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The EEG has reached its limit: SPD

11 Sep 2017 16:06 (+01:00 GMT)
The EEG has reached its limit: SPD

London, 11 September (Argus) — Germany holds general elections on 24 September at a time when the German energy sector is tackling the challenges of and seeking opportunities in the decentralisation, decarbonisation and digitalisation of the power sector. Argus talked to Bernd Westphal, economic and energy policy spokesman for Germany's social democratic party SPD in the lower house of parliament, about his party's position on energy policy. Edited highlights follow:

The EEG has come under scrutiny recently. Do you think that it should be replaced by the end of the next legislative period?

I think so. The EEG was intended as an instrument for the introduction of renewable energy, and we have achieved that. The EEG is of course granting subsidies for exiting renewable installations over 20 years and these subsidies will continue to be paid from EEG funds. But I could imagine that we will introduce an alternative to the EEG for new renewable energy installations.

What could these alternatives look like?

There are a number of proposals that we are now reviewing, because we also will not be able to achieve sector coupling — bringing renewable energies into sectors such as heating, cooling and transport — with the EEG. Germany has struggled to receive EU state aid approval for the EEG because of rebates for energy intensive industries, and this is another point to consider. I think the EEG has just reached its limits. Whether it will be replaced with a CO2 levy on fossil fuels or with another instrument is something we need to look at.

You mentioned sector coupling. What are the biggest hurdles for sector coupling in your view and what could the next government do to remove those?

There are some hurdles, generally, when it comes to the housing sector. We will not be able to meet all demand for cooling and heating with heat pumps, especially when it comes to existing, older housing. So, I do not think that sector coupling solely on the basis of electricity will be possible. We will need other technologies such as power-to-gas or power-to-hydrogen. But there are certainly some regulatory hurdles, for instance when it comes to sector coupling in the mobility sector where we still have a lack of infrastructure for charging stations for electric cars.

Would the SPD support a reform of the German taxation and levy system to incentivise sector coupling, given the high levies on end-consumer electricity prices?

Yes, absolutely. We have a number of options to adjust the system here and there, and this includes reducing the EEG levy as we find an alternative funding system for new renewable energy installations. Putting a CO2 levy on the use of fossil fuels, say for heating, could be one option to incentivise the use of low-carbon technologies.

Do you support a recent proposal to ban certain technologies, such as fossil fuel heating systems?

No, we want to support sector coupling in a technology neutral way. We certainly want a high-electricity society but not an electricity-only society. I do not think that would be achievable. There should be a number of technologies to help achieve a low-carbon society, and that can be hydrogen or biogas.

You mentioned the transport sector. Do you think the current government's goal to have more than 1mn electric vehicles on German streets by 2020 is still achievable?

At the moment, we have more than 50mn vehicles on German streets. And the car manufacturing industry is of course under pressure to make the transition from the combustion engine to alternative technologies in a relative short period of time. There is pressure to offer attractively priced cars with a long range and I could imagine that the dynamic in this area will pick up, with the government providing funds for recharging infrastructure. So I think the 1mn target is still achievable. This government has already launched a buyer's premium for electric cars and plug-in hybrids. There are switch premiums from car manufacturers, but I hope the industry will offer more in that area — a premium to switch to low-carbon cars should be offered for mid-range cars and not just for SUVs.

In terms of the future of fossil fuel-fired power plants, the EU has decided on new caps for pollutants, such as NOx, from large combustion plants (LCPD) to come into force in mid-2021. Does the SPD support a proportionate implementation of the new caps into national law?

We of course have to look at these new emission caps, which have to be compatible with what is actually achievable with the technology that we have available. We have to look at why these thresholds have been lowered so significantly — of course we have to look at health problems being caused by pollutants such as NOx. But if we do have to lower the thresholds we have to give the energy industry the opportunity to retrofit their plants so they can continue to operate them.

Do you think it would be sensible for the next government to decide on an exit from coal and lignite-fired generation?

An exit from coal and lignite in the power sector can make sense but only if the framework conditions are right. We need to complete the electricity grid expansion, we need storage facilities and we are completing the exit from nuclear power in 2022. All of this means that it does not make sense for us to say today when we can end coal and lignite-fired power generation. These plants will certainly no longer run by 2050 but to say today in 2017 whether these units should be shut down in 2030 or in 2040 — we cannot know that right now.

Another cornerstone for the decarbonisation of the energy sector is combined heat and power (CHP) generation. Does the SPD back the continued support for CHP beyond the CHP law from 2016?

Yes, absolutely. CHP generation is making a significant contribution to cut greenhouse gases (GHGs). The current CHP law from 2016 is aimed at delivering additional CO2 cuts of 4mn t CO2 equivalent/yr. I think there is further potential to expand CHP, especially in metropolitan areas, and I think smaller-scale gas CHP plants make sense here. Support for CHP plants with heating storage facilities or for power-to-heat technologies, say for instance with the use of immersion heaters, are one option to support sector coupling.

The CHP 2016 law does gear support for CHP plants to gas units. Will the SPD continue to support this?

Yes. We want to help to incentivise the switch from coal to gas with the 2016 law and we would continue to support such a switch.

What role does the EU emissions trading scheme (ETS) play in decarbonisation efforts and would the SPD support a CO2 floor price on a national or on an EU level?

Should we support a CO2 floor price it needs to be on an EU-level because we need a level playing field. In general, I do think that a CO2 price that incentivises investment in low-carbon technology and as such is facilitating for Europe to meet GHG reduction goals is absolutely sensible.

Another big topic in German is the digitalisation of the energy sector. Do you think the next government has to fine-tune framework conditions for this?

With the current government, we have set framework conditions for the roll-out of smart meters when we passed the digitalisation law. I think we will see huge developments in that area from a technical perspective, which will require the next government to make adjustments to framework conditions as we will find new applications for smart meters or grids. Certainly, when it comes to volatile renewable energy production, digitalisation can be the tool to match that with flexible demand-side management. So I think digitalisation will be vital for the energy transition.