissioned by Initiative Neue Soziale Marktwirtschaft (INSM). The Berlin-based group “wants to renew the social market economy of Ludwig Erhard and adjust it to globalization, demographic change and the knowledge society”. RWI has been critical of the EEG scheme in the past.

The quota model as such is not new. It has been proposed by the Monopolies Commission and was inter alia supported by the the former Liberal Economics Minister, and has so far always been rejected. It remains to see be seen if some aspects of the WEE model in the proposed or in an amended form will be included in the ideas for an overhaul of the EEG that Environment Minister Altmaier lately announced to present in autumn.

Source: RWI

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