EU targets German Renewable Energy Act

15 July 2013

The European Commission appears to be sharpening its focus on Germany's Renewable Energy Act due to possible violations of European Union competition regulations. Energy-intensive German companies that have profited from incentives could be forced to pay back millions in back payments, according to German weekly Der Spiegel.

The European Commission looks set to launch an investigation into Germany's controversial renewable energy subsidy policy, which EU officials say favors energy-intensive domestic companies over European rivals.

German news weekly Der Spiegel reported on Sunday that the Commission is planning to launch an official inquiry on Wednesday due to possible violations of EU competition regulations.

A European Commssion spokesperson confirmed on Monday that a preliminary investigation was underway but added that no further developments were planned before the summer break.

The Renewable Energy Act, originally introduced in 2000 and later amended in 2009 and again in 2012, is aimed at subsidizing renewable energy, providing feed-in incentives and promoting the development of renewable energy technologies by mandating an energy surcharge from electricity consumers.

The problem for the European Commission is a loophole in the legislation that provides energy-intensive companies with an exemption from the levy due to the possible threat of increased international competition – an advantage that may actually prove a competitive disadvantage for European rivals.

Antoine Colombani said on Monday that the Commission had received a complaint from a German association representing private consumers and small and medium-sized enterprises regarding the reduced surcharge for energy intensive companies.

The law has forced private consumers and SMEs, which do not qualify for the discounts, to pick up the bill for exempted companies.

Colombani said the EC was looking into the complaint, specifically the reduced surcharge for energy intensive undertakings as well as support for renewables under the new financiny system introduced in 2012. "We are examining whether these measures constitute state aid in the meaning of the treaty and whether, if so, they comply with applicable state aid rules and other treaty provisions," Colombani said. "This preliminary investigation is not over yet. In any event, no developments are schedueled before the summer break."

Germany's renewable energy law has allowed a wide range of companies, from brown coal mining facilities to public transportation companies, to obtain exemptions from having to pay the renewable energy surcharge. In some cases, companies only have to pay 1% of the surcharge.

According to the Spiegel, Joaquin Almunia, Commission vice president in charge of competition policy, has come to the conclusion that rebates for energy-intensive businesses violate European competition law.

The EU Commission inquiry is focusing on the economic advantages the law has had for German companies and whether the exemptions are not only protecting them against competitive disadvantages, but whether they might also be providing an edge over rivals from fellow EU member states.

The investigation could lead to companies not only losing future entitlements, but also having to pay back millions already obtained through the exemptions.

The levy is also helping to finance more and more solar and wind power plants that provide an additional supply of electricity, leading to lower electricity prices and additional advantages for major energy-intensive industries.

In addition, the rules that determine who can benefit from the discounts are vague and have resulted in questionable practices, such as the exemption of some public transportation companies, including Berlin's BVG and the MVG in Munich, which clearly do not face international competition in Germany.

Vattenfall Europe Mining, a subsidiary of Swedish giant Vattenfall – the third largest electricity producer in Germany -- which operates several brown coal, or lignite, mines, has also benefitted from the surcharge exemption, prompting many to question the stated goals of the renewable energy law as lignite is largely considered to be a climate killer.