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 green-house gas cuts. However, it is critical of the cost development for the Energiewende, particularly for electricity: Irrespective of burden-easing measures for highly energy-intensive companies, 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 as planned in the Energiesammelgesetz (act collectively amending energy legislation). Moreover, an acceleration of the carbon phase-out 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 becomes ever more important
The EEG charge causes an artificial cost increase for electricity consumption. Electricity consumption is rising with the digitalisation of industrial processes. 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. For energy-intensive companies, burden-easing from the EEG charge is vital, even though 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. Funding is available with the extra tax revenue of over 50 billion euros (most recent estimate) which is not yet earmarked for other purposes under the coalition agreement. Moreover, effective impulses are lacking for limiting the costs of the expansion of renewables and for the market integration of renewable 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 financed 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 (Umlage-mechanismus) could be maintained. In this approach, the EEG charge could be reduced to 0 cent within 20 years.
  • Bring grid fees in an efficient form
    As the grid fees are becoming an ever higher cost factor for the chemical industry, they should be regulated in such a manner that they do not adversely affect the international competitiveness of companies. The grid fee structure should be such that it allows final consumers with variable consumption to keep their electricity demand flexible. This would enable the companies to contribute to integrating ever rising quantities of electricity from renewable sources.

For questions or suggestions, please feel free to contact us.

Contacts

Alexander Kronimus

E-Mail: kronimus@vci.de