German Electricity Tax Rises 50% to Support Renewable Energy

Bundesverband WindEnergie (Wind Energy Association)/Promo image

A small news item in the IHT caught my eye yesterday: Germany's renewable energy tax on household electrical bills will increase 50% in 2013. The short AP blurb mentions just the facts, without much context:

The country's four main grid operators say Monday that the tax will rise from €3.6 cents to €5.3 cents ($6.7 cents) per kilowatt hour starting in January. That brings the annual cost of financing Germany's energy switchover for a family of four to about €250 ($324) per year, including sales tax.

The tax is used to pay producers of solar, wind or biomass power guaranteed above-market rates to ensure their investment will be profitable.

Windmill Blade Protest

If that is all there is to it -- a new burden on the taxpayer that goes straight to the bottom line of wind and solar energy producers -- why is there a huge windmill blade standing directly between Chancellor Angela Merkel's office and the Federal buildings in Berlin with words protesting the renewable energy levy?

The windmill blade (photo above) reads "Schluss mit der EEG-Umlüge" which is a play on the words Umlage (levy) and Lüge (lies) such that it can be best translated as "Stop the Renewable Energy Levy Lies".

The association for solar power also released press briefings protesting the situation.

Why Would Wind and Solar Protest?

The renewable energy (EEG) law sets out a method to calculate each year's levy. The method multiplies the amount of renewable energy being supplied by an adder that guarantees renewable energy projects a minimum rate for energy they produce. Thus the levy shoots up as Germany's renewable energy production levels have broken the 25% barrier on their way to meeting the law's own goals of 80% renewable energy by 2050.

According to the Wind Energy Association, only 2.26 cents of the 5.3 Euro cent levy actually subsidize renewable energy projects. Another quarter of the taxes subsidizes energy intensive industries.

The Real Lie -- and the Hidden Truth

The real "lie" that the renewable people want in the public eye concerns the remainder of the difference between money intended for laudable policy goals and the actual levy:

The large amount of renewable energy flowing into the German market has actually caused electricity costs on the open market to sink!

But these sinking costs are not passed through to the household consumer, who in fact pays even more levy to represent the gap between market costs and the guaranteed price.

This debate hide a further truth that industry wants in the spotlight of strategic planning for a sustainable energy future. A study by Green Budget Germany demonstrates that if the subsidies provided to traditional energy producers (e.g. coal and nuclear power plants) were distributed to taxpayers on a per kilowatt hour basis, the levy required would be 10,2 euro cents.

The EEG law will be up for discussion as politicians fear the backlash of this steep rise in the levy -- especially in light of the unintended consequences driving it higher than needed for meeting the initial political goal of growing sustainable energy and the newly re-committed goal of shutting down nuclear power plants. The growth of renewables in Germany demonstrates that these investments make good sense, and the policies have earned their "made in Germany" reputation for their effectiveness. But the time has come to rework the renewable energy policies so that the ends once again justify the means.

Tags: Electricity | Germany | Renewable Energy | Solar Energy | Wind Power