The politics and economics of
constructing, contesting and restricting
socio-political space for renewables –
the case of the German Renewable
Energy Act
Volkmar Lauber
Staffan Jacobsson
1
Introduction
• We try to give an overview of the politics of
protective spaces for RES-E in Germany (late
1980s to 2013 – about 25 years)
• Apply distinction fit-and-conform vs. stretchand-transform (re: costs, time-scale of change)
and adapt them to fit our cases
• Look at the recent “affordability” controversy
on RE support and at both the paradigms and
the interests clashing in this conflict
2
3
4
Summing up Conflicts
(not for oral presentation)
• Market creation for renewable electricity was strongly
contested in Germany from the start (late 1980s)
• First impulse from anti-nuclear and anti-coal (SO2, CO2)
Energiewende movements (1970s, Chernobyl,…)
• Five/six episodes of rebellions against party leaders (exc
Greens)
• ”Political accident” of passage of Feed-in Law in 1990
• Polarising controversy over philosophy of EEG (phasing out
fossil fuels) and nuclear phase-out in 2000/2004
• Intense conflict over intention to delay new renewables by
delaying nuclear phase-out (2010)
• Intense conflict over attempts to wind down EEG in 2012-13
5
Persistent divide in the German debate
• Those who (i) emphasize high consumer cost of new
technologies and not their total costs; (ii) take a shortterm view on both costs and required learning
periods ; (iii) neglect or play down the role of market
formation in innovation and cost reduction (“F-a-C”)
• Those who (i) emphasize total costs; (ii) take a longterm view on costs and required learning periods and
(iii) argue that market formation is central to
innovation and cost reduction (iiii) expect lower longterm consumer costs with renewables (“S-a-T”)
6
Misrepresenting the impact of the EEG
surcharge on consumer costs
• Covers gap between spot market yield and feed-in
tariffs paid
– 0.25 Ct (2001); 1.16 Ct (2008); 5.28 Ct or 18% of household electricity
prices 2013 – a large “burden”?
• (i) Growing share of industry largely exempted from surcharge
– adding in 2013 1.29 Ct/kWh for households
• (ii) Merit order effect, falling coal and ETS certificate prices
lead to lower spot market prices passed on to big industry but
not to households or small industry – for those, falling spot
prices actually increase surcharge! 0.69 Ct/kWh in 2013
• Of the 5.28 Ct, less than half should be seen as fair addition to
consumer price (of 28-29 Cent)
7
Exaggerating the “burden” from renewable
electricity by shifting focus from total cost to
consumer cost (1)
Technology
Total cost/kWh
Supply of electricity
Total costs
(TWh)
(billion Euro)
Onshore wind
8.0
46.0
3.68
Hydro
7.6
21.2
1.61
PV
36.7
28.0
10.28
Weighted average legacy
16.3
cost/kWh – RES
Hard coal
14.8
118.0
17.46
Soft coal
15.6
159.0
24.80
Weighted average costs –
15.3
coal
8
Exaggerating the “burden” from renewable
electricity by shifting focus from total cost to
consumer cost (2)
• The “burden” of renewables is currently
negligible
• Current feed-in rate for PV is down to 9.5-14
eurocents - even PV is now becoming
competitive with coal in terms of total costs
• Strong doubts about the validity of arguments
referring to “cost-efficiency”, “subsidies” and
“affordability” (except for the poor who
always suffer)
9
Ignoring inter-generational equity issues“affordability for whom” (1)
• We need to build capital goods industries that
can deploy technologies on a large scale
• Requires a long-term view due to the inherently
long time-scale in that process
– in the “formative phase”, a rudimentary capital goods
industry is developed that provides a technology with
a reasonable price/performance ratio (takes a couple
of decades)
– an additional two to three decades required to
increase the capacity of the capital goods sector and
deploy the technology (in further improved forms)
until the market is saturated
10
Ignoring inter-generational equity
issues- “affordability for whom” (2)
• Onshore wind and PV are in their growth phases
– EEG central to that development
• Offshore wind, wave etc. need to go through a formative
phase
• Failing to provide the material means to supply “lowcarbon” electricity on a very large scale with technologies
that have gone through decades of improvement means
shifting the costs of climate change to future generations
• An appropriate cost concept should include long-term
benefits from learning, strengthening the economic case
of renewables further
11
Explaining discourse intensity
1 – intellectual paradigms
• In sum, the cost discourse is weak and misleading –
how can we explain its ferocity?
• (1) The divide reflects a broader debate between
those inspired by neoclassical analysis of the
advantages of industry- or technology-neutral
policies and those advocating a more powerful state
implementing industry- or technology-specific
policies.
– To an extent, the ferocity of the debate can be explained
by these diametrically opposite views on the nature of
large-scale transformation processes
12
Explaining discourse intensity
(2) Clashing interests
• The large utilities suffer from loss of market share and
reduced profitability of generation, particularly at peak
hours. The Economist argues that deployment of
renewables creates an “existential threat” to the large
utilities, stating that:
• the country’s biggest utility, E.ON, has seen its share
price fall by three-quarters…and its income from
conventional power generation…fall by more than a
third since 2010. At the second-largest utility, RWE…net
income has also fallen a third since 2010. As the
company’s chief financial officer laments,
“conventional power generation, quite frankly, as a
business unit, is fighting for its economic survival”.
13
Fit-and-conform,stretch-and-transform
put to the test in analysing Germany
• Fit-and-conform (FaC) and stretch-and-transform (SaT) are
helpful concepts to sum up different economic logics which
inspire (or are formed in the context of) different policies
and are used pragmatically by different interest groups
• These paradigms define struggle between and within
political parties (German Conservatives, Soc Dem) and
different government levels
• Conceptual problems arise when a SaT policy is reoriented
in the name of SaT values in the direction of a FaC policy, as
happens in Germany since 2010-12
• FaC is invoked by large utilities to curtail ”wasteful”, longterm EEG approach, not by advocates of renewables
14
Germany: Development of new renewables-based electricity generation,19902011, in GWh (from about 1.5 TWh to 105 TWh): 70x, excl hydro
Adapted from: FME (Federal Ministry for the Environment, Nature Conservation and Nuclear
Safety) (2012).
German Coal, Nuclear, Gas and Renewable Generation 1990-2012
Source: Gipe, Paul (March 2013): 2012 German Nuclear & Gas-Fired Generation Falls Further While
Renewables Grow. Available on: http://www.wind-works.org/cms/index.php?i
d=39&tx_ttnews[tt_news]=2259&cHash=3991f443a7d9f79482d8c8d4816c0a32, 18.03.2013.
18
Figure 2. Ownership shares in biogas installed capacity in 2010 (Total: 2.280 MW)
Adapted from: trend:research (2011), p.51.
Figure 3. Ownership shares in installed PV capacity, Germany 2010 (Total: 16.917 MW)
Adapted from: trend:research (2011), p.62.
Image: Cost components for one kilowatt-hour of electricity for household
consumers 2000- 2011
Source: BMU (2012): Erneuerbare Energie in Zahlen. Nationale und internationale Entwicklungen. Availlable at:
http://www.erneuerbare-energien.de/fileadmin/ee-import/files/pdfs/allgemein/application/pdf/broschuere_ee_zahlen_bf.pdf,
accessed 23 September 2013, p. 43.
Electricity price on the German futures market and profitability thresholds of
different types of power plants, 2008-2012
Jerome à Paris (5 September 2013), The Economic and Political Consequences of the Last 10 Years of
Renewable Energy Development. Available at: http://www.resilience.org/stories/2013-09-06/theeconomic-and-political-consequences-of-the-last-10-years-of-renewable-energy-development,acccessed
27.09.2013.
Electricity Production and Spot-Prices: CW 24 2013
Source: Mayer, Johannes (2013): Electricity spot prices and production Data in Germany. Published
by: Fraunhofer ISE. Available at: http://www.ise.fraunhofer.de/de/downloads/pdffiles/aktuelles/boersenstrompreise-und-stromproduktion-2013.pdf, 02.11.2013.
History of Price Extremes in the Day-Ahead Market
Source: Mayer, Johannes (2013): Electricity spot prices and production data in Germany. Published
by: Fraunhofer ISE. Available at: http://www.ise.fraunhofer.de/de/downloads/pdffiles/aktuelles/boersenstrompreise-und-stromproduktion-2013.pdf, 02.11.2013.
Figure: 1: German PV FITs from January 2004 to October 2013
Bernard Chabot (2013) Diversity in PV Systems Sizes and Market Deployment Management from Prices: Two
Strategic Lessons from the German PV Policy and Measures. P. 1. Available at:
http://cf01.erneuerbareenergien.schluetersche.de/files/smfiledata/3/0/3/4/9/9/TwoStrategicLessons.pdf,
09.09.2013.