Welcome to European Tribune. It's gone a bit quiet around here these days, but it's still going.
While the attack on wind power is on-going in Britain, an attack on the feed-in law is on-going in Germany. The argument is basically: renewables increase electricity prices because they decrease electricity prices!

Sounds bizarre? Here is how it goes:

  1. The feed-in law guarantees fixed rates for renewables producers which are above the average market price.
  2. At the time the feed-in law was first adopted, to make it acceptable to Big Industry (and its backers in politics), there was a compromise: energy-intensive industries would be exempted from sharing the extra costs of the feed-in law.
  3. This exemption was implemented in practice the following way:
    • At the end of every year, network operators prepare a prediction of electricity demand, market prices and renewables production for the next year.
    • Next year's surplus cost of electricity under the feed-in law is calculated, and the difference of the calculated and real surplus cost for the current year is added.
    • This cost is then divided by the predicted consumption of private homes and small business, which is then added as a surcharge to their electricity bills.

  4. This year, renewables (especially solar power) heavily reduced demand for variable power with a daily variation. This depressed wholesale electricity prices, in particular spot market prices at the  at the European Energy Exchange (EEX) in Leipzig. The effect is expected to be even stronger next year. (This is the merit order effect at work, discussed several times on ET.)
  5. For existing plants, lower spot market prices mean a higher difference between the rate guaranteed by the feed-in law and market price. Now, network operators expected higher EEX prices for this year and now expect even lower prices for next year, thus they doubled the feed-in law surcharge for normal consumers.

In a fact-based policy discussion, this would be a good opportunity to attack the exemption of energy-intensive industries: the system actually provides a virtual subsidy to them (they benefit from lower wholesale prices due to the merit order effect). It would also be a good opportunity to attack the profit-taking of utilities, because announced electricity prices don't reflect the reduction in spot market prices.

Instead, the crescendo in the media is all about renewables making energy bills more expensive, and the usual suspects (FDP, the business wing of the CDU, established power companies) demand an end to the feed-in law (ignoring the fact that to be built new plants with their degression-reduced rates would contribute little to the total surcharge).

*Lunatic*, n.
One whose delusions are out of fashion.

by DoDo on Mon Oct 22nd, 2012 at 05:22:27 AM EST

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