The Effect of the German Renewable Energy Act (EEG) on "the Electricity Price"
AbstractMany technologies that produce electricity from renewable energy sources are currently not competitive. This is due to the fact that their generation cost is higher than that of conventional thermal power plants. Nevertheless, since using renewable energies has a number of positive effects, these installations have been supported by German public policy for many years. This support is currently demonstrated very successfully by the German Renewable Energy Act (EEG), which provides for fixed feed-in tariffs (FITs). The costs of this support scheme are distributed to the electricity consumers. Due to the so-called EEG levy, electricity costs of industry are increased and as a result their competitiveness is decreased. Consequently, electricity intensive enterprises have protested against the levy on a regular basis and finally achieved a reduction of the levy. However, the potential effect of the EEG on the wholesale price for ele ctricity has not yet been considered. Against this background, we analyze the effect of the EEG on electricity prices in a perfect market. We will show that the support of electricity production from renewable energy decreases the wholesale price of electricity. Consequently, electricity costs of companies that are subject to the reduced EEG levy may decrease too. --
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Bibliographic InfoPaper provided by Hamburg Institute of International Economics (HWWA) in its series HWWA Discussion Papers with number 358.
Date of creation: 2006
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Web page: http://www.econstor.eu/handle/10419/20
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Renewable Energy Act; EEG levy;
Find related papers by JEL classification:
- Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy
- L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
- H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
- Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
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- Meyer, Niels I., 2003. "European schemes for promoting renewables in liberalised markets," Energy Policy, Elsevier, vol. 31(7), pages 665-676, June.
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