Environment
Opinion Article
December 22, 2020

The Renewable Energy Sources Act: From words to actions

Karl Marx once said that, until now, philosophers limited themselves to interpret the world; however, the goal is to change it. And change is necessary – human beings reached the current state of evolution due to their capacity to adapt and overcome.

Nowadays, people (or at least their vast majority) are concerned with climate change and all its associated consequences, such as the melting of ice caps, rising sea levels, the extinction of species, or still the increasing frequency of natural disasters. We’ve made estimates and we’ve searched for solutions–once again, we looked at innovation for a way out. Now, it’s our job to act rather than to react.

The fight against climate change must include a shift towards renewable energies.The possibility of substituting fossil fuels with energy harnessed from wind,sun, earth and water creates lots of expectations but also lots of opportunities. However, the problem remains of how to make these energies accessible, cheap and efficient – and this is why the German example is worth highlighting.

In 2000, Germany launched the Renewable Energy Sources Act, or EEG (Erneuerbare-Energien-Gesetz),a set of laws that consisted in a feed-in tariff (a transfer made to households and businesses that use renewable energies to generate their own electricity)in order to ‘enable the energy supply to develop sustainably in particular in the interest of mitigating climate change and protecting the environment, to reduce the costs to the economy and not least by including long-term external effects, to conserve fossil energy resources and to promote the further development of technologies to generate electricity from renewable energy sources’(Renewable Energy Sources Act, 2014). This scheme replaced the Electricity Feed-in Act (1991), the first green electricity feed-in tariff in the world that was contested by the European Court of Justice, who considered it an illegal threat to competition (article 87 EC Treaty).

Consequently,in 1999, Hermann Scheer and Hans-Josef Fell developed the EEG legislation.This law imposed on grid operators the obligation to prioritize the purchase of electricity generated exclusively from hydrodynamic power or wind, solar radiation or geothermal energy, instead of nuclear power, gas or coal. Besides this, grid operators should pay compensations to producers based on the technology used and quantity of energy purchased, giving producers a feed-in tariff with a duration of 20 years in which they could guarantee the return of their investment. The trick here, in order to avoid the same scrutiny by the European Court of Justice, was that, in contrast with the 1991 Electricity Feed-in Act, those payment were not considered public subsidies because they didn’t derive from taxation but from a surcharge on consumers that shared the expenses – so, there was no charge in Germany’s public finances. The EEG also foresaw a regular decrease in the feed-in tariffs (known as ‘degression’) as technologies became more cost-efficient.

The EEG legislation has been reviewed over the years and suffered some changes in 2004, 2009, 2012, 2014 and 2017.

IMPACT

Since the EEG legislation was enforced in 2000, the cost of photovoltaic systems decreased by 50% in 5 years. In relation to the coverage of renewable energy, Germany's initial target was for 12.5% of its electricity production to derive from renewable sources by 2020. In 2007 it already covered 14.7%. In 2014 it covered 27.4%, and in 2018 this value was at 37.8%. Currently, the target for 2050 is at least 80%. From data obtained from the period between 1990 and 2015,it’s visible that wind was the renewable source that most contributed to Germany’s green transition regarding gross electricity generation.

 

Besides this, thousands of long-lasting jobs have been created from these clean energy sources - wind was the source that employed most people, more than doubling the number of jobs created between 2004 and 2013,followed by biomass and solar. Usually, the abrupt transition to renewable energy leads to fears of losing jobs, which has a strong impact on public opinion. However, the data shows that the transition to renewable energies demonstrates huge potential in creating more jobs than it destroys.

Nowadays,in Germany, renewable energy can compete with fossil fuels, even when taking into account the cost of transport of such energy and the costs associated to the building of the infrastructure required for its production. In the case of renewable energy, the cost per kilowatt per hour depends on many natural factors, such as the amount of wind and hours of sunlight, but they are all, on average, below $0.11/kWh, with onshore wind and geothermal being the cheapest(both $0.03/kWh), whereas biomass and offshore wind are the most expensive($0.09/kWh and $0.11/kWh, respectively). Coal represents a cost of about$0.13/kWh and nuclear energy around $0.09/kWh.

This bet on renewable energy turned out to be very profitable for Germany. The cheaper production of energy allowed the country to be much more competitive in terms of electricity prices, until recently enforcing its position as a net exporter of energy over the years. France, Austria and the Netherlands are the most common destinies of German energy.

ACCEPTANCE

The EEG legislation could be considered a social and economic success – it has increased the use of renewable energy while raising awareness about pollution,created thousands of jobs, and allowed Germany to become profitable in this sector. Other countries' attempt further demonstrates this success (as, for example, Brazil) to copy the feed-in tariff to accelerate their transition to renewable energies.

On the 8th of May 2016, there was a point during the day in which Germany was guaranteeing 87% of the energy being consumed by the entire country at that specific time from renewable sources. The production was so high that producers were obliged to offer free energy to consumers in order to drain the electricity.

However,the EEG is far from perfect and has been criticized many times to this day. The biggest grievance against this law was the high levels of feed-in tariffsupport. This position gained the support of the European Commission in 2014(even though, until this day, the EC defends that ‘well-adapted feed-in tariff regimes are generally the most efficient and effective support schemes for promoting renewable electricity’) and led to some modifications in the legislation. In 2014, it was adopted what is known as the EEG 2.0.,in which the compensation rates ceased being defined by the government to becoming defined through auctions.

This auction system was criticized too. In 2012, estimates pointed out that almost half of Germany's renewable energy capacity was owned by citizens through energy cooperatives and private installations. According to the critics, the auction system would harm these kinds of producers, threatening all the original EEG legislation's development.

Today,Germany wants to obtain between 80% and 100% of the electricity consumed within its territory through renewable sources by the end of 2050. This path won’t be easy in a country where big coal plants are still the main source of energy,even after all those efforts of transition. In July 2019, Germany became a net importer of energy for the first time in almost two decades.

Once again, the capacity to adapt and overcome is required.

Students Authors: João Caetano and João Rodrigues

This content was originally published in The Awareness News.

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