Germany’s 2014 Renewable Energy Law Reform Is A Resounding Failure

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Originally published on Lenz Blog.
By Karl-Friedrich Lenz

The German government has in its infinite wisdom dumped the successful feed-in tariffs and is transitioning to a model based on auctions instead.

German flagNow the latest report on investment levels in 2015 was published, and it shows some rather embarrassing figures.

Investment in Germany was down compared to 2014 by a whopping 46%, leaving the country at place six in the top ten worldwide (see Figure 14 on page 23 of the report).

German GDP is estimated at $3.371 trillion in 2015, so those $8.5 billion are somewhat around 0.25% of German GDP.

No other country in the top 10 has such a horrible record. On a world-wide scale, 2015 was a new record year with a solid 5% increase to a $285.9 billion.

That’s still far from the level of growth needed to adequately deal with the climate crisis, but it’s much better than the 46% decrease Germany has shown.

The good thing about this development is that it clearly shows what happens when you phase out feed-in tariffs and use an auction model instead. A massive breakdown of the market, making the climate crisis worse.

So while the German failure apparent in these numbers is bad news for the climate, Germany can still serve as an excellent model on how not to do things.

Reprinted with permission.

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18 thoughts on “Germany’s 2014 Renewable Energy Law Reform Is A Resounding Failure

  • Grid full – have 100% RE power supply already been achieved?

    I can’t get the full data, so a question to the specialists here:

    According to an analyst quoted by Platts/London a 40 GW PV+windpower production would cover Germany’s power demand during Easter Sunday:

    Now, these predicted 40 GW weren’t achieved on Easter Sunday but on Easter Monday. At 11.45 on Monday 28th of March 40.6 GW PV and wind power were produced:

    Taken that Monday and Sunday show a similar demand (both were public holidays) have the 100% RE coverage now been achieved?
    Entsoe can’t provide data (?) and I don’t know who to ask – help please!

    Thank you.

      • 70% at the optimal point on that page.

        • It is home consumption versus home production.
          Exports are on different balance sheet when it comes to national demand coverage , to the 100%-question.

      • Fraunhofer gives 9 GW of exported power for the 28th (11.00-12.00)

        This number is disputed by Agora, they claim it must have been 14 GW:

        France alone prepared to take 6.4GW:

        ( click on “Balance of exchange programs”)

        Spot market prices went even negative in France thanks to German imports.
        France was a net importer at the time, actually several times on Easter Monday.Making money with switching-off own plants and instead making money by taking in power from Germany.

        The number from Fraunhofer (ca. 0.2GW import to France from Germany between 11.00 and 12.00) can’t be true.

        Given that several power plants failed and 1 or 2 were switched off “to level supply and demand” and France was still exporting the German imports claimed by Fraunhofer (0.2GW) would not have been enough to stabilize the French grid.
        It must have been much more, even the 4.6GW from Agora are probably underestimated.

        Scandinavia was flooded, all power lines exporting via Denmark and Sweden as well on full capacity.
        Power lines to Switzerland and Austria were also full to the rim.

        Several atom power plants gave in, Cattenom 2 was turned off to level out supply and demand( Fessenheim 2 as well):

        and a press report practically confirming a total oversupply from Germany :

        Machine translation:

        Given Fraunhofer’s data
        – that the around 17 GW non-RE power was produced

        -and ignoring the obviously wrong data about pumped storage and hydro storage generation (Germany was flooded with power)

        – and taking 2-3% of the power generated as self -consumption
        then the 100% RE-coverage (of power sold in Germany at 11.00-12.00) was achieved.

        The pumped power stations very likely consumed power at this time but did not contribute power, the power prices were negative.
        As well the hydro power stations would have closed most of their turbines to avoid grid instability.
        Hydro power data is guesstimated by Fraunhofer I think, they are publishing annual average numbers instead of real numbers.


        So the question remains:

        How much electricity was consumed in Germany and how much RE-power was produced in Germany?

        Any data source showing power consumption AND generation?


  • It’s not really a problem with the auction model as such, for the utility sector. This has allowed the growth of wind energy in Brazil to the point where it usually dominates open auctions against all other technologies. The same path is being followed on solar. (Auctions also work quite well for UK offshore wind.) The differences are that Brazil now has an established mechanism understood by all the players, and it has been consistently used to purchase large volumes. Germany killed off utility FITs before having an auction system in place. Once it finally launched auctions, they were for piddling volumes, with no perspective of longer-term support.

    FITs are certainly better for small-scale installations, and Germany has kept them for the sector. However, it sets the bar ridiculously low. A single carpark commercial installation can easily top 1 MW. Such promoters will not be professional solar developers and should not be exposed to the red tape, professional fees, and project risk of an auction.

  • Here is my non-professional assessment: The drastic reduction in renewables investment was intended. The 2014 legislation was meant to serve two purposes. The first was, as advertised, to move toward a system more suitable to long-term and large-scale investment. The second, less well advertised, was to (temporarily) brake the renewables growth, in shocked response to the (partial) collapse of the RWE and EON energy giants, and the rapid growth of the renewables surcharge related to the surge in PV installations. The result has been a body blow to the national PV industry. Some change in direction was certainly needed, but whether so violent may be questioned. The inner circles are presumably talking about a ‘rebalancing’.

  • Renewable capacity additions in Germany increased in 2015 over 2014 but investment was down 46%. Doesn’t seem like an “excellent model on how not to do things”.

  • This story would make sense if, I knew what a ‘feed in tarif’ was.

    • A FiT is a fixed amount of money a power producer gets paid for each kWh it injects into the grid on top of the market price. This used to be the most common way of subsidizing renewable power, and it still is for small projects like rooftop PV or anaerobic digesters.

      Everyone who builds a wind or solar farm in a given year gets the same FiT. This meant that everyone from highly efficient multinational developers to small village cooperatives can build projects, though the latter would of course see lower returns than the former. It also means that there is no hard limit on how much capacity can be built in a given year. If you start producing power, you get the FiT.

      For larger projects, most countries are now moving to auctions. In an auction, the government says ‘I want X MW of solar power. How much do you want for it?’.

      Companies can then bid, and the company that offers to build the project for the lowest cost per kWh gets to build it.

      This has two obvious advantages:

      (1) The government can control precisely how much and which kind of generating capacity can get built
      (2) Costs are as low as they possibly can be, because only the most efficient developers get to build anything.

      In principle, this is a much better system than a FiT, at least in purely economical terms. The problem is that the German government has so far only organized very small scale auctions and has made the system extremely complicated.

      • ” Costs are as low as they possibly can be, because only the most efficient developers get to build anything.”

        That is debatable. A Frisean farmer gets cheaper credit than companies, therefore, killing FITs may not produce the macroeconomically best result.

        • For small installations, FiTs are retained. If said Frisian farmer believes that he or she can handle a bigger project, then he’s free to take part in an auction. I believe cooperatives won a handful of projects in the last auction, no?

          • The German FIT system has led to cheaper rates than in some other countries with better resources, e.g. UK, this BTW with a broad owner base.

            In order to maintain this I would only slightly reduce the FITs and add a FLH creterium but not force the farnmers or small cooperatives into a auction model.

            Or: Do not change a winning team when you do not have long-term data for the alternative.

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