New technologies no longer need special

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1 05 Feb 2016 New technologies no longer need special protection More competition thanks to the 2016 Renewable Energy Sources Act (EEG): funding for green electricity will be set by auction. Find out more New technologies no longer need special protection More competition thanks to the 2016 Renewable Energy Sources Act (EEG): funding for green electricity will be set by auction.

2 Fotolia.com/Rawpixel.com Last year, we set a new record: one third of our electricity was generated from the wind, the sun and other renewables - never before had the share of renewables in electricity consumption in Germany been greater. The federal government aims to make it 40 to 45 per cent by And the figures show that this objective is within reach. Saying yes to green electricity but staying on track... Whilst all the new green capacity is good, the ability to plan is better. We must be able to distribute wind and solar power to final users throughout the country. For this purpose, we need new electricity grids, and their expansion must keep pace with the growing number of new installations. We need both - green electricity and grids to transmit it - and we have to be able to plan the two aspects. In addition, the grids must be suited to cope with growing shares of fluctuating power: the windier and sunnier it is, the more electricity is generated and must be transmitted by the grids.... and keeping a lid on the costs The cost of the expansion of renewables must also be limited. The last few years have shown why this is so important: in 2013, we faced the risk of rocketing costs from the expansion of green power. This was due to the fact that since 2000 operators of installations had been granted a fixed funding amount by the state for each kilowatt-hour (kwh) of electricity generated on the basis of wind and sun - guaranteed for 20 years. The aim was to help new technologies to gain ground - "the faster, the better". But the more wind turbines and solar roofs were installed in Germany, the greater was the risk of costs running out of control. Paving the way for a more market-based system For this reason, the funding of green electricity was revamped by the 2014 Renewable Energy Sources Act: funding was focused on the cheap energy sources, i.e. solar and wind power, and development corridors were introduced for each type of renewable energy. Furthermore, electricity providers were obliged to market their electricity directly. So the new Act cut costs and helped people to plan. In addition, the 2014 Act laid the foundation for a completely new system, namely competitive auctions for the funding of green electricity. In these auctions, the operators of installations compete for public funding. The lower their calculated costs, i.e. the lower their dependency on funding, the greater is their chance to win the funding in an auction. In other words, the funding goes to those who ask for least. In this way, market forces will keep down the cost of funding green electricity. Pilot auctions for ground-mounted PV installations - a success story In 2015, the newly introduced auctions were tested for ground-mounted PV installations - and the results are very promising: all three auction rounds attracted a large number of competitors. Many different players submitted bids, and small bidders and projects also won funding. And that is not all: the third auction round with the lowest prices of all was the round in which most citizens' cooperatives and alliances participated - and some of them even won funding. This is good news for small citizens' cooperatives that are competing for funding with professional operators. The price level also fell from round to round. This is good news especially for electricity consumers.

3 While the remuneration for electricity generated in ground-mounted PV installations totalled an average 9.41 cents per kilowatt-hour (kwh) in 2014, competition resulted in a decline to 8 cents per kilowatt-hour by the end of This is a promising start. What proved to be successful for ground-mounted PV installations is now to be applied to other renewables. "The new technologies have matured" Federal Minister for Economic Affairs and Energy Sigmar Gabriel said: "Renewable energies will in the future compete for funding in auctions. The former provisions of the Renewable Energy Sources Act were good at promoting new technologies." The Minister added: "The new technologies have matured. They no longer need special protection. These technologies must now be brought to the market." The 2016 Renewable Energy Sources Act: a decisive step The 2016 Renewable Energy Sources Act is based on the experience gained in the auctions for ground-mounted PV installations. It is a decisive step for the next stage of the expansion of renewables: the 2016 Renewable Energy Sources Act treats renewables like mature technologies and creates the preconditions for stabilising costs and at the same time maintaining public acceptance for the energy transition. According to the planned revision, funding for wind power and other PV installations will also be based on competitive auctions as from The funding awarded to operators will be just enough to cover the cost-efficient operation of the installations. That is the underlying principle of the auction scheme. "In the future, it is not the Bundestag and the Bundesrat that determine the price of carbonfree green electricity but rather competition for the cheapest solution," Federal Minister Gabriel underlined. This is to apply to more than 80 per cent of the green electricity generated in new installations. The focus is on onshore wind power and solar energy. But the cost of offshore wind power is also planned to be reduced by introducing auctions. The auction schemes will differ depending on the respective technologies, e.g. offshore wind farms or solar roofs. Auctions will take place on a nation-wide basis to ensure fair competition for planned installations in the whole of Germany. A share of 40 to 45 per cent: no more and no less In order to make sure that the electricity grids can keep pace with the expansion of renewables, the existing development corridors for renewable energies will not be changed. 40 to 45 per cent of gross electricity consumption is to be covered by renewables by no more and no less, so that the expansion can be planned. We are working full speed ahead on the new draft Renewable Energy Sources Act. Specific proposals on this aspect and on the draft Act are contained in a 'key issues paper'. The legislation is to complete the parliamentary process by the autumn.

4 FURTHER INFORMATION 2016 Renewable Energy Sources Act: auctions for funding renewable energy 'Key issues paper' on the 2016 revision of the Renewable Energy Sources Act Entering a new era "The energy transition is part of the modernisation of our economy, and our energy system is entering a completely new era." Federal Minister Sigmar Gabriel on the role of the energy transition for the economic world of tomorrow. BMWi At more than 43 million employed people, we have set a new all-time record, and economic growth in Germany will continue to be above-average this year in the European comparison. But we cannot afford to rest on these laurels. What must be done to ensure that the German economy remains strong? A new energy system - a modern economy The transformation of our energy system plays a vital role in this context. A secure and affordable energy supply is a precondition for a highly developed industrial country like Germany. "Politicians and electricity providers must establish a completely new system", Federal Minister Sigmar Gabriel underlined during his speech at the Handelsblatt s "Energy Industry 2016" conference in Berlin on 19 January At the same time, the energy transition is a driver of innovation, jobs and progress.

5 Linking up elements of the energy transition In his speech, Federal Minister Gabriel summarised the challenges that our energy system must tackle in the coming years: "First, the renewables must be integrated in the electricity market, and costs must be reduced gradually. Second, the electricity market must be made fit for growing shares of renewable energies. And third, we need an adequate infrastructure. This requires a rapid expansion of our electricity grids and the digitisation of our electricity supply. Above all, these three elements must be linked up to guarantee that the whole system works and to ensure security of supply. The key challenge of a successful energy transition is optimum system integration." On track The key reforms in the context of Germany's energy transition are making good progress: pursuant to the revised Renewable Energy Sources Act (EEG), funding for green electricity will be determined by auction. In addition, we have set out the regulatory framework for the German electricity market of the future, the electricity market 2.0, in the draft Electricity Market Act. Furthermore, the Act on the Digitisation of the Energy Transition is intended to pave the way for smart metering and smart grids before this summer. And a major step towards the energy infrastructure of the future was taken when a statutory priority to place high-voltage direct current (HVDC) lines underground was adopted at the end of To listen to the full speech (in German), please click here. FURTHER INFORMATION Energy transition

6 Electricity a leading export Germany is exporting more and more electricity to its neighbouring countries. Cross-border trade in electricity contributes to security of supply and results in lower costs. Federal Ministry for Economic Affairs and Energy; based on data from AGEB. Trade in electricity: exports up, imports down According to the provisional figures for 2015 published by the Working Group on Energy Balances (AGEB), Germany exported a total of 83.1 billion kilowatt-hours (kwh) to other countries. That is more than in the last two years, namely 74.5 billion kwh in 2014 and 72.2 billion kwh in In the same period, electricity imports at 33 billion kwh fell to the lowest level in more than 20 years. They had amounted to 38.9 billion kwh in 2014 and 38.4 billion kwh in More security of supply, lower costs In 2015, Germany recorded an export surplus of around 50 billion kwh. The figures show that Germany's electricity exports to its neighbours were higher than its imports. All people in the European Union benefit from cross-country trade in electricity since a larger, functioning market reduces costs. European electricity trading can take advantage of the smoothing effects over a wide area and efficiency gains in the fields of consumption, renewables and the use of conventional power plants. Consumers benefit from this in the form of lower electricity bills. Connecting national energy systems also improves security of supply. If, due to a bottleneck, there is not enough electricity or gas available in one place, a well developed cross-border energy infrastructure can help to transport energy to wherever it is needed.

7 Lower energy consumption in Germany The preliminary calculations also show that altogether Germany needs less energy. This becomes particularly evident when we look back on the last three years: in 2013, around 13,900 petajoules (PJ) were consumed in Germany. In 2014, consumption totalled only 13,200 PJ. Last year, consumption rose slightly at 13,300 PJ, but this was primarily due to the cold weather. One petajoule equals about billion kwh. This corresponds, for instance, to the amount of energy that Saarland needs for its railway transport in the course of one year. Germany has also set clear energy consumption goals for the coming years: These include the objective to cut the country's primary energy consumption by half by 2050 compared to The 20 per cent mark is to be reached by FURTHER INFORMATION Energy data and forecasts More information about the electricity market of the future Security of supply What is the 'rebound effect'? It s on special offer? A good reason to buy more of it. But do we really save money when we buy more? This is an interesting question - also regarding energy efficiency. What is the 'rebound effect'? BMWi

8 It's about tempting efficiency gains What do apples have to do with the energy transition? Quite a lot. For instance, say one kilo of apples is on special offer. If you buy two kilos, you may realise only later that less money is left in your purse. It appears rather paradoxical, doesn't it? You wanted to save money, but you ended up spending more. Can the same happen when we want to save energy? And if so, why? The answer is the 'rebound effect'. It means that cost savings due to energy efficiency make consumers demand more energy - and thus de facto reduce energy efficiency gains. A special offer for apples, for instance, makes consumers buy more. More energy efficiency, the same energy consumption? Of course, we must not compare apples with oranges. But there is a parallel between apple pies and energy-saving light bulbs. Energy-saving light bulbs may cause us to switch off the light later in the evening than conventional light bulbs. Freezers are another example: there can be no doubt that energy-efficient appliances need less electricity. However, if consumers buy larger or additional freezers, the efficiency gains are lost. Cars today also need less fuel per unit of horsepower than some years ago - but there are more high-power cars on the roads than there used to be. If fuel consumption falls per kilometre driven, the cost of the car is reduced - but this increases the incentive to use the car more often. This is relatively easy to understand at the level of private households, but it has entirely different dimensions for an economy with millions of people. This is why we must bear in mind the rebound effect in connection with the energy transition and the related increase in energy efficiency. Energy efficiency strategy: we must not lose sight of the rebound effect The rebound effect of course must not prevent us from making efforts to save energy. Increasing energy efficiency is important to reduce the number of inefficient appliances. But we must also save energy and make use of efficiency potentials in a targeted way. Germany aims to reduce primary energy consumption by 20 per cent by 2020 compared with 2008 and by 50 per cent by The National Action Plan on Energy Efficiency (NAPE) sets out the federal government's strategy to reach this objective and to increase overall energy efficiency. The Federal Ministry for Economic Affairs and Energy is elaborating further approaches to improve energy efficiency - which also take account of the rebound effect. The new approaches are to be published in a "Green Paper on Energy Efficiency" and be subject to public consultation this year. FURTHER INFORMATION Information about the National Action Plan for Energy Efficiency Energy efficiency

9 Quote of the week "The heating market is crucial for the energy transition, and public utilities and CHP plants play an outstanding role in this context." Katherina Reiche, CEO, German Association of Local Utilities (VKU) VKU / Chaperon Wind power research: the Federal Ministry for Economic Affairs and Energy is promoting the research project "Future rotor blade concept" Scientists at the Fraunhofer Institute for Wind Energy and Energy System Technology (IWES) are developing testing methods to collect more realistic data. 17 and 18 March 2016: Berlin Energy Transition Dialogue towards a global Energiewende In order to transform the successful outcome of COP21 in Paris without delay into applicable concepts for an intelligent, sustainable and cost-efficient energy transition, the Federal Government is inviting the international energy elite to Berlin for the second time. The Berlin Energy Transition Dialogue is the pivotal international energy transition summit. For more information, please visit You can subscribe to the Energy Transition Order the international edition of the "Energiewende direkt" Newsletter here Federal Ministry for Economic Affairs and Energy Legal Notice

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