Budget gap due to green energy subsidy: Cheap electricity is expensive for the federal government

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Written By Maya Cantina

The state will probably have to subsidize green energy this year with twice as much money as originally budgeted: around 20 billion euros.

Aerial view of the largest solar park in Mecklenburg-Vorpommern on highway 19

The large photovoltaic systems have a striking lack of storage Photo: Jens Büttner/dpa

Promoting green energy through the Renewable Energy Act (EEG) is ripping bigger and bigger holes in the federal budget. In the autumn, the transmission system operators responsible for billing had forecast a subsidy need of EUR 10.6 billion for 2024 – but after the state had to support the EEG bill with more than EUR 2 billion in April alone and now half of that after just four months the planned annual budget has already been used up, industry estimates are now twice as high as originally estimated.

Operators of solar and wind power plants usually receive a fixed feed-in tariff. The difference between the market value and the compensation is financed from tax revenues.

However, the market value of green energy is declining rapidly. This was especially dramatic the day before yesterday: between 9 a.m. and 6 p.m. the electricity price on the spot market was negative – a sign that no one could manage electricity volumes sensibly at that time. At midday sun, prices fell so low that wholesale buyers received more than 13 cents per kilowatt hour. A kilowatt hour, for which the EEC pays 7 cents, has an impact on the state budget of 20 cents. Critics speak of a ‘removal fee’.

Too little energy storage

Even on weekdays it is becoming increasingly common for prices to drop below zero in the afternoon hours. In May, German electricity wholesalers had already expected 72 hours of negative prices by Wednesday – more than ever. The highest May value so far was 38 hours in 2021.

The problem will quickly worsen in the future because photovoltaic systems in particular – even more so than wind turbines – supply large amounts of electricity almost simultaneously. As a result, each additional system increases surpluses and makes the entire system increasingly unprofitable from an economic point of view. Economists call this ‘cannibalization’.

The electricity market is now making clear the major deficit of the German energy transition: measured by the expansion of power stations, there is a glaring lack of storage. The situation will worsen even further if the plans of the Federal Ministry of Economic Affairs become reality, as photovoltaic solar energy alone is expected to reach an installed capacity of 215 gigawatts (GW) by 2030 – two and a half times the current amount . Germany currently needs no more than about 80 GW, even at peak times, and often only about 60 GW around midday.

This means that in just a few years, solar energy could produce twice as much solar energy as the electricity needs of the entire country at midday. Moreover, wind energy is also a fluctuating source of electricity: by 2030 at least 30 GW must be installed at sea (today: 8.5 GW), and on land 115 GW (today: 62 GW).

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