European Commission Questions German Renewable Energy Law
Yesterday I had a nice chat with a policy consultant at eclareon about the trade investigation the European Commission announced on the German Renewable Energy Law (EEG - Erneuerbare Energien Gesetz). The probe launched on May 6, 2013 is based on a complaint by an association for German private consumers and small and medium business enterprises. Little information has been released about the probe and the preliminary investigation is still underway with no major developments scheduled until after the German election on September 22nd. A major overhaul of the existing EEG is already expected to occur after the election since efforts to reform the law failed earlier in the year. This probe will likely play a major role in shaping the EEG overhaul.
Past
Since the enactment of the EEG in 2000, energy intensive, internationally competitive industries have been exempt from fully contributing to the energy transition. Therefore, the majority of the support has come from private citizens and other businesses. Since Germany has some of the most expensive electricity in Europe, this exemption was helped keep the large German firms competitive in international markets. The widespread adoption of renewable energy has dramatically pushed down the price of wholesale electricity, which means large firms can now buy electricity very cheaply (as low was 1 ct/kWh) during peak hours. This dual benefit has been a sore spot for many German citizens especially as the cost of renewable energy has been the main driver of the increased in residential electricity bills.
Present
Future
The potential ramifications from the probe range from a reduction or termination of the EEG exemption to requiring firms to pay back all the savings reaped from the exemption. The last course of action seems exceedingly draconian since this amounts to Billions of euros from Germany companies likely causing bankruptcies, job losses, and a withdrawal of energy intensive industries from Germany. Even just the elimination of the exemption will likely results in the loss of some energy intensive companies.
International Escalation
What appears to be a domestic issue, could take on a more international tone as the European Commission may argue that the EEG exemption gives German firms an unfair advantage over companies in other EU countries. A court ruling in 2001 on the case Preussenelektra vs. Schleswag found the renewable energy law preceding the EEG, the Stromeinspeisungsgesetz, did not illegally subsidize Germany companies. However, the European Commission may reconsider the question of the EEG's impact on EU competition given the recent changes to the law.
Since there will be little to no movement on this issue until after the election, it is hard to predict which way the ruling will go. The European Commission seems to be trying to keep this issue quiet as to not disrupt the German election, yet this has done nothing to calm the anxiety of German firms.
Sources -
[1] "Brussels Questions German Energy Revolution". Der Spiegel Online. Web. 30 Aug 13.
[2] "EEG-Umlage: EU prüft deutsches Ökostrom-Gesetz". EurActiv. Web. 30 Aug 13.
Past
Since the enactment of the EEG in 2000, energy intensive, internationally competitive industries have been exempt from fully contributing to the energy transition. Therefore, the majority of the support has come from private citizens and other businesses. Since Germany has some of the most expensive electricity in Europe, this exemption was helped keep the large German firms competitive in international markets. The widespread adoption of renewable energy has dramatically pushed down the price of wholesale electricity, which means large firms can now buy electricity very cheaply (as low was 1 ct/kWh) during peak hours. This dual benefit has been a sore spot for many German citizens especially as the cost of renewable energy has been the main driver of the increased in residential electricity bills.
Present
In the most recent amendment to the EEG in 2012, the government expanded the definition of what is considered an energy intensive industry from a minimum energy consumption of 10 GWh per year to only 1 GWh per year. This expansion has allowed discount markets, furniture stores, and retail chains to consolidate their electricity bills from stores across Germany to receive the exemption. As a result, the number of companies exempt from fully contributing to the EEG rose from 979 in 2012 to 2,245 in 2013 [1] and the national savings from the EEG exemption rose from €2 Billion in 2010 to €5.6 Billion in 2013. [2] The increasing number of exempt companies has placed even more of the burden on private consumers and business too small to qualify. This most recent broadening of the exemption is likely the reason behind the complaint and may potentially provide legal grounds for action from the European Commission.
Future
The potential ramifications from the probe range from a reduction or termination of the EEG exemption to requiring firms to pay back all the savings reaped from the exemption. The last course of action seems exceedingly draconian since this amounts to Billions of euros from Germany companies likely causing bankruptcies, job losses, and a withdrawal of energy intensive industries from Germany. Even just the elimination of the exemption will likely results in the loss of some energy intensive companies.
International Escalation
What appears to be a domestic issue, could take on a more international tone as the European Commission may argue that the EEG exemption gives German firms an unfair advantage over companies in other EU countries. A court ruling in 2001 on the case Preussenelektra vs. Schleswag found the renewable energy law preceding the EEG, the Stromeinspeisungsgesetz, did not illegally subsidize Germany companies. However, the European Commission may reconsider the question of the EEG's impact on EU competition given the recent changes to the law.
Since there will be little to no movement on this issue until after the election, it is hard to predict which way the ruling will go. The European Commission seems to be trying to keep this issue quiet as to not disrupt the German election, yet this has done nothing to calm the anxiety of German firms.
Sources -
[1] "Brussels Questions German Energy Revolution". Der Spiegel Online. Web. 30 Aug 13.
[2] "EEG-Umlage: EU prüft deutsches Ökostrom-Gesetz". EurActiv. Web. 30 Aug 13.
