English - Renewable Energy - BMU response to renewed criticism of EEG by RWI: Well known and refuted a long time ago

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BMU response to renewed criticism of EEG by RWI: Well known and refuted a long time ago

Systematic promotion of electricity produced from renewable energy sources in Germany started in 1991 with the adoption of the Electricity Feed Act (Stromeinspeisungsgesetz). In 2000, this act was replaced by the Renewable Energy Sources Act (EEG). Both acts are based on the principle of tariffs for renewable generated electricity to be paid by grid operators. Since 1991 these tariffs have been differentiated depending on the technologies used, with a more and more refined differentiation over time to take account of technological developments. By now, this scheme is supported by all political parties presented in the German Bundestag.

In its final report of the project "Economic impacts from the promotion of renewable energies: The German Experience” the Rheinisch-Westfälische Institut für Wirtschaftsforschung (RWI) now criticizes the EEG.

This new RWI report does not feature any new reasoning. It just brings up well-known arguments against the successful EEG that have been refuted a long time ago. Whereas the International Energy Agency¹ and the European Commission² commend the EEG as an effective and efficient tool and dozens of countries in the EU and beyond are following the German example³, the RWI remains stuck in its old way of thinking.

The positive climate impact of the EEG

Due to the EEG and its predecessor act, the Electricity Feed Act of 1991, the use of renewable energy sources has grown rapidly in Germany. The share of renewables in gross electricity consumption rose from around 3% in 1991 to well over 6% in 2000 (entry into force of the EEG) and to over 15% in 2008. In 2008, biomass, geothermal, hydropower, photovoltaic, and wind energy installations promoted by the two acts facilitated CO2 savings of around 53 million tonnes. No other piece of legislation has led to comparable savings in GHG emissions in Germany⁴.

Still, the RWI claims that there is no positive climate impact of the EEG because of the emissions trading system. It claims that due to the specified CO2 caps additional renewable energy sources (RES) installations would not bring about any further CO2 reductions. This argument ignores the fact that when setting caps within the emissions trading system the impacts of the EEG were included in the calculations. Without the effects of the EEG, caps would of course have been set at a significantly higher level.

It must also be noted that only through the promotion of renewable energies and their use, caps to be determined for the post-2020 period can be set as low as necessary to reach our most important climate goal: to limit temperature increase in the long run to a maximum of 2°C. To reach this goal, industrialized nations including Germany have to reduce their GHG emissions by 80-95% by the year 2050 compared with 1990 levels. This requires the rapid market introduction of renewable energies - also and especially in the electricity sector. In its weekly report 11/2009, the Deutsches Institut für Wirtschaftsforschung (DIW) explained in detail why the EEG is indispensible even with a functioning emissions trading scheme. Incidentally, 15 other economic experts have voiced their support for this weekly report⁵.

Technology development due to the EEG

Due to the EEG, a vibrant marketplace for technologies to generate electricity from renewable energy sources has developed in Germany. Dozens of companies are competing in Germany to build the best wind energy installations, the best biogas plants and the best and most efficient photovoltaic systems. It is for this reason that the four companies that build the largest wind energy installations worldwide (with capacities of 5-6 MW) are located in Germany. In early 2009, the German research institute Fraunhofer ISE has achieved a new world record for concentrating PV systems with an efficiency factor of 41.1%. A comprehensive expert opinion commissioned by the BMU has shown that the EEG has been a driving force in this technology development⁶.

But the RWI does not seem to be impressed by this. It claims that “the system of feed-in tariffs suffocates competition among renewable energy technologies”. To justify this view, it states that the economically superior thin-film solar cell technology for PV modules is only slowly gaining ground because of the massive existence of regular PV modules.

This argument is not convincing either. It is particularly in this respect, that the EEG is fully intentionally open to all technologies. Tariffs for electricity from PV installations must be paid irrespective of the technology used. The German government does not assume the right to decide which PV technology is the better or more appropriate option to generate electricity. Consumers are therefore free to decide which kind of module they want to buy, which technology suits them best. It is therefore the market that decides the future of different technologies.

Security of energy supply ensured by the EEG

By expanding the use of renewable energies we are getting more independent from fossil and nuclear energy sources. We can permanently reduce electricity production from fossil energy sources and the corresponding GHG emissions step by step and in the medium term forego without nuclear energy.

Due to the EEG, 55 TWh less of natural gas were needed in Germany for electricity generation in 2008. 83% of natural gas is imported (as of 2005). In 2008, around 140 TWh of hard coal imports were saved due to the EEG. German hard coal is disregarded in this context as there is a sales guarantee for it. Resource imports saved through the EEG alone summed up to nearly 3 billion Euro in 2008 and this number is set to rise⁷.

Nevertheless, the RWI still doubts that a greater share of renewable energies is effectively improving our energy supply security. It claims that more natural gas would be needed for electricity generation to buffer the fluctuating quantities of electricity produced by wind and solar technologies and fed into the grid. This argument is again well known and not conclusive. By now, forecasts of wind energy production are quite precise. Therefore, the much slower reacting coal-fired power stations can also contribute considerably to compensating for these fluctuations.

Of course, gas-fired power stations are well suited and today still necessary to quickly counterbalance unexpected changes in wind and solar energy production. This requires “balancing energy”. But balancing energy is also necessary for unexpected changes in electricity demand or in the case that a nuclear power plant or a coal-fired power plant has to be disconnected from the grid at short notice due to an incident.

For that reason, intensive research is being done to provide balance energy by other technologies or to minimise the demand for it. Improved load management, further improvement in wind forecasts, the smart use of bioenergy and hydropower installations and the use of storage systems will significantly improve the integration of renewable energies into the grid. Besides, if we want to minimise our dependence on natural gas imports, there are other areas that are of key importance:

Nearly 50% of our heat supply, which is responsible for roughly half of Germany's final energy consumption, depends on natural gas and nearly 25% depends on mineral oil. The share of natural gas in the electricity supply on the other hand is only 11% (as of 2005)⁸. It is therefore foremost in the heat sector that dependence on the ever more dwindling and more expensive energy sources natural gas and oil can and must be reduced.

In this context, RWI's arguments ignore policy measures in the important field of energy efficiency measures, e.g. the increased thermal insulation of buildings. This comes as a surprise as there is a broad political consensus: Better thermal insulation and the increased use of renewable energies should allow for a strong gradual decrease in the use of natural gas for space heating and process heat in the medium and long term.

Appropriate measures have been introduced for many years now and been clearly stepped up in order to implement the government's decisions of Meseberg of summer 2007. These measures include in particular the promotion of modernisation in order to increase energy-efficiency (KfW programmes), the new Energy Saving Regulation (Energieeinsparverordnung), the new Renewable Energies Heat Act (Erneuerbare-Energien-Wärme-Gesetz), the improved Combined Heat and Power Act (Kraft-Wärmekopplungsgesetz) and the improved Market incentive programme for renewable energies which by now is legally binding.

Needless to say that the expansion of renewable energies does not pose a risk to the security of energy supply - on the contrary.

The EEG and jobs

The view on the EEG's impact on the labour market is biased as well. The RWI report justifies its claim that there are only negligible if not negative net long-term job effects of the EEG by quoting various older studies that were all based on quite unrealistic assumptions. Recent well-founded scientific studies conducted for the BMU have shown that not only a large number of jobs has been created in the RES sector, but that the net job effects of renewables are clearly positive in all realistic scenarios even when taking job losses in other sectors, either connected directly or indirectly, into account⁹.

The BMU will of course continue to investigate this question; an update of the above-mentioned study is currently under way.