Reset Option

Considering that German Ministers Altmaier and Rösler are willing to declare default on the obligation to pay existing renewable energy installations the feed-in tariff at the amount in place when the investment was made, here is an alternative proposal.

I understand that over 90 percent of the cost for the renewable energy feed-in tariffs in Germany comes from existing installations. If you can’t touch their existing rights, any attempt at reducing costs will be very limited in its success from the start on.

I have already proposed the basic idea in a post titled “Stretching Out Payments for Existing Renewable Installations“. From that post:

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.

The basic idea is to stretch out the payments over a longer term in return for reducing them. Give people an option to reset their feed-in payment schedules for another twenty years from now on, at correspondingly reduced tariff rates.

 

Published by kflenz

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

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