The Feed in Tariff Reform (EEG reform) is not a big deal as it leaves important parts aside. The planned cap for renewable energy is luckily not a strong as it was planned before, the FIT of wind onshore and biomass will not be cut as drastically as initially planned. The Energiewende will therefore continue, but important parts are not tackled, as the grid extension, the need for an increasing energy security of renewable energy by an efficient load management, smart grids, demand side management (DSM) and storage.
The EEG reform claimed to cut electricity prices and reduce the FIT share, but this will not happen. In order to reduce the FIT share substantially, two important things would need to be done:
1. One important reason why the EEG share is increasing is because of the increasing number of industry companies exempted from paying the EEG FIT. Initially only those companies were exempted which have very high electricity costs and are faced with strong international competition. The EU allows for those exemptions, especially if they are connected with concrete measures as return to improve energy efficiency. Within the emissions trading scheme, these exemptions are allowed for appr. 900 companies. In Germany, the EEG exempts now over 2500 companies. This leads to a higher share for all other electricity consumer as households or small sized companies. If the EEG exemptions would be reduced to the initially number, the price of electricity for all other consumer could be reduced by 1 Cent/kwh.
2. One other important reason is the declining stock exchange price for power. The EEG is calculated as difference to the stock exchange price. The lower the stock exchange price, the higher the EEG share. If this declined price would be passed to the electricity consumer, the total electricity price would drop.
The stock exchange price is low as there is a drastic over supply of electricity: still a large number of nuclear and old coal power plants are in place. The over supply rises in regions in the North, East and West of Germany also with the rising share of renewable energy. The share of coal is rising because of the low coal and CO2 price. If the EU emissions trading system will not be repaired, this development might continue. Therefore it is important that the over supply of additional emissions allowances will be reduced substantially, 2 Billion additional allowances need to be removed permanently out of the market. A higher CO2 price will increase the power stock exchange price and therefore give the right signals to decline the share of coal but increase the share of gas and pumped hydro storage plants.
The EEG reform by the current German government is not an electricity price cut. Winner is the industry, looser the private households. Renewable energy is abused as excuse for disproportional price increases. The electricity price could be reduced of the industry exemptions would be reduced and the stock exchange price would be stabilized by the shut down of old and inefficient coal power plants.