Altmaier: Trillion Euro Cost for German Feed-in Tariff

German Federal Environment Minister just told FAZ in an interview that he is worried that the cumulative cost of the German feed-in tariff system might reach EUR 1 trillion until 2040.

I have a couple of comments to that.

For one, if that proves to be right, so what? Is there anything wrong with investing EUR 1 trillion in the only show in town (after nuclear is gone) to get rid of carbon in the electricity sector?

Actually, 1,000 billion until 2040 would work out to about 35 billion a year, which is only around 1.45% of 2012 German GDP (2451,3 billion, IMF estimate). Not something to get excited about, and not even at the level of the 2% that should be the absolute minimum invested.

Next, the feed-in tariff costs will peak in the next couple of years and then only go down. That is especially true for solar, the most expensive option until now, since solar is capped at 52 GW and that cap will be reached well before 2020.

I recall that a more serious estimate of the total cost of solar in Germany is around 70 billion cumulative until 2020 (Fraunhofer, page 15). In that decade the savings from extremely cheap solar electricity from solar panels already paid back will outweigh by far any cost from new installations at further greatly reduced prices. As noted earlier, distributing that over the years from 2000 to 2020 results in 0.14% of GDP for solar.

So I sure wish Germany would spend one trillion Euros on renewable energy until 2040. However, I don’t think that will happen, nor do I think it will be necessary to get to 100% renewable electricity (a modest goal anyway, we need 100% renewable for all energy).

Altmaier also says this about his estimate:

Das gilt unter der Voraussetzung, dass der Börsenstrompreis auf dem aktuellen Niveau von 4,5 Cent die Kilowattstunde bliebe und die geltende Förderpraxis nicht geändert wird. Würde der Börsenstrompreis weiter sinken, würde es noch teurer.

So he thinks that the wholesale price of electricity at the exchange market has an influence on the costs.

Actually, that is wrong. As explained earlier, anything added to the surcharge because of lower wholesale costs is canceled out by savings from lower wholesale prices. It should not matter to the consumer, except if the utilities try to rip off the consumers by not passing on their savings.

Again, it is rather weird to worry about lower prices.

Also, Altmaier completely fails to account for the fact that business as usual (burning fossil fuel) also comes with a cost. It is therefore not fair to only look at the cost of the feed-in tariff and completely neglect what the cost for the alternatives would be. I recall that the damages from global warming are already at the level of $1.2 trillion a year right now, and they will certainly increase in the future.

 

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