SUPPORT SCHEMES TO PROMOTE THE USE OF RENEWABLE ENERGY SOURCES GERMANY
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thx SUPPORT SCHEMES TO PROMOTE THE USE OF RENEWABLE ENERGY SOURCES GERMANY
SUPPORT SCHEMES TO PROMOTE THE USE OF RENEWABLE
ENERGY SOURCES
GERMANY
This case study was drafted by Ramboll Management Consulting (Belgium)
with contributions from Vivid Economics
Rambøll Management
Consulting A/S
DK reg.no. 60997918CONTENTS
1. Introduction 3
2. Background 4
Socio-economic profile of the country Error! Bookmark not defined.
The country’s approach towards climate change mitigation policies 4
3. Key features of the selected policy 6
Legal basis 6
Responsible entities Error! Bookmark not defined.
Key objectives 6
Policy mechanisms 7
Key target groups Error! Bookmark not defined.
4. Socio-economic impacts and inequality outcomes 11
Economic impacts 11
Social impacts 12
Inequality outcomes Error! Bookmark not defined.
5. Compensation strategies adopted 16
- List of interviewees 19
– List of sources consulted 20
21. INTRODUCTION
The present document sets out the case study undertaken on the German support scheme for
renewable energies, which is called the Erneuerbare Energien Gesetz (EEG). The main component
of the EEG is a renumeration in the form of a market premium, for which operators of renewable
energy plants must submit tenders (for some renewable energy plants, operators can apply to a
market premium or a feed-in tariff). It is financed by a surcharge that is paid by the end consumers
of electricity, called the “EEG-Umlage”. Already in 1991, Germany had introduced a feed-in priority
for renewable energy (called the Stromeinspeisungsgesetz), which was reformed and renamed in
2000 as the EEG. It is considered the first law for prioritising usage of renewable energy in the
national electricity grid in the world, and the first one to guarantee producers of renewable energies
a fixed price on their generated electricity.1
Germany was selected as a case for exploring the social and economic impacts of a market
premium. There are two reasons why this case provides a good opportunity to explore the nature
of these impacts:
1. The policy is quite mature. Since social and economic impacts of climate change
mitigation policies can be expected to develop over a longer period of time, this case enables
to observe this impact over the past 20 years.
2. The impact of the EEG on inequality has been subject to intensive public debate in
Germany, which triggered some studies that attempted to uncover the scope and
mechanisms of these impacts. This provides a relatively good base of evidence that will be
analysed in this case study.
This case study commences with a brief context chapter providing some background information
on Germany, its energy profile and its approach to climate mitigation policy. The subsequent chapter
introduces in more detail the policy processes and stakeholders of the EEG. In chapter 4, the main
arguments will be discussed that have been brought forward in the debate on the economic and
social impacts of the EEG. The case study concludes with a brief overview on compensation
strategies that have been adopted to mitigate the social and economic impacts of the EEG.
1
Florian Lüdeke-Freund, Oliver Opel: Die Energiewende als transdisziplinäre Herausforderung. In: Harald Heinrichs, Gerd
Michelsen (Ed): Nachhaltigkeitswissenschaften. Springer-Verlag, Berlin Heidelberg 2014, p. 429- 454
32. BACKGROUND
The German energy profile
German energy production is still highly dependent on conventional energy production technologies
such as coal and nuclear power. However, the energy industry in Germany is undergoing a twofold
transition. First, the German government decided to phase out electricity generation through
nuclear power in 2011.2 Since then, nuclear power plants have steadily been closed down.
Currently, only six nuclear power plants are producing electricity, and the last one will be shut down
by the end of 2022.3 Second, Germany committed to reach a 30% share of renewable energy
production in its mix of energy production by 2030.4 In line with this target, the German government
passed the Act for shutting down coal power (Kohleausstiegsgesetz) in 2020. It requires all coal
power plants to be shut down by 2038.5
As seen in Figure 2.1, the share of nuclear power has been decreasing steadily over the past years,
while electricity production from renewable sources such as wind and solar has increased, with wind
power being the most important source of renewable energy production.
Figure 2.1: Gross power production in Germany
Source: Umweltbundesamt on Basis of AG Energiebilanzen.6
This major transition from conventional to renewable power has been labelled with the term
Energiewende (Engl.: energy transition) in the political debate in Germany.
The country’s approach towards climate change mitigation policies
Germany has taken on a leadership role in climate mitigation policies, with the first national strategy
for climate mitigation formulated already in 2000. A crucial role in the country’s approach to limiting
2
Bundesregierung (2021): Ausstieg aus der Kernkraft.
3
Bundesministerium fur Umwelt, Naturschutz unf Reaktorsicherheit (2021): Kernkraftwerke in Deutschland.
4
Bunsministerium fur Wirtschaft und Energie (2021): Integrierter Nationaler Energie- und Klimaplan, p. 20
5
Deutscher Bundestag (2020): Gesetz zur Reduzierung und zur Beendigung der Kohleverstromung und zur Änderung weiterer
Gesetze (Kohleausstiegsgesetz).
6
Umweltbundesamt (2020): Erneuerbare und konventionelle Stromerzeugung.
4climate change is the doctrine of the energy transition (Energiewende), which describes the process
of transitioning the energy production from fossil fuels (predominantly coal and nuclear energy) to
renewable sources of energy generation.
After many revisions and reforms, the current Climate Action Plan 2050 (Klimaschutzplan 2050)
of the federal Government of Germany sets out the main strategic framework for Germany’s climate
change mitigation policies. 7 It was approved in November 2016 and was developed as a response
to Germany’s signature of the Paris Agreement, to ensure Germany’s contribution to the
international target to limit global warming to 2°C. Concretely, the Climate Action Plan 2050
contains the objective to cut CO2 emissions by at least 55% by 2030 relative to the emission levels
of 1990.
The Action Plan also includes sector specific greenhouse gas emission goals. The energy production
sector plays a crucial role, as Germany committed to reducing the CO2 emissions from electricity
production by 62% by 2030 compared to 1990 emission levels. In line with the procedures of the
Paris Agreement, the Climate Action Plan will be reviewed on a regular basis, with the first update
most likely to start in 2022.
To underpin the commitments that Germany made in the Climate Action Plan 2050, the federal
Government published the Climate Action Programme 2030 (Klimaschutzprogramm 2030) in
2019.8 The Climate Action Programme 2030 sets out policy measures that Germany intents to
implement in order to reach its targets. The Climate Action Programme 2030 sets out measures in
four main dimensions:
• Measures to incentivise CO2 emissions savings (i.e. support for energy efficient renovations on
buildings, measures to support public transportation, etc.)
• Measures to price CO2 emissions (such as emissions trading systems for heating and transport,
etc.)
• Measures to reduce costs of consumers and businesses (such as a stabilisation of the EEG
surcharge through revenue recycling from the new CO2-pricing, increase of housing benefits,
etc.)
• Regulatory measures (to be introduced in 2030)
7
Bundesministerium fur Umwelt, Naturschutz unf Reaktorsicherheit (2016): Klimaschutzplan 2050. Online available at:
https://www.bmu.de/fileadmin/Daten_BMU/Download_PDF/Klimaschutz/klimaschutzplan_2050_bf.pdf
8
Bundesregierung (2019): Klimaschutzprogramm 2030 der Bundesregierung zur Umsetzung des Klimaschutzplans 2050
Online available at:
https://www.bundesregierung.de/resource/blob/975226/1679914/e01d6bd855f09bf05cf7498e06d0a3ff/2019-10-09-klima-
massnahmen-data.pdf?download=1
53. KEY FEATURES OF THE SELECTED POLICY
Legal basis
The Renewable Sources Act (Erneuerbare Energien Gesetz, EEG) was first introduced in 20009 and
succeeded the Electricity Feed Act (Stromeinspeisungsgesestz), which had been in place since 1991.
Since then, the EEG has undergone multiple revisions and reforms in 2004, 2009, 2012, 2014, 2017
and 2021. The latest reform of the EEG came into force on January 1st, 2021. During the last twenty
years, the rational of the EEG has fundamentally changed, by moving away from a fixed feed-in
tariff towards a competitive pricing scheme that is based on auctions and tenders.
Responsible entities
The main entities for implementing the EEG are the regularity authorities and the electricity grid
operators. While the fixed price for electricity guaranteed to producers of renewable energy was
previously predetermined by the parliament (upon proposals of the Ministry Federal Ministry for
Economic Affairs, responsible for renewable energy), the reform of 2017 led to a shift towards a
system of auctions. Since 2017, the Bundesnetzagentur publishes tenders for a set capacity of new
renewable energy projects that will be supported. Producers of renewable energy, who wish to
construct new renewable energy plants can submit proposals for projects, and bidders with the
cheapest price win the auction and are awarded a market premium. The amount of the market
premium is determined by the proposal that has been submitted. By means of sector-specific
tenders, the market premium is essentially being determined on a competitive basis, and in the
bidding rounds of 2019, a total of nine technology specific calls for tenders were published.10
This change towards determining the amount of support for renewable energy through auctions
was implemented in 2017 as a response to very high fixed tariffs that did not consider cost-savings
achieved through innovations by the renewable energy industries. Especially in the solar sector,
very high feed-in tariffs led to a run for installing solar and photovoltaic plants, as high feed-in
tariffs and reduced investment costs achieved very high margins for investors.11
Another key player in implementing the German support scheme for renewable energy are the
Transmission System Operators (TSOs) and the Distribution Grid Operators (DSOs). There
are four TSOs in Germany that each operate parts of the national high-voltage electricity
transmission grid, while over 800 DSOs operate the high- and medium-voltage distribution grids
that transport electricity to end consumers. The TSOs calculate the surcharge that is paid by the
electricity consumers to finance the subsidies that support operators of renewable energy plants.
This surcharge is called “EEG-Umlage”, and it is adjusted each year to cover the difference between
the remuneration for renewable energy producers and the market price of electricity. The value of
the surcharge tariff is calculated by the TSOs.
Key objectives
The general objectives of the EEG are set out in §1, paragraph 1 EEG. The key objectives are:
9
Deutscher Bundestag (2000): Gesetz fur den Vorrang von Erneuerbarer Energien (EEG-Gesetz) sowie zur Anderung des
Energiewirtschaftsgesetzes und des Mineralolsteuergesetzes. Online available at:
https://www.bgbl.de/xaver/bgbl/start.xav?startbk=Bundesanzeiger_BGBl&jumpTo=bgbl100s0305.pdf#__bgbl__%2F%2F*
%5B%40attr_id%3D%27bgbl100s0305.pdf%27%5D__1611910280973
10
Tiedemann, Silvana; Kelm, Tobias; Hirth, Lion, Erhart, Karl-Martin et. Al. (2019): Evaluierungsbericht der Ausschreibungen
für erneuerbare Energien.
11
Pegels, A. (2016). Feed-in tariffs for renewable energy : which determination option works for whom ?, (January), 1–22.
6• Enable a sustainable supply of electricity
• Increase the share of renewable energies to 65% of the total electricity production in Germany
by 2030
• Achieve greenhouse gas neutrality of the whole electricity produced in Germany by 2050
• Achieve cost efficient solution to achieve these objectives
Furthermore, §2, sets out the fundamentals of the means by which these objectives are to be
achieved:
• Integrate renewable energies and gas power into the electricity grid
• Renewable energies and gas power shall be marketed directly
• The amount of the support for renewable energies shall be determined by auctions
According to §3, paragraph 21 of the EEG, the following forms of energy production can be subject
to support under the EEG act:
• Waterpower (including ocean energy such as tidal or wave power)
• Wind power (both on- and off-shore)
• Solar power
• Geothermal power
• Biomass power
The rationale of the EEG is to make investments into renewable energy technologies competitive
relative to conventional energy production technologies, while at the same time reduce the costs of
the funding scheme. While the feed-in tariff prior to the reform 2017 was mainly concerned with
reducing the risk for investors by introducing a fixed and guaranteed tariff, the current auctioning
system places greater importance on the competitiveness of the support scheme to achieve cost-
efficient solutions with the auctions determining the remuneration. In case of high production of
renewable energy (due to strong winds or sunshine), operators of renewable energy plants are
compensated for any electricity produced that could not be fed into the national grid due to
bottlenecks in the grid infrastructure.
By highly incentivising investments in renewable energy technology, the EEG seeks to reduce the
costs of renewable energy through economics of scale and innovations in the renewable energy
sector.
Target group
The main target group of the EEG are investors and companies who invest in or operate renewable
power plants. The rational of the EEG is to provide incentives to invest in renewable energy plants.
Also, small-scale operators of renewable energy production units, such as homeowners who install
solar panels on their rooftops, benefit from the support scheme for renewable energy. Especially in
the early stages of the Energiewende, this group of micro producers of renewable energies where
the forerunners in the uptake of renewable energies, and big incumbent energy companies were
rather reluctant to apply for support under the EEG.12 Further, the EEG targets TSOs and DSOs, as
they are responsible for the implementation of the EEG. 13 Electricity from onshore wind and solar
energy is often managed directly at the level of the DSOs, while larger renewable energy plants
(such as off-shore wind power) are managed by the TSOs. As they have to feed the grid with
12
Kungl, G. (2015): Stewards or sticklers for change? Incumbent energy providers and the politics of the German energy
transition. In: Energy Res. Soc. Sci. 8, 13e23
13
Most of the onshore wind and solar power is fed into the grid at the level of the distribution grid, which is not managed by
the TSOs but by smaller distribution grid operators.
7renewable energy when it is possible, it also incentivises TSOs and DSOs to invest in the electricity
grid infrastructure, which is a crucial part in the uptake of renewable energy.
On the cost side of the EEG, the target group consists of the consumers of electricity. Everyone who
consumes electricity in Germany is subject to the EEG surcharge, which is part of the price of
electricity. Only some energy intensive industries can apply to be exempt from paying the EEG
surcharge, as mentioned above.
Policy mechanisms
The EEG grants electricity produced from renewable energies usage priority. This means that, in
situations with high production from renewable energies, the power output from conventional power
plants must be reduced first to prioritise electricity produced from renewable sources. Furthermore,
producers of renewable energy receive renumeration for their produced renewable energy.
Moreover, renewable energy producers receive support for the energy produced. The modus and
amount of the support granted depends on the size of the renewable energy plant and the
technology. The EEG contains a number of support schemes:14
Feed-in tariff
For power plants with a capacity of up 100 kW the support system is based on a feed-in tariff. The
fixed tariff is paid by the grid operator to the plant operators, and the amount of tariff is set by law
over a period of 20 years. The plant operators may also change to support in the form of a market
premium. Plants with a capacity higher than 100 kW can be supported through the feed-in tariff in
exceptional cases.
Market premium
Plant operators of renewable energy plants, that exceed an installed capacity of 100 kW and are
not obliged to take part in the tendering procedures (see below) are supported by a market premium
for electricity which is marketed directly. The amount of the market premium is calculated each
month as the difference between a fixed feed-in and the monthly market value of the sold
electricity.
Tendering
The following technologies are obliged to apply for funding via tenders:
• Onshore and offshore wind projects with a capacity exceeding 750 kW
• Solar projects starting with a capacity exceeding 750 kW
• Biomass plants starting with a capacity exceeding 150 kW (including existing biomass plants)
The amount of the granted support is determined by the auction, and the most cost-efficient
proposals will receive the support.
The TSOs are required to sell all generated renewable electricity on the spot market. The difference
between the electricity price achieved on the spot market and the guaranteed remuneration for the
production of electricity from renewable energies represents the main cost that arise, which is
covered by the EEG-surcharge. Similarly, the costs for the market premium of directly marketed
electricity are derived from the difference between the monthly price for electricity and the feed-in
14
C.f. Sternkopf, Tim (2019): Germany: Support Schemes. On Res Legal – Legal Sources on Renewable Energy. /
8tariff. Other costs covered by the EEG-surcharge result from the compensation measures offered to
renewable energy power plant operators where the national grid is saturated with electricity.
These costs are shared by all consumers of electricity in the form of the EEG surcharge. Every
consumer of electricity has to pay it per kWh consumed. As such, the support scheme increases the
price of electricity payed by consumers.15 For 2020, the EEG surcharge was calculated at 6.7
ct/kWh, and it made up around 23% of the overall price of electricity.16 Figure 3.1 shows the
development of the EEG surcharge over the past 10 years. Notably, the EEG surcharge has been
stable in the past few years, which is a consequence of the reform in 2014.17 This was achieved by
reducing the renumeration for renewable energy plant operators after 2015. It is however not
completely clear whether the reform of the EEG to an auctions-based system has achieved cost
savings and reduced the renumeration for renewable power plants. Berkhout et al. 2018 compared
the rules for determining the amount of the renumeration of the feed-in tariff of the EEG 2014 with
the reformed auction-based determination of the EEG 2017. They argue that the actual
renumeration for wind power plants of projects awarded under the EEG 2017 is not necessarily
cheaper than what the same projects would have received under the old EEG 2014.18
Figure 3.1: Development of the EEG surcharge per kwh in Euro Cents
Source: own depiction, data source: Bundesministerium fur Wirtschaft und Energie (2021): Erneuerbare Energien19
15
Gielen, Dolf; Saygin, Deger; Wagner, N. (2015). Renewable Energy Prospects: Germany. REmap 2030 Analysis,
(November). Retrieved from www.irena.org/remap
16
Ibid.
17
Bundesministerium für Wirtschaft und Energie (2014): Das Erneuerbare-Energien-Gesetz 2014 Die wichtigsten Fakten zur
Reform des EEG. Online available at: https://www.erneuerbare-
energien.de/EE/Redaktion/DE/Downloads/Hintergrundinformationen/eeg-2014-infobroschuere-
bf.pdf?__blob=publicationFile&v=9
18
Berkhout, V.; Cernusko, R.; Grashof, K. (2018): Ein Systemwechsel ohne Vorteile; Energie und Management: Herrsching,
Available online at: https://www.energie-und-management.de/nachrichten/alle/detail/ein-systemwechsel-ohne-vorteile-
123389
19
Bundesministerium fur Wirtschaft und Energie (2021): Erneuerbare Energien. Online available at:
https://www.bmwi.de/Redaktion/DE/Dossier/erneuerbare-energien.html
9One third of the total costs for the feed-in tariff are paid by private consumers, while the other two
thirds are paid by businesses and industry.20 Electricity-intensive industries can apply to be exempt
from paying the EEG surcharge. The reason for the exemption is to maintain the international
competitiveness of such industries and to prevent them from moving their production facilities
abroad. In 2020, a total of 2,201 companies applied for this exemption21. These industries are
accountable for 25% of the total electricity consumption in Germany. Examples of electricity
intensive industries are the aluminium industry or electric rail transport.
Alternatively, the electricity produced can be marketed directly. Since 2016, renewable energy
plants that exceed a installed capacity of 100 KW have to market their electricity. Using the market
premium model, the difference between the price achieved on the exchange and the feed-in tariff
is compensated for by a market premium. In order to encourage as many already existing EEG
systems as possible to switch to direct marketing, an additional management premium is paid if
operators choose to market their electricity directly.
20
Bundesministerium fur Wirtschaft und Energie (2020): EEG-Umlage 2021: Fakten & Hintergründe
https://www.bmwi.de/Redaktion/DE/Downloads/E/zahlen-und-fakten-eeg-
umlage.pdf?__blob=publicationFile&v=4#:~:text=Die%20EEG%2DUmlage%202021%20sinkt,verg%C3%BCteten%20Strom
erzeugung%20aus%20erneuerbaren%20Energien.
21
Ibid.
104. SOCIO-ECONOMIC IMPACTS AND INEQUALITY
OUTCOMES
The following section will discuss the various effects of the EEG that have been discussed in the
literature. To start with, the EEG achieved two main effects. On the supply side of electricity
generation, it serves as a subsidy for renewable energy production by providing a remuneration for
electricity. This incentivises investments in renewable energies and reduces incentives for
investments in conventional energy production. On the demand side, the EEG has an impact on the
consumer price of electricity, as it adds a surcharge on top of the electricity price to the consumer.
Whether the EEG as indeed an increasing effect on the consumer prices of electricity is still subject
to debate.
Economic impacts
The impact of the EEG on the development of the labour market in Germany is difficult to estimate.
While the EEG is one of the main instruments in implementing the German energy transition, other
policy instruments have been put in place to implement the energy transition as well, making it
difficult to isolate the impact of the EEG alone. Considering the Energiewende as a whole, most
studies conclude with a net positive impact of the uptake of renewable energies on the German
economy.
Positive impacts
Looking at the energy transition as a whole, the literature suggests that it is a vector for economic
growth and job creation.
Bhattacharya et. Al. find that the uptake of renewable energy is a major driver for economic growth
- they analysed the effect of renewable energy on economic growth in 38 countries 22, while a
number of studies conclude that the energy transition has had a net positive impact on the labour
market in the past and will continue to create extra jobs.
A study by the Friedrich-Ebert Foundation for instance estimated that the energy transition is
responsible for an additional 71,000 jobs compared to a baseline scenario in which no renewable
energy or energy efficiency policies have been implemented. However, while some sectors show a
very sharp rise in additional number of jobs (such as the service or construction sector), the energy
transition results in a loss of jobs in the energy and mining sectors.23
Similarly, a study commissioned by the Federal Ministry of the Economy and Energy (BMWi)
confirms this positive effect of the energy transition in the overall labour market.24 The authors
estimate, depending on different export assumptions for renewable energy technologies, that the
net job growth from the renewable energy sector will be between over 150,000 to over 250,000
additional jobs.
Another stakeholder that profited from the EEG was municipalities, who benefitted from a growing
number of renewable energy cooperatives. Since the EEG rates for solar energy were not adequately
22
Bhattacharya, Mita & Paramati, Sudharshan Reddy & Bhattacharya, Sankar. (2016). The effect of renewable energy
consumption on economic growth: Evidence from top 38 countries. Applied Energy. 162. 733-741.
23
Hoch, Markus: Lambert, Jannis; Kirchner, Almut; Simpson, Richard; Sandhovel, Myrna; Mundlein, Tabea (2018): Jobwende
- Effekte der Energiewende auf Arbeit und Beschäftigung. Online available at: https://www.fes.de/themenportal-bildung-
arbeit-digitalisierung/artikelseite/studie-jobwende-effekte-der-energiewende-auf-arbeit-und-beschaeftigung
24
Lehr, Ulrike; Ulrich, Philip; Lutz, Christian; Thobe, Ines; Edler, Dietmar; O’Sullivan, Marlene; Simon. Sonja; Naegler,
Tobias; Pfenning, Uwe; Peter, Frank; Sakowski, Fabian; Bickel, Peter (2015) Beschäftigung durch erneuerbare Energien in
Deutschland: Ausbau und Betrieb, heute und morgen. Study for the Federal Ministry of the Economy and Energy.
11adjusted to the technologically achieved cost savings, a “bubble” of solar energy investments
started to form after 2009.25 Heinbach et. Al (2014) estimated, that the average municipality was
able to generate 166 jobs and an additional tax income of 9.3 million EUR in 2011 due to the uptake
of renewable energies.26
Negative impacts
In terms of negative economic impacts, the “Budget effect” has been brought forward. As the EEG
increases the amount that households spend on electricity, it can be assumed that these additional
costs must be saved elsewhere. This in turn could lead to general lower purchasing power, which
would hamper demand for goods and services in Germany.27
Moreover, for businesses, a 2015 study showed that an increasing price for electricity leads to job
losses as businesses are forced to reduce their staff to compensate for the higher costs of
electricity.28 It is argued that the increase of the electricity price can lead to the loss of 50 000 –
60 000 jobs.29 30 However, the changes witnessed in the price of electricity are not only determined
by the EEG surcharge, and these negative effects are subject to debate. The uptake of renewable
energy has a decreasing price effect on the stock market price for electricity, as the additional
capacity of renewable energy plants leads to a surplus of electricity on the stock market. Thus,
without the EEG support, the stock market price (and therewith the consumer price) of electricity
would be much higher.
While most sources have acknowledged that the uptake of renewable energies has a net positive
impact on the job market, it was found that some sectors will experience a decline in their workforce.
This applies mainly to the mining and manufacturing sector, which are expected to experience a
small decline of jobs.31
It is worthy of note that the evidence presented above on the negative economic impact of the
support scheme for renewable energies is rather outdated so should be treated with caution; no
more recent evidence was found.
Social impacts and inequality outcomes
The social impacts of the EEG and associated inequality outcomes have been subject to extensive
debate in Germany. In general, there are two main lines of argument that have been brought
forward in this debate:
One side argues that the EEG is by nature a regressive tax that disadvantages low-income
households. In particular, as the maximum price for electricity is partly determined by public
regulations while the price of other energy sources are mostly determined by market mechanisms,
25
Pegels, A. (2016). Feed-in tariffs for renewable energy : which determination option works for whom ?, (January), 1–22.
26
Heinbach, K., Aretz, A., Hirschl, B. et al. Renewable energies and their impact on local value added and employment. Energ
Sustain Soc 4, 1 (2014)
27
Dehnen, Nicola; Mattes, Anselm; Traber, Thure (2015): Die Beschäftigungseffekte der Energiewende. Online available at:
https://diw-econ.de/wp-content/uploads/804_DIW-Econ_Besch%C3%A4ftigungseffekte-der-Energiewende_v5.0.pdf
28
Ibid. p. 18
29
Ibid. p. 18
30
Lutz, Christian; Lindenberger, Dietmar; Kemmler, Andreas (2014): Gesamtwirtschaftliche Effekte der Energiewende.
Endbericht, Projekt Nr. 31/13 des Bundesministeriums für Wirtschaft und Energie, Berlin. Online available at:
https://www.bmwi.de/Redaktion/DE/Downloads/S-T/gesamtwirtschaftliche-effekte-der-
energiewende.pdf?__blob=publicationFile&v=3
31
Ulrich, Philip; Lehr, Ulrike; Lutz, Christian (2018): Gesamtwirtschaftliche Effekte der Energiewende. Methodische Ansätze
und Ergebnisse.
12critics of the EEG see it as a contributor to inequality.32 Furthermore, it is argued that it resembles
a redistribution mechanism “from the bottom to the top”, as energy intensive industries are exempt
from paying the EEG surcharge.33
On the flip side, it is argued that although the EEG is added to the consumer price for electricity, it
led to a lower electricity price on the stock market. Therefore, if the EEG would be abandoned, the
consumer price of electricity would not necessarily decrease, and common goods such as climate
protection and long-term energy security would not be adequately provided. Both lines of argument
will be presented in more detail in the following section.
The EEG as a source of negative social impacts and inequality outcomes
The EEG has been criticised as being a regressive tax and thereby heavily affecting low-income
households. Grösche and Schröder (2011) found that the German feed-in tariff system has a
regressive effect on income, while the magnitude of the effect is found to be relatively small.34 In
a recent policy paper that proposed to reduce the EEG surcharge to 0 by the German Energy Agency,
the authors argue that the EEG surcharge disproportionally targets low income households, as they
have to spend a higher proportion of their income on electricity.35 Another study showed that during
the period of 2006 – 2016, the share of electricity costs of households increased more for low-
income households than it did for middle-income households.36
Furthermore, the low elasticity of the electricity price and the fact that low-income households have
due to budget restrictions only limited possibilities to save electricity contribute to the regressive
nature of a higher price for electricity. In 2016, low-income households had to spend 5% of their
total income on electricity, while average-income household only spent 1.5% of their income on
electricity.37 While consumption behaviour can save electricity to some extent, low-income
households have difficulties making investments in new, more energy efficient household
appliances. Almost 10% of households in the highest income percentile operate solar panels and
benefit from the support under the EEG, while only 0.4% of households in the two lowest income
percentiles enjoy operating their own solar panels. Thus households who spent a smaller share of
their income on the EEG surcharge benefit more from the support scheme.38
Moreover, the great majority of low-income households live in rental apartments which makes it
difficult for them to improve the energy efficiency of the heating and cooling of buildings. Low-
income households are also less likely to be able to upgrade old and inefficient household appliances
to reduce their electricity consumption. Further, homeowners that consume self-produced electricity
are subject to a reduced surcharge on electricity, which further contributes to the unfair distribution
of costs between homeowners and tenants.39
Finally, the exemption granted to high-intensive electricity consumers effectively increases the cost
burden on the rest of consumers. The industrial sector is responsible for 50% of electricity
32
Gawel, E., Korte, K., & Tews, K. (2015). Distributional challenges of sustainability policies-The case of the German energy
transition. Sustainability (Switzerland), 7(12), 16599–16615
33
Schaefer, Thilo (2018): EEG-Umlage: Umverteilung von unten nach oben. IW Kurzbericht 67/2018.
34
Grösche, Peter; Schröder, Carsten (2011) : On the redistributive effects of Germany's feed-in tariff, Economics Working
Paper, No. 2011-07, Kiel University, Department of Economics, Kiel
35
Kuhlmann, Andreas; Fischer, Tibor; Battaglia, Manuel; Roberts, Moritz (2020): Vorschleg fur die Senkung der EEG-Umlage
auf null.
36
Frondel, Manuel & Sommer, Stephan (2018): Der Preis der Energiewende: Anstieg der Kostenbelastung
einkommensschwacher Haushalte. In Diskussionspapier, Heft 128.
37
Ibid.
38
Schaefer, Thilo (2018): EEG-Umlage: Umverteilung von unten nach oben. IW Kurzbericht 67/2018.
39
https://epub.wupperinst.org/frontdoor/deliver/index/docId/7339/file/WSA17_Schaefer.pdf
13consumption, but it only contributes 30% of the costs to the EEG. Private households, in turn,
consume around 25% of the total electricity but have pay 35% of the costs of the EEG. 40 A study
from 2014 concluded that the EEG surcharge increased by 1.35 cents per kWh due to the exemption
of favoured industries with high energy consumption.41 At the same time, the merit-order effect led
to a drop in electricity prices on the stock market. Energy intensive industries that are exempt from
the EEG surcharge could highly benefit from this price drop, which was achieved by the uptake of
renewable energies. This benefit for high-intensive electricity consuming industries from the
electricity price drop was estimated to 500 million EUR per year.42
Thus, the EEG is criticised for being a distributional mechanism “from the bottom to the top”, in
which private household finance the investments for renewable energies, while investors in
renewable energy plants benefit from the guaranteed feed-in tariff and large industry with high
electricity consumption are exempt from sharing the costs.43
The EEG counter argument
On the flip side, it has been argued that the impact of the EEG on inequality is overestimated in the
public debate. Gawel et. Al. (2015) for example argued that the rise in the share of households’
expenditure on electricity had been moderate, while the expenditure share on other energy sources
(such as oil or gasoline) had increased much faster. As seen in Figure 4.1, over the past 30 years,
the price of electricity did not rise as much as for example the price of heating oil, which was not
subject to any surcharge. Also, there have been more fluctuations in the heating oil price than in
prices for electricity. Thus, it does not seem that the introduction on the EEG surcharge led to a
sharp increase or other fluctuations in the household consumer price of electricity. Compared to the
price of heating oil, the share of electricity of the total household spending did not increase,
providing a basis for arguing that the EEG did not lead to increasing inequality.
40
Pegels, A. and W. Lütkenhorst (2014). Is Germany's energy transition a case of successful green industrial policy?
Contrasting wind and solar PV. Energy Policy 74(2014): 522-534
41
Mayer, J.N.; Burger, B. Kurzstudie zur Historischen Entwicklung der EEG-Umlage; Fraunhofer ISE: Freiburg, Germany, 2014
https://www.ise.fraunhofer.de/content/dam/ise/de/documents/publications/studies/ISE_Kurzstudie_EEG_Umlage_2014_07_
14.pdf
42
Pegels, A. (2016). Feed-in tariffs for renewable energy : which determination option works for whom ?, (January), 1–22.
43
Gawel, E., Korte, K., & Tews, K. (2015). Distributional challenges of sustainability policies-The case of the German energy
transition. Sustainability (Switzerland), 7(12), 16599–16615.
14Figure 4.1: Development of household consumer prices of selected sources of energy (incl. VAT)
Source: Bundesministerium fur Wirtschaft und Energy (2020): Zahlen und Fakten: Energiedaten, table 26 44
Furthermore, it is argued, that the rising electricity price cannot be solely attributed to the EEG
surcharge. The main argument that disagree with the idea that the rising price in electricity can be
associated to the EEG is the merit-order effect. The uptake of renewable energies significantly
decreases the electricity price on the stock market because of a surplus of energy supply on the
market. Thus, in a scenario with no support for renewable energy (and no EEG surcharge), the
stock market price for electricity would be higher than the current price, increasing the consumer
price for electricity.45
Thus, not the EEG is to blame for the rising consumer price of electricity, because the EEG support
for renewable energy at the same time reduced the stock market price for electricity through the
merit-order effect.46 This is important to consider when assessing the social impacts of the EEG,
which is only one specific measure. Especially when arguing that the EEG poses additional financial
burdens to low-income households, it must be first confirmed that the EEG indeed increased the
costs for electricity for end-consumers. This section provided an argument, that claims that this
effect of the EEG on a rising electricity price is not clear.
44
Bundesministerium fur Wirtschaft und Energy (2020): Zahlen und Fakten: Energiedaten. Available online at:
http://www.bmwi.de/Navigation/DE/Themen/energiedaten.html
45
Gawel, E., Korte, K., & Tews, K. (2015). Distributional challenges of sustainability policies-The case of the German energy
transition. Sustainability (Switzerland), 7(12), 16599–16615
46
Wronski, Rupert; Fiedler, Swantje (2017): Was Stom wirklich kostet. Ed. Forum Ökologisch-Soziale Marktwirtschaf
https://www.greenpeace-energy.de/fileadmin/docs/publikationen/Studien/GPE_Studie_StromKosten_WEBV02_DS.pdf
155. COMPLEMENTARY STRATEGIES ADOPTED
The Climate Action Program 2030 of federal Government of Germany includes “relieving the burden
on citizens” as one of its key elements. It is the proclaimed objective of the Climate Action Program
2030 to relieve vulnerable citizens of the additional costs of climate policies, and to implement
climate action policies in an economically sustainable and socially equitable manner.47
The German Development Bank KfW introduced the loan scheme “Energieeffizient Sanieren
(151/152)”, which enables homeowners to finance energy efficiency measures in
buildings.48 While these measures first and foremost target homeowners who are usually not at
risk of struggling to cover rising electricity prices, it might incentivise landlords to renovate the
buildings and apartments of their tenants. This should in principle contribute to relieving
marginalised households (who tend to live in rented accommodation) from growing electricity bills.
In 2021, Germany introduced a price on CO2, which is paid by retailers of fossil fuels in form of
emission certificates. The additional costs of emission certificates are expected to increase the
consumer prices of fossil fuels such as heating oil or gas. This bears the risk of increasing the energy
costs of tenants as they cannot influence the type of heating in their dwellings.
Further, current schemes to support energy efficiency measures in buildings tend to only increase
the tenants’ rent, and not incentivise efficient measures, but more expensive measures.49 In
addition, homeowners with low incomes rarely use such support schemes. The main reason for this
is the administrative complexity of these measures and a lack of awareness.50 Thus, measures to
support investments in energy efficiency often do not really target low-income household or help
with the rising costs of electricity. However, measurements to share the costs of the CO2 price
between landlords and tenants are currently being discussed by the German government.
As a more direct compensation strategy, the Climate Action Program 2030 includes an increase in
housing benefits (dt. Wohngeld). Low-income households are eligible to apply for housing benefits
to pay rent as well as energy and electricity bills, which are paid as grants. These housing benefits
have been increased by 10% to cushion recipients of housing benefits from rising energy prices.51
Most importantly, the Climate Action Program 2030 introduces a CO2 tax on traffic and heating
with a national emission trading system in addition to the European emission trading system.
Additional revenues that are generated through the new CO2 tax will be used to reduce the EEG
surcharge in the medium term. The federal government is supposed to take a more active role in
financing the remunerations granted under the EEG to relieve citizens of continuously rising
electricity prices.52 This was started in December 2020, as the federal government decided to
develop a concept based on the procedure for the years 2021/2022 that ensures the gradual
reduction of the EEG surcharge by means of an alternative, budget-neutral financing model.
Moreover, since January 2021, a further rise in the EEG surcharge has been compensated for by
47
Deutsche Bundesregierung (2019): Climate Action Program 2030 – an overview. Online available at:
https://www.bundesregierung.de/breg-en/issues/climate-action/klimaschutzprogramm-2030-1674080
48
KfW (2021): Energieeffizient Sanieren – Kredit. Online available at:
https://www.kfw.de/inlandsfoerderung/Privatpersonen/Bestandsimmobilien/Finanzierungsangebote/Energieeffizient-
Sanieren-Kredit-(151-152)/
49
Thomaßen, Georg; Reutter, Leo; Langenheld, Alexandra; Deutsch, Matthias (2020): Wie passen Mieterschutz und
Klimaschutz unter einen Hut? Available online at: https://static.agora-
energiewende.de/fileadmin2/Projekte/2020/2020_07_Warmmieten/A-EW_190_Mieterschutz_Klimaschutz_WEB.pdf
50
European Parliament (2016): Energy Efficiency for Low-Income Households. Study for the ITRE Committee. Online available
at: https://www.europarl.europa.eu/RegData/etudes/STUD/2016/595339/IPOL_STU(2016)595339_EN.pdf
51
Deutsche Bundesregierung (2019): Climate Action Program 2030 – an overview. Online available at:
https://www.bundesregierung.de/breg-en/issues/climate-action/klimaschutzprogramm-2030-1674080
52
Ibid.
16federal funds, which is financed by the newly introduced price on CO2. It is estimated that this
combination of caping the EEG surcharge and increasing the price for fossil fuels will benefit low
income households while putting a stronger burden on households with higher incomes.53
53
Schumacher, Katja; Dr. Cludius, Johanna; Blanck, Ruth; Braungardt, Sibylle; Liste, Victoria; Kreye, Konstantin; Hünecke,
Katja (2021): Neu ab Januar: Stürzt uns der CO2-Preis zusätzlich in die Krise?
176. CONCLUSION
The case study on the renewable energy support system in Germany under the EEG serves to show
how difficult it is to assess the socio-economic impacts of one single climate mitigation policy. While
the economic impacts of the support system were mostly positively judged, arguments for a
negative impact of the support system on the German economy are either outdated or focus on
specific economic sectors.
Regarding inequality outcomes, the evidence examined in this case study draws a mixed picture.
The levy on electricity is criticised for being regressive, but the actual impact of the levy on
electricity prices is still subject to a controversial debate. Further, the case study revealed that
Germany has put numerous compensation strategies in place that specifically target higher
electricity costs for consumers, and more general issues of energy poverty and energy inefficient
housing.
18- LIST OF REVIEWERS
Three experts have reviewed this case study, from the following entities
• Section "Renewable Energy", Umweltbundesamt (two people)
• Environmental Policy Research Centre at the Free University Berlin
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