PHOTOVOLTAICS IN THE GERMAN POWER SYSTEM

PHOTOVOLTAICS IN THE GERMAN POWER SYSTEM Past, Now and in the Future Dr. Simon P. Philipps Fraunhofer Institute for Solar Energy Systems, ISE / Fraunhofer Energy Alliance Wind & Solar Seminar, Vaasa Energy Week Vaasa, Finnland, 16 March 216 www.ise.fraunhofer.de

CONTENT Short Introduction to Fraunhofer Now PV Installations and Market Electricity Generation from Renewables Past The (Political) Path to High Amounts of PV And in the Future Cost Perspective System Perspective 2

The Fraunhofer-Gesellschaft Largest Organization for Applied Research in Europe 67 institutes and research units Staff of nearly 24, More than 2.1 billion annual research budget, of which around 1.8 billion is generated through contract research Roughly 7 percent on behalf of industry and publicly funded research projects. Roughly 3 percent is contributed by the German federal and state governments in the form of base funding.»fraunhofer-linien«fraunhofer lines 3

The Fraunhofer-Gesellschaft Locations in Germany 67 institutes and research units Staff of nearly 24, Zentrale Main locations o Other locations Headquarters 4

Fraunhofer Energy Alliance Facts and Figures 18 member institutes 5 business areas Renewable Energies Energy Efficiency Technologies Buildings and Components Intelligent Energy Systems Energy Storage Business Office at the Fraunhofer Institute for Solar Energy Systems ISE, Freiburg Zentrale 5

Fraunhofer Institute for Solar Energy Systems ISE Performing Research for the Energy Transformation Director: Prof. Eicke R. Weber Staff: ca. 11 Budget 215: 83.7 million (preliminary) Established: 1981 6

Fraunhofer ISE Our Areas of Business PHOTOVOLTAICS SOLAR THERMAL TECHNOLOGY BUILDING ENERGY TECHNOLOGY HYDROGEN TECHNOLOGIES ENERGY SYSTEM TECHNOLOGY 7

CONTENT Short Introduction to Fraunhofer Now PV Installations and Market Electricity Generation from Renewables Past The (Political) Path to High Amounts of PV And in the Future Cost Perspective System Perspective 8

More than 39 GW of PV are installed in Germany Building- Integrated <1% Rooftop Single-familiy houses 1-1 kwp ca. 13% Picture: Schüco Picture: Grammer Multi-family houses, commercial + public buildings, farms 1-1 kwp ca. 41% Large commercial buildings > 1 kwp Picture: Sulfurcell ca. 19% Picture: Solarwatt Picture: Solarwatt Picture: BP Field Installation 9 Degree of Integration Share of cumulated installation until Dec. 214 Size ca. 26% ca. 26% Picture: Geosol Picture: Phoenix Data Sources: 2-29: Bundesnetzagentur, BSW Solar; From 21: IHS

Global Cumulative PV Installation until 214 13% Japan 18% China & Taiwan 12% USA 1% Italy 2% Germany 1 Data: IHS. Graph: PSE AG 215

Electricity Generation in Germany 215: 3% from Renewables! 3% Hydro 6% PV 8% Biomass 13% Wind Data: BMWi 11

CONTENT Short Introduction to Fraunhofer Now PV Installations and Market Electricity Generation from Renewables Past The (Political) Path to High Amounts of PV And in the Future Cost Perspective System Perspective 12

Contribution of RES to Electricity Supply in Germany Historical Development 39 GW PV in 15a 41 GW Wind in 25a Electricity Feed-in Act: Jan. 1991 - March 2 EEG: April 2 EEG: August 24 EEG: January 29 3% 1, roofs program: 1991-1995 1, roofs program: 1999-23 3% 13 Data: BMWi

Electricity Feed-in Act of 199 The First Impulse for Market Entry of RES Electricity Market was dominated by a few large power companies à Aim: Opening of electricity market for producers of power from RES Utilities required to connect RES generators to the grid Legally fixed prices: 65 to 9 % of average tariff for final customers àeffect: Easy access to the grid and fixed prices àwind energy and small hydropower profited primarily 14

Contribution of RES to Electricity Supply in Germany 1, and 1, Roofs Programs EEG: January 29 EEG: April 2 EEG: August 24 3% Electricity Feed-in Act: Jan. 1991 - March 2 1, roofs program: 1991-1995 1, roofs program: 1999-23 3% 15 Data: BMWi

1, and 1, Roofs Programs Incentives for PV-Installations Electricity Feed-in Act: Price for renewable energy connected to respective electricity price à No push for development of not-yet competitive renewables Early 9s: 1, Roofs program as incentive to install PV on buildings (1-5 kw) à ~ 7% of investment was granted by the government 1999-23: 1, Roofs program: low interest credits for PV installations Source: Wikipedia 16

A new Strategy in Germany The Renewable Energy Act (EEG) EEG: January 29 EEG: April 2 EEG: August 24 3% Electricity Feed-in Act: Jan. 1991 - March 2 1, roofs program: 1991-1995 1, roofs program: 1999-23 3% 17 Data: BMWi

How Does the Feed-In Mechanism Work in Germany? Strength of Feed-in-Tariff Government Provides for grid access, sets feed-in tariffs Feed-in payment Renewable electricity RES-E Producer Utility Payment for conventional electricity Conventional electricity Electricity consumer + Feed-in- Tariff-bonus Attractive and secure investments Distribution of costs over a long period and among a high number of people Digressive rates lead to cost reduction and early investments Each technology can be supported individually Weaknesses Political Dependency Growing costs at the beginning 18

The Success of the EEG for PV - I Technological Improvements: Performance Ratio in the 199s Typical PR ~7% Very wide PR-range 19 Source: Fraunhofer ISE 1 Dächer Jahresbericht 1994 and 1997; 211 system evaluation

The Success of the EEG for PV - I Technological Improvements: Performance Ratio Today Typical PR ~8-9% Less variance of PR as compared to 199s 2 Source: Fraunhofer ISE 1 Dächer Jahresbericht 1994 and 1997; 211 system evaluation

The Success of the EEG for PV - II Price Reduction of PV Systems in Germany 26-215 Average Price for PV Rooftop Systems in Germany (1kWp - 1kWp) BOS incl. Inverter Modules Data: BSW-Solar. Graph: PSE AG 215 21 Source: Fraunhofer ISE: Photovoltaics Report, updated: 24 March 216

The Success of the EEG - III Electricity Costs in Germany Data: BMU, EEG 214 and BMWi Energiedaten. Design: B. Burger - Fraunhofer ISE, Update: 16.1.215 22 Source: Fraunhofer ISE: Photovoltaics Report, updated: 24 March 216

The Success of the EEG - III PV-Electricity Cost in Germany à Grid Parity in 211! Data: BMU, EEG 214 and BMWi Energiedaten. Design: B. Burger - Fraunhofer ISE, Update: 16.1.215 23 Source: Fraunhofer ISE: Photovoltaics Report, updated: 24 March 216

The Success of the EEG - III PV-Electricity Cost in Germany à Comparable to Wind Data: BMU, EEG 214 and BMWi Energiedaten. Design: B. Burger - Fraunhofer ISE, Update: 16.1.215 24 Source: Fraunhofer ISE: Photovoltaics Report, updated: 24 March 216

CONTENT Short Introduction to Fraunhofer Now PV Installations and Market Electricity Generation from Renewables Past The (Political) Path to High Amounts of PV And in the Future Cost Perspective System Perspective 25

Price Learning Curve Driven by Market Growth and Technology Developments Learning Rate: Each time the cumulative production doubled, the price went down by 19.6% for the last 34 years. 26 Source: Fraunhofer ISE (215): Current and Future Cost of Photovoltaics. Study on behalf of Agora Energiewende

Long-term utility-scale PV system price scenarios 27 Source: Fraunhofer ISE (215): Current and Future Cost of Photovoltaics. Study on behalf of Agora Energiewende

Levelized Cost of Electricity Solar Power will soon be the Cheapest Form of Electricity in Many Regions of the World 28 Source: Fraunhofer ISE (215): Current and Future Cost of Photovoltaics. Study on behalf of Agora Energiewende

Levelized Cost of Electricity Financial and Regulatory Environments will be the Key to Reducing Cost in the Future 29 Source: Fraunhofer ISE (215): Current and Future Cost of Photovoltaics. Study on behalf of Agora Energiewende

Electricity System with High Shares of Renewables Example: Electricity Generation in Germany in Jan. 214 Actual Production Max. Power Date Max. Power Monthly Energy 3 Grafik: B. Burger, Fraunhofer ISE; Daten: Leipziger Strombörse EEX, http://www.transparency.eex.com/de/ Interactive graphs on German electricity production: www.energy-charts.de

Electricity System with High Shares of Renewables Example: Electricity Generation in Germany in June 214 Actual Production Max. Power Date Max. Power Monthly Energy 31 Graph: B. Burger, Fraunhofer ISE; Daten: Leipziger Strombörse EEX, http://www.transparency.eex.com/de/ Interactive graphs on German electricity production: www.energy-charts.de

How Will the Energy System Look Like in 25? Electricity Mobility Heat à Develop a model to simulate the transformation of the energy system 32

Model Germany s Energy System Electricity generation, storage and end-use Fuels (including biomass and synthetic fuels from RE) REMod-D Renewable Energy Model Deutschland Techno-economic optimization based on comprehensive simulation (hourly time scale) Mobility (batteryelectric, hydrogen, conv. fuel mix) Heat (buildings, incl. storage and heating networks) Processes in industry and tertiary sector 33 Henning, H-M., Palzer, A.: Was kostet die Energiewende?, Study Fraunhofer ISE, November 215

Sun Solar thermal GW 58 PV 125 128 GW 85 5 Methanation 2 GW 55 Battery stor. GWh Total quantity heating Conversion 17 Losses 18 264 Final energy 28 Mobility Water Wind Environmental heat Deep geothermal 121 3 Hydro power 21 5 GW Onshore wind 419 12 GW Offshore wind 176 32 GW 135 Electrolysis 15 GW H2-storage GW 18 Bio-2-H2 GW Bio-2-CH4 GW 19 Battery veh. 18 36 GWh 6 Pumped stor. 5 1 GWh H2-2-Fuel GW 71% Renewables 29% Fossil Total quantity hydrogen Conversion Losses 18 Final energy 18 1% Renewables % Fossil Total quantity gas 128 Conversion Losses 52 Final energy 63 21 237 2 Electricity (baseload) 375 Raw biomass Natural gas Petroleum Lignite Hard coal Uranium 34 Renewable energy sources 19 Bio-2-Liquid 9 23% Renewables 375 1 GW 77% Fossil 335 Total quantity raw 141 Biodiesel 85 biomass 13 15 GW Biogas plant 244 Conversion Losses 13 13 Processing 91 2 GT 1 72 Final energy 49 1 GW 17 GW 335 383 1% Renewables Biogas 13 Bio-2-el. CCGT % Fossil 52 storage GW GW Total quantity liquid 11 77 fuels 485 Reforming District heat GW 5 GW Conversion 126 CHP HP 39 1 66 Losses 237 Final energy 237 144 39% Renewables Oil PP 61% Fossil GW 215 Electricity Total quantity Import 98 electricity 37 Lignite PP 13 REMod-D Energy 3 GW 271 Conversion 2 88 Losses 51 Final energy 68 Hard coal PP 27 86 system model 7 GW 16 Electricity 87% Renewables 46 Surplus Export 13% Fossil Nuclear PP GW Renewable raw materials Primary fossil energy carrier Energy conversion Storage Consumption sector Hydrogen Heat Gas Raw biomass Liquid fuels Electricity Industry (fuel based process) 11 445 Heating (space heating and hot water) 384 CO2 emissions 199 (reference year) 99 Mio t CO 2 CO2 emissions 196 Mio t CO 2 CO2 reduktion related to 199: 8%

Major Guiding Question for the Model What is the cost-optimal transformation pathway of the German overall energy system including all sectors? Essential boundary condition: Political goals of reducing greenhouse gas emissions are fulfilled Both for the target value and in each single year 35

Energy Transition: Techno-Economic Path Optimization Fluctuating Renewable Energy in 25 Wind Offshore Wind Onshore PV #1-8 % CO 2, Coal exit not accelerated Installed Power 25 in GW #2-8 % CO 2, Coal exit accelerated #3-85 % CO 2, Coal exit accelerated #4-9 % CO 2, Coal exit accelerated Fraunhofer Henning, H-M., Palzer, A.: Was kostet die Energiewende?, Study Fraunhofer ISE, November 215

Energy Transition: Techno-Economic Path Optimization Energy and CO 2 in the - 85-%-Scenario Electricity Generation Electricity Consumption Primary Energy CO 2 - Emissions Mio. t Fraunhofer Henning, H-M., Palzer, A.: Was kostet die Energiewende?, Study Fraunhofer ISE, November 215

Energy Transition: Techno-Economic Path Optimization Cost in the - 85-%-Scenario Cumulative Kumulative Costs 214-25, Kosten 214-25, Mrd. Mrd. Boundary Conditions No cost of CO 2 - Emissions Constant prices for fossil fuels Cumulative Kumulative Costs 214-25, Kosten 214-25, Mrd. Mrd. Increasing cost for CO 2 - Emissions to 1 /Ton in 23; constant afterwards Increasing prices for fossil fuels (2 % p.a.) Fraunhofer Henning, H-M., Palzer, A.: Was kostet die Energiewende?, Study Fraunhofer ISE, November 215

How Will the Energy System Look Like in 25? Essential messages out of the model: The cost of the new Energy Electricity System is not higher than the cost for the current system! The cost for transformation is in the same order as Mobility Heat maintaining the current system! Fraunhofer

The Phases of the Energy Transition Phase 1 (completed) Phase 2 (ongoing) Renewable Energy Share Installation of Renewable Energies primarily for electricity generation (Wind, PV) No substantial change of the system architecture System Transformation Flexible Generation and Consumption of Electricity Promotion of Efficiency and decrease of consumption Infrastructure-setup (e.g. heat networks) Natural gas essential, in particular for complementary electricity generation Storage becomes more important Business Models for storage operation and complementary electricity generation Phase 3 The last 15-2 percent Long-time storage (e.g. power-to-gas for electricity/heat) Displacement of natural gas (Power-to-Gas) International networks Time Source: Hans-Martin Henning, Andreas Palzer (Fraunhofer ISE) Fraunhofer

Summary PV has become a cost-efficient and major element of the German electricity system à 6% of the German Electricity Generation in 215 Several political means have enabled technology improvements and cost reduction of PV à 8-1 ct./kwh Cost of PV systems will decrease further making PV the cheapest form of electricity in many regions of the world à 2-4 ct./kwh Financial and regulatory environments will be the key to reducing cost in the future The key for an energy system based on Renewables is to link the electricity, heat and transport sectors. Fraunhofer

Thank you colleagues at Fraunhofer ISE and you for your attention Fraunhofer Institute for Solar Energy Systems ISE Dr. Simon P. Philipps www.ise.fraunhofer.de simon.philipps@ise.fraunhofer.de 42