Germany’s energy sector welcomed the government’s €130bn ($146bn) stimulus package to help Europe’s largest economy overcome the deep recession triggered by the Covid-19 pandemic, but said more is needed to reach the country’s target for 65% renewable power by 2030.

As part of a wide array of measures that also includes direct help to families and a cut in value added tax, the heads of Chancellor Angela Merkel’s Christian Democrats (CDU), their Bavarian allies (CSU) and the Social Democrats (SPD) have agreed to cap a surcharge to finance renewable energy (EEG surcharge) at €0.065 per kilowatt hour next year and at €0.06/kWh in 2022, which is slated to cost some €11bn.

Falling wholesale power prices due to the Covid-19 demand slump may push up the surcharge and thus actually push up electricity prices for consumers, E.ON chief executive Johannes Teyssen had recently cautioned.

The EEG surcharge finances the difference between wholesale power prices and guaranteed prices of support. As wholesale prices have fallen dramatically, that difference becomes greater, an effect that is exacerbated by declining prices for fossil fuels, and a record feed-in from wind and solar farms early this year.

In the wake of the crisis, the EEG surcharge could jump to up to €0.08/kWh ($0.087/kWh) next year - from €0.0756/kWh this year - E.ON had warned.

The federation of energy and water industries (BDEW), Germany’s largest energy lobbying group, said it would have been better to cap the EEG surcharge at €0.05/kWh and at the same time lower electricity taxes.

The coalition as part of the corona stimulus package once more confirmed the continuation of solar support, which the government previously had planned to end once the country’s cumulated installed PV capacity reaches 52GW, which is expected soon.

“With a view to the urgently needed expansion of renewable energies, the proposed measures give an important boost - however, the still existing obstacles to wind and photovoltaics must finally be removed,” BDEW chairwoman Kerstin Andreae said.

“That would trigger additional investments - without having to take money in hand. It is also to be welcomed that the CO2 building renovation program will be increased, because we need additional impulses for greenhouse gas reduction in the heating sector.”

The government parties as part of the stimulus package also decided to double to €6,000.00 a bonus paid for the purchase of new electric cars (of a cost of up to €40,000.00), and earmarked €2.5bn for charging station infrastructure, and research into e-mobility and battery manufacturing. Also, e-vehicles until the end of 2030 won't have to pay vehicle taxes.

The government resisted heavy lobbying by the car industry to also grant a scrappage bonus for combustion engine cars after protests by climate activists. The car industry is the backbone of German industry, so not bending to its demands is extraordinary. After the financial crisis of 2008/9, the government still had paid for the purchase of new combustion engine cars.

"It is gratifying that no fossil combustion vehicles will be subsidised, but that a double purchase premium for battery-electric vehicles will be granted in the future," said Thomic Ruschmeyer, head of the federation of solar mobility (BSM).

Hydrogen strategy

The package also gave a first official glimpse into the national hydrogen strategy that the cabinet plans to present still this month.

In its latest draft of the hydrogen strategy seen by Recharge, the economics ministry said expects that Germany should have at least 3GW, if not 5GW of electrolyser capacity by 2030 to produce ‘green hydrogen’ from renewable energy projects in Germany.

A further 5GW in electrolyser capacity will be built in Germany by 2035 or 2040 at the latest, the stimulus package revealed, adding the hydrogen production will be exempt from the EEG surcharge.

The coalition partners have earmarked €7bn for ramping up a hydrogen infrastructure in Germany, and another €2bn for measures in partnership with other countries, where hydrogen can be produced efficiently, but with machinery “made in Germany”.

The renewable energy federation (BEE) welcomed the cap on the EEG surcharge, but like the BDEW also demanded to lower a tax on electricity, and demanded a complete overhaul of the tax and fee system in energy to make sure consumers will benefit from lower wholesale power prices due to a higher share of renewables in the system.

BEE president Simone Peter added: “Now a roadmap for the accelerated expansion of renewable energies is immediately required - also to meet the growing needs of sector coupling in the form of green hydrogen, electromobility and heat pumps.”

UPDATED with more comment from the federation of solar mobility