Germany's Iconic Renewable Energy Feed-In Law Threatened By Politics

In advance of Germany’s 2013 election, politicians are jostling over the country’s iconic support for renewable energy.

Four utilities announced they are raising the surcharge that customers pay (on their utility bills) to fund renewable energy by a steep 47% next year.

The 47% rise reflects the fact that renewable energy supplies an increasing share of the country’s electricity, which is bought from producers at guaranteed above-market rates.

Utilities charge customers a surcharge, known as "Umlage", to cover the difference between the higher price they’re required to pay for renewable energy and market prices for fossil fuels.

The increase is expected to total $77 a year for an average household that uses 3,500 kilowatt-hours.

To prevent voter backlash related to rising energy costs, Merkel’s government is also looking to cap subsidies for wind and biomass, as it has for solar.

Earlier this year, solar subsidies were capped at 52 gigawatts (GW), up from the current 30 GW. Once that level is reached, price guarantees will stop.

"Renewable energy has come of age in Germany, and it’s time for the system of subsidies to grow up too," Michael Fuchs, deputy parliamentary leader of Merkel’s Christian Democratic bloc, told Bloomberg. "Whoever has 25% of the market share must be treated as such."

Environment Minister Peter Altmaier wants to "fundamentally" reform the system to make renewables compete at market prices "as quickly as possible." 

Others see it differently. Energy-intensive companies are exempt from paying the Umlage and leftover costs from 2012 are responsible for more than half of the new fee.

"Instead of blaming renewables, unnecessary exemptions for industrial consumers including banks and slaughterhouses, should end," says Juergen Trittin, co-leader of the Green Party.

"It is not the growth of renewable energy that is driving prices but the government’s serving of lobby groups and making wrong decisions," senior lawmaker Ulrich Kelber from the opposition Social Democrats told Bloomberg.

And the Renewable Energy Research Association says the debate is short-sighted because 570 billion euros will be saved by 2050 as Germany closes nuclear plants. Last year, Germany spent about 16 billion euros to support renewable energy feed-in laws.

Capping subsidies would create a rush to install renewable projects and deter industry investment in the long run, says Dietmar Schuetz, president of the German Renewable Energy Federation. "Such steps increase costs." 

Just last year, Germany passed a new version of its landmark feed-in law, upping the Renewable Energy Target to 40% by 2020 (while phasing nuclear out by 2022), and raising payments for biomass, geothermal, & offshore wind. It maintained solar PV and onshore wind incentives.

Since then, however, solar tariffs have been cut several times, causing fairly constant disruption, but an avalanche of new projects – 7.6 GW of solar in one year. Germany gets 25% of electricity from renewables, up from 6% in 2000.

A poll shows that 69% of Germans want nuclear plants closed even if energy prices rise, but 81% say they expect the government to help minimize those costs.