Stretching Out Payments for Existing Renewable Installations

Since I happen to think that higher electricity prices are a good thing on a planet threatened by global meltdown, I hesitate to write down this idea I just had about reducing surcharges.

On the other hand, this is probably a minority positi0n. And reducing surcharges helps keeping the successful German feed-in tariff system in place.

So here we go.

The worst proposal in the recent paper of German Environment Minister Altmaier was to retroactively reduce feed-in tariffs for existing installations. It would irresponsibly undermine trust in the German government.

But if one wants to reduce costs, one needs to somehow reduce payments to existing installations. These are responsible for over 90 percent of the costs. If you can’t touch them, you can forget about actually reducing costs.

By the way, some of the proposals have no impact on cost in the first place. For example, the surcharge reductions for industry are only about distribution of the cost, they don’t change the cost as such.

So here is how to reduce payments for existing installations without undermining trust in the system, and without violating Constitutional law, as well as the guarantees against expropriation in the Energy Charter Treaty:

Don’t reduce the sum of payments. Spread them out over a longer term. And do so by giving investors a right to choose to do so voluntarily.

For example, a small rooftop installation registered in 2005 is entitled to another 13 years of feed-in tariffs at 54.53 cents. Give the owner an option to choose another twenty years at 37 cents instead. That would be slightly more than the 35.44 cents one gets by multiplying 54.53 by 13 and dividing by 20, but considerably less than what is paid now.

If one stretches out the payments over a longer term, it follows logically that payments now will be reduced. And if one does so by giving investors an additional choice, no one can complain about broken promises.

The nice thing about this idea is that 13 years from now, when the 2005 installation would drop out of the feed-in tariff system without this option, the cost of the feed-in tariff system will be going down anyway. The costs will peak in the next couple of years and then go down in the next two decades.

Therefore, it makes sense to stretch out payments into later years which have less of a burden in the first place, and profit from basically zero cost solar electricity paid for mostly now.

The existing law has a similar concept already in place in Article 31, Paragraph 3. Investors in offshore wind have a right to choose a higher feed-in tariff for a shorter period. My idea would be just the reverse of that.

 

Published by kflenz

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

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