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Dictionary

German Energy Market

The energy transition is the changeover of a society from dependence on 'dirty fuels', such as hydrocarbons and uranium, to an energy supply system based on sustainable renewable sources. Known by its German term, the "Energiewende" is taking place in a number of countries, and enjoys a special promotion in Germany.

The energy transition is the changeover of a society from dependence on 'dirty fuels', such as hydrocarbons and uranium, to an energy supply system based on sustainable renewable sources. Known by its German term, the "Energiewende" is taking place in a number of countries, and enjoys a special promotion in Germany.

The energy transition is the result of two major problems: the non-internalization of social and environmental costs in conventional energy supply, and climate change. In addition, the decarbonisation of the energy industry, by ending the use of fossil fuels such as oil, coal and natural gas, will create a long-term stabler economy, and greatly reduce pollution.

In Germany, the nuclear power industry will be forcibly shut down in 2022. The Energiewende plans for the replacement of nuclear power and fossils by renewable energy sources for electricity generation, by steps, from the 27.4% in 2014, 35% in 2020, 50% in 2030, 65% in 2040, to 80% in 2050.

Transition Issues
  • Measures taken to reduce emissions, with a focus on greenhouse gases (GHG), but also SOx, NOx, ozone and particulate matter air pollution.
  • Increased penetration of generation facilities based on intermittent RES
  • Electricity market liberalization (i.e. breaking the stranglehold of fossilists on policy, and enabling consumer choice)
  • Distributed generation (smartgrid and micro systems (e.g. rooftop PV) instead of centralised generation)

EEG Tariff

The network operators are charged for the costs of compulsory remuneration, which they recoup through sales of EEG-financed electricity on the market. The difference between the amount to be paid to producers for electricity generation and their income forms the basis for the calculation of the EEG levy paid by electricity consumers.

In 2012, the revenues were 4.5 billion euros, and the expenditures (compulsory remuneration) 19.5 billion euro. The EEG levy was therefore € 14.0 billion (72% of the price).

Regulation on the EEG-Compensation Mechanism (Verordnung zum EEG-Ausgleichsmechanismus, AusglMechV): since 17 July 2009, latest edition 17 February 2015 (amendment 13.10.2016, in force 01.01.2017). R.E.-generated electricity is sold directly to transmission network operators, and therefore there is no longer any obligation on the utilities to take up R.E.

The additional costs resulting from the generation of EEG electricity are, however, still charged to the utilities and thus also to the final customers via an EEG levy. In addition, the AusglMechV contains provisions for a more transparent calculation of the EEG tariff.

The revised allocation (rolling) mechanism (Wälzungsmechanismus), adopted by the Regulation, is seen as a decisive factor in the sharp drop in stock market electricity prices as of 2010 and the rapid rise in the EEG levy over the same period.

Criticisms

Financial: the long-term high cost for the consumer is trying the patience of the 93% of Germans who support the development of renewable energy.

Consumer protection entities criticise the unequal distribution of the burden. Large consumers (in 2016, 2.137 large industrial companies) are to a great degree exempt from the levy (they saved &euro4.8 bn in 2014), shifting the burden to the small to medium-sized enterprises and the private consumer (non-privileged consumers).

Industry warns of potential loss of competitiveness for German industry, since Germany has higher standards than other countries, making the international market an uneven playing field.

References:

Composition of the electricity charge 2016. Average prices for the supply of electricity to households in Germany:

  • Network charges, measurement, billing: 7.07 cents (24.6%)
  • EEG Tariff: 6.35 Cent (6.85 cents in 2017) (22.1% in 2016, and c. 23.5% est. for 2017)
  • Power generation, sales: 6.11 Cent (21.3%)
  • Sales tax: 4.58 cents (16%)
  • Electricity tax: 2.05 cents (7.1%)
  • Concessions: 1.66 cents (5.8%)
  • Other tariffs: KWK, §19 NEV Offshore: 0.86 cents (3.0%)
  • Total: 28.69 cents each kWh