Wednesday, January 30, 2013

Germany's Surcharge Problem

BAH! A pox on taxes!
Germany's Environmental Minister Peter Altmaier recently proposed ammendments to the FiT rules that would hold the FiT surcharge - currently at 5.3 cents/kWh - in check. While this proposal has merit Altmaier's subsequent suggestion that Germany impose retroactive taxes is a miserable idea.

One measure that may work would be to ask people to defer their contracted FiT for X months. You'd be paid the current FiT rate for your net production. After X months you'd go back to your contract but it will have been extended by X months. If you could get enough people to defer payment every other year you'd be able to hold the surcharge in check.

Another angle would be to look at time-weighted wholesale electricity prices over the last 5 years and extrapolate where they'd be without the FiT. Let's say the aggregated savings to Heavy industry has been a billion dollars. Raise the surcharge for the Heavy Industries so that you recover this billion dollars. I think this rule is actually rather important. The subsidy effect the FiT has on Heavy Industrial electricity purchases could easily be seen as unfair competition under WTO conventions.

The concept of holding the surcharge in check is reasonable. There do seem to be some options. 

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