Promotion of Renewable Energies in Germany: The development of the EEG levy and the influence of decentralised capacity mechanisms
Discussion Papers DIW Berlin
The promotion of renewable energies in the electricity sector in Germany is based on a feed-in tariff for producers of renewable energies, whereby they receive guaranteed revenues for their supply.
The difference between the guaranteed remuneration and the market values is covered by a consumption levy, the so-called EEG levy.
While on the one hand the guaranteed tariffs will continue to fall due to technological progress in renewable energies, on the other hand, the expected market values of renewable energies depend on market design and system flexibility and thus also the necessary EEG levy.
To investigate this relationship, we use the equilibrium model of the European electricity market EMELIE-ESY. The results show a clear dependence of the market values of renewable energies on high system flexibility and the current energy-only market design.
Under these conditions, the market values of renewable energies gradually recover in the period from 2024 to 2034 as electricity market prices rise.
This makes it possible to limit the increase in the core levy to a quarter of the levy of 2013 despite a doubling of the renewable energies by 2024 and to introduce a substantial reduction of the EEG levy by 2034.
In contrast, the introduction of a capacity market would significantly reduce the market value of renewable energies and trigger strong growth in the core levy. Under the conditions of an inflexible supply structure and a capacity market, the core levy would increase by 50% by 2024. Accordingly, the market value of wind energy would decrease by the same amount, and the generation-dependent share of consumer prices would increase by more than a quarter.PDF Download of this publication