Lower electricity prices leave German government short of €8.7 bln in renewables funding

Falling wholesale power prices have torn a hole in Germany’s financing of renewable energy sources, whose operators receive state support if revenues from selling electricity are lower than their guaranteed remuneration. In a letter to the German parliament’s budget committee, the finance ministry said an additional 8.7 billion euros will be needed to pay out the guaranteed remuneration to operators, news agency dpa reported in an article on n-tv. The difference between wholesale power prices and the guaranteed remuneration level used to be funded by power customers through the so-called renewables surcharge on their power bill, but the government changed the funding mechanism in 2022 to direct state support to reduce energy costs for households and other electricity consumers. The funds generated through Germany’s national carbon pricing system on heating and transport are one of the sources of income used to finance renewables. The government so far planned with about 10.6 billion euros in renewable power support costs which, according to the finance ministry, was the expected amount based on higher power prices in autumn 2023, before the 2024 budget was calculated. However, this sum has almost been used up in the first six months of the year, the article said.

Renewable energy industry lobby group BEE said it had warned about additional financial requirements in a 2021 report. “The government must now act quickly to avoid further cost rises in the future,” said BEE head Simone Peter. She stressed that the difficulties in funding did not alter the fact that power generation costs for renewables are cheaper than fossil or nuclear energy. “Many projects nevertheless need financial safeguards for the banks to make investments available,” Peter argued. The BEE said that the system could be reformed by basing support on the amount of electricity fed into the grid, instad of focussing on a fixed time period of guaranteed remuneration. This should be complemented with investments in storage capacity and flexible demand management.

The large additional funding requirements are likely to impact the ongoing negotiations within the government coalition about the 2025 budget, which was further complicated by a court ruling late last year which declared some 60 billion euros earmarked for funding climate and transformation projects as unlawfully booked. The government was forced to quickly reshuffle funds or scrap projects altogether to remain within its allowed budget. Energy expert Andreas Jung, from the opposition conservative Christian Democratic Union (CDU), criticized the government for revealing the need for additional funding only now, as these “could have been anticipated for a while”. Instead of securing the necessary funds, the government instead “planned to spend CO2 revenue elsewhere”.