Energy Transformation

Energy Transformation

German Polish Energy Dialogue

Karsten NeuhoffMeeting with Polish JournalistsBerlin, 5.12.2012

1 Background on Polish and German Energy System

2 Energy Transformation in Germany

3 Economic prospects of energy transformation

4 European dimension of energy transformation


Comaprison energy use/person

Karsten Neuhoff, 22.3.20123

1

1965

1969

1973

1977

1981

1985

1989

1993

1997

2001

2005

2009

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

1965

1969

1973

1977

1981

1985

1989

1993

1997

2001

2005

2009

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

Other REHydroNuclearCoalGasOil

Poland Germany

Primary energy use (Tone of oil equivalent) per person

• Both countries with strong history of coal• Germany shifted first to oil then to gas as domestic heating source• RE growth strong in Germany (as no losses in transformation 3* bigger than depicted)• German ambition – replace nuclear and fossil with efficiency and renewables

Source: Based on BP Statistical Review of World Energy June 2012 and Eurostat

Import dependency motivates savings and substitution


Source: Based on BP Statistical Review of World Energy June 2012

1

1970

1974

1978

1982

1986

1990

1994

1998

2002

2006

2010

0%

20%

40%

60%

80%

100%

120%

140%

Coal PolandCoal GermanyGas PolandGas Germany

Share of domestic consumption met by local productin

Hard coal: Germany net importer since 1982, Poland since 2011-> reduced demand will not impact local mining but reduce import costs

Lignite: Both Germany and Poland with large lignite share in power-> existing fields operate til approx. 2030

CO2 emissions / head

5

1

1965

1968

1971

1974

1977

1980

1983

1986

1989

1992

1995

1998

2001

2004

2007

2010

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

0.00

2.00

4.00

6.00

8.00

10.00

12.00

14.00

16.00

1965

1969

1973

1977

1981

1985

1989

1993

1997

2001

2005

2009

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

0.00

2.00

4.00

6.00

8.00

10.00

12.00

14.00

16.00

CO2/headOther REHydroNuclearCoalGasOil

Poland Germany

• Both counries have strong reductions since 1989 due to combination linked to efficiency and economic transformation

• Despite lower energy use/person, high carbon larger coal share in Poland translates into similar CO2 emissions in both countries.

Source: Based on BP Statistical Review of World Energy June 2012 and Eurostat

Investments in energy savings and renewables can reduce fossil fuel import costs


1

Fuel import costs relative to GDP (2011)

Poland Germany0%

1%

2%

3%

4%

5%

6%

7%

Coal import costsGas import costOil import cost

Source: Based on BP Statistical Review of World Energy June 2012

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.0

10

20

30

40

50

60

0

100

200

300

400

500

600

700

800

900Incremental thermal retrofit costs Non-thermal retrofit costs

Energy savings

An

nu

alis

ed I

nve

stm

ent

Co

sts/

En

erg

y S

avin

gs

in E

UR

/m2

Up

-Fro

nt

Inve

stm

ent

Co

sts

in E

UR

/m2

Single-Family House KfW 100Multi-Family House KfW 100 (=New Built) KfW 55 KfW 55

Key for cost effectiveness: Energy efficiency potentials

8Based on 7 Cent/kWh gas price, 5.5% real interest rate

Source: Neuhoff et al., 2011. „Economic Viability, Financial

Support, and Energy Savings“ www.climatepolicyinitiative.org

2

Competition - Chinese energy & climate policy targets

9

2

Energy efficiency target

Carbon efficiency target

Car

bon

inte

nsity

16% Energy intensity17% Carbon intensity

20% Energy intensity

45-50% Carbon intensity

Chinese commitments to energy & carbon intensity improvements:

12th FYP

1

Based on Review of Low Carbon Development in China, 2010 and early reports of 12th FYP

20

20

20

15

20

10

Experience curves – from innovation to diffusion2

Source IEA

Support for renewable energy – learning and improving

2

DIW Discussion Papers 1189, Thilo Grau:: Responsive Adjustment of Feed-in Tariffs to Dynamic PV Technology Development

11

Anlagen bis 30KW

12

2Costs for energy transformation – can be managed

Distriubutional impacts key – deserve tailored policy

Source: DIW Wochenbericht Nr. 41.2012

Energy transformation – investing in RE and EE to reduce fuel import costs

14

Average annual energy system costs for Europe (2011-2050)

Current Policy Initiatives: 2619 billion Euro (39% Capital cost)

High Renewables Scenario: 2590 billion Euro (48% Capital cost)

European fossil fuel import bill (2030 / 2050)

Current Policy Initiatives: 532 / 704 billion Euro

High Renewable Scenario: 375 / 154 billion Euro

Savings: 157 / 550 billion Euro

German FIT “predictable and transparent… long-term” investment framework

23

Source: based on EC 2011, Energy Roadmap 2050 Table 40/41

Amecke, Hermann

Hier fehlt der Titel

The job and productivity benefits

•Green investments reach macro-economic significance•They can have long-term productivity gains. • In the short-term, some can have high multipliers

3

The role of EU ETS for European companies

Karsten Neuhoff17

4

Gt CO2

in EU-27

0

1

2

3

4

5

2010 2020 2030 2040 2050

Linear 80-95% reduction trajectory


EU Target

20% full CDM

20% no off-sets

30% full CDM

30% no off-sets

ETS numbers based on “The role of CDM post 2012” Climate Policy Initiative working paper

The impact of EU ETS for Innnovation and Investment

1. Capturing Companies’ AttentionCompanies with higher expectations of the future

stringency of permit allocation are more likely to invest in low-carbon innovation

2. Providing Clarity for Decision MakingThe EU ETS directive has set a cap on ETS emissions

that declines at a rate of 1.74% per year from 2013, unless reset, until 2050. This creates a long-term framework to inform company strategy.

3. Creating enabling environment for Low-Carbon Investment

Power generators report the following factors are important for investment decisions: Price & access of fuels, Price & access of installations, Price & demand for electricity, Public opinion and the long term carbon priceSource: (1) study by LSE/Imperial/Carlos III interviews with 800 manufacturing companies (3) study by ISI-Fraunhofer/ETH Zürich survey of 65 power companies, as part of Carbon Pricing for Low-Carbon Investment Project http://climatepolicyinitiative.org/publication/344/

18

4

Coordination for policies and supply chain

Karsten Neuhoff19

4

Assumed emission growth business as usual 1%/year

Contribution from new low carbon technology portfolio

Contribution from energy efficiency

Gt CO2

in EU-27

0

1

2

3

4

5

2010 2020 2030 2040 2050



Renewables DirectiveSET Plan

EU Target

20% full CDM

20% no off-sets

30% full CDM

30% no off-sets

ETS numbers based on “The role of CDM post 2012” Climate Policy Initiative working paper

EE Directive

The Need for European Action


- Other regions accelerate implementation of carbon pricing

4

Graph: Left: Michaelowa et a., right: Andreas Türk, Sonja Klinsky, Michael Mehling, Xin Wang 2012, Climate Strategies

EU ETS

WCI (2013)

RGGI PRChina(2013?)

NSW

NZ ETS

TokyoKorea(2015?)Taiwan(201x?)

Australian ETS 2012

South African Carbon Tax

Transmission constraints – Germany in Europe4Line Loadings: Voltage Levels >= 220kV - Max wind

10 E


Source: Neuhoff, K, Boyd, R., Grau, T., Barquin, J., Eachavarren, F., Bialek, J., Dent, C., von Hirschhausen, C., Hobbs, B., Kunz, F., Weigt, H., Nabe, C., Papaefthymiou, G., Weber, C., 2011, Renewable Electric Energy Integration: Quantifying the Value of Design of Markets for International Transmission, DIW Berlin, Discussion Paper, 1166.

Integrated (European)

energy markets

Grid 2020 – financing needs4

Sources: ‘planned’ from Roland Berger 2011, ‘estimates’ from EC, 2011

0

20

40

60

80

100

2010 Market Value(6 TSOs)

2020 Market Value(estimate scaled to 6 TSOs)

Envisaged Grid Investment to 2020:Planned by TSOs (ref: Roland Berger), and

EC estimate

2020 EstimatesDebtEquity

· 1.5% annual equity growth

EC estimate: approx 50% of EUR 100bn

Roland Berger: approx 50% of planned

investments

Vielen Dank für Ihre Aufmerksamkeit.

DIW Berlin — Deutsches Institutfür Wirtschaftsforschung e.V.Mohrenstraße 58, 10117 Berlinwww.diw.de

RedaktionKarsten [email protected]

Energy Transformation

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