Global Project Finance > Tax Equity Telegraph > Germany Debates How to Pay for Renewables
27 Mar '13

Germany has been praised for its political ambition to shift from nuclear and fossil fuels to renewable sources of energy.  Its so-called “Energiewende” has sparked debate on how to address rising costs for consumers while supporting the renewables policy. 

At a first joint meeting on February 14, 2013, the federal ministers for the environment and for economics and technology have proposed legislation that would freeze the renewable energy surcharge consumers currently pay through 2014 and cap further increases of the surcharge at 2.5 percent per year as of 2015. 

The federal ministers also proposed to partially shift the economic burden of the Energiewende from consumers to producers.  Their proposals include a new “energy solidarity tax” charged to new, as well as existing, solar and wind energy generators; the cancellation of a biogas promotion bonus (the so-called “Güllebonus”); higher cost sharing by energy-intensive industries, mandatory direct marketing by large plant operators as opposed to access to fixed feed-in tariffs; and lower reimbursements for curtailment.

Although there is a common understanding that the renewable energy legislation needs fundamental reform, the federal government’s plans are not going uncriticized by opposition parties, who have a majority in the Bundesrat.  Meanwhile, the minister for the environment of the state of Bavaria attempted to reach a compromise that would include either short-term reductions of energy taxes for consumers or an exemption of the renewable energy surcharge from value-added taxation (VAT).  He also proposed replacing the fixed renewable energy pricing with a system of predetermined fees the amount of which would depend on the type of producer.  This alternative would allow the renewable energy price to fluctuate with the market price and would protect consumers from unnecessary taxation in case the market price drops.

We can only hope that this debate results in Germany finding a viable way to encourage renewables and spread the cost equitably.  If it does, it could be a model for other nations.

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