President of German Cartel Office Calls for Reform of Renewables Law and Questions Feed-in Priority

Andreas Mundt, President of the German Cartel Office, has demanded a fundamental EEG reform in the near future in an interview with Handelsblatt. Renewable energy production was completely regulated, but without rhyme or reason, he said. In the interview he also indicated that the feed-in priority for renewables under the current EEG could be abolished.

Mr. Mundt has often called for more market orientation of the Renewable Energy Sources Act (EEG) over the last years. He saw an openness in all political parties to discuss an EEG revision and hoped that after the Federal Election in September the time was ripe for a fundamental EEG reform, Mr Mundt told Handelsblatt.

If one could start all over a again, a quota model (that would oblige utilities to buy certain quota of renewable energy) was probably the most preferable approach, Mr Mundt said (this approach has also been suggested by various sources like the German Council of Economic Experts, former Economics Minister Rainer Brüderle, the Monopolies Commission and RWI in the past).

Concerning amendments of the existing EEG, there were many options Mr Mundt pointed out, naming first and foremost an obligation of producers of green electricity to sell the energy themselves (under the current EEG grid operators are obliged to buy electricity from renewable power plants and pay fixed feed-in tariffs, cf. Section 8 EEG, if the producer doesn’t opt for direct marketing, cf. Sections 33a to 33i EEG). The sale of renewable energy should not “be covered by a fully comprehensive insurance scheme”, Mr Mundt continued to say, probably alluding to the fact that according the aforementioned Sections of the EEG producers of green electricity who market energy themselves can claim a market premium (cf. Section 33g EEG) in addition to the sales revenue obtained.

Producers of renewable energy had to become subject to the pure conditions of competition to overcome the existing “produce and forget” mood. A support scheme for renewable energy was still needed, but should be more market-oriented, e.g. by introducing auction models, Mr Mundt said, adding that the feed-in priority could be abolished as it only had a marginal impact on the growth of renewables. All in all, it was not a lack of approaches for changing the system, but rather the contrary that made it difficult to find a solution, Mr Mundt remarked.

He demanded to better manage the growth of renewables so as to ensure a better alignment with grid expansion, conventional power plants, load management and storage facilities.

Regarding the costs for consumers, Mr Mundt warned of special electricity rates (Sozialtarife) for needy citizens, saying they would lead to disproportionate bureaucracy, but called the EEG limitations for so-called energy-intensive customers, who are subject to international competition, essential (these limitations have been much discussed in the recent past, for more information please see here).

He was against abolishing the renewable surcharge, the EEG surcharge, with which consumers pay for the difference between the fixed feed-in tariffs and the sale of the renewable energy (that it not sold directly) by the transmission system operators, in favour of a special tax, Mr Mundt said. After all, the surcharge had an incentive effect as it was linked to the consumption.

Concerning the efforts to ensure enough conventional energy to balance the renewable energy sources, Mr Mundt warned not to create another regulated market. The capacity market models he had seen were rather complex, based on unreliable forecasts, and bore the risk that the regulation failed, he said. Therefore the implementation of a capacity market model would currently be premature, he stated. Instead he advocated for a strategic reserve model (also proposed by the Federal Association of the Energy and Water Industry – BDEW), in which conventional power plants provide reserve capacities for situations of special demand. This model could be easily introduced, was reversible and relatively low-cost, he said (regarding the current regulatory framework to ensure the security of supply, please click here). For the time being there was no capacity shortage in Germany, only as of 2020 there might be the risk of a lack of capacity in the one-digit GW range, which could be covered by a strategic reserve, Mr Mundt said.

Mr Mundt called the developments in the distribution sector, in which strong competition existed, very positive, but criticized the efforts of many municipalities to re-municipalize the distribution grids (which they had often sold to investors in the past) so as to gain more influence on energy policy matters. Distribution grids were not the place to implement energy policy goals, Mr Mundt said, adding that small grids could simply not be operated efficiently.

He considered the EEG exemptions for industry sectors facing international compensation indispensable. Without them, whole industries would be at risk.

Andreas Mundt’s comments come at a time when the costs of the Energiewende are attracting more and more attention in Germany, and when important voices like Siemens’ Peter Löscher and E.ON’s Johannes Teyssen have recently been highly critical of the German energy turnaround.  In a Handelsblatt interview last week, they argued that key elements supporting renewable energy in Germany were inefficient. In their view, things are materially going wrong. PV support was too strong, as solar contributed little to base load supply.  More market was needed, regulation only where necessary, and energy efficiency should receive much stronger support.  Justus Haucap, member of the Monopolies Commission which advises the German government and legislature in the areas of competition policy-making and regulation, voiced similar concerns in a FAZ interview last week. He considered the Energiewende to be a gigantic experiment in which the government would not pay sufficient attion to costs.

Sources: Handelsblatt, 25 July 2013, page 12;  Handelsblatt

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