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Renewable Energy: Quota Model Not Viable Alternative to EEG

Press Release of November 9, 2012

The German Renewable Energy Sources Act (EEG) has proven to be an effective instrument in promoting electricity from renewable resources, and the same basic structure has been adopted by a large number of other countries. The support provided for in the EEG consists particularly of a guaranteed fixed feed-in tariff or, since 2012, an optional market premium which is almost identical to the fixed feed-in tariff. As an alternative to the EEG model, there is some discussion about a quota mechanism that would oblige energy companies to supply a certain percentage of their power from renewable energies. However, switching to a system of this type would not resolve the problems that are currently being debated which are mainly not directly related to the EEG, for example, in the field of network regulation, electricity market design, and the promotion of innovation. Rather the introduction of a quota model would result in a higher investment risk and, in turn, an increase in promotion costs which are ultimately borne by the end user. Furthermore, due to a lack of differentiation between technology sectors, the introduction of a quota system would also be associated with the risk that the long-term goals for use of renewable energies would not be attained and electricity costs for consumers would not fall but rise further. Thus, a radical change in the support system is not recommended. It would make more sense to step up efforts to develop the current model with a focus on cost reduction and system integration.