When Rainer Baake, the director of the Berlin think tank Agora Energiewende, recently proposed major changes to Germany's renewable energy law, he found himself in the middle of a firestorm.
The Renewable Energy Act (Erneuerbare Energien Gesetz, or EEG) has been a major driver of the long-lasting clean energy boom in Germany. But when Baake's organization proposed an overhaul and simplification of the law, many renewable energy advocacy groups cried foul.
What basically had the country's entire renewable energy landscape up in arms was the fact that Baake's think tank put a number to the value of clean power in Germany -- a very low number in the eyes of critics: €0.089 per kilowatt-hour ($0.123). “It doesn’t matter if it's coal, gas, wind, or large-scale photovoltaic arrays -- power from new systems costs about 8 cents to 9 cents per kilowatt-hour,” said Baake. Therefore, in his view, the future feed-in tariffs for renewable energy should be limited to just that, starting Jan. 1, 2015. “The proposal is intended to ensure that the energy transition is a success, not just ecologically but also economically,” he added.
But some fear a sudden death of the industry instead. In particular, biomass and geothermal systems, which currently enjoy feed-in tariffs of up to €0.3 per kilowatt-hour ($0.414), may not have a viable business model under an EEG 2.0 shaped by Agora's vision. Offshore wind developers would have to drastically scale back their plans, as well. Racking up incentives of up to €0.19 per kilowatt-hour ($0.262) this year and targeting an installed capacity of 13 gigawatts by 2022, Agora expects the plans to be scaled back to a mere 6 gigawatts by 2020. Meanwhile, onshore wind and PV would thrive, with each expected to add 3 gigawatts of newly installed capacity annually through 2020. By that time, Agora sees renewables contributing 40 percent of the country's annual electrical power demand, with 57 gigawatts of installed PV and 55 gigawatts of installed onshore wind being the major contributors.
Eurosolar, an influential European lobbying organization for renewables, harshly criticized the plan, characterizing it as being based on false assumptions and incorrect figures. Eurosolar argues that requiring installations with more than 1 megawatt of capacity to directly market their power output, as Agora proposes, would heighten risk for investors and eventually lead to “the death of onshore wind parks, which were the most important workhorses of the distributed energy revolution." The group also contends that the new feed-in tariff would also be too low for PV power plants and residential PV systems.
Baake concedes that it will not be easy to continue to meet the installation goals for renewables under the new feed-in tariff, but he argues that something has got to give. In an interview with the wire service Deutsche Presse-Agentur, he said, “Our proposal is tough on all groups involved. But we have to make sure that the costs for the expansion of the renewables come down to an acceptable level.”
The proposal, which lays out a total of twelve plan components, says that certain conditions have to be met in order to make the scenario work. One condition is that the current restriction limiting the capacity of most solar parks in Germany to 10 megawatts must be lifted. The document also contends that the agreed settlement price of €0.56 per watt for Chinese modules imported into the EU has to go.
Agora's proposal spells out a few additional suggestions that are supposed to help integrate renewables into the market and make sure that the financial burden of the energy transition is distributed equally among as many parties as possible. Finally, it calls for a debate about a new power market design, which will be necessary in order to integrate renewables into the system. But what will likely be a sticking point in the many discussions to come, especially once Chancellor Angela Merkel wraps up her negotiations with the Social Democrats and the new government gets down to business, is the number €0.089.
From now on, it is going to be very difficult for clean energy lobbyists in Germany to take that number off the table in any negotiation about incentives, because like it or not, Agora director Baake is considered to be one of their own. He served as undersecretary of the environment during the coalition of the Social Democrats and the Greens from 1998 to 2005, and the first version of the EEG was largely his brainchild.