The Strategist

Competition tears German renewable energy market apart

04/26/2018 - 14:23

Fixed tariffs, which guaranteed investors 20 years with a fixed price of € 0.51 per 1 kWh of generated energy, were one of the main market measures in Germany. They were aimed at stimulating the development of renewable energy sources (RES). The households were able to produce and sell renewable energy (mainly sun and wind), including by merging into energy cooperatives.

Nenad Kajić /
Nenad Kajić /
In the last ten years, this has led to a boom in renewable energy in Germany, turning many settlements from energy-deficient to energy-efficient. According to the National Renewable Energy Agency, in 2016 households owned 31.5% of the total installed capacity of RES, another 10.5% belonged to farmers. Power companies owned only 15.7% of capacity, another 14.4% fell on developers. The number of energy cooperatives has increased from 66 in 2001 to 1 thousand by 2015.

"We remain profitable and pay 0.5% of dividends to members of the cooperative, while the rate on bank deposits today is 0.05-0.06%. But work has become much more difficult," says Petra Gruner-Bauer, head of the energy cooperative The Solix. The fact is that the system of fixed tariffs and restrictions on greenhouse gas emissions led to a sharp increase in electricity prices in the country (however, most citizens were ready for this), although the cost of generating renewable energy due to the cheapening of technologies has significantly decreased. This resulted in a revision of the government's support system for RES. 

Although the rules of the game have not changed for old projects (the guarantees that were given for 20 years are still in force), all new capacities from 2017 should sell their energy at open auctions, and the guaranteed tariff for the smallest producers was reduced to € 0,13 for 1 kW/h. Already at the first auctions, the price for 1 kWh fell to € 0.9. "The transition was too fast; large companies began to lose in the competitive struggle and started pressing the government. Now we are unlikely to grow," complains a representative of UrStrom cooperative Klaus Grieger. The government, large industrial companies and housing and utilities companies are waiting for a reduction in electricity prices, while local producers and generating companies of renewable energy believe that this will undermine investment and the growth of renewable energy sources.