Federal Cabinet Approves Solar Feed-in Tariff Cuts and Changes for Green Power Privilege

In a attempt to cut down costs related to the Renewable Energy Sources Act (EEG), the main support scheme for renewable energy in Germany, the Federal Cabinet (Bundeskabinett) yesterday approved solar feed-in tariff cuts.  The cuts shall apply as of 1 July or 1 September 2011, depending on the type of installation. The Cabinet also agreed on a reduction of the green power privilege. In addition, the government announced plans to cut back certain biomass support in 2012.

For solar feed-in tariffs, the government approved the joint proposal made in late January by the Federal Ministry for the Environment (BMU) and the solar industry association BSW Solar. Parts of the regular solar feed-in tariff cuts due at the beginning of 2012 are brought forward to 1 July, respectively 1 September 2011 for freestanding installations. The July/September reductions of up to 15% shall depend on PV capacity installed in March, April and May 2011.

The cuts reflect the fact that some 17,000 MW of solar capacities meanwhile exist in Germany, 7,000 MW of which were installed last year alone, a BMU press release comments. Excessive solar promotion has been heavily criticized by various parties in the recent past, including consumer protection agencies that warned of rising electricity prices (please see related posts).

The Cabinet also agreed on a reduction of the green power privilege (Grünstromprivileg) for utilities.  Currently, utilities are fully exempt from the EEG reallocation charge (EEG-Umlage) if they supply electricity originating at least 50% from renewable energy sources.  As of 1 January the EEG reallocation charge exemption will be capped at 2.0 Cent/kWh, and with therefore no longer cover the full EEG reallocation charge (presently 3.53 Cent/kWH).

With the EEG surcharge (also called reallocation charge), electricity consumers have to pay the difference between market prices for renewable energy and the feed-in tariffs pursuant to the EEG. As the EEG reallocation charge has increased from 2.047 Cent/kwh in 2010 to 3,53 Cent/kWh in 2011, it was feared that it was becoming too commerically interesting to set up green power subsidiaries in order to reach the 50% mark, while at the same time enjoying the exemption also for the other half of their energy supply. Initially BMU had proposed to cut the green power privilege as of 1 July 2011. However, the industry intervened claiming that a lot of utilities had already signed electricity procurement contracts for 2011 and committed themselves to end-customers. Backed by the Ministry for Economics and Technology, the reduction shall now apply as of 1 January 2012.

Both proposals for cuts were made in the form of a “wording-aid” for the parliamentary groups of the ruling Christian Democratic Union (CDU) and Free Democratic Party (FDP) coalition. To speed up parliamentary procedures, the parliamentary groups shall introduce the EEG amendments as part of the already ongoing parliamentary process concerning a bill transposing Directive 2009/28/EC on the promotion of the use of energy from renewable sources into national law (Europarechtsanpassungsgesetz für Erneuerbare Energien – EAG EE). Energate reports that the second and third parliamentary reading in which the Bundestag would decide on the amendment could take place on 25 February.

The Federal Council (Bundesrat), the legislative body that represents the Länder (German states) on the federal level, does not need to consent, but can only object to the amendment. In the case of so-called “objection laws” (Einspruchsgesetz), the Bundestag (Parliament) can ultimately override the Bundesrat’s objection.

The BMU press release also announced that biomass feed-in tariffs will be cut as part of the EEG amendment scheduled for 2012. Environment Minister Norbert Röttgen and Agriculture Minister Ilse Aigner agreed on the need for a reduction as the increasing demand for corn as a raw material for biomass plants lead to an excessive cultivation of corn in some regions, resulting in a strong price increase in rents for farmland. The ministers were also concerned about the negative effect of monoculture for biodiversity and landscape.

Source: Federal Ministry for the Environment, Nature Protection and Nuclear Safety (BMU), Federal Ministry of Economics and Technology (BMWi)

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