Renewable energies are taking over the electricity market

BEE President Simone Peter told Handelsblatt: “In order for the target of 80 percent renewable energies in gross electricity consumption to be realistically achieved by the traffic light coalition in 2030, new framework conditions for the electricity market are needed in addition to the dismantling of market barriers for renewables.” A system that was previously based on fossil fuels must adapt to renewable energies, “especially the integration of large amounts of fluctuating energies such as sun and wind”.

The concept for the electricity market of the future is based on a coal phase-out in 2030, on decentralization and a more flexible electricity supply and demand. In the opinion of the BEE, some political measures are essential for the change of course to be successful.
This includes lowering the electricity tax from currently 2.05 cents per kilowatt hour to the minimum amount of 0.05 cents permitted under European law, as well as completely eliminating the surcharge under the Renewable Energy Sources Act (EEG). It is already included in the coalition agreement and should take effect from January 2023.

In addition, the renewable energy industry is calling for the fees for the use of the power grids to be variable over time: the fee for end customers should be linked to the feed-in of renewable energies. This would create an incentive for every consumer to consume more electricity when wind or solar power floods the grids and the market price on the electricity exchange is low. The prerequisite for such models is that intelligent electricity meters (“smart meters”) are in use in as many households as possible. The renewables industry also recommends extending the network fee exemption for hydrogen electrolysis.

In addition, the BEE advocates lowering the ancillary costs of electricity storage systems: The network fee exemption for electricity storage systems must be expanded and it must be possible to apply it to all storage constellations. According to the industry’s expectations, there must be an investment subsidy of ten percent for the construction of electricity storage systems.

Biogas takes on the back-up function

In addition, biogas plants should have additional capacity and be connected to gas storage facilities. The aim is to create a significant controllable output that can always come into play when wind and solar power cannot make a sufficient contribution to meeting the demand for electricity.
This would mean that biogas plants would play a central role in securing the supply. Bio-energy, systems for combined heat and power (CHP) and storage could together provide “sufficient controllable power for the security of supply”, it says in the paper. Only a “very small expansion” of hydrogen gas-fired power plants is required – and that only well after 2030.

Many players in the energy sector see it completely differently. For example, the Federal Association of German Industry (BDI), the German Energy Agency (Dena) and the Federal Association of Energy and Water Management (BDEW) are convinced that a considerable amount of additional gas-fired power plant capacities will have to be created by 2030 in order to be able to use coal and To be able to ensure the supply at all times.

BDI, Dena and BDEW agree that new gas-fired power plants must be suitable for operation with hydrogen. For a transitional period, however, they consider the use of natural gas in the new power plants to be unavoidable. The BEE, on the other hand, considers such bridging solutions to be superfluous.

The renewables industry sees considerable potential for the domestic production of green hydrogen: Up to 100 gigawatts (GW) of electrolysis capacity can be built up in this country “financially lucrative and with high regional added value by 2045, so that green hydrogen can be imported for direct use for implementation the energy transition is not absolutely necessary in Germany, ”says the BEE.
The National Hydrogen Strategy, which was passed by the then federal government in 2020, provides for the development of an electrolysis capacity of five GW – but by 2030. The traffic light coalition is committed to building on the hydrogen strategy of the previous government and continuing it.

The traffic light partners have already defined a new target value for electrolysis capacities in 2030: They are aiming for ten GW by 2030.

Unlike the BEE, the traffic light coalition is sticking to the previous government’s plan not to rely solely on domestic production of green hydrogen. Rather, the traffic light coalition is committed to building hydrogen import partnerships.
The BEE plans coincide in places with the ideas of the Greens. The party had already presented a position paper for the reshaping of the electricity market in the spring. Some of the ideas from this are also reflected in the coalition agreement, which, however, remains quite non-binding overall.

From 2023 the EEG surcharge will be history

The BEE and the traffic light coalition agree that the electricity price must be exempt from taxes and surcharges. The coalition partners take this into account with the decision to announce the complete abolition of the EEG surcharge for January 2023. This means that in future there will be no annual income of around 25 billion euros. Financing is provided by the Energy and Climate Fund (EKF), which is fed from the income from the emissions trading system and a subsidy from the federal budget.

In the medium term, the promotion of renewable energies will also change. The system of fixed feed-in tariffs for electricity from renewable sources has been adapted again and again in recent years and supplemented with market-oriented instruments. However, they are still highly dependent on the EEG payments.
Experts recommend changing that. “In the future, plant segments and generation technologies that are already competitive due to cost reductions and rising market prices should be gradually removed from the EEG subsidy,” said Andreas Kuhlmann, head of the German Energy Agency (Dena), the Handelsblatt.

This applies to wind farms, whose 20-year EEG subsidy has expired, “with immediate effect, and for the vast majority of systems in the photovoltaic open space segment already now,” said the Dena boss. Nevertheless, the EEG funding will remain important, especially for smaller systems, such as photovoltaic roof systems or in the segment of medium-sized commercial systems.
You can see that with the Agora Energiewende think tank as well: For the time being, “a safeguard such as that provided by the EEG is necessary to achieve the expansion targets for renewable energies,” said Thorsten Lenck, electricity market expert at Agora Energiewende. At the same time, direct purchase agreements could be strengthened, for example through further reforms of taxes, levies and network charges.

According to the BEE, renewables will only be “marketable” from 2040 without further funding. In this regard, the traffic light coalition is making higher demands: “With the completion of the coal phase-out, we will phase out the promotion of renewable energies,” says the coalition agreement, who “ideally” strive for a coal phase-out by 2030.

Is the extension possible today without state aid?

However, there are also voices who want renewables to become self-employed today. An as yet unpublished study by the Epico think tank comes to the conclusion that renewables could be built without government aid. “The reason is that even in a system with a very high proportion of renewables there will still be periods with high electricity prices and thus revenue opportunities,” says Epico boss Bernd Weber. This is the case “when renewables cannot completely cover the load and thus flexible generation technologies and flexibility options with high marginal costs, such as hydrogen power plants or loads that can be switched off, set prices”.

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