“Effectiveness not that high”
How unfair is KFW’s e-car solar funding?
September 30, 2023, 4:24 p.m
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On the first night after the start, the KFW Bank stopped the new funding program for electric cars and electricity storage for homes. The funding for 2023 has already been exhausted. Energy economist Andreas Löschel sees parallels to other subsidies in recent months. It tends to be a bottom-up distribution.
If a funding pot is used up immediately, does that indicate that it was designed particularly well or particularly poorly?
Andreas Löschel: First of all, that suggests that you should take a closer look. It’s very unusual that the money was used up so quickly. We saw something similar when renovating buildings. At that time there may have been large deadweight effects – the subsidies were accessed very quickly, but were not as effective.
Does that mean that no one is investing in a photovoltaic system, charging stations and solar power storage because of the program?
Yes, exactly. The question is: Are the programs triggering something that wouldn’t have happened otherwise? I have my doubts about that. It is of course difficult to construct the comparison situation. However, similar analyzes on funding for energy-efficient renovation show that the effectiveness of the funding was not that high. This is simply because the people such programs are aimed at would often invest anyway. They usually do it because they want to and can afford it. The calculation will not change substantially as a result of the funding.
Would you have guessed beforehand that the program would have such large windfall effects?
It’s hard to say in advance. But here something is being promoted that is already attractive. If you have a PV system, then an electric car is attractive because you don’t have to get electricity from the grid, but can use your electricity from the roof. And for that they need the charging station. The funding probably influenced a few people in their decision, but of course there are many who want to take it with them. However, these households often do not actually need any special relief.
Because they can already afford their own home and an electric car?
Andreas Löschel is a professor of environmental and resource economics at the Ruhr University in Bochum.
(Photo: picture alliance/dpa/RUB)
Yes, unfortunately we often see this in the implementation of the energy transition. We promote electromobility, renovation, photovoltaics, and this mostly benefits people who are actually doing well. Through these programs we tend to distribute from the bottom up. You should keep that in mind.
It’s a dilemma: Wealthy people also have a larger carbon footprint on average and therefore more potential to save CO2.
But they also have significantly more options to respond to higher costs. When electricity prices rise, it is the people with high incomes who can afford a more efficient refrigerator or a photovoltaic system with storage for self-sufficiency. Therefore, high-income households react significantly more strongly to price increases than poor households. They cannot reduce their electricity consumption so easily and are stuck with higher costs. The money would be better spent if it was used to cushion the hardships of the transformation for people who cannot react to rising prices.
The program encourages individual households to keep electricity on hand instead of feeding it into the grid. Is that even the right approach?
People would like to become more autonomous in their energy consumption. That’s why most homeowners buy the storage system along with the PV system. This often doesn’t make sense from a systemic perspective. It would usually be better if the storage were on an aggregated level, for example in districts, to absorb fluctuations. Investments at the household level are of course a private decision, but the state does not have to promote it additionally.
So it’s not a perfect solution, but perhaps the only one that motivates people to abandon combustion engines and switch to renewable energies?
It can be. But it would be better to initiate the switch with the right incentives. So make fossil fuels more expensive and green electricity as cheap as possible. Then there would be no need to have a discussion about individual subsidies. But that would also mean that households should be relieved very quickly and widely through climate money. Unfortunately, this discussion is not being conducted decisively enough.
Andreas Löschel spoke about Nele Spandick