Clearing up another myth about German energy policy: net-metering is not replacing the feed-in tariff
The following is a fact sheet intended to clear up a myth that colleagues in the U.S. energy policy field report has been circulating in their circles.
MYTH: Germany has figured out that the feed-in tariff does not work, so they are canceling it and opting for net-metering instead.
FACT: The German feed-in tariff has largely been a remarkable success story.
Thanks to Germany's feed in tariff, the country's share of renewable sources in the power mix soared from 6.2% in 2000 to more than 25% today.
Most of this renewable power is owned by citizens, farmers, and small businesses.
The FIT created more than 300,000 jobs.
This movement, while there may be debate over details, has had broad general support across the political spectrum.
The FIT has allowed whole cities and regions to achieve or surpass 100% renewable electricity targets and inspired several others to set them. See here for many examples.
The FIT's revitalizing effect on rural communities has been widely documented. See this report for example.
While there has lately been much polemical reporting, especially in the English speaking press, of the FIT causing skyrocketing power bills in Germany, the FIT has actually accounted for a relatively modest fraction of power bills and bill increases (an average of about 10% of the bill since the FIT started in 2000, peaking at 18%) and a very small fraction of household energy bills (average 2.5%, peaking at 4%). (Source for statistics: German Renewable Energy Agency) German retail prices are, in fact, forecasted to largely not rise in the year ahead, despite a rise in the renewable share of ratepayers' bills. At least one major power supplier has announced it will be lowering retail rates in the coming year in part because renewable resources have drastically cut spot market power prices, and these savings are being passed on to customers.
Retail rates for average ratepayers are likely to come down further when industry exemptions for paying the renewable energy surcharge are reduced. A controversial policy in Merkel's administration has been drastically increasing the number of industrial companies that are off the hook from paying the surcharge in power bills that covers the feed-in tariff payouts. The result has been growing concern - including in European Parliament - that this is causing an unfair distribution of costs for Germany's renewable energy program which unduly favors industry and overburdens citizens. It is predicted that the new coalition government will likely make reductions in the number of industry exemptions.
FACT: Germany has not canceled the feed-in tariff, although there have been adjustments to the renewable energy program, as markets have evolved and as incumbent energy players and big industries have pushed back politically.
The FIT was designed from the beginning to be on a gradual degression schedule, as the price of renewable technologies came down and as penetration scaled up. At this point, the tariffs are significantly lower than in the year they began, largely a sign that the policy has generally been successful in its aim - renewables have scaled up, and prices for these technologies has come down.
The most dramatic, and probably most commonly discussed, fall in pricing - and tariffs - has applied to solar PV because widespread installation and cost reduction of solar PV, which began as the most costly renewable power technology by far, happened more quickly than anticipated.
As the amount of renewable energy has been rising in Germany, so too has pressure on government leaders by incumbent energy players, such as utilities and the coal sector, whose business models are threatened. Industrial players have also pushed to abolish feed-in tariffs for renewables because they fear losing their exemption from having to help pay for the renewable energy transition. These tensions have been key drivers behind the federal government lowering renewable power tariffs more quickly than many in the renewable energy industry and advocacy sectors would like.
However, despite calls among those against robust renewable energy advancement to cancel the the FIT, this has not happened.
FACT: Germany has not replaced its FIT with net metering. It has, however, added a program in recent years called self consumption, which incentivizes onsite consumption of solar power.
In the last few years, Germany has been trying to encourage more on-site consumption of solar power (as opposed to simply selling the power to the utility) with a program called "self consumption." In this program, a meter specifically tracks how much of the power solar PV generated is used onsite, and this power is credited by the utility at the retail rate. Excess power that is not consumed onsite is remunerated by the utility at a feed-in tariff rate that is now significantly lower than the retail rate.
The European Photovoltaic Industry Association (EPIA) draws a clear distinction between self consumption and net metering. Their position paper states:
"Self-consumption: The possibility for any kind of electricity consumer to connect a photovoltaic system, with a capacity corresponding to his/her consumption, to his/her own system or to the grid, for his/her own or for on-site consumption, while receiving value for the non-consumed electricity which is fed into the grid.
Net-metering: A simple billing arrangement that ensures consumers who operate PV systems receive one for one credit for any electricity their systems generate in excess of the amount consumed within a billing period. In this case, production and consumption are compensated over a larger time frame (up to one year), and the network should be regarded as a long term storage solution, with the PV electricity being occasionally injected and consumed later on."