Regulatory and policy options to encourage development of ...
Regulatory and policy options to encourage development of ...
Regulatory and policy options to encourage development of ...
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MODULE 9: RENEWABLE ENERGY: REGULATORY AND POLICY OPTIONSpage 9.59The new tariff scheme, detailed in the EEG law, was adopted in 2000. The EEGlays down pricing mechanisms for the support <strong>of</strong> a range <strong>of</strong> renewable energytechnologies, with a specific pricing mechanism applied <strong>to</strong> each. It also redefinesthe regulations regarding the financial <strong>and</strong> institutional support <strong>of</strong> windenergy.The EEG law restates the obligation on distribution network owners regardingconnection <strong>of</strong> renewable energy genera<strong>to</strong>rs <strong>to</strong> the grid where such a connectionis requested. The nearest grid owners <strong>to</strong> a proposed site are obliged <strong>to</strong> connecta new genera<strong>to</strong>r <strong>to</strong> their grid. Whilst the genera<strong>to</strong>r owner is liable for the costs<strong>of</strong> connection <strong>to</strong> the grid, the bill submitted <strong>to</strong> the genera<strong>to</strong>r for this function ismade subject <strong>to</strong> oversight by the Federal Cartel Office (FCO) <strong>to</strong> ensure that thecost is a reasonable reflection <strong>of</strong> the actual costs. The grid owner is liable forany costs relating <strong>to</strong> the upgrading <strong>of</strong> the grid <strong>to</strong> facilitate the new genera<strong>to</strong>r.That is, the German system uses shallow connection charging for renewable electricitygeneration.The EEG Act compels the grid owners <strong>to</strong> purchase electricity produced by therenewable energy genera<strong>to</strong>rs within the pricing mechanism laid down within theAct. The new act also contains provision <strong>to</strong> address one <strong>of</strong> the most contentiousaspects <strong>of</strong> the old EFL Act, establishing a national equalization scheme. Thenational equalization scheme makes compulsory the payment <strong>of</strong> compensation<strong>to</strong> those distribution <strong>and</strong> transmission network owners which bear above averagecosts <strong>of</strong> paying for renewable energy sources from those which make purchasesbelow the average. This removes the system set up under the EFL,whereby the costs borne by local network opera<strong>to</strong>rs could only be passed on <strong>to</strong>their own consumers. This socialization <strong>of</strong> costs is administered by the networkopera<strong>to</strong>rs themselves, with the law enabling network opera<strong>to</strong>rs <strong>to</strong> require eachother be independently audited <strong>to</strong> assess the actual costs <strong>of</strong> purchasing renewableelectricity (Bechberger <strong>and</strong> Reiche 2004).The EEG also changed the mechanism for calculating the base price paid for windgeneratedelectricity. The previous flat payment <strong>of</strong> 90 per cent <strong>of</strong> the final consumertariff is replaced by initial fixed payments <strong>of</strong> €0.088/kWh for the first fiveyears, with the potential for an extension <strong>of</strong> this period dependent on the actualperformance <strong>of</strong> the turbine. Wholesale electricity prices in Germany are typically€0.02/kWh.This has the effect <strong>of</strong> producing a scale <strong>of</strong> payment dependent on the quality <strong>of</strong>the location <strong>of</strong> the wind turbine <strong>and</strong>, it is hoped, ensuring that efficiently operatedturbines can be run pr<strong>of</strong>itably, while inefficiently run turbines can not. Theeffects <strong>of</strong> this may well be an increase in the number <strong>of</strong> sites that can be pr<strong>of</strong>itablyoperated, <strong>and</strong>, it is speculated, may act <strong>to</strong> increase the further penetration