Renewable Surcharge Reduction to 20% or Less for 65 Energy-Intensive Sectors?

A consensus is nearing for Germany’s dispute with the EU over reductions granted to energy-intensive companies on the surcharge promoting renewable energy sources in Germany (“EEG-surcharge”), major newspapers report. Citing from a draft for new EU guidelines on environmental and energy state aid, they say that the EU Commission was prepared to allow reductions granted to energy-intensive companies from up to 65 sectors. Generally companies should bear at least 20% of the costs, but member states shall be able to limit payments further depending on the added value, with according to Handelsblatt a cap at 2.5% of the gross value added.

According to Frankfurter Allgemeine Zeitung (FAZ), neither the list of 65 sectors, comprising industries like aluminum, steel and zinc, but also industrial gases, cement and electronic components, has been finalized yet, nor the exact amount with which companies from the sectors listed shall contribute to the EEG surcharge. Industry representatives hoped for a further reduction than the 80% currently envisaged by the EU, FAZ says. A fifth of the EEG surcharge of 6.24 ct/kWh for 2014 would still amount to more than 1.2 ct/kWh. Besides, it still seems to be unclear if and to what extent German companies that benefitted from EEG surcharge reductions in the past may have to pay them back. Trade representatives were, however, confident that the surcharge would not have to be fully refunded, FAZ says.

Pursuant to Sections 40 to 44 Renewable Energy Sources Act (EEG), energy-intensive companies can currently apply for EEG surcharge reductions with the Federal Office of Economics and Export Control (BAFA). For 2014 BAFA granted reductions to 2.098 applicants expected to be worth EUR 5.1 billion (2013: EUR 4.0 billion).

In December last year, the European Commission opened an in-depth investigation to examine compliance of the EEG surcharge reduction with EU state aid rules (as well as compliance of the reduction on the EEG-surcharge granted to suppliers that source 50% of their electricity portfolio from domestic renewable electricity (“green electricity privilege”)). At the same time, the Commission also published “Draft Guidelines on environmental and energy State aid for 2014-2020“, which set out the conditions under which state aid measures may be declared compatible with the internal market, which now seem to have been specified with regard to exceptions for energy-intensive companies.

Reaching agreement with the EU on the matter of the EEG surcharge reduction is important for the German government. In December last year  the German government defended the EEG exemptions, but announced an overhaul of the entire EEG including the exemptions from the EEG surcharge. A draft bill has meanwhile undergone consultation. The government intends to adopt the bill on 8 April 2014 and wants the EEG reform, which shall significantly cut EEG-related costs, to enter into force on 1 April 2014. The draft bill, however, does not  yet contain a proposal regarding the EEG surcharge exemptions for large energy consumers in view of the ongoing talks with the Commission.

Source: Frankfurter Allgemeine Zeitung; Handelsblatt

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