This post is one in a series I am writing right now discussing German Environment Minister Peter Altmaier’s recent proposals on reform of the Law for Priority for Renewable Energy, which fortunately have zero chance of getting enacted.
In this particular post I will address the worst of these ideas.
First, the proposal in the original German version:
Für Bestandsanlagen bleibt es grundsätzlich beim Vertrauensschutz. Es ist essentiell, dass das Vertrauen in gesetzlich gegebene Zusagen nicht enttäuscht wird. Deshalb kommt lediglich die befristete Erhebung eines „Energie-Soli“ durch eine geringe und vertretbare Vergütungskürzung in Betracht. Aufgrund der großen Zahl von Bestandsanlagen könnten sich die Einnahmen gleichwohl auf bis zu 300 Mio. Euro belaufen.
Here Altmaier proposes to retroactively treat owners of existing installations worse than the law promised them when they decided on their investment. He acknowledges the need to avoid disappointing the trust in promises from the legislation. And then he says that because of that only “small and time-limited” reductions are possible.
I agree with the first part. It is essential to keep promises.
The Finance Minister, now Wolfgang Schäuble, won’t publish a position paper where he proposes a “small and time-limited” reduction in paying back German government bonds. He knows that such an announcement would immediately nuke the AAA rating German bonds enjoy.
That, of course, would only increase the costs of borrowing money.
In exactly the same way, the only thing to be achieved by announcing a “small and time-limited” retroactive change of conditions is that investors will reasonably conclude that Germany can’t be trusted and ask for higher interest for any further investments in clean energy to compensate for this new risk.
This kind of position paper damages the essential trust in the stability of the system even if, as in this case, it has no chance to actually get enacted as law. Fortunately the irresponsible ruling CDU/FDP coalition will find it impossible to get the necessary majority in the Bundesrat for this.
But it should actually not be necessary to rely on the Constitutional Court or international arbitration to make sure that the German government keeps its promises to investors. That’s just common sense.
Again, this will not become law anytime soon. But having the Federal Environment Minister propose it in public already does a lot of damage to investor trust.
And that, in turn, will already increase financing cost for any further projects in Germany, even if the proposal fails to get enacted as law.
That, all other things being equal, will make deployment of clean energy in Germany more expensive. So if you think that cost reduction is an urgent problem (I don’t), proposing this kind of irresponsible damage of trust in the stability of investment conditions is counterproductive.
Altmaier thinks that this kind of “small and time-limited” reduction could save about EUR 300 million in surcharge costs. That’s about 3 EUR and 67 cents per capita of the German population.
I would like to think that the honor of Germans and the trust in the promises of the German government is worth somewhat more than that.