Germany Backs Distributed Storage to Reduce FiT Payments

georg maueBy GEORG MAUE

Germany’s energy policy, lately dubbed the Energiewende or energy transition, is driven by the long-term target of creating a sustainable energy supply. That means affordable, secure, environ- mentally and climate-friendly energy instead of today’s dependence on energy imports (at present 70 percent of German energy consumption) of exhaustible fuels, which harm the environment and produce ever-rising costs for the society.

When designing the Energiewende, the German government, together with experts from business, science and interested groups, looked at available energy options. Comprehensive long-term studies concluded that the transition toward a sustainable energy supply was possible by the middle of this century and it would offer numerous benefits for society and the economy, new jobs and business, sustainable investments and a cleaner environment.

The cornerstones for the transition are doubling energy efficiency and covering demand with mostly renewable energies. According to the government targets, renewable energies shall amount to at least 60 percent of the total energy demand and 80 percent of electricity by 2050.

The German Renewable Energy Act (EEG) of 2000, offering grid priority and fixed feed-in tariffs (FiT) for all producers of electricity from renewable energy, has proven to be a powerful instrument to boost the use of renewable energies. Electricity from renewable energy increased from 6 percent when the act was introduced, to 23 percent in 2012.

The allocated costs increased, too, even though the EEG act has a built-in cost degression. For example, the initial FiT for rooftop solar photovoltaics (PV) of more than €.50 per kilowatt-hour melted down to €.15 per kilowatt-hour recently. Nevertheless, the renewable energy surcharge, which all electricity consumers pay with their bill (except for selected industrial branches), has developed from a fraction of an euro-cent in 2000 up to €.053 per kilowatt-hour in 2012. The recent increase of the surcharge has kicked off a heated debate on the costs of the EEG act and on the energy transition itself.

Therefore, a new instrument to ease the cost spiral, and to relieve pressure on the power grid, was introduced in May 2013. It supports new PV installations using batteries, with a grant of up to €660 per kilowatt-peak. To earn the grant, investors in new (small) PV must use 40 percent of their produced electricity on site, by making use of the batteries at noon peaks, thereby reducing FiT payments and lowering grid stress.

Early projections indicate that new PV will no longer be the cost driver of the EEG, as tariffs are continuously decreasing and — due to new EEG regulations and the battery program — less electricity from new PV is sold to the grid.

Beyond that, changes of the feed-in tariff and the surcharge mechanism, a revision of exemptions for industry and instruments for safeguarding power plant reserves, can be expected soon.

Georg Maue is first secretary for energy and climate at the German Embassy in Washington, D.C.

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