Energiewende: Cost Cap and Alternative Funding

Arguments and Positions

The Energiewende (energy transition) remains an economic challenge for the chemical industry. Irrespective of burden-easing for highly energy-intensive plants, the chemical industry is currently paying around 1 billion euros p.a. in EEG charge (EEG-Umlage). This sum will continue to increase, as the EEG charge will further rise − irrespective of the EEG reforms 2014 and 2017 for cost containment and to bring the system in a more market-economic shape. The financial burden is borne by those companies that do not benefit from burden-easing; these are essentially small and medium-sized enterprises (SMEs). But also for companies that fall under the burden-easing provisions, costs will further go up in consequence of the transformation of the energy system. A possible coal phase-out would additionally drive up costs.

In fact, the German federal government and the EU Commission have agreed to maintain the status quo for existing self-generation plants for the time being, where the EEG charge is concerned. This enables more reliable planning for the companies. On the other hand, new costs arise due to the reregulation of the combined heat and power surcharge: Here, an extra burden of just under 100 million euros is threatening for the chemical industry alone.

Further Rising Costs
The political goal of the Energiewende is climate protection and restructuring electricity production. Climate-friendly, reliable and affordable energy supplies are striven for. But concerning costs, the Energiewende is not developing sustainably. This threatens to bring disadvantages compared with foreign competitors, particularly for companies not benefiting from burden-easing.

Effective impulses are still lacking for limiting the costs of the expansion of renewables and for their market integration, e.g. through fixed market premiums instead of floating ones. The tendering for capacities − as introduced with the EEG amendment 2017 − will not reverse the cost trend either; it will merely slow down the further cost increase. Here, additional steps are necessary to achieve a better market integration of renewable energies.

New fields of action cause new costs
Beside the expansion of renewables also the costs of grid expansion and grid stabilisation are moving in the focus of the debate. According to the Federal Network Agency (Bundesnetzagentur), the costs for new grids amount to 40 billion euros. Add to this further blocks of costs like 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 results in higher grid fees and charges that bring yet more cost increases for the industry. The described 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. In a first step, for example, a fixed market premium should be introduced instead of a floating one. 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, and 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.
  • 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 industry. 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