Reform of the energy transition: Bundestag is negotiating the future of renewables

Renewable energies are facing a revolution. This is likely to be triggered by the government coalition's draft laws, which the Bundestag is now negotiating. The message is: In the future, producers of renewable energy will no longer receive any money for increasing amounts of electricity.

“The proposed cuts” would “deprive small photovoltaic systems of the investment basis,” writes the association of solar companies in its statement at the hearing of the Economic Committee in the Bundestag on Monday.

The government's proposals can be understood as a departure from the logic of the now 26-year-old Renewable Energy Act (EEG). Until now, the principle was that every kilowatt hour of renewable electricity produced by wind turbines, solar systems, biogas reactors or hydroelectric power plants could be fed into the public grid. This reduces the proportion of fossil, climate-damaging electricity. In addition, renewable electricity is appropriately paid for or compensated. However, the government has clearly abandoned both rules in its draft of the new EEG.

The debates are still ongoing. The draft law comes from Economics Minister Katherina Reiche (CDU). The SPD negotiator Nina Scheer doesn't want to simply wave through some paragraphs - what the outcome of this will be is not yet clear. However, if the Union prevails, these would be the main changes: New, small solar systems on the roofs of residential buildings would no longer receive a fixed feed-in tariff, which today amounts to around eight cents per kilowatt hour.

For a transitional period of three years, homeowners would only receive a good five cents. After that, there would no longer be a fixed amount, but property owners would have to use the electricity themselves, store it or sell it to retailers. In this so-called direct marketing, you receive the market price, which can tend to zero if there is a large supply. And the dealers don't have to buy every kilowatt hour produced.

Since this proposal came into the world, its consequences have been hotly debated. “For many small systems,” it is “highly likely that long-term economic operation cannot be expected,” said Manfred Fishick, President of the Wuppertal Institute for Climate, Environment and Energy, to the Science Media Center, a scientific information service.

In this perspective, the loss of the feed-in tariff causes a financial loss that homeowners cannot compensate for by using their own electricity, even if they install larger storage systems. One possible consequence: new rooftop solar systems are built smaller, which means that the production of renewable electricity is lower than it could be.

Andreas Löschel from the RWI Institute for Economic Research in Essen, for example, takes the opposite position. “In many constellations, a solar system on the roof will still be worthwhile,” he emphasizes. However, this will probably depend, among other things, on how direct marketing develops. There are hardly any offers for this at the moment. And the technical requirements are usually not yet available. The government wants to step up the pace and accelerate the installation of intelligent electricity meters that automatically process electricity sales.

Another key point concerns new wind turbines and solar parks. If the operators build them in the future where the power lines are not yet sufficient, they will receive less compensation from the network companies than they do today if the electricity produced cannot be transported away. This could reduce the expected revenue by up to 20 percent. Possible consequences for wind and solar parks: Because of the increasing risk, lenders are demanding higher interest rates, which may thwart some construction projects.

Economics Minister Reiche chooses this path because she wants to reduce the overall costs of expanding renewable energies. In her speech to the Bundestag, she recently argued that the energy transition costs the federal budget 36 billion euros per year, mainly caused by the feed-in tariff that the state pays. By no longer receiving any remuneration for new, small rooftop solar systems, these expenses should be reduced. Taxpayers would be relieved.

Reiche also focuses on network costs, which account for around a quarter of the electricity bills of private households and companies. If new solar and wind farms receive less compensation from the network operators, this item will also fall, according to the Economics Minister's calculations. The energy transition would be cheaper for everyone. The critics, on the other hand, fear that the rich and the government are slowing down the pace of the energy transition - especially now that things are finally going well.

As a result of the reform, private households and companies would build fewer green power plants than before. This calls into question one advantage of the energy transition: solar and wind are now the cheapest energy sources. More of it means lower overall energy prices for everyone, while less green energy means higher prices. The Economics Minister still sticks to her argument about falling costs: The expansion of renewable energy should continue as planned, just more efficiently.