Germany, leading the charge on renewables

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Germany – leading the charge on renewables

Hans De KeulenaerOctober 2015

Content

IntroductionEnergy PolicyGovernanceSupplyDemandPricesSummary

| Country Profile Germany2

IntroductionCountry snapshot in numbers

Indicator Unit Year of Estimate Value

Land area Thousand sq.km 2014 348.5

Forest area % of land area 2012 31.8

Population Millions 2013 80.6

Population density People per sq.km 2013 231.3

GDP per capita PPP 2011 $ 2013 43,206

TPES/capita Toe/capita 2013 3.81

Industry value-added % of GDP 2013 30.7

Inflation CPI % 2013 1.5

Rents (mineral, oil, coal, gas)

% of GDP 2012 0.1

| Country Profile Germany3 Source: World Bank – World Development Indicators

IntroductionWind & Solar resources


IntroductionTopography

Maximum elevations ~ 2,000 meters in the South


IntroductionInternational waters


IntroductionResources


Significant coal reserves but used with restraintMinute oil & gas reservesGrowing renewable capacityNuclear initially as a transition technology, phase-out after Fukushima Reserves in Mtoe

Available Renewable Capacity in GW

Source: World Energy Resources – 2013 Survey

Energy PolicyNational energy plan

Energy Concept (“Energiewende”)(BMU & BMWi, 28/9/2010)

• Horizon 2050• Integrated plan with consistent &

ambitious targets for climate, renewables, energy efficiency

• 9 themes: renewables, efficiency, nuclear & fossil, integration, buildings, mobility, innovation, international context, acceptance

• After Fukushima: 6/6/11 Update on Section C “nuclear &

fossil”


Energy PolicyNational energy plan - Targets

“Energiewende” (Energy Transition) as overall energy concept• GHG emissions reduction of 40% by 2020 and >80% by 2050 (over 1990)

• Increase of renewable energy (60% of gross energy use by 2050) • Complete exit from nuclear power by 2022

• 50% primary energy consumption reduction by 2050 (over 2008)• 2.1% p.a. improvement in energy productivity• Electricity consumption reduction of 10% by 2020 and 25% by 2050 • 2% annual building renovation rate• 40% reduction in final energy consumption

• Investment of €20 Billion in HV grid development for the next 10 years

• Additional larger investment needed for distribution grid from 27.5 to 42.5 B€


Energy PolicyNational energy plan - Highlights

Renewables as the cornerstoneEnergy efficiency in all sectors (3 themes)Flexible conventional power stationsNuclear as transition technology -> phaseoutExploring a role for CCSTermination of coal subsidiesExpansion plan for grid & storage6 million EV’s by 2030EU-wide electricity labellingRenewables from North-Africa (Mediterranean Solar Plan)Need for foreign pumped storage


Energy PolicyRenewable Energy

The NREAP for 2050 is part of the energy concept “Energiewende”.• Expected RE share of 19.6% of gross energy consumption by 2020 to exceed EU-

target of 18%• 38.6% RE in electricity• 15.5% RE share in heating cooling• 13.2% share in the transportation sector

• Federal incentives in heating/ cooling include Market Incentive Program (MAP), Renewable Energy Heating Act (EEWärmeG), Cogeneration Act (KWKG), Energy Savings Regulation (EnEV) and funding programs by KfW

• Federal Emission Act (BImSchG), Energy Taxation Act (EnergieStG) and Biofuels Regulations (Biokraft-NachV, BioStNachV, BioKraftQuG) are programs in the transportation sector

• Regional and local incentive programs complement the national plan


Energy PolicyEnergy Efficiency

The NEEAP from 2014 defines Germany’s EE target of primary energy consumption reduction of 20% by 2020 and 50% by 2050 (over 2008).

• Focus on final energy consumption savings and energy transformation and distribution efficiency (e.g. via ETS, IED etc.)

• 3 core pillars:• Increase EE in the building sector• Establish EE as business and profitability model• Increase individual responsibility for EE

• 4 main categories of measures to achieve primary energy saving targets:• Standards & target setting (e.g. EnEV)• Pricing/ taxation (e.g. truck toll, energy tax, emissions trading etc.)• Investment incentives and programs (e.g. tax exemptions, building renovation

financing• Consulting and labelling programs (e.g. communal energy consulting)


Energy PolicyElectricity

Generation: 4 generators with 78% market share (excl renewables)• HHI = 2021 (reasonable competition)

Transmission: • 4 onshore TSOs (3 certified), 1 offshore TSO (uncertified)

Distribution: >850 DSO’s• 90% not separated into network/retail due to de minimis requirement

(<100,000 customers)EPEX SPOT for day-ahead and intraday, EEX for derivatives market

• 363 traders activeWholesale prices decreasing but retail prices increasing (taxes & levies)10.4% switching rate – choice among 72 suppliers

| Country Profile Germany13 Source: Commission – Single market progress report

Energy PolicyElectricity

15.9’ system interruption per year (most reliable in the world)Installed capacity 187 GW (of which 70 GW wind + PV)Peak load capacity 82 GW8 of 17 nuclear reactors already shutdown; rest by 2022

• Annual adequacy assessment by TSOs

Reserve Power Plant Regulation (ResKV)• Procurement procedure for spare capacity

Increasing congestion in the North-South corridor

| Country Profile Germany14 Source: ENTSO-E – SO&AF 2014-2030

Energy PolicyGas

15 gas TSOs2 markets: NCG and GasPoolEGEX exchangeCross-border price > NCG/Gaspool priceTrading volumes >> physical exchanges86% of customers can choose between 31 suppliers

• 10.7% switching rate

| Country Profile Germany15 Source: Commission – Single market progress report

Energy PolicyCoal

Phase-out of subsidies by 2018• 20 B€ over the period 2009-2019

One hard-coal producer (RAG), 7.5 Mt in 2013, responsible for phase-out

• Imports from US (26%), Russia (26%), Colombia (18%), Poland (10%), ...

3 lignite producers (RWE, Vattenfall, MIBRAG), 200 Mt, increasing, largest in Europe


Energy PolicyNuclear

Phase-out announcement (mid 2011):• Progressive abandonment of nuclear • Limiting lifespan of nuclear plants to 32 years• Prohibition to build new nuclear• Prohibition on reprocessing• 10-fold increase in insurance cover

Litigation by nuclear operatorsDecommissioning fund


Energy PolicyClimate

Successful decoupling of GHG emissions from growthKyoto target -21% (actual -25% w/o flexibility mechanisms)Energy Concept targets: -40% by 2020, -80+% by 2050ETS revenues fully used to fight climate change

“Energy & Climate Fund”


GovernanceInstitutions

Federal Ministry for Economic Affairs (BMWi)Länder Ministries of EconomyConference of Ministers of Economy

BMUB - climateBMEL – biomassBMF – taxation

Bundesnetzagentur: Electricity, Gas, Telecom, Post, RailwaysDena: national energy agency


GovernanceActors

Electricity Gas# of companies representing >95% of power generation

>850 #of entities bringing natural gas into country

38

# of main entities 4 # of main entities 3

# retailers > 1,000 # of retailers 851

# main retailers 4 # of main retailers 3

HHI power 2021 HHI supply 1886

HHI retail n/a HHI retail 300

Market value (B€) 74.9 Market value (B€) 27.5

Installer capacity (GW) 171.7

Peak load (GW) 81.9 +200 DH companies, operating 500 networks


SummarySimplified Energy Balance


ktoe 1960 1970 1980 1990 2000 2010 2011 2012 2013

Primary Production 125261.5 174692.3 185624.9 186108.3 135170.1 129278.9 122896.3 123380.4 119715.7

Imports 39938.01 165438.7 213749.9 189137.4 236032.9 247502.3 239979.7 240564.3 245947.8

Exports -23512.2 -30817.5 -30369.1 -21863.3 -30375.1 -43001.8 -40313.9 -41007.4 -43318.9

Bunkers -431.356 -2322.39 -2773 -4502.53 -6578.17 -8092.03 -7809.59 -8313.87 -8182.41

Stock changes 3270.811 -1107.85 -5555.1 4694.918 4330.85 4527.65 -1133.82 419.285 511.236

Total Primary Energy Supply 142177.5 301801.1 357175.7 351094.5 336400.8 327463.7 310921.5 312525.1 312391.6

Available for final consumption 98459.93 218167.2 248663 240723.3 231252.4 229600.1 218845.9 220982.3 ..

Industry 44630.65 80622.01 78831.29 66164.38 51333.81 55296.66 55965.13 55685.28 ..

Transport 16057.08 31599.13 44199.61 54399.18 59369.66 53119.56 53571.01 53169.9 ..

Services 25912.41 57749.12 54873.96 62964.14 65112.47 63128.88 54917.4 57414.04 ..

Residential 1730.162 25918.37 28492.07 28978.85 25733.35 35305.94 31863.95 32742.15 ..

Agriculture 882.508 2084.708 3010.683 2422.16 289.911 0 0 0 ..

Non-energy uses 2624.39 14142.22 22962.71 22946.4 25067.58 22570.54 22366.14 21813.18 ..

Efficiency of transformation 69.3% 72.3% 69.6% 68.6% 68.7% 70.1% 70.4% 70.7%

Energy independence 88.1% 57.9% 52.0% 53.0% 40.2% 39.5% 39.5% 39.5% 38.3%

Source: IEA Energy Balances of OECD Countries

SummaryExtended Energy Balance

ktoe Solids Oil Gas ElectricityBiofuels & waste Heat Total

Primary Production 47,596 3,373 9,566 35,035 27,810 0 123,380

Imports 33,285 128,049 74,067 3,979 1,184 0 240,564

Exports -1,167 -18,813 -14,258 -5,746 -1,018 -6 -41,007

Bunkers 0 -8,314 0 0 0 0 -8,314

Stock changes 438 -443 424 0 0 0 419

Gross inland consumption (TPES) 80,152 101,336 69,799 33,268 27,976 -6 312,525

Available for consumption 7,234 91,735 52,385 45,861 13,413 10,355 220,982

Industry 6,021 3,248 19,068 19,457 2,829 5,063 55,685

Transport 0 48,677 516 1,039 2,938 0 53,170

Services 743 12,944 21,613 12,343 6,396 3,375 57,414

Residential 103 7,317 9,133 13,023 1,250 1,916 32,742

Agriculture 0 0 0 0 0 0 0

Non-energy uses 366 19,391 2,056 0 0 0 21,813

| Country Profile Germany22 Source: IEA Energy Balances of OECD Countries

SupplyOverview


SupplyTotal Primary Energy Supply


SupplyElectricity

| Country Profile Germany25 Source: ENERDATA – Global Energy & CO2 Data

SupplyElectricity


SupplyInterconnectors

7% interconnection rate with 6 countries (Cz, DK, F, NL, Pl, CH)• Plan for interconnects with B (Alegro – 1 GW) and Russia (600 MW)

Net exporter, increasinglyTransmission expansion slower than plannedTSO investment in 2012: 1.15 B€ (+36%)Electricity Grid Expansion Act: 1,877 km planned (EnLAG)20 PCIs in Germany


SupplyGas

5 domestic producers (15% of demand)Declining production, increasing imports

• 45% Russia, 26.5% NL, 29% Norway

NordStream pipeline with Russia: 55 BCm/yr (50+% of demand)Exports to Cz, Fr, NL, CHStorage: 22 BCm (~25% of annual demand)Heart of European gas trade with robust supply


SupplyOil

95% imports• 35% Russia, 12% Norway, 10% UK, 16% OPEC

13 refineries – large importer of refined products


DemandOverview


DemandIndustry


DemandTransport


DemandServices


DemandResidential


Energy and tax bill for the world’s largest countries

Notes: - : non relevant

PricesFinal energy bill in Germany in 2014

Oil: 47% of taxes in end-consumer priceso53% of taxes for the transport sector (49% for diesel and 58% for gasoline)o7% for industry and 22% for households and services

Electricity: 50%o48% of taxes for industry and 52% for households and services

Gas: 20%o11% of taxes for industry and 24% for households and services

Renewable electricity fees: EEG Umlageo€6,24c/kWh in 2014 (€6,17c/kWh in 2015)

Energy and tax bill for the world’s largest countries

PricesEnergy taxes in Germany in 2014

PricesElectricity prices w.r.t. neighbours


Constant price in US$cents05 of electricity in industry (taxes incl.)

Unit 1980 2013 2014 Unit 1980 2013 2014

Belgium USc05/kWh 11.1 10.1 9.9 Z-score 0.1 0.3 0.1

France USc05/kWh 11.5 10.0 9.9 Z-score 0.2 0.3 0.1

Germany USc05/kWh 11.5 13.9 14.8 Z-score 0.2 1.2 1.2

Italy USc05/kWh 14.6 25.6 25.9 Z-score 0.8 4.0 3.8

Poland USc05/kWh n.a. 8.5 7.8 Z-score n.a 0.0 -0.4

Switzerland USc05/kWh 13.4 9.5 9.5 Z-score 0.6 0.2 0.0

Source: ENERDATA – Global Energy & CO2 Data

PricesGas prices w.r.t. neighbours


Constant price in US$05 of natural gas in industry (taxes incl.) GCV

Unit 1980 2013 2014 Unit 1980 2013 2014

Belgium USc05/kWh 2.5 3.9 3.3 Z-score -0.4 0.1 -0.2

France USc05/kWh 2.9 4.3 4.1 Z-score -0.3 0.4 0.3

Germany USc05/kWh 2.7 4.1 3.8 Z-score -0.3 0.2 0.2

Italy USc05/kWh 3.3 4.2 4.0 Z-score -0.1 0.3 0.3

Poland USc05/kWh 1.4 3.3 3.3 Z-score -0.7 -0.2 -0.1

Switzerland USc05/kWh 5.0 5.2 5.2 Z-score 0.4 0.8 1.0

IndicatorsSecurity


Indicator Unit 1970 2000 2013Oil self-sufficiency % 6 3 3

Coal self-sufficiency % 103 71 58

Gas self-sufficiency % 77 22 12

Total self-sufficiency % 58 40 38

RES share in TPES % 1 3 11

RES share in electricity % 7 6 24

TPES/GDP toe/ 2005 $ PPP 0.25 0.14 0.11

TPES/capita toe/capita 3.88 4.09 3.81

Source: IEA Energy Indicators for OECD Countries

IndicatorsEnvironment


Indicator Unit 1970 2000 2013CO2 per capita Tons - 9.1 -

CO2 per unit GDP kg per PPP 2011 GDP - 0.22 -

Network losses % 4.5

Access to electricity % 100 100 100

Source: IEA Energy Indicators for OECD Countries

SummaryTechnology

Research initiatives of the federal ministry:• Power grids of the future

• Solar building construction

• Energy-efficient cities

Top 5 energy related areas for funding and research:• Wind power

• Photovoltaics

• Deep geothermal (esp. for district heating)

• Solar-thermal power plants

• Hydro and maritime power generation


SummaryA few specifics

Leading in overall energy efficiency according to ACEEE scorecardInternational market leader and innovation driver in the fields of energy

efficiency and green buildingsBuilding energy efficiency supported by strong building codes

and EE targetsStrong position in passive house technology and related

productsCertification for passive house trades people


SummarySpecifics

Highest wind power generation capacity growth among European countries

More than doubled offshore wind capacity on 2014New CCS technology tested with large scale demonstration in

2015Increase oxygen stability and 20% input energy reduction by use of

new solvent technology90% CO2 capture rate from coal-fired power plants

Strong position in e-mobility based on German automotive industry (e-vehicles, hybrids)

Tax incentives on electric vehicles and development of related infrastructure


SummaryIssues

Stabilization of electricity prices to support transition to renewables• Currently, lowest wholesale prices but highest retail prices in Europe

• However, due to lower consumption, residential electricity bill similar to US

Fast and cost-effective approach to grid extension essential to integrate renewable energy production

• Increasing wind power generation in Northern Germany requires improved transmission infrastructure

• Decentralised PV & biomass production also requires LV grid expansion

Leading the market of energy storage• Driven by economics

• Not needed for balancing until after 2030


SummaryIssues

Shutdown of all nuclear power plants and complete exit from nuclear energy by 2022Proposed strict regulation for fracking and shale-gas-related activities to protect water resources and environment

Restrictions by region and type of environment/ bedrock Additional restriction for general oil & gas drillingHard coal subsidies to run out by 2018 on both federal and

“Länder” levelClear definition of future role of gas and coal in energy mix required to

achieve CO2 emission targets


Conclusions

A large & diversified energy system with strong interconnections (with the exception of oil) Highest electricity Quality of Supply in the world (based on SAIDI)An example how to transit to a sustainable energy with limited indigenous resources (but path forward is uncertain)Leading the charge on renewables (up to now)A lesson on learning curves and getting support schemes right Is the current retail price structure (incl taxes) sustainable?Moderate liberalization in generation, advanced in marketOver 1,000 grid operators; lots of small-scale community initiativesHV grid expansion difficult, even in a progressive countryEnergy transition requires ambitious implementation of EU Policy complemented with additional policiesRole of lignite, coal and gas in Energiewende needs clarification


Country Comparison on Energy use from 1960 to 2012 (ktoe)


Sources

Macroeconomic indicators: http://databank.worldbank.orgEnergy Balances: Eurostat, IEA, EnerdataEnergy Prices: Eurostat, EnerdataCountry Report, Global Energy Research (Enerdata)Country Report, www.reegle.info European Commission: Progress towards completing the IEMENTSO-E: TYNDPENTSO-E: Scenario Outlook & Adequacy ForecastNREAP GermanyNEEAP GermanyWorld Energy Council: World Energy Resources 2013 SurveyIEA Energy Policies of IEA Countries Germany 2013 Review


http://databank.worldbank.org/

http://www.reegle.info/

Glossary

CCS Carbon Capture and StorageCPI Consumer Price IndexETS Emission Trading SystemEV Electric VehicleGHG Greenhouse GasHHI Herfindahl-Hirschman IndexHV High VoltageNEEAP National Energy Efficiency Action PlanNREAP National Renewable Energy Action PlanPCI Project of Common InterestTOE Ton of Oil EquivalentTPES Total Primary Energy SupplyTSO Transmission System Operator


Acknowledgement

Thank you to our reviewersArne Jungjohann, http://arnejungjohann.de/ Baktash Nasiri, Research associate/PhD student at TU DortmundNN reviewers from the financial sector, from the utility sector and from industry

http://arnejungjohann.de/

http://arnejungjohann.de/

[email protected]

Thank you


For more information please contact

Annex – Transposition of EU Policy in Germany

Energy PolicyTransposition of EU Policy

RED – implemented in Germany via EEG (Enerneuerbare Energien Gesetz 2009, renewed 2012 and August 1st, 2014)

• EEG 2014 sets 3 main principles to boost wind and solar energy:• Investment protection through guaranteed feed-in tariffs and

connection requirement • No additional cost to Germany’s public budget • Innovation by decreasing feed-in-tariffs

• Target renewable energy share 18% (of total energy consumption) by 2020• 30% of electricity consumption from renewable energy• 14% of heating energy from renewable energy

• Additional national regulations include Biomass regulation (BiomasseV) and Biomass-electricity-sustainability regulation (Bio-St-NachV)



EED – mostly implemented in GermanyArticle 7 as core of EED: Germany committed to cumulated savings of 1,758

Petajoule (PJ) until 2020• Implemented energy efficiency measures have contributed 1,476 PJ

Creation of dedicated institution (Bundesstelle für Energieeffizienz – BfEE) to ensure EED target implementation

NEEAP 2014 as basis for fulfilment of EED requirements and targets In Germany Recent transposition activities include

• Energiedienstleistungsgesetz (EDL-G) modified to accommodate Article 8 of EED (energy audits)

• KWK-Kosten-Nutzen-Vergleich-Verordnung (KNV-V) to implement Article 14 of EED

Introduction of additional voluntary “market-oriented incentive system" (MEAS)



EPBDEnergy Savings Act (EnEG) 2013 creates the legal basis for further regulations

(e.g. EnEV)• Heat insulation/ reduction of energy loss• Prescribes effective use of energy for heating and cooling during planning

phase

Energy Savings Regulation (EnEV) exists since 2009 with latest update in November 2013 to implement EPBD

• Applies to all new and existing buildings that require energy for heating or cooling

• “Energy passports” for “overall efficiency of buildings” – “lowest energy building” standard as of 2021 for all new buildings

Renewable Energies Heat Act (EEWärmeG)• Addresses requirements on renewable energy in the heating sector



Internal electricity and gas marketsGerman Energy Act (Energiewirtschaftsgesetz) (EnWG) as the main

federal legal framework for all energy market related regulations and acts

• Liberalization and deregulation as key objectives• Ongoing efforts to remove contractual bureaucracy and provide

marketing options for energy from renewable sourcesGrid Expansion Acceleration Act (Netzausbaubeschleunigungs-Gesetz)

(NABEG)• Regulates the expansion of cross-border HV power line construction

with focus on expedited planning and permitsFederal Requirements Plan Act (Bundesbedarfsplangesetz) (BBPIG)

• Proposes HV transmission infrastructure projects in addition to projects already defined in the Power Grid Extension Act (EnLAG)



IED – German official implementation on May 2nd, 2013 viaBundes-Immissionsschutzgesetz (BImSchG) Wasserhaushaltsgesetz (WHG) Kreislaufwirtschaftsgesetz (KrWG) Gesetz über die Umweltverträglichkeitsprüfung (UVPG) Various sections of the Bundes-Immissionsschutzverordnung

(BImSchV) • 4. BImSchV - regulation on industrial facilities requiring permits• 9. BImSchV – regulation on permission processing• Several sections relating to specific industrial installations (e.g. fuels,

halogenated compounds, volatile compounds etc.)Industrial facilities to use “BVT” (best available technology)



ETSTreibhausgas-Emissionshandels-Gesetz (TEHG) 2011 as national basis

for participation in European emissions trading3rd trading period (2013-2020) is implemented via Allocation Regulation

2020 (ZuV 2020) without National Allocation Plan• Regulates calculation of allocation and application within TEHG

EHV 2020 (Emissions-Handels-Verordnung) – Emission Trading Regulation for liquid biofuels

ProMechG (Projekt-Mechanismen-Gesetz) – Project Mechanism Act implelements the Linking Directive creating the legal basis for CDM and JI-projects

ProMechGebV (Projekt-Mechanismen-Gebührenverordnung) – Project Mechanism Fee Regulation


Germany, leading the charge on renewables

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