Subsidies for ecologically friendly hydropower plants through favourable electricity remuneration in Germany

Abstract

Whereas hydromorphological alterations represent one of the major ecological challenges for European river systems, very few economic instruments exist to mitigate their impacts. The German Renewable Energy Sources Act has established an innovative instrument for the hydropower sector. By guaranteeing higher remuneration for electricity produced by hydropower installations that comply with selected ecological requirements, it provides incentives for improving the morphological situation next to the plants. The present case study describes the most important aspects of this economic policy instrument (EPI) and provides a critical evaluation, taking in particular environmental outcomes, economic effects and institutional aspects into account. It aims at being a useful source of information on this EPI which is so far not much discussed at international level but which constitutes nevertheless a very interesting example of how the promotion of renewable energy sources can be reconciled with nature conservation objectives as well as the requirements of the EU Water Framework Directive.