So much for the feed-in tariff. That was the mechanism by which Berlin kickstarted its solar and wind energy ambitions—it guaranteed renewable energy producers locked-in, above-market rates for their power over a long period of time, and just like that, for larger projects, it’s no more. The FT reports:
Rising bills and pressure from the EU — which wants to see a more market-based method of supporting carbon-free power — have prompted the government to pass a big reform of [Germany’s Renewable Energy Law (EEG)], which was voted through by the Bundestag on Friday. From next year, feed-in tariffs will be replaced with a system of competitive auctions: anyone can bid, but the developer offering the cheapest electricity wins. Only small photovoltaic arrays — anything below 750 kilowatts — will be exempt.
The reform also carefully calibrates the amount of new wind and solar capacity Germany will tender out over the next few years, amid concerns that the massive expansion in green power over the past few years put too much of a strain on the country’s electricity grid. […]
[M]any now believe the subsidies…have spun out of control. German consumers pay for them through a surcharge that has left them with some of the highest household energy bills in Europe: it currently stands at about €200 per year for a four-person household.
Feed-in tariffs were one of the most important tools in the energiewende toolbox, but they had their problems. For one, they were costly, and it was ultimately German consumers who ended up having to pay in the form of green surcharges on their monthly power bills. Those surcharges have grown in recent years and pushed German electricity rates to the second-highest level in Europe. They also worked a bit too well, putting strain on Germany’s power grid (and the grids of its neighbors) as the intermittent nature of these surging (pun intended) renewable supplies undermined stability.
But what of the feed-in tariff’s replacement, the auction? Auctions have lately become the renewable subsidy du jour, being deployed in the UAE, Peru, Mexico, and India, to name just a few. They seek to address runaway costs by rewarding projects to developers willing to sell their power for the cheapest amount. Preliminary signs show that it can be effective in keeping electricity rates down, but this approach has its own hazard, namely that in an attempt to secure a given project, the winning bidder might go too low and lock themselves into a contract where turning a profit is impossible. In this scenario, new wind or solar farms might be forced to go under, or might never be built in the first place, as we’ve seen in India.
Berlin is already running up against some economic and logistical limits of its renewable energy expansion, and until researchers make some solar and wind power breakthroughs and Germany expands its own grids to account for this new influx in variable supplies, these problems are going to continue to hamstring the energiewende‘s attempts to reach its lofty goals, no matter how it’s subsidized. If the ultimate goal is reducing the greenhouse gas emissions of its national power mix, we’d suggest Germany start by rethinking its ideological rejection of zero-emissions nuclear power.