The German Energy transition State of Play of Renewable Energies

The German Energy transition State of Play of Renewable Energies Dr. Georg Maue, Counselor Climate and Energy Policy Embassy of the Federal Republic of Germany 4645 Reservoir Road, Washington, DC 20007 Tel: +1 (202) 298 4355 Fax: +1 (202) 298 4391 E-mail: wi-6@wash.diplo.de 15-12-03 Referent 1

Milestones of the Energiewende Germany is part of an integrated European energy and climate strategy. 2

RE Act has pushed growth of RE Development of electricity generation from renewable energy sources in Germany since 1990 140,000 120,000 Hydropower Biomass * Wind energy Photovoltaics EEG: January 2009 100,000 EEG: April 2000 EEG: August 2004 [GWh] 80,000 60,000 40,000 StromEinspG: January 1991 - March 2000 Amendment to BauGB: November 1997 20,000 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 * Solid and liquid biomass, biogas, sewage and landfill gas, biogenic share of waste; electricity from geothermal energy not presented due to negligible quantities produced; 1 GWh = 1 Mill. kwh; StromEinspG: Act on the Sale of Electricity to the Grid; BauGB: Construction Code; EEG: Renewable Energy Sources Act; source: BMU-KI III 1 according to Working Group on Renewable Energy-Statistics (AGEE-Stat); image: BMU / Christoph Edelhoff; as at: March 2012; all figures provisional 3

Cornerstones of the Renewable Energy Sources Act Guaranteed grid access; priority transmission and distribution Fixed price (tariff or premium) for every kwh produced Tariffs are set for each type of technology and with regard to further provisions (e.g. site and size) Additional costs for renewable energy production are offset through the EEG levy (2014: ~ 6,24 ct/kwh), with reductions for energy-intensive industries Additional costs are offset via grid operators and independent of the public budget Regular monitoring and evaluation; accompanying research 15-12-03 Speaker 4

Two pillars of the Energiewende Supporting fields of action Energy Efficiency Market and system integration Renewable Energy Key legislation: Energy Saving Ordinance Heating Cost Ordinance Energy research and development Key legislation: Renewable Energy Sources Act Renewable Energy Heat Act Reduce energy consumption Cost-efficient European energy and climate policy Steady growth Environmentally friendly The energy transition s foundation are renewables and reduced energy consumption. 5

Source: Ecofys 2014, based on Ragwitz et al. (2012) Renewable electricity support mechanisms in Europe Quota obligation Feed-in tariff Feed-in premium Tendering Mixed models Sweden Finland Norway Estonia Latvia Denmark Lithuania Support scheme currently suspended Policy uncertainty * support scheme was cut significantly ** Germany will start tendering groundmounted PV in 2015 Ireland Portugal UK Netherlands Poland Germany** Belgium Czech Republic* Slovakia Austria Hungary France Slovenia Romania Croatia Italy Bulgaria Spain Greece Malta Cyprus 15-12-03 Speaker 6

Source: Federal Government 2010, BMU/BMWi 2014, AGEE-Stat 2014 Energiewende targets until 2050 and progress made so far Achieved 2014 2020 2025 2030 2035 2040 2050 Climate % greenhouse gas reduction (vs. 1990) -26,4% (estimated) -40-55 -70-80 to -95 Renewable Energies Energy Efficiency % electricity consumption % final energy consumption % primary energy consumption (vs. 2008) energy productivity 27 % 12.4% (2012) -3,3 % (2013) +1.1% p.a. 35 40 to 45 18-20 50 55 to 60 65 30 45 +2.1% p.a. 80 60-50 building renovation ~1% p.a. doubling of renovation rate: 1% 2% Germany has set ambitious targets in all sectors and is partly on track. 7

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Source: Statistisches Bundesamt, BDEW /AGEB 2014 Where do we stand: Share of renewables is growing in all sectors, but fastest in electricity. 2003 total: 608.8 TWh renewables share: 45.6 TWh 2014 total: 610,4 TWh renewables share: 157,4 TWh 24.1% hard coal 5% others 3.1% wind nuclear 27.1% lignite 26% 7.5% 10.3% gas 1.1% biomass 2.9% hydro 0% solar 0.4% waste The renewables share in electricity production tripled within ten years. RE are now biggest source of electricity 11

Sourece: 50hertz, Boris Schucht 2015 Expansion of renewable energy sources in Germany wind solar PV biomass The number of renewable power plants as grown exponentially over the past 14 years. 15-12-03 12

GHG emission avoided, million tonnes CO2 -equivalents 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Source: BMWi AG EE-Stat 2014 GHG emission savings through renewables use 160 electricity sector heat sector motor fuel sector 140 120 100 80 60 40 20 0 In 2014 renewables avoided 152 million tonnes of CO 2 in Germany. 15-12-03 Speaker 13

Source: trend:research 2013 Ownership structure of German RES facilities in 2012 contractors and others 1% 13% funds and banks private investors 35% 14% industry 12% utilities farmers 11% 14% project developers Renewable installations create multiple opportunities for new entrepreneurship. 14

Challenge No.1: New (and smart) Infrastructure 2013 Network Development Plan led by Federal Network Agency Identified need for over 3800 km of new transmission (HVDC) Financing mechanisms in development Grid Expansion Acceleration Act (NABEG) Additional efforts on energy storage: Pumped hydro Power to gas EU electricity grid interconnection Research funding Smart Grid and E-Energy pilot communities Demand-side management 15

Source: Agora Energiewende 2012 The Challenge No.2: German electricity-system volatility in 2022 GW end of November 2022 week no. 47 GW mid-august 2022 week no. 33 80 80 60 60 40 20 40 20 Mon Tue Wed Thu Fri Sat Sun Mon Tue Wed Thu Fri Sat Sun electricity demand photovoltaic residual load hydro (fossil plants) onshore / offshore wind biomass Renewables will partially cover 100% of demand by as early as 2022. 16

Source: BMU 2012 Four areas to increase flexibility 20% 35% 50% 65% 80% Share of RE 2025 2035 2050 Target year Grids Grid expansion Generation Flexibility RE curtailment Consumption Demand response Storage Power-to-heat Pumped storage Power-to-gas Different flexibility measures are suitable for varying shares of volatile renewables. 15-12-03 Speaker 18

Source: Sterner, Stadler et al 2014 Characteristics of power storage technologies Pumped hydro * Compressed air Storage capacity* *logarithmic scales Technologies differ widely in duration of discharge and storage capacity. 15-12-03 Speaker 19

Source: Agora Energiewende / Öko Institut, 2014 * Biomass development low scenario Net feed-in payment trends in Germany bill. 25 20 15 liquidity reserve + account balance solar offshore wind onshore wind 10 5 0 2010 2011 2012 2013 2014 2015 2016 2017 biomass* solar (old) offshore wind (old) onshore wind (old) biomass (old) The main share of payments for renewable electricity goes to existing plants. New installations account for a much smaller share. 21

Source: Fraunhofer ISE 2014 based on data from BSW Average price of rooftop PV systems in Germany Declining module costs in particular have driven down PV system. 15-12-03 Referent 22

Source: TU Wien, DIW Berlin, 2013 Wholesale market pricing with merit order Price in /MWh Demand: 60 GW 100 Price: 75 /MWh 50 Merit order (stylised) The price is determined by the cost of the marginal technology. Price: 35 /MWh RES nuclear lignite hard coal gas oil Power plant dispatch in GW Renewables shift the merit order and lower price levels. 15-12-03 Speaker 23

Source: Fraunhofer ISI, DIW, GWS & IZES (2013) Costs and benefits of renewable energy sources Distribution benefits Reduced electricity market prices (merit order effect) Local added value Distribution burden Difference costs electricity Public support spending Macroeconomic benefits More jobs created in the renewables sector than jobs lost in conventional sect. GDP effect: reduced power market prices Avoided fuel imports Systemic benefits Avoided environmental damage Portfolio effect: more diversity Macroeconomic burden Less jobs in conventional energy sector Increasing energy prices for end-users Systemic costs Transaction costs: public support costs Balancing energy, grid extension costs Difference costs The benefits of a more sustainable energy supply outweigh the costs. 15-12-03 Referent 24

Source: BMWi 2013 Energy imports and domestic production in Germany % of primary energy consumption 100 90 80 70 60 50 40 30 20 10 0 domestic production import dependence 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 renewables lignite hard coal gas oil oil imports gas imports hard coal imports nuclear total imports Renewables reduce Germany s energy dependence. 25

Source: adelphi 2013, DLR/DIW/ ZSW/GWS 2013, BMU 2012 Job creation in the German renewables sector employees (in 1,000) 800 700 600 500 400 300 estimated optimistic scenario estimated moderate scenario geothermal hydro 200 100 0 1998 2000 2002 2004 2006 2008 2010 2012 2020 2030 solar biomass wind The renewables sector will grow to around 600,000 jobs in 2020. 26

Source: Infratest 6/2012, 9/2013 Public acceptance of the Energiewende very good good How do you assess the decision to carry out the Energiewende from today s perspective? 26% 40% 66% total extremely important important Renewable energy use and development are 66% 27% 93% total Attitude towards increasing the Renewable Energy Source Act surcharge to approximately six eurocents: not enough 5% appropriate 50% 55% total The German public broadly supports the Energiewende. 27

Renewable Energy Sources Act Amendment 2014 More coordination (1) Binding target corridors for RES deployment (2) Introducing quantity control mechanisms More efficiency (3) Focus on cost-efficient technologies More market integration (4) Increase market integration through premium system (5) Tendering scheme for ground-mounted PV Affordability Environmentallyfriendly energy supply More diversified distribution of costs (6) EEG levy on self-supply (7) Adjusted exemptions for the industry Security of supply More Europe (8) Open auctioning scheme for European neighbours 3-Dec-15 Speaker 28

Summary The German energy transformation is a concrete programme and it is happening. Renewable energy generation will be led by wind and solar power. Grid expansion and integration, more flexibility solutions (incl. storage) are required within Germany and across Europe. The restructuring offers numerous economic opportunities (for new and existing industries). The implementation will be monitored regularly. 29

Thank you for your attention! Thank you for your attention! Dr. Georg Maue, First Secretary Climate and Energy Policy Embassy of the Federal Republic of Germany 4645 Reservoir Road, Washington, DC 20007 Tel: +1 (202) 298 4355 Fax: +1 (202) 298 4391 E-mail: wi-6@wash.diplo.de 30

Source: Fraunhofer ISI 2014 Levelised cost of electricity in Europe 2014, 2020, 2030 Many technologies can already compete with conventional powerplants, onshore wind in particular. 15-12-03 Referent 31

Jan 06 Jul 06 Jan 07 Jul 07 Jan 08 Jul 08 Jan 09 Jul 09 Jan 10 Jul 10 Jan 11 Jul 11 Jan 12 Jul 12 Jan 13 Jul 13 Jan 14 Jul 14 Jan 15 EEG remuneration an net electricity prices [ct/kwh] Source: EEG 2014 (Draft, 26.06.2014), BSW 2013, 2014, BMWi 2013 System price [EUR/kWp] (3) PV support costs decline steadily Support levels solar energy (Cent/kWh) January 2006 Roof-top installations March 2014 < 10 kw 51,80 12,59 60 50 40 ground-mounted system small roof-top system net system price for 10 kw roof-top system 7000 6000 5000 < 40 kw 51,80 12,25 < 100 kw 49,28 10,59 Large installations FiT FiP < 1000 kw 48,74 11,26 30 20 10 Electricity price households (net) Electricity price industry (net) 4000 3000 2000 1000 < 10 MW 48,74 9,05 0 0 Groundmounted 40,60 tendered 15-12-03 Referent 32

Source: BMU 2013, BMWi 2014 German energy imports cost trend bill. 300% 31.1 36 40 35 import costs saved due to RES import costs 250% 200% 150% 100% 25.2 10 8.4 4.4 5.6 6.3 6.1 6.6 7.1 1.4 1.6 1.7 1.9 2.9 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 30 25 20 15 10 5 0 import costs saved due to RES and energy efficiency import costs excl. RES production actual import costs (incl. RES production) Renewables save Germany billions in import costs for fossil fuels. 33

Source: Renewable Energy Act 2014 (Draft, 26.06.2014) (3) Technology specific support levels EEG 2014 Corridor Remuneration in ct/kwh Degression Hydropower - 3,50 12,52-0.5 %/a from 2016 Landfill, sewage and mine gas - 3.80 8.42-1.5 %/a from 2016 Biomass 100 MW (gross) 5.85 23.73 (dependent on fuel and size) -0.5 % every three months from 2016 Geothermal 25.20-5.0 %/a from 2018 Wind energy onshore Wind energy offshore Solar energy (PV) 2,400 2,600 MW (net) Standard tariff: 8.90, for at least 5 years; Minimum 4.95 - Initial tariff: 15.40 for min.12 years; Option: 19.40 for min. 8 years if installed before 2020 Minimum 3.90 2400 2600 MW (gross) 9.05 12.89 (and tenders for ground-mounted PV) -0.4% every quarter from 2016 Standard tariff: - 0, 5 ct/kwh in 2018, 1 ct/kwh in 2020-0,5 ct/kwh/a 2021; Option: - 1 ct/kwh in 2018-0.5 % per month from 09/2014 15-12-03 Referent 34

Source: REN 21 2014 Renewable power capacities worldwide After hydropower, wind is the leading renewable source. Its main market is China. 15-12-03 Speaker 35

Source: OECD 2013, GWEC 2014, WWEA 2015 Wind market development worldwide 50000 annually installed capacity (MW) 40000 30000 20000 10000 Rest of the world Rest of EU-28 Poland Sweden France Italy United Kingdom Spain Germany 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 The German wind market has grown steadily, while other European markets have experienced highs and lows. 15-12-03 Speaker 36

Source: BMWi and BMU 2012, BNetzA and BKartA 2012-2014 Costs of balancing measures to ensure grid stability 1600 1400 curtailment of renewables mill. 1200 1000 800 600 400 redispatch, countertrading, blackstart capability, reactive power compensation for transmission losses 200 0 2007 2008 2009 2010 2011 2012 2013 balancing energy System service costs fell despite the energy transition. Better coordination between the four TSOs has reduced costs since 2010. 15-12-03 Speaker 37

Source: NDP 2013 baseline scenario 2023 Electricity generation per federal state in 2023 Lignite Hard coal Natural gas Oil Pump storage generation CHP Other conventional Wind onshore Wind offshore PV Biomass Hydro power Other renewable Demand Pump storage consumption Generation capacity in the North will cover demand in the South. 15-12-03 Referent 38

Source: Map from Offshore Stiftung 2014, Data BMWI 2014 Offshore wind potential Figures for Germany Capacity (MW) In operation (as of June 2014) 628.3 Under construction approx. 2,300 Electricity generation offshore wind 2012: 675 MWh (June 2014 estimate: 2.5 TWh) Target 6.5 GW by 2020, 15 GW by 2030 Large offshore wind will support the system as baseload power plants. 15-12-03 Referent 39

Petajoule [PJ] Source: Prognos, EWI, GWS 2014 Trends in German primary energy consumption (reference scenario) 16000 14000 others 12000 natural gas 10000 oil 8000 lignite 6000 hard coal 4000 2000 0-2000 2011 2020 2025 2030 nuclear net electricity imports renewables Renewable energies play an increasingly important role in the energy supply. 15-12-03 Speaker 40

Petajoule [PJ] Source: Prognos, EWI, GWS 2014 Trends in German primary energy consumption (target scenario) 16000 14000 others 12000 natural gas 10000 oil 8000 lignite 6000 hard coal 4000 2000 0-2000 2011 2020 2025 2030 nuclear net electricity imports renewables Renewable energies play an increasingly important role in the energy supply. 15-12-03 Speaker 41

Source: Statistisches Bundesamt 2014 Mill. t/a Hard coal suppliers for the German market 70 60 50 40 30 20 10 Domestic production South Africa EU Australia Russia Colombia USA 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 others Canada Coal imports remain stable while domestic production has declined. 15-12-03 Referent 42

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014* Source: Ecofys 2015 based on BMWi 2014 German energy expenditures and shares expenditures per year 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0 4-person household share of net-income 22% 20% 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% motor fuels ( 1,200 l petrol /a) natural gas (12,000 kwh/a) electricity (4,500 kwh/a) average household low-income household An average 4-person household spends roughly 7% of it s income on energy. Petrol accounts for the the largest share. *preliminary data 15-12-03 Referent 43

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Source: UBA, BNetzA 2013, BDWi 2013 based on Netzentwicklungsplan 2012, Scenario B 2022 German power generation capacities by region Renewable energy Wind installed 1,000 MW Wind expected Solar installed 1,000 MW Solar expected Wind energy Installed capacity (2013) 30,284 MW Expected capacity (2022) 58,700 MW Solar energy Installed capacity (2013) 33,409 MW Expected capacity (2022) 54,100 MW Nuclear phase-out will affect regions to a different extent: High capacity loss in southern and northwestern Germany will be replaced manly by PV, hydropower and biomass in southern Germany and by wind from northern Germany. 15-12-03 Speaker 45

Source: BMWi 2014 Renewables share in % (1) Renewables share in gross electricity consumption 50 45 40 35 45.0 40.0 Overall target corridor In 2025: between 40% and 45% RES-E In 2035: between 55% and 60% RES-E 30 25 20 15 10 6.2 5 10.2 17 27.8 Capacity additions Onshore wind and PV 2 500 MW (2.5 GW) per year each Bioenergy 100 MW per year Offshore wind 6.5 GW by 2020, 15 GW by 2030 0 2000 2005 2010 2015 2020 2025 Focus on Wind and PV as most cost-effective solutions 15-12-03 Referent 46

Source: BMWi 2014 (2) Flexible adjustment of capacity expansion Support levels react flexibly to market development. 15-12-03 Speaker 47

Source: Prognos et al. 2012 Distribution of costs Final electricity consumption TWh 600 500 400 300 0.1 70 72 87 44 46 45 3.5 0.1 22.5 5.6 2.6 6.0 65 81 85 86 96 107 44 47 0.2 1.1 2.3 2.8 52 53 54 44 Exempted from paying full EEG levy Partially exempted (EEG 2014) 200 100 425 423 416 401 405 377 386 382 370 Fully liable to pay EEG levy 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 non-priviledged final consumption auto generation PV self supply priviledged final consumption (BesAR) exempted according to 39 EEG The new EEG also involves those who benefit from the EEG. 15-12-03 Referent 48

(7) Exemptions for energy intensive industries Eligibility criteria Requirement Electricity intensity International trade Description Companies that work in one of the electricity-intensive sectors registered in the EU wide list 1 Additional sectors prone to international competition as featured in list 2 of the EU Commission Electricity cost intensity List 1: required electr. cost intensity of 16-17% List 2: required electr. cost intensity of 20% Support scheme Minimum contribution: full EEG surcharge for the first GWh Price: In principle, 15% of the EEG surcharge, cap at 0,5 % / 4% of gross value added, but at least 0.1 ct for every kwh beyond 1 GWh The adjusted compensation scheme follows the EU Commission guidelines. 15-12-03 Referent 49

Fact-Check for some Myths around the Energiewende (1) Does Germany need to import electricity after shutting down 8 NPP? Does Germany face outages with rising RE and less NPP? Does Germany have to use more coal to compensate for NPP? (Industry) Studies from 2011 predicted negative effects on German GDP due to increase in wholesale electricity prices, CO2 prices. Did that happen? 50

Source: Ecofys based on ENTSO-E 2014 Electricity import and export No! Germany rather exported (net) more electricity than ever (in 2014 net export added up to 35 TWh = 6 % of total production.) balance (load flow) exports imports Germany has been a net exporter since 2003. The Netherlands imports the highest amount, while France delivers the most energy to Germany. 51

Source: CEER 2014 Average duration of supply failures in 2012 300 average duration in min/a 250 200 150 100 50 0 excluding exceptional events including exceptional events Germany will maintain top security levels despite the energy transition. 53

Source: AGEB 2014 German electricity mix (gross power generation) trends:continuous RE growth; less fossils/nuclear TWh Renewables have become the biggest source of power generation. 55

Fact-Check for some Myths around the Energiewende (4) Does Germany need to import electricity after shutting down 8 NPP? Does Germany face outages with rising RE and less NPP? Does Germany have to use more coal to compensate for NPP? (Industry) Studies from 2011 predicted negative effects on German GDP (German Industries) due to increase in wholesale electricity prices, CO2 prices. Did that happen? 56

Negative predictions did not come true 1) Electricity wholesale prices down by > 30% since 2011 good for industry, bad for renewable surcharge 2) CO2 prices down by > 60% since 2011 57