Altmaier Paper on Renewable (3): Reducing Payments for New Installations

This post is one in a series I am writing right now discussing German Environment Minister Peter Altmaier’s recent proposals on reform of the Law for Priority for Renewable Energy, which fortunately have zero chance of getting enacted.

In this particular post I will address the most vague and difficult do understand of the proposals. Here it is in German language:

Der Zubau von neuen EEG-Anlagen bleibt möglich, allerdings müssen die Investoren damit rechnen, dass die Zahlung der Einspeisevergütung ab Inbetriebnahme für eine bestimmte Anzahl von Monaten ausgesetzt wird, bis das EEG-Konto wieder ausgeglichen ist. Hierdurch und durch Maßnahmen wie eine einmalige Sonderdegression und die Abschaffung von Boni kann im Bedarfsfall eine Kostenersparnis von bis zu 500 Mio. Euro erreicht werden.

That paragraph has three proposals.

The first one is to delay payments of feed-in tariffs “for a couple of months”.

I don’t understand how that is supposed to lead to any significant savings. All it can save is some interest on the delayed payments. In contrast, it is rather difficult to even understand when exactly that kind of measure would apply, and even more difficult for investors to reliably assess the risk of that happening.

While it would not help much with reducing costs, it would be devastating to the stability of investment plans. Having payments come in late can easily bankrupt these projects if they are unable to secure bridge financing for those “couple of months”.

A second proposal is a “once-off special feed-in tariff reduction”.

That lacks in merit as well. As Altmaier notes in his paper, new installations only contribute a small part (less than 10 percent) to the costs of the feed-in tariff system. Therefore it doesn’t make much sense to discuss any “special reductions”. Especially for solar, the tariffs have already been reduced rather dramatically in the last couple of years, which is exactly how the feed-in tariff system is supposed to work.

And the third proposal is to “eliminate some bonus payments”. It is impossible to understand what Altmaier has in mind here. There are a lot of different bonus payments in the Law on Priority for Renewable Energy, and any discussion on eliminating some of them would need to start with stating which one are supposed to be eliminated.

Since I don’t understand what Altmaier wants to propose here, I am unable to comment on the merits of this particular proposal.

While I am at it, I would also like to mention this excellent recent comment by Tina Ternus on the costs of the German feed-in tariff system at Photovoltaik Magazin.

According to her, the costs were at  EUR 16,621,170295.30 in 2012. And at EUR 16,369,030162,63 in 2011. That’s an increase of 1.54%, according to Ternus. I have checked that number and find the same result.

So whatever the reason for the 46% increase in surcharges, it definitely is not that the number of Euros paid out has increased dramatically. It follows that reducing payments for new installations is neither necessary nor sufficient for getting surcharge costs down.

Published by kflenz

Professor at Aoyama Gakuin University, Tokyo. Author of Lenz Blog (since 2003, lenzblog.com).

One thought on “Altmaier Paper on Renewable (3): Reducing Payments for New Installations

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: