Fed up with feed-in

The EEG, Germany’s feed-in-tariff system for renewable energy, has been lauded and copied all over the world. However, inside the country, criticism of the EEG is growing.

A recent study, authored by RWI, a well-known Essen-based economic think tank, claims the EEG has ‘failed to harness the market incentives needed to ensure a viable and cost-effective introduction of renewable energies into the country's energy portfolio.’ The study even goes a step further, saying that the German government’s renewable energy support mechanisms have been counterproductive, resulting only in ‘massive expenditures that show little long-term promise for stimulating the economy, protecting the environment, or increasing energy security.’

The study singles out solar photovoltaic energy as an example of government support gone wrong. Berlin pays 43 cents per kWh of solar power – roughly eight times the wholesale electricity price. As a result, PV modules installed in Germany between 2000 and 2010 will swallow some €53.3 billion in taxpayers’ money, the RWI study says.

Of course the study also acknowledges that Germany today has the second-largest installed wind capacity in the world, is the world’s biggest PV market and home to several top-notch solar energy companies. But the overall share of renewables remains negligible, the study says, noting that the amount of electricity produced by the German solar power plants in 2008 was only 0.6 percent of the overall energy mix.

The study also claims that the roughly 275,000 jobs created by Germany’s renewable energy companies will disappear once funding is cut. Again, the PV industry is mentioned as an example. Berlin subsidizes a worker in the photovoltaic industry with up to €175,000, says RWI.

The RWI-study further argues that the EEG has almost no effect on climate protection, with CO2 abatement costs linked to PV and wind power much too high to make sense. Germany’s technological first-mover advantage is also said to be negligible: the EEG fails to support innovation, the study says, for example by encouraging PV producers to stick to mono-crystalline cells rather than developing thin-film cells.

The study presents some harsh numbers, but in many ways it’s one-sided. Yes, Berlin is pouring massive amounts of cash into renewables. But let’s not forget that nuclear energy has received some €40 billion in subsidies and the German lignite industry nearly €130 billion up to date. Subsidies to these industries are continuing, if to a lesser degree than in the past. Last year, renewables saved Germany fossil-fuel imports worth at least €3 billion. And if you keep in mind that the world’s fossil fuel-based resources are depleting, it’s safe to assume that the future belongs to renewable energy technologies – so subsidizing them makes sense.

Stefan Nicola
It’s true that the PV market in Germany is artificially bloated. If global cell production and sales prices remain as low as they are now even after the economy recovers, PV subsidies should be cut (even more than the 10% cut now foreseen for 2010), but the government should not endanger the many small and midsized companies in the sector by reducing the PV feed-in-tariff too drastically.

Because in the end, supporting PV makes sense. It may not succeed in chilly Germany, but in Asia, the Americas and Africa, the technology has huge potential. The expertise gathered by German PV companies and research institutions was sparked in part by the economic security provided by the EEG.

And the study’s assumption that the climate hasn’t benefited seems highly doubtful. Renewable energy sources promoted by the EEG in 2008 alone saved 53 million tons of CO2 emissions, according to the German environment ministry.

Green technologies such as wind and PV will play a key role in protecting the climate – and that is partly because the German EEG funded renewables at a time when not many governments believed they had a future. This has changed now, so let’s not fall back into old thinking.