Sat May 12th, 2012 at 09:40:13 AM EST
Yesterday (Friday, 11 May), the upper house of the German federal parliament, the Bundesrat, voted down a reform of the feed-in law that included drastic curbs in the feed-in rates for photovoltaic solar power. The law will now be subject to an arbitration between the two houses of parliament.
The Bundesrat decision was unexpectedly clear, with the representatives of several state governments led by the Christian Democrats (CDU) voting against rather than abstaining. This is likely to further diminish the chances of the CDU in tomorrow's snap elections in Northrhine-Westphalia state, with the Social Democrats (SPD) and Greens seizing on the opportunity to attack the CDU's leading candidate, who happens to be federal environment minister Norbert Röttgen.
A non-exhaustive recap of what this is all about.
The impact of solar power on the energy market
In The 3-part view of power generation, I argued that intermittent renewables falling under a feed-in law should be seen as part of the same regime as traditional baseload: they mean plants always producing as much power as possible, and the other parts of the power plant portfolio – both scheduled (or intermediate) power and peak power – take them into account in their variability. This doesn't mean that the latter aren't impacted: market price is set by the production price of the most expensively producing plant needed to meet demand (the merit order effect), thus any change to the variability of the load-following part of power production, and the resulting change to energy prices, will impact profits and the viability of investments.
So, what is the effect of photovoltaic solar power? Let's look at yesterday's power curve in Germany (taken from the European Energy Exchange):
As can be seen, at present, on good days, photovoltaic power shaves off most of the diurnal variation in demand. On one hand, this reduces the demand for intermediate power (in Germany, impacting the total generation of high-grade anthracite coal power plants the most, squeezing profits). On the other hand, this also reduces the occurrence of high market prices around midday, making investment into expensive peaker plants less viable.
Now, how would the power market look like if solar capacity doubled but wind capacity wouldn't grow as fast? Then solar on good days would eat away at the market share of conventional baseload (in Germany, nuclear and "brown coal") while peak demand for intermediate power would shift to the night. Of course, owners of nuclear and "brown coal" power plants would not like this.
The past political angles
The traditional energy policy of all members of the federal government coalition in Germany, the CDU, the Bavarian Christian Socialists (CSU) and the (neo)liberal Free Democrats (FDP) was to support the interest of Big Energy, that is the private companies operating major conventional plants and most of the grid. There was divergence more recently: while the federal CDU saw the sign of the times and wanted to neutralise the Greens with a nuclear exit and new-found support for renewables (a strategy long advocated by federal environment minister Norbert Röttgen and adopted last year by chancellor Angela Merkel after Fukushima and the Baden-Württenberg state elections), the FDP made opposition to the feed-in law and PV in particular an ideological question.
The FDP's main "argument" was the high cost of solar power, which was odd for several reasons:
- they display an ignorance of market pricing and the merit order effect, arguing as if energy prices were identical to production prices as in a Marxist system;
- they keep confusing extra costs (what paying the feed-in rate for renewables costs above producing the same electricity by conventional means) with the feed-in rate itself;
- they keep talking about the supposed impact on consumers and the industry, ignoring both repeated polls indicating wide public tolerance for eventual extra costs for renewables and the (in fact perverse) exclusion of the biggest electricity consumers from shouldering feed-in law extra costs;
- they ignore studies that, due to the already significant rate reductions, the cost effect of future installations (and only those are affected by the increased rate cuts they wanted) is minimal;
- they also ignore the economic effect of collapsing the renewables production industry that grew to supply the feed-in-law-created markets.
Up until this March, the divergent CDU and FDP strategies more or less cancelled each other out, resulting in a somewhat haphazard policy: rate cuts were accelerated, but the latter only matched the accelerated fall in PV panel prices, and created rate-change bubbles (see this comment
on the phenomenon).
However, the FDP is in dire straits, dropped from several state parliaments in recent state elections, and its boss (Philipp Rösler, who is also the federal economy minister) switched into panic mode and sought to push through some signature policies uncompromisingly. So the CDU gave them a bone: while averting Rösler's demand for a cap on new installations, Röttgen capitulated on almost every other point, ushering in a reform including yet another one-off mid-year rate cut, various new conditions, and future rate cuts made dependent on new installations, with an explicit goal to reduce them by an order of magnitude. Perversely, the planned reform was worst for facilities in the 10-100 kW range, which mostly consists of the supposedly most desirable part of the rooftop segment (roofs of public buildings, mid-size industries, farms).
The future political angles
Above I only mentioned the federal CDU and CSU, but the picture is complicated by local factors: the production facilities of the solar industry in Germany are mostly resident in East German states whose governments include the CDU, and job loss is a concern for them. And this local opposition to federal government policies can express itself in the upper house of the German federal parliament, the Bundesrat, which consists of representatives of the state governments. The feed-in law is not subject to a Bundesrat approval, but the Bundesrat can trigger a re-negotiation by rejecting a law.
Röttgen severely mis-calculated the effects of his
capitulation tocompromise with Rösler. First, already in the lower house, the Bundestag, there was enough intra-CDU opposition to force significant changes (above all, projects initiated before 1 April were exempted from the drastic one-off rate cut). Second, his comrades in the state governments showed unexpectedly firm opposition, resulting in against votes rather than abstentions in the Bundesrat. Third, the Bundesrat vote had the worst possible timing for Röttgen, whose political career advance is to be blocked by an election tomorrow.
Röttgen, who was treated as a potential future chancellor in recent years, hails from Northrhine-Westphalia (NRW) state, which is Germany's most populous and includes the Ruhr Area. Röttgen hoped that the next step of his career could be the post of prime minister in NRW once the term of the state's SPD-Greens minority government is over. (Minority governments were highly unusual and unstable in German history.) However, due to a mis-calculation of the opposition, the minority government collapsed "at the wrong time": when they still led the polls. Although the meteoritic rise of the Pirate Party in Germany and the FDP's poll bump after their success in last week's Schleswig-Holstein state elections changed the coalition arithmetic, the latest NRW polls still predict majority for SPD and Greens in tomorrow's elections.
As taz reports, chancellor Merkel sought to deflect blame from Röttgen with the unusual tactic of declaring that the defeated law revision was the government's, not Röttgen's. Still, she benefits, as she still seems to be Merkel Above All, yet again 'losing' a potential crown prince.