Germany s challenges on the way to sustainable energy production

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1 Germany s challenges on the way to sustainable energy production Markus Strangmüller, Corporate Sustainability Munich,

2 Growing electrification is leading to a power matrix today we focus on sustainable energy production Page 2

3 Germany with ambitious targets and far-reaching legislation as part of the Energiewende Targets of German Energiewende Power Generation CO 2 Emissions Energy Efficiency TWh Mt CO % 60% 19% 35% 60% 5% 37% 63% 0% 50% 50% 80% 20% Renewables (incl. Hydro) Fossil Nuclear Increase share of RES in power generation to: 35% (2020), 50% (2030), 80% (2050) Increase RES share of primary energy cons. to >50% (2050) Nuclear phase-out by % % Reduction of CO 2 emissions compared to baseline 1990: -40% by % by 2050 GDP (bn EUR) Increase of energy efficiency in primary energy use compared to baseline 2008: 20% by % by 2050 GDP TPEC TPEC (Mtoe) TPEC: Total primary energy consumption Page 3

4 Today, Germany has a Renewable share of 21% of generated power and 42% of installed capacity Power Generation 2011 Installed Capacity 2011 CO 2 Emissions TWh GW Mt CO 2 Total RES 21% Target 2020: 35% 3% 606 7% 8% 3% 19% 15% 1% 44% Other RES Wind Solar PV Hydro Nuclear Gas Oil Coal Total RES 42% 168 Solar PV Hydro Nuclear Gas Oil Coal Other RES (4%) -17% 29 Wind (17%) 25 (15%) (6%) (8%) 24 (14%) 9 (5%) 52 (31%) 309 Target: -40% To reach German targets (35% in 2020), RE share to be increased by another 14% within the next 9 years Further renewable growth potential mainly in Solar PV and Wind; Wind Offshore still in starting phase -17% reduction during the last 21 years; target of -40% in 2020 challenging (-23% within the next 9 years) Page 4

5 Today, Germany has a Renewable share of 21% of generated power and 42% of installed capacity Power Generation 2011 Installed Capacity 2011 CO 2 Emissions TWh GW Mt CO 2 Total RES 21% Target 2020: 35% 3% 606 7% 8% 3% 19% 15% 1% 44% Other RES Wind Solar PV Hydro Nuclear Gas Oil Coal Total RES 42% (4%) 29 (17%) 25 (15%) (6%) (8%) 24 (14%) 9 (5%) 52 (31%) Other RES Wind Solar PV Hydro Nuclear Gas Oil Coal Peak Load 2011: 84 GW Min. Load 2011: 36 GW % 309 Target: -40% To reach German targets (35% in 2020), RE share to be increased by another 14% within the next 9 years Further renewable growth potential mainly in Solar PV and Wind; Wind Offshore still in starting phase -17% reduction during the last 21 years; target of -40% in 2020 challenging (-23% within the next 9 years) Page 5

6 Grid Capacity, energy storage and flexible fossil fleet is key to integrate more renewables Load curve vs. renewable capacity, Germany 2020 Solutions Capacity 2020 (GW) Three levers to integrate more renewables: Load curve one day in Summer 2 Storage technologies 1 Extension of grid capacity to utilize geographically different potentials of wind and solar generation Extend grid capacity Increased RES Import Load 6 Increased RES Export 12 Wind 18 3 Source: E ST MC Day time [h] Increase of the energy storage capacity to balance temporary overcapacities of wind and solar generation Transition to more flexible fossil fleet with ability to follow the highly fluctuant renewable current entry Wind + Solar Solar Page 6

1 TSOs grid development plan with major HV-grid extensions and four North-South highways High-voltage lines (AC): 1,700 kms in new routes 2,800 kms in existing routes High-voltage lines (DC): 2,100

7 1 TSOs grid development plan with major HV-grid extensions and four North-South highways High-voltage lines (AC): 1,700 kms in new routes 2,800 kms in existing routes High-voltage lines (DC): 2,100 kms in new routes Total (AC+DC): 6,600 kms Extension (Aufseilung) of existing lines: 1,300 kms Expected costs: 20 Challenges: Potential over-estimation of required extension Distributed generation reduces need for HV grids Plan is mainly driven by new on-/offshore wind in northern Germany and high load factor for coal Implementation: Lacking coordination between federation and states Slow and tedious permitting processes Key Questions: Who will finance the grid development? How will general public resistance affect the grid development plan? Source: Netzentwicklungsplan Page 7

8 2 On the long run, storage technologies will be required to fully decarbonize the European Power Sector Seconds Minutes Hours Days/ Months Li-Ion NaS Batteries Super capacitor Flow-Batteries Flywheel storage Superconductive coil H2/ Methan (stationary) CAES Power quality Pumped Hydro 1 kw 10 kw 100 kw 1 MW 10 MW 100 MW MW 1 2 Operating reserve 4 3 Energy reserve Time shift Technology Chemical Storage Electrochemical Storage Mechanical Storage Electrical Storage Maturity Commercial Early commercial Demonstration Source: Study of DNK/WEC Energie für Deutschland 2011, Bloomberg Energy Storage technologies Q CAES Compressed Air Energy Storage Page 8

3 Backbone gas: World record in efficiency with flexible SGT5-8000H series 60,75% efficiency in combined cycle power plant 375 MW* output in simple cycle power plant (50Hz) > 570 MW* output in

9 3 Backbone gas: World record in efficiency with flexible SGT5-8000H series 60,75% efficiency in combined cycle power plant 375 MW* output in simple cycle power plant (50Hz) > 570 MW* output in combined cycle power plant (50Hz) Reduced emissions t CO2 savings per year compared to state-of-the-arttechnology Fast start-up capability and operational flexibility also in part-load operation * ISO conditions Page 9

Energy market design must ensure affordability, sustainability and security of supply Target triangle of energy sector How do we ensure, that the Energiewende is done efficiently and additional costs

10 Energy market design must ensure affordability, sustainability and security of supply Target triangle of energy sector How do we ensure, that the Energiewende is done efficiently and additional costs for economy and society are minimized? Sustainability Affordability Security of Supply What frame conditions are required to ensure the energy sector contributes to the reductions of German CO2 emissions? How do we achieve sufficient energy production capacity with fluctuating renewables? Source: Siemens Page 10

Affordability: Energy prices in Germany are already today above European average Energy prices in Germany and other european states 2011 (in ct/kwh) Households 1 29,8 25,2 +37% 18,4 21,2 8,7 14,2

11 Affordability: Energy prices in Germany are already today above European average Energy prices in Germany and other european states 2011 (in ct/kwh) Households 1 29,8 25,2 +37% 18,4 21,2 8,7 14,2 12,4 15,8 20,8 13,5 20,9 14,7 11,5 Industry 2 14,0 +25% 11,2 11,5 6,7 9,3 8,1 11,1 10,4 16,7 9,4 11,6 10,8 7,6 Deutschland EU27 Belgien Bulgarien Dänemark Frankreich Griechenland Großbritannien Italien Polen Spanien Tschechien Türkei 1) Haushalte: durchschnittlicher Drei-Personen-Haushalt mit kwh/a 2) Industrie: mittelspannungsseitige Versorgung, Abnahme von 100 kw/1.600 h bis kw/5.000 h Quelle: Siemens; BDEW, Strompreisanalyse (Stand: ); Eurostat Year 2011/2 (Stand ); Arbeitsgemeinschaft Energiebilanzen Page 11

12 Electricity prices for industry are less loaded with feed-in tariffs and network costs Composition of electricity prices Electricity prices 2011 in ct/kwh 25.2 VAT 14.0 electricity tax KWKG EEG concession levy Grid Cost 2) 5.4 Power Generation Wholesale Industry 1) Household EEG: KWKG: Erneuerbare Energien Gesetz Kraft-Wärme-Kopplungsgesetz 1) Average price for medium voltage supply on voltage level 10 or 20 kv and electricity demand from 100 kw / 1,600 h to 4,000 kw / 5,000 h; companies with energy consumption >10GWh/a pay only 0.05 ct/kwh EEG (exceptions) 2) On average, industry customers pay only 25% of Grid Cost household customers pay Source: BDEW, Strompreisanalyse Mai 2012 (Stand: ); VDI Page 12

Environmental Portfolio of Siemens contributes to a sustainable energy production and consumption as of November 2011 Environmental Umsatz des Umweltportfolios Portfolio revenue (in (Mrd.

13 Environmental Portfolio of Siemens contributes to a sustainable energy production and consumption as of November 2011 Environmental Umsatz des Umweltportfolios Portfolio revenue (in (Mrd. billions) EUR) 40,0 27,4 29,9 26,8 31 Energy efficiency 12 Renewable energies ) ) ) 2014 (Target) Environmental Portfolio CO 2 abatement (in million metric tons) Environmental technologies ) Without OSRAM, on a comparable basis Page

Our Environmental Portfolio helps our customers to improve their efficiency and performance Customer benefits along the energy conversion chain (examples) Power consumption Power production Power

14 Our Environmental Portfolio helps our customers to improve their efficiency and performance Customer benefits along the energy conversion chain (examples) Power consumption Power production Power generation Power transmission and distribution Industrial applications End use Highly-efficient combined cycle power plants with an efficiency rating of over 60% Offshore wind farms for the optimal wind yields on the open sea High-voltage Direct Current (HVDC) transmission to convey electricity over long distances at low loss Grid connection for offshore wind farms Gas-insulated transformer stations for urban centers Environmentally friendly steelmaking processes Efficient high-speed trains Traffic management systems Water and wastewater treatment in the paper industry Building modernization Energy-saving, cost-effective magnetic resonance systems Page 14

Summary Germany has set ambitious targets and need to redesign its energy market Many technological solutions are already available or research is going on (Network, Storage and flexible production)

15 Summary Germany has set ambitious targets and need to redesign its energy market Many technological solutions are already available or research is going on (Network, Storage and flexible production) The Energy market design must ensure affordability, sustainability and security of supply Cost reductions through market oriented policies and subsidies Change in cost allocations not via energy prices but connection capacity Ensure security of supply by secured capacity Achieve CO2 targets by setting limits for conventional power plants Page 15

The Energy Transition in Germany Past, Present and Future

The Energy Transition in Germany Past, Present and Future smart energy Paraná, Conferência International 2014 9 May 2014 Dr. Carsten Tschamber A Brief History of the Energiewende 1973 - oil crisis, Federal