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04/12/2016

Oettinger warns Germany against solo efforts on energy

Energy

Oettinger warns Germany against solo efforts on energy

Outgoing Energy Commissioner Günther Oettinger doled out harsh criticism of Germany's energy policy. [EP]

Before switching portfolios, Günther Oettinger took one last opportunity to single out Germany’s energy policy, warning against “ill-advised” national solutions. EurActiv Germany reports.

In one of his last appearances in Berlin as EU Energy Commissioner, Günther Oettinger called on the German government to give its energy policy a more European focus.

“We must finally complete the European internal energy market. It cannot be limited to political rhetoric,” he said on Tuesday (30 September).

Oettinger also criticised Germany’s solo effort in expanding renewable energies. “There are different expansion plans for all 16 federal states. That is unwise,” he said.

The discussion over security of supply is something Germany should take special care not to pursue on its own, the conservative politician warned.

Oettinger’s remarks come at a time of growing concerns in Germany over the country’s future energy supply.

“We have no more investors who are prepared to build new power plants,,” warned Rainer Baake, state secretary in the German Ministry of Economic Affairs. “The opposite is true: Many power plant owners are taking their shares off the market. That threatens to create gaps in supply and power outages,” he said.

The threat of outage has been progressing along with the rapid expansion of the renewable energy sector, which has not been matched by corresponding adjustments in energy trading.

Currently, Germany relies on a so-called energy-only market for electricity. At the Leipzig power exchange, energy shipments are traded to ensure that the cheapest power plants satisfy demand at any given moment. In this system, conventional power plants are often left with the short end of the stick because renewable energies receive fixed feed-in remuneration and are often cheaper to boot.

For conventional power plants, further expansion of renewables means greater economic difficulties because they see their operating times fall and facilities no longer able to cover fixed costs.

“Capacity mechanism, yes – but European”

For this reason, the German government is considering so-called capacity mechanisms.

The term describes a system in which power generation capacities are rewarded through financial compensation. Supporters claim this model will prevent possible blackouts, such as on days with high demand and low wind and sun. Under this model, compensation for secure supply is meant to help conventional stations cover their costs.

But Oettinger is critical of capacity mechanisms: “If the German government wants to take this path, then it must be a cross-border model. Otherwise it will become an undesirable cost driver,” he warned.

Although capacity mechanisms are already on the daily agenda in many EU member states, Germany is still in the discovery phase.

“We are leaving all options open,” Baake explained. But the German government is in close contact with relevant EU neighbours over developing an adequate energy market design.

“We do not want a national solution. That does not make sense,” Baake said.

At the same time the state secretary pointed the finger at France and the United Kingdom. Both countries recently introduced capacity mechanisms within their own borders, each in a national solo effort.

“In light of these developments, we do not believe there will be an EU-wide answer in the medium-term,” Baake indicated.

In November, Economic Affairs Minister Sigmar Gabriel intends to publish a green paper on energy market design. Then in 2015 he hopes to set a corresponding law in motion.

Accelerate grid expansion, introduce fracking

In light of the Ukraine crisis and possible bottlenecks in Russian gas supplies, Oettinger is calling on the German government to promote fracking and reduce the country’s dependence on imports.

But shale gas alone is not enough, he said. As a result, Oettinger indicated that subsidisation mechanisms in the member states may need to be reevaluated by the Commission, which has been critical of such schemes.

>> Read: Brussels, Berlin bury hatchet over green energy rebates

The German Commissioner pointed at British subsidies for the construction and operation of two nuclear power plants as an example.

The two power stations – including the controversial one at Hinkley Point in southwest England – will be handed over to operators EDF and Areva with a 35-year contract. During this period, the contract guarantees the station operator a subsidy of £92.50 (€109) per megawatt hour, adjusted for inflation. That amount is considerably higher than the market price for energy, which was £49 last year.

Oettinger said he is “sceptical” of the project, but added that tensions with Russia have created new conditions.

“Confidence in imported gas is not very stable at the moment,” the Energy Commissioner said.

The European Commission is expected to reach a decision soon over whether the British government’s guaranteed purchasing prices violate EU state-aid law.

According to Oettinger, what Europe needs now is a pan-European energy infrastructure. National borders are not logical borders for the energy market, he argued.

That is why it is absurd, the conservative politician said, that Belgium must remove its nuclear power plants from the grid while there are barely any possibilities to import from other countries.

“We need cross-border grids and gas pipelines, and fast,” Oettinger argued. Easy transport of gas from one EU member state to another would enable competition and automatically level out prices that are currently quite uneven. In addition, Russia would not be able to play one country against the other, the Commissioner said.

Until the year 2020, the Commission is allocating almost €6 billion to lay cables and construct gas pipelines.

In the meantime, it has released a list of 248 cross-border projects it plans to prioritise, including 22 German projects with pipelines to Denmark or Austria. 14 of these apply to the power grid, five to the gas supply and two deal with oil pipelines.  

Authorities must give a green light to the priority projects within three years, Oettinger said. But so far, approvals of this kind take an average of 10 years. “That is unnecessary. Acceleration will serve the cause,” the German politician said.

Concluding his comments, the outgoing Energy Commissioner spoke of his “dreams” and used precisely the same concept that he vehemently advocated for during his term.

“At the end of the decade, I hope to see a completed internal market for energy in Europe with fair competition,” Oettinger said, “in which consumers can freely choose their providers and in which we are no longer beaten by the United States with regard to energy prices.”

Background

As most renewable energies are still more expensive than fossil fuels, a variety of support schemes have been put in place to accelerate their uptake and meet the EU's goal of sourcing 20% of its energy from renewable sources by 2020.

>> Read our LinkdDossier: Supporting renewable energies: The 'transition' schemes

?In Germany, the Renewable Energy Act (EEG) has introduced a price surcharge to finance the transition to a nuclear-free, green energy production system - the so-called 'Energiewende'.

Energy-intensive industries were exempted from the surcharge as part of efforts to keep down the cost of the transition for businesses and maintain the country's international competitiveness. Industry energy prices in Germany are roughly 19% above the EU average.

Bu the European Commission disputed the rebate, saying it should apply to all producers, not just German ones.

The two sides came to an agreement in July 2014. Higher energy costs are expected to result from the new German law, exceeding those planned in the government's original draft. But the extra burden for industry ended up much lower than anticipated.

>> Read: Brussels, Berlin bury hatchet over green energy rebates