Regional Net Impacts and Social Distribution Effects of Promoting Renewable Energies in Germany

This paper concerns the net effects of promoting renewable energies on value added and disposable income in Germany, as well as their distribution among regions and income brackets. Since its entry into force, the German Renewable Energy Sources Act (EEG) has stimulated tremendous investments in renewable energy capacities by guaranteeing investors a fixed price per kWh as well as a preferred feed into the grid over electricity from conventional sources. The policy measures are financed by a surcharge on electricity prices. In recent years, a controversy has arisen about potentially negative regional and social distribution effects. In this paper, multiregional price and quantity input-output models with endogenous heterogeneous households are used to trace the indirect impacts of the EEG on value added and disposable income through the complex network of regional value chains. Our findings suggest that the generation of electricity from renewable sources itself leads to small positive impacts on industries, but leads to a significant drain on household income and has regressive distributive effects. However, investment in new capacities may possibly transform these negative impacts into a positive direction for the majority of households.