The expansion of renewable energies will continue, albeit at a slower pace. Feed-in rates will continue to be fixed for 20 years. This makes sense, because the regulation fosters stability, considerably reducing the risk premium for investments in new facilities. This also applies to other EU countries, many of which have also opted to apply the German regulations. Since renewable energies have now become much cheaper, adjusting the subsidies is the logical thing to do - this was also one of the fundamental principles of the German Renewable Energy Sources Act (EEG) 1.0.
One of the avowed aims of the reform is to slam the brakes on cost increases for end consumers. The main cost factor, however, lies in the subsidy costs incurred to date, i.e. the start-up financing. New facilities are still virtually insignificant in this respect. Germany's subsidy rates for solar and wind energy now rank among some of the lowest in Europe. So there would be more effective ways of reversing the increase in electricity prices. Some of the options being debated include cutting the tax levied on electricity or transferring the "start-up financing" to a fund that would be settled over a longer period of time.
What is more, a number of truly radical changes have been put off: what, for example, should be the structure of the auction models that are to be used to calculate subsidies from 2017 onwards? Can smaller citizens' initiatives continue to contribute to the expansion of renewable energies? Or: what electricity market design will provide new incentives for investments in power plants and in the grid? Market participants need a transparent process early on. The 10-point plan published by the German government to provide an overview of the imminent reforms is a key first step in the right direction.
