VDMA
Keeping the financial cogs turning: energy policies have a direct effect on German manufacturing
Credit: VDMA
Gerd Krieger  
The reputation of German machinery and plant manufacturers is entwined with the success of the energy transition in Germany, writes Gerd Krieger of VDMA Power Systems.

The current political discussions on the amendment of the Renewable Energies Act (EEG) are unsettling investors and therefore also jeopardizing the transformation of Germany’s energy system that has been resolved by all parties.

The 3100+ manufacturing companies in the investment goods industry who are represented in the German Engineering Association (VDMA) need clarification here as quickly as possible. For these manufacturers, predictable political boundary conditions in their domestic market that enable them to plan ahead are absolutely vital. A stable market development in Germany is the foundation for the strong position of its industry in the global marketplace.

Closed value-added chains are another important factor for success. For this reason, electricity costs for industry – which is subject to international competition – must remain affordable. We need an amendment that reflects, in equal measure, both the expansion targets for renewable energies and for combined heat and power generation, and the costs of changing the energy system.

The reputation of German machinery and plant manufacturers is closely linked to the success of the energy transition or ‘ Energiewende’ in Germany. If our engineering skills and ability to drive innovation enable us to position Germany as one of the world’s most energy-efficient and eco-friendly economies, this will act as a prototype for the global market.

We therefore welcome the clear commitment to develop the EEG amendment within a European context and, at the same time, to make sure that we do not lose sight of the particular circumstances in Germany. The change in tendering required by Brussels should therefore not be rushed, but instead should only take place once enough experience has been gained in Germany.

By contrast, criteria that are compliant with European law and avoid windfall gains while, at the same time, avoid disadvantaging German industry must be found as quickly as possible. We welcome the adoption of the new energy and environmental guideline which is a good compromise.

VDMA
Technological advances have made the change to renewables possible
Credit: VDMA

Fundamental reform

For the successful implementation of the energiewende, we provided input for an EEG 2.0 and an Electricity Market Design 2.0 in the autumn of 2013.

For these, we came out in support of a fundamental EEG reform and new products for the electricity market. Important markers in the EEG Key Issues Paper, including reliable expansion corridors for renewable energies and the accelerated transition to binding direct marketing, have been picked up by politicians.

We will support the political implementation of these ideas. In view of the close links between the EEG and an Electricity Market Design 2.0, clarity about further developments is also essential here. Secure power plant output, expansion of storage systems, regional distribution of renewable energies and the creation of new electricity market products for the pricing of flexibility are topics that must be addressed as quickly as possible.

We welcome the clear commitment to protect existing plants. However, this protection of confidence must also be extended to projects already at an advanced stage of completion, so that investors will continue to invest in the energy transition in the future.

However, the timeframe of the EEG amendments coming into force in August this year would be completely inadequate for projects already in the planning stage,as well as under construction.

Many projects are at risk as a result. We therefore demand a transition period until 1 January 2015. Given the fact that some planning processes for bioenergy plants, hydroelectric power plants and wind power plants can take several years, the current debate has also highlighted the need for a fundamental overhaul of our approach to creating security for potential investors.

In view of the central importance of the political framework, investors will only be willing to invest in projects where the framework conditions in force at the time of the investment decision will continue to be valid. For this reason, the EEG amendment should include a general ruling on the final investment decision (similar to the US). We have submitted proposals for this.

VDMA
A stable energy market in Germany is the foundation of German industry, argues VDMA
Credit: VDMA

The need for innovation

It is only the technological advancements of recent years that have provided us with the platform that has made the change to renewable energy systems possible.

Modern wind energy plants, highly-efficient gas power plants, flexible coal power plants, modern pumped storage power stations and innovative decentralized energy soutions are the precondition for an affordable energy turnaround. However, the energy policy framework conditions must ensure that these technologies can also be used in the future. The exclusion of particular wind energy sites – as has been demanded in Bavaria – or a virtual stop in the expansion of biomass plants are counterproductive here, as they obstruct the use of newly developed and highly-efficient technologies.

We welcome the fact that the expansion will continue to be managed on a technology-specific basis. Uncertainty has a negative impact on all technologies. However, the specific situation is quite different for the individual technologies.

Biomass

In the case of biomass, the proposed measures overshoot the mark considerably given the massive reduction in expansion that has already occurred under the current EEG rulings. Suitable incentives are needed to achieve the flexibilization of plants required in the coalition agreement.

Offshore wind energy

Trust has slowly returned thanks to the clear political commitment to offshore expansion. We therefore find it impossible to understand why investors have once again been unsettled due to planned reductions in the acceleration model for 2018/2019. This will endanger the startup of the second wave of investment again.

Onshore wind energy

We generally welcome an expansion corridor. The deciding factor is that, when detailing the reference revenue model, commercially viable operation of further plants is also possible at good sites.

Hydroelectric power plants

Clear political signals are required in order to resolve the modernization bottleneck on hydroelectricity facilities so that the loss of generating capacities in southern Germany in particular can be prevented.

VDMA
Turbine technology has become a cornerstone of German energy manufacturing
Credit: VDMA

Self-generation

We reject charging the EEG levy on self-generated electricity, as this is not fair according to the input involved. If a contribution is required under the aspect of solidarity, the current proposal of a “minimum levy” of 50 per cent for CHP plants far exceeds the objectives.

As well as unsettling potential investors, this has a drastic negative impact in terms of commercial viability.

This is in clear contrast to the requirements of the coalition agreement that the commercial viability of CHP plants should be preserved. The minimum limit is also far too low, as even micro-CHP plants are affected. The EEG levy on self-consumed electricity must be significantly reduced.

Gerd Krieger is deputy managing director of VDMA Power Systems. For more information, visit www.vdma.org.

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