As of 30.06.2011

Cost and benefit effects of renewable energy expansion in the German power and heat market

What are the cost and benefit effects of the expansion of renewable energies (RE) in the German power and heat sector? This question, which takes the economic analysis of RE well beyond the usually dominating issue of support costs, is the focus of a multi-year research project funded by the Federal Environment Ministry (BMU). The study is being carried out by the Fraunhofer Institute for Systems and Innovation Research (ISI, Karlsruhe), the Institute of Economic Structures Research (GWS mbH, Osnabrück), the institute for future energy systems (IZES, Saarbrücken) and the German Institute for Economic Research (DIW Berlin, Berlin).

The first phase of the project was concluded in March 2010 with the submission of an extensive interim report. The major outcome was a conceptual framework to facilitate an overall evaluation of the effects without double counts or gaps. This framework subdivides the cost and benefit effects of renewable energy expansion into three main categories:

• System-related cost and benefit aspects, which comprise direct and indirect costs of the system as well as benefits of RE expansion.
• Allocation aspects, which indicate which economic actors or groups enjoy benefits or suffer burdens as a result of the support for renewable energy expansion.
• Macroeconomic aspects, which identify national or sectoral growth effects at the macroeconomic level, for example effects on the gross domestic product and employment.

Aggregate cost and benefit effects can only be determined within the respective categories. Moreover, the project has identified further benefit effects which are difficult to quantify and which up to now have been largely ignored.

The extensive interim report published in March 2010 quantified major cost and benefit factors for the years 2007 and 2008. Two brief updates to the report give the latest key figures, the most recent one appearing in June 2011 with data on 2010. The BMU has also published a short background paper covering the issue in general. The paper is also available in English, but currently only covers data up to 2009. It is planned to update this document and include a projection of potential effects for 2020 and 2030.

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