Energiewende: Cost Cap and Alternative Funding

Arguments and Positions

The chemical-pharmaceutical industry supports the political goal of the energy transition (Energiewende) to make energy supplies climate-friendly, reliable and affordable, and the industry actively contributes to further greenhouse gas cuts. However, it is critical of the cost development in the Energiewende, particularly for electricity: Irrespective of burden-easing measures for highly energy-intensive com¬panies, the chemical industry is currently paying, inter alia, over 1.2 billion euros p.a. in EEG charge (EEG-Umlage). This amount is likely to rise, as the EEG charge will further go up - especially with the decided faster expansion of renewable energies and extra tendering under the Energiesammelgesetz (act collectively amending energy legislation).

Moreover, an acceleration of the coal phase-out - as recommended by the Commission on Growth, Structural Change and Employment - to 2038 brings higher electricity exchange prices due to the shift in the price-setting type of power plant from coal to gas electricity generation. Compensation for this cost increase is essential for the international competitiveness of energy-intensive industries.

Electricity is becoming ever more important: for example, for the digitalisation and electrification of industrial processes and for electro-mobility. Also, the "decarbonisation" of chemistry gives a stronger role to renewable electricity. However, technologies with lower CO2 emissions can become established only if competitive prices for the required electricity are guaranteed in the long term - while the EEG charge causes an artificial cost increase in electricity consumption. Therefore, burden-easing from the EEG charge is vital for energy-intensive companies. However, relevant measures are repeatedly put into question under state aid law..

Alternative funding to combat high costs
The necessary investments will not be made in such uncertain planning conditions; reliable planning will be possible only by way of a system change. Total costs have to be reduced, and future plants should be no longer funded through the EEG charge on electricity but - as an overall task of society - from the federal budget. Such burden-easing for consumers, particularly in the medium-sized range, would directly stimulate the economy.

.Moreover, effective impulses are lacking for limiting the costs of the expansion of renew-ables and for the market integration of renew-able energies. Grid fees and further charges are rising due to the costs of grid expansion and stabilisation and further blocks of costs such as the capacity reserve and the brown coal reserve, redispatch measures and temporary reductions or shutdowns (Abregelung) of plants for renewables due to grid bottlenecks. This development weakens the competitiveness of energy-intensive companies without any additional benefit for climate protection.

THE VCI IS CALLING FOR THE FOLLOWING

  • Reduce the costs of the Energiewende to a minimum
    The further promotion of renewable energies should be as market-based as possible. A first positive step is the introduction of fixed - instead of floating - market premiums in "innovation tendering", which had been proposed by the federal government. The tenders are a test for more competition and the suitability of grids and systems. Furthermore, the follow-up costs for infrastructure expansion should be contained, e.g. by coordinating the expansion of renewables with grid construction and by suspending the promotion of renewable energy plants in times of negative electricity prices.
  • Promoting renewable energies should be funded differently
    The Energiewende is an overall task of society and needs an alternative funding system, with a view to easing the strain on the production factor electricity and to preventing distortions of competition for energy-intensive sectors. New renewable energy plants should be no longer financed through the EEG charge but within the federal budget, while funding of existing plants via the charge mechanism (Umlagemechanismus) could be maintained. In this approach, the EEG charge could be reduced to 0 cent within 20 years.
  • Make up for rising electricity prices in a way compliant with state aid legislation
    The extra costs of a faster "coal phase out" could total up to 54 billion euros. Due to competitive pressure, the energy-intensive industry responds sensitively to price increases. Therefore, regarding the expected cost increase in electricity purchasing, the German federal government should negotiate with the EU Commission a compensation that is compliant with state aid legislation.

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Contacts

Alexander Kronimus

E-Mail: kronimus@vci.de