No Immediate EEG Revision – Agreement on Grid Expansion Acceleration

In their latest round of Energiewende talks, Chancellor Merkel and the Prime Ministers of the Länder agreed to speed up grid expansion inter alia by making the Federal Network Agency  (BNetzA) the plan determination authority pursuant to NABEG. They did however not reach agreement with regard to measures limiting the electricity price costs before the Federal Election in September as recently proposed by the competent ministries.

1. Grid Expansion

Regarding grid expansion, the states approved of the bill for a “Second Law Concerning Measures to Accelerate the Expansion of the Electricity Grids”, which contains the “Federal Requirement Plan for Transmission Networks”, the Federal Ministry of Economics and Technology (BMWi) reported following the meeting. The bill contains the transmission power line projects which are deemed necessary and urgent for an energy supply in accordance with the German Energy Act (EnWG) within the next ten years. The bill has recently been introduced to parliament.

Concerning an accelerated expansion of the transmission grid system, the government and the federal states also decided to make BNetzA the plan determination authority for transmission power lines covered by the Grid Expansion Acceleration Act for Transmission Networks (NABEG). Since the Federal Council (Bundesrat), the legislative body that represents the interests of the federal states, has to formally approve (cf. Section 2 para. 2 NABEG) , they agreed to submit a so-called Planfeststellungszuweisungsverordnung (Plan Determination Assignment Ordinance) to the Bundesrat for approval on 7 June 2013. The government plans to bring down the time for planning and constructing new power lines from 10 to 4 years.

2. EEG Revision

The government and the states did not reach agreement with respect to measures limiting the steady increase of the electricity prices in Germany, which are some of the highest in Europe. They only ruled out feed-in tariff payments cuts for renewable power plants already in operation. The recent proposal for measures putting a stop to the electricity price rise submitted by the Economics and Environment ministries included a 1.5% flat-rate reduction for plants commissioned before 1 August 2013. It had caused much debate among politicians, renewable power plant owners and investors.

According to Chancellor Merkel, the Heads of the Chancellor’s Office and of the State Chancelleries will continue their discussion about amendments of the Renewable Energy Act (EEG), the law that provides for fixed  feed-in tariffs for the growing amount of renewable energy in Germany. They agreed in principle that a fundamental revision of the EEG was necessary, she said. It had to go in hand in hand with a new market design for power plants that are capable of supplying baseload power, Mrs Merkel remarked, saying that this was a task for the period after the Federal Election in September. At present there is little incentive to build new more efficient gas-fired power plants that could deliver baseload power as renewable energy enjoys priority in the grids and coal prices are cheap.

Regarding short term measures limiting the price increase before the Federal Election in September, Mrs Merkel announced that the parties would present results of their continued talks in May. She pointed out that the main topics were a higher contribution of large energy customers to the EEG surcharge, the (steadily rising) EEG surcharge as such and the request by the states to reduce the electricity tax for consumers.

With the EEG surcharge consumers cover the difference between the revenue obtained from the sale of the renewable energy at the energy exchange and the feed-in tariffs paid pursuant to the EEG. large electricity consumers can apply for a limitation (cf. Sections 40 to 44 EEG). Cutting back this privilege figured among the measures to limit the electricity price increased proposed by the Economics and Environment Ministry. Besides they had proposed to only pay feed-in tariffs as of the sixth month and cut tariffs with the exception of those for solar power.

The request by the states ruled by the opposition parties to reduce the electricity tax for consumers by the equivalent of the share of renewable energy, i.e. 25%, proved to be a main stumbling block. Mrs Merkel said she had taken note of the request, but not made any commitments. The matter shall be further discussed, though. The request by the states to discuss a reform the European Emission Trading Scheme on the European level had also duly been noted, Mrs Merkel said, pointing out that a discussion was already under way in the EU.

One was trying to reach an agreement on measures limiting the electricity price increase before the September election and act in unison in the next legislative period, Mrs Merkel concluded her press statement, adding this presented a great challenge.

3. First Reactions

In a press statement the Federal Association of the Energy and Water Industry (BDEW) deplored the lack of agreement regarding the electricity prices, saying the government and the states failed to assume their responsibility to limit the rising electricity costs caused by the EEG.

It remains to be seen whether or to what extent upcoming political election considerations will allow any revision of the EEG before the elections on 22 September 2013.

Source: Bundesregierung; BDEW

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