Archive for the 'European and German energy law' category

Germany Suing the EU Commission over Feed-In Tariffs

Feb 17 2015 Published by under European and German energy law

According to SPIEGEL (in German), the German government has sued the EU Commission over their decision to treat the German feed-in tariff as “State aid”, with the consequence of requiring approval by the EU Commission for all German legislation in this area. Thanks to this Tweet by Energiewende Germany for the link.

I applaud this move. How Germany legislates on renewable energy is none of the business of the EU Commission. They have been engaged in an illegal power grab that is incompatible with basic democratic values and the German Constitution.

I hope the German government wins this case, like they won the PreussenElektra case on the same question in 2001.

But for the very least, even if the Court says that there are some elements to the present feed-in tariff that make it qualify as “State aid”, the consequence of that should be to abolish those elements, not to continue taking the orders of the EU Commission elected by nobody in Germany on this point.

Also, even if a feed-in tariff was “State aid”, Article 3 Paragraph 3 of the Renewable Energy Directive 2009/28 already says that Member States may implement “support schemes” for renewable energy, which includes feed-in tariffs under the definition of the term in Article 2 k).

Since this Directive already allows feed-in tariffs unconditionally, there is no room for the EU Commission to attach any conditions to that permission. For example, if the Commission thinks that it is a great idea to restrict feed-in tariffs to a system where the tariffs are determined by auctions, they are free to introduce legislation changing Directive 2009/28. If they find a supporting majority in Parliament and in the Council for this useless and harmful idea, then the support schemes for renewable energy in the EU will reflect their opinion.

But they obviously don’t have the power to unilaterally change the Directive without any legislation procedure. Their position is incompatible with EU law as well as with the German Constitution.

What interest exactly is the EU Commission’s position supposed to protect?

They are correct in their assessment that support schemes for renewable energy come at a cost to competition. Selling electricity from coal power plants in Poland is more difficult with a feed-in tariff system in place in Germany.

But that interest (coal power plants from Poland) is not worthy of any protection whatsoever. The EU has made multiple policy decisions to phase out fossil fuel and to support renewable energy. Abusing general competition law to try to help coal power plants is in clear contradiction to this basic policy.

To sum this up: The Commission’s position is incompatible with basic values of democracy, incompatible with the German Constitution, and incompatible with Directive 2009/28. And they take this extreme position to help coal stay longer in business, which is incompatible with basic EU policy decisions.

I really hope the German government wins this case.

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New Record for Wind Installations in Germany

Jan 31 2015 Published by under European and German energy law

As Spiegel and many others report, the German Wind Energy Association BWE has announced figures for 2014. They are a new record 4.75 GW, breaking the 12 year old record of 2002 (3.2 GW).

That sounds like good news, and it is.

The bad news is that much of that is built by people who think that the 2014 reform of the Renewable Energy Law will make projects harder to build. They have finished their projects early to avoid being hit by these changes.

I have just written a paper (in Japanese) on the 2014 reform and agree with the sentiment that it may be a good idea for a developer to try avoiding these changes. Most of them are intended to prolong the life of coal electricity generation in Germany by delaying the transition to renewable, under the pretext of saving costs (actually, the transition to an auction model will work to increase cost).

It will take a couple of years to see how much renewable energy in Germany is slowed down by this reform. But one good thing has already happened, and it is irreversible. In anticipation of these unfortunate changes, Germany has set a new record for new wind installations last year.

That will come in handy when the time for evaluation of the transition to an auction model comes. Obviously, the drop in speed will look even more impressive when it is compared to a record year like 2014.




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Regional Variations in Feed-In Tariffs

Nov 06 2014 Published by under European and German energy law

Craig Morris at Renewables International discusses some interesting numbers on the regional differences in the cost of wind and solar energy in Germany.

The big picture is that wind is cheaper in the north, and solar is cheaper in the south.

For solar, that makes sense. Solar resources are better in the south.

For wind, it makes sense in the big picture. There are more good wind sites in the north, but that doesn’t mean there are no windy places in southern Germany.

Morris also goes ahead and compares these different costs per kWh to the feed-in tariffs for wind and solar. And he finds that the feed-in tariffs are insufficient for some sites, but way too high for others.

To remedy this problem, one might want to change the feed-in tariff so as to reflect these differences.

That would seem to be a good idea. So good actually, that this is already the way things are done right now for wind power.

Article 49 Paragraph 2 of the Law on Deployment of Renewable Energy has a very fine-tuned granular approach, under which the amount of feed-in tariff payments already depend on whether the site in question is above or below average.

With the large differences for solar reported by Morris it would probably make sense to have a similar approach for solar as well. Costs are about 2 cents (Euro) lower per kWh in the most southern part of Germany compared to the most northern parts. It doesn’t make much sense to have the same feed-in tariff for these very different conditions.

That in turn means that if, like the EU Commission wants, Germany moves to a system based on auctions, that most of solar under such a system would be built in the south. Projects in northern parts of the country would be unable to compete. That in turn would mean that whatever costs are saved by concentrating solar where the sun shines more would probably be offset by the need to have more power lines coming from such concentration.



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European Council Climate Decision Powers

Oct 26 2014 Published by under European and German energy law

Green Member of the European Parliament Claude Turmes says last week’s conclusions of the European Council amount to a “coup”, taking over powers from the Parliament.

He is worried about this passage in the first paragraph of the conclusions:

The European Council will keep all the elements of the framework under review and will continue to give strategic orientations as appropriate, notably with respect to consensus on ETS, non-ETS, interconnections and energy efficiency.

He seems to think that this might mean a change in decision powers. Where formerly the European Parliament and the Council could decide on these matters with majority votes, this passage means that now all these powers are transferred to the European Council. In that case, all decisions would need an unanimous vote, which would slow down speed to whatever the dirtiest Member State (*ahem* Poland *ahem*) wants.

For this to be true, there are two conditions.

For one, the passage above would need to mean that the European Council wished to transfer legislation powers. Another possible reading is that it just means that the European Council will keep these items on its agenda. Obviously, the European Council has the power to set its own agenda.

Also, even if the European Council wished to transfer all decisions on climate change and energy away from the Parliament and Council, the only way to actually do that would be to change the Treaties. You can’t just change the distribution of power by unilateral declaration in a European Council conclusion document.

Therefore, I don’t agree with Turmes. I think this is just the European Council stating that these are important matters that will remain on the agenda of the Heads of State. And I agree with that assessment. The European Council should keep all of the elements of the framework under review.

Actually from the position of Turmes, who thinks the decision lacks in ambition, keeping it under review is a good thing, since that means it may be changed to something more in line with his ideas as a result of such review.

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40% Percent Reduction Domestically Until 2030

Oct 25 2014 Published by under European and German energy law

The decision to reduce CO2 emissions in the EU by 40% until 2030 comes with a nice qualification:

The European Council endorsed a binding EU target of an at least 40% domestic reduction in greenhouse gas emissions by 2030 compared to 1990.

“Domestic reduction.”

As EU Climate Change Commissioner Connie Hedegaard pointed out in talking to the dpa news agency, that means that in contrast to the 20% goal of 2020 the EU can’t rely on buying carbon credits from countries outside of the EU to achieve this goal.

That in turn means that 40% is not only the double of the previous goal. It is even more ambitious.

Of course the European Council could have decided on even more ambitious goals. But I for one would be quite happy with adding 20 percent every ten years from now on.

For the next fifty years, counting fr0m 2030.

Which would leave us at 60% for 2040, 80% in 2050, 100% in 2060, 120% in 2070, and 140% in 2080.

That of course means cleaning up 20% of 1990 EU emissions in 2060, while having zero new emissions, and increase that to 40% in 2080.

The cheapest option to do so may be using olivine.

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What Excessive Costs?

Oct 05 2014 Published by under European and German energy law

I disagree with Michael Liebreich, who does not like feed-in tariffs. But in his latest piece for a conservative website, he asks a great question:

Germany may have reached over 25% renewable electricity, but at what excessive cost to its household energy users?

I am not aware of any “excessive costs” of the feed-in tariff system, compared to auction systems favored by Liebreich. That’s because an auction system increases the complexity of the regulation (something Liebreich says he doesn’t like). It increases the risks for anybody brave enough to participate, and, as a consequence, the amount of interest they need to pay their banks. There is the completely new risk of failing to succeed with any bid. There is the completely new risk of having to pay high penalties because the project gets delayed for one reason or another.  So I am far from convinced that feed-in tariffs come with “excessive costs”.

But the nice thing is that we will now see how exactly this will play out. The latest reform in Germany wants to phase out feed-in tariffs and phase in auction systems. We will see if that leads to “less regulation”. And we will see if it will lead to less costs.

I would be surprised if it does.

Anyway, at this point, it doesn’t matter much any more. Costs of solar are down so far (as a result of the German feed-in tariff Liebreich disagrees with) that increasing them somewhat with a less efficient auction model won’t change the big picture any more. Solar and wind energy will continue their explosive exponential growth world wide.

Also, a feed-in tariff system like the German one that makes the rates dependent on installation records actually is a very simple auction model, with a minimum of regulation. If the market goes down below the target rate, the feed-in tariff goes down slower or goes even up again. That means the feed-in tariff is reacting to the market, as opposed to being fixed only by the state.

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Another Smil Mistake

Oct 01 2014 Published by under European and German energy law

Craig Morris writes another  long debunking article pointing out some mistakes in something Vaclav Smil wrote about the German Energiewende.

Morris points out more than five errors. But there is also is this extraordinary claim by Smil:

The levelized cost of German photovoltaic electricity is easily four times that of coal-based generation.

Let’s do some fact-checking.

Right now, the feed-in tariffs for solar are between 9.16 and 13.05 cents Euro (since today, depending on the size of the project).

Since Smil wrote “easily”, we’ll take the lower figure (9.16) and divide that by four to get 2.29 cents for coal-based generation in Smil’s alternative universe.

In reality, the latest study quoted at the relevant German Wikipedia page gives cost for new coal between 6.3 and 8.0 cents.

This is important. The biggest success of the German feed-in tariff system was to bring prices down. Which will help deploying solar faster everywhere.

The basic premise of Smil’s article is wrong as well. Of course opponents of the transition to renewable energy in Germany like the INSM losers have noticed this and tried to make hay from this particular talking point.

The only way to avoid this problem with a feed-in tariff would be to approve lower surcharges for low income households, as there are already exceptions for industry and railways.

But that would make the system even more complicated, which is really not warranted for the couple of Euro a month the average household actually pays in surcharge costs.

The last time I wrote about Smil here was under the headline “Smil mistake“, pointing out a simple error in one of his books. This is another one.

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The Hammelburg Story

Sep 29 2014 Published by under European and German energy law

This story is showing in German right now at the website of Hans-Josef Fell, the former Green member of Parliament who was one of the authors of the German feed-in tariff.

It is about the experience of the small town of Hammelburg. It has a population of around 11,000.

In 1993, the local electricity provider decided to pay 2 German mark per kWh for solar electricity, up to a capacity of 15 kW, and finance that with a surcharge of 0.0015 mark (about 0.o7 cents Euro). A private company was founded and investors came up with 210,000 German mark (around 100,000 Euro). They installed solar panels and got their feed-in tariffs.

At the time, Hans-Josef Fell had high hopes. He thought in 1996 that Germany might be able to reach a whopping 80 MW a year if that principle of a feed-in tariff was extended to the whole country.

The actual success of this model was better by close to two orders of magnitude. It is interesting to look back and see that 80 MW a year was something people would value as a high number.

Now the solar panels at Hammelburg have worked for 20 years. And they are expected to work for at least another 20 years.

That’s another point worth noting. Solar panels are not going away once they are paid for (after twenty years). Those couple of kW in Hammelburg are among the first that celebrate such an anniversary. But they won’t be the last.

I leave it as an exercise for the reader to figure out what that means for the price of solar electricity (hint: it is much lower than what you’d get if you assume only 20 years of operation).

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“Germans Have Been Buying Price Decline”

Sep 16 2014 Published by under European and German energy law

From this article by Justin Gillis at the New York Times on the transition to renewable energy in Germany.

The whole quote would be “The Germans were not really buying power – they were buying price decline”, attributed to Hal Harvey, CEO of the “Energy Innovation” think tank.

I agree with the sentiment that the price decline was the more important result of installing all that renewable energy in Germany. But clearly Germany has also bought some power in the deal, and some price declines in the long term and in the short term wholesale markets.

My way of saying that is that the ebbing tide lifts all the boats.

The article closes with another quote, this time from Markus Steigenberger of Agora Energiewende. “Indeed, the German people are paying significant money. But in Germany, we can afford this – we are a rich country. It’s a gift to the world.”

Exactly. And it is not only a gift, but also payback for the fact that Germany as one of the early industrialized countries has profited most from the irresponsible use of fossil fuel over the last two centuries. Germans have a moral obligation to help with the solution of this problem.

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Germany Dirtiest Country of the World

That’s not a title to be proud of. I like the World Cup win much better.

Unfortunately, Germany is the largest producer of lignite in the World. I just learned this because I read this blog post by Craig Morris about Germany’s large lignite reserves, and their relation to the transition to renewable energy. Morris points out that Germany might continue producing “cheap” lignite electricity even once it is not needed any more domestically and export it.

Wikipedia explains that Germany has over 14 percent of the World’s lignite reserves and is the World’s largest producer. At least the trend is in the correct direction: Production is down to 169 million tons in 2010, from 388 million in 1980.

I think Germany should greatly reduce production of lignite. The way to do this is easy. All that is needed is to stop granting permits to expropriate citizens’ real estate for these projects, which typically require whole villages to relocate. The only way that can be done under German Constitutional law (Article 14 Paragraph 3) is if the project is necessary for the common welfare (Wohl der Allgemeinheit).

Digging lignite out of the ground and burning it to produce electricity is making global warming worse, since that is the most CO2 intensive way of producing electricity. There is no fuel as dirty as lignite. As such digging it out of the ground is incompatible with the common welfare. Common welfare interests require phasing out the dirtiest energy first. They certainly don’t require expanding lignite mining.

If it is impossible to expropriate real estate owners, companies who want to relocate villages to get at the lignite buried below them will have to pay much higher prices. That in turn will remove the only remaining advantage of this dirty fuel: Price.

Another way to increase the price of lignite would be to reduce production (phaseout profit theory). In contrast to coal, lignite is sold at localized prices, since it doesn’t make sense to transport lignite over long distances. Reduce supply each year by 3 percent (which would result in a reduction around 60 percent over the next 30 years) and watch prices go up. That’s good for the owners of these lignite resources, good for people who else would see their home villages disappear in a big hole, good for future generations (who will have left more of the valuable resource left), and good for the climate.

And all it takes to do that is to stop relocating people and destroying whole villages.



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