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EFI Report: Government Advisors Recommend to Discontinue EEG

While the government is in the process of revising the Renewable Energy Sources Act [1] (EEG), the Commission of Experts on Research and Innovation [2] (Expertenkommission Forschung und Innovation – EFI), recommends to abolish the EEG. Neither was it a cost-efficient climate protection tool, nor did it have a positive effect on innovation, the experts concluded in their 2014 report, presented to Chancellor Merkel today.

The EFI expert commission has been appointed by the federal government to provide scientific policy advice. A key objective of the commission is to point out strengths and weaknesses of the German innovation system and to develop proposals for national research and innovation policy. Its latest and very critical report contributes to the controversial EEG reform debate.

The increase of renewable energy sources in the gross electricity production from 7% in 2000, the year the EEG entered into force, to about 23% had resulted in high costs. EEG feed-in tariff payments rose from EUR 883 million in 2000 to EUR 23 billion in 2013, the Committee points out. EEG surcharge transfer payments on average accounted for one fifth of the average electricity price for consumers.

1. EEG As Climate Protection Tool

The EEG was not a suitable instrument for climate protection, since CO2 emissions for industries covered by the European Emissions Trading System EU ETS were capped, the expert commission says. Hence, the expansion of renewables triggered by the EEG would not lead to additional CO2 avoidance, but only to a shift of emissions (carbon leakage effect). „The EEG does not help increase climate protection, furthermore it increases costs”, the experts say.

2. Impact of the EEG on Innovation

According to the commission, empirical studies for the period 1990 to 2005 could only find an impact of the fixed feed-in tariffs paid under the EEG on innovation for wind power plants. A new study that specifically examines the effects of EEG feed-in tariffs for the period 2000 to 2009 did not find a positive correlation in any renewable energy sector at all, the professors say.

Fixed feed-in tariffs did not provide the incentive to develop new technologies, the expert committee explains the findings. With feed-in tariffs that reflect average costs, an investor did not earn more by investing in a new technology than for an investment in an existing technology, while at the same time having a higher risk. Besides, market barriers for new technologies were likely to be created by the fast growth of old technologies that lead to cost reductions.

3. More R&D Funding

Already last year they had pointed out the imbalance between the EEG support and the promotion of research and development and advised to correct the imbalance in favour of R&D support.

Regarding the government’s schedule for the EEG reform, which shall enter into force on 1 August 2014, please see here [3].

Source: Commission of Experts on Research and Innovation [4]

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