Brussels, Berlin bury hatchet over green energy rebates

Around one fourth of industry power in Germany is generated from the plants themselves. Hainburg, Germany October 2013 [Carsten Frenzl/Flickr]

Around one fourth of industry power in Germany is generated from the plants themselves. Hainburg, October 2013. [Carsten Frenzl/Flickr]

After months of tension, Germany and the European Commission have resolved their conflict over Berlin’s support scheme for renewable energy, by agreeing on planned industry rebates. But this did not happen without concessions from the Merkel government. reports.

In its dispute with Germany over the controversial Renewable Energy Sources Act (EEG), the EU Commission has cleared the way for the country’s green energy reform.

Rainer Baake, State Secretary at the Federal Economic Affairs Ministry, praised recent talks as “very constructive”.

Higher energy costs are expected to result from the new law, exceeding those planned in the German government’s original draft. But the extra burden for industry ended up much lower than anticipated.

“Those who invest in renewable energy facilities and those who profit from the special equalisation scheme will have legal security for the next few years,” Baake claimed. The new EEG law is expected to come into effect on 1 August.

Shortly before Germany signed off on the measure, the European Commission had issued several complaints calling for changes to the bill. The Bundestag fulfilled many of these demands at the last minute, before the document was approved.

>> Read: Gabriel accuses Brussels of ‘foul play’ in renewables row

Already last Wednesday (2 July), Sigmar Gabriel (SPD), the Minister of Economic Affairs and Energy, claimed nothing else stood in the way of approval from the EU. But shortly after the comment, EU Competition Commissioner Joaquín Almunia made it clear that certain points and the technical implementation still needed to be settled.

Imported energy

To the very end, the dispute surrounded power generated from renewable sources imported from other EU member states. The surcharge, which is tacked onto the energy bill in Germany, is meant to subsidise renewable power generation from sources like wind, water or solar.

Berlin refused to exempt imported green energy from the EEG surcharge, claiming the rebate was designed to alleviate the burden on Germany’s energy-intensive industries. 

The Commission disputed this, saying the rebate should apply to all green energy, included imported power. Otherwise, the rebate could be assimilated to an import tariff, in conflict with EU rules, it said.

But Germany remained tough, running the risk that the Commission rejects the green energy reform in its entirety. Without the Commission’s approval for the measure, German industries would have lost billions in EEG rebates, raising their energy costs by that much.

ECJ ruling benefited Germany

In the end Germany won out in the dispute and Almunia accepted the EEG as it was passed in the Bundestag.

A recent ruling by the European Court of Justice (ECJ) most likely affected the Commission’s decision. In the ruling, EU judges decided that wind energy produced in Finland should not be subsidised by Sweden, even when the energy is imported into the Swedish power grid. Germany’s government felt the ECJ decision had strengthened its position and stood its ground.

>> Read: ECJ decision pivotal in debate over Germany’s green subsidies

Almunia confirmed the agreement of the EEG also settles a conflict over possible back payments owed by German industries over rebates they obtained in 2013 and 2014. Now that a compromise has been obtained, energy-intensive companies must only pay an additional €30 million to cover the EEG surcharge for those years.

Relief for German industry

Baake emphasised that the agreement ensures German industry will remain safe from the threat of billions in back payments. Such exorbitant fees could have considerably endangered employment and prosperity in Germany, he argued.

Representatives from German industry also breathed a sigh of relief. Utz Tillmann, the Managing Director of the German Chemical Industry Association (VCI), praised the EEG amendment, saying companies have won a bit of long-term legal security and can now submit their applications for relief. “Preservation of relief systems was an industrial policy bid, as the EU also recognised”, said Tillmann.

But despite agreement with the EU, it is unlikely that the compromise would have been possible without concessions from the German government.

The Federal Republic was under pressure from the EU Commission to end EEG surcharge exemptions for its own industrial power plants after 2016. Starting in 2017, the law calls for a reassessment of this benefit for existing facilities.

This raised alarm bells among German industries, which drew attention to the insecurity created by such a measure. But the EU has not given a signal as to whether or not the benefit will remain intact.

Self-sufficiency is very important for Germany: Around one fourth of industry power is generated from the plants themselves.

Energy efficiency as the second pillar of the Energiewende

In a plenary session in the Bundesrat on 11 July, the German regions (Länder) approved the EEG reforms. Now German President Joachim Gauck is due to sign off on the document.

The German government is certain that the solutions agreed with Commissioner Almunia will be waved through by the members of the Commission on 23 July. In that case the EEG’s reforms could come into effect as planned on 1 August.

On Thursday (10 July), Gabriel also pointed out that energy efficiency should be increased as a second pillar of Germany’s “energy transition” (Energiewende).

“Without energy efficiency there will be no successful Energiewende,” he said. A national action plan on energy efficiency is expected to be tabled soon.

In May 2013, the powerful employers’ group BusinessEurope called on European Commission President José Manuel Barroso to radically shift the EU's energy policy away from climate change mitigation towards cost-competitiveness and security of supply.

But an EU summit dedicated on energy with the objective of lowering prices and boosting the Union’s industrial competitiveness, held on 22 May 2013, ended up without major decisions. [more]

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.

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