Germany s energy transition (and implications for Australia)

Germany s energy transition (and implications for Australia) Prof. Dr. Andreas Löschel Westfälische Wilhelms University Münster April 2015

The German Energy Transition end 1990s: fundamental decision for renewable energy system 2010: Energy Concept of German Government Securing a reliable, economically viable and environmentally sound energy supply is one of the great challenges of the 21st century. [ ] 2011: Fukushima and decision to phase out nuclear by 2022 Energiewende needs monitoring 2

Monitoring the Energy Transition http://www.bmwi.de/en/topics/energy/ Energy-Transition/monitoring.html Progress Report 2014 A lot achieved, a lot ahead http://www.bmwi.de/en/topics/energy/ Energy-Transition/progressreport,did=690530.html 3

Long Term Targets of the Energy Transition 96,7% (Ren 25,3%) 96,0% (Ren 12,0%) energy productivity 2,1% Total electricity consumption Renewable electricity share in electricity generation Primary energy consumption Renewable energy share in final energy consumption 101,0 Primary energy supply in buildings Primary energy supply in transport sector -22,6% Sources: AGEB, AGEE, BMU, Bundesregierung, UBA 4

Develop pathways and consistent targets Develop hierarchy of targets not all have the same importance What has to be strictly achieved, what is indicative and adjusted if enconomic, social, environmental costs turn out to be too high? Oberziele Main targets Reduktion der Treibhausgasemissionen GHG emissions Ausstieg aus der Nuclear Kernenergie phase out Unterziele 1. Ebene Indicative targets 1st level Anteil der erneuerbaren Energien Share of renewables am Brutto EEV Energy Reduktion efficiency des PEV 2nd level 2. Ebene Biomethaneinspeisung biogas Kraftstoffe aus EE Wärme aus EE Strom aus EE fuel heat electr. Strom aus KWK Red. Stromverbrauch Red. EEV Raumwärme Red. EEV Verkehr 3. Ebene 3rd level Maßnahmen Measures GasNZV BioKraftFÄndG MAP EEWärmeG Offshore Windleistung off shore EEG (Novelle) KfW Programm Offshore Wind KWKG (Novelle) Sanierungsrate Source: Löschel et al. (2012) Monitoring: Is actual progress as expected and to what extent are additional actions needed NABEG insulation Energie und Klimafonds EnWG (Novelle) 5

Where are we: changes and targets Historical change 1990-2012 bzw. 1990-2013 2008-2012 bzw. 2008-2013 Average yearly change in % 2012-2020 bzw. 2013-2020 2020-2050 GHG emissions 1) -1,3-1,1-2,8-3,6/-7,9 3) Primary energy consumption 2) -0,2-1,3-2,6-1,6 Primary energy productivity 2) 1,9 1,7 3,0 2,5 Gross electricity consumption 2) 0,3-0,7-1,0-0,6 Electricity consumption productivity 2) 1,1 1,4 1,6 1,5 Final energy productivity 1) 1,8 1,1 2,6 2,1 Final energy use (heating) 1) (households) -0,7-2,9-1,3-4,5 Final energy use in transport 1) 0,3-0,1 4) -1,2-1,3 CHP-electricity 1) 2,3-3,2 5) 1,6-3,1 3,6-4,5 1) Bezugsjahr 2012 2) Bezugsjahr 2013 3) Emissionsminderung -80%/-95% 4) 2005-2012 5) 2003-2012 Necessary change to reach target 6

GHG emission reductions Government determined to reach 40% GHG reduction target CO 2 from electricity sector: lignite (159 Mt), hard coal (87Mt), gas etc (66 Mt) Possibilities Measures outside ETS (buidings, transport) Strengthen ETS (MSR, retirement) 1400 Retire EUAs 1200 Measures in electricity sector 1000 National CO 2 tax 800 Proposal after Climate Action Programm: lignite in cap reserve 600 400 200 1.248 1.118 1.040 994 951 750 560 375 250 ( 80%) 60 ( 95%) 0 1990 1995 2000 2005 2010 2012 2013 2020 2030 2040 2050 2050 Treibhausgasemissionen in Mio. t CO 2äqu. Summe Treibhausgasemissionen Minderungsziele Veränderungen der Treibhausgasemissionen Ist Entwicklung von 1990 bis 2013 : 23,8 % ( 1,2 % p.a.) Notwendige Minderung 2013 bis 2020 : 21,2 % ( 3,3 % p.a.) zur Zielerreichung: 2020 bis 2050( 80%) : 66,7 % ( 3,6 % p.a.) 2020 bis 2050( 95%) : 92,0 % ( 8,1 % p.a.) 7

Renewable support effective, but not efficient Renewable Energy Sources Act (EEG): long term fixed technology specific feed in tariffs with privileged access to market and obligation for network connection: 20,5 GW ( 04) to > 80 GW ( 14) EEG 2014: reduction in feed in tariffs, targets for annual increase in installations New support scheme after 2017 (market integration, grid development) 100.000 Installed renewable capacity Power production in 2014 (610 TWh) 23,5 % 80.000 60.000 40.000 20.000 0 1990 1991 Wasserkraft Water Photovoltaik Photovoltaik Geothermie Geothermal 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Windenergie onshore an Land Biomasse Biomass 2006 2007 2008 2009 2010 2011 2012 2013 2014 201 Source: AG Energiebilanzen 8

Nuclear phase out and capacity nuclear (and fossil) production plants close to consumers Source: BNetzA 9

Transmission grid extension lacks behins Finished km Target 2009 Target 2013 10

Energy consumption and energy efficiency Final energy efficiency improved since 1991, but improvements slower after 2008, 0,9 %/year (2008 2013) Lowest improvement in industry and transport (2008 2013) National Action Plan for Energy Efficiency (NAPE) adopted December 2014 170 160 150 140 130 120 110 100 90 80 GHD Services Straßengüterverkehr Freight transport Gesamtwirtschaft Total economy Straßenpersonenverkehr Road transport Haushalte Households Industrie Industry Source: Expert commission on the Energy of the future monitoring process, Statement on the first progress report by the German government, December 2014 11

Costs play a crucial role, distribution matters Energy costs increase sharply due to support for renewable capacities, transmission and distribution grid investment, investments in backup capacities and storage total amount FiT increased from 2 bn (2002) to about 20 bn (2012) on average 19 ct/kwh FiT renewable costs per household with 3500 kwh/year up from 55 EUR in 2010 to 220 EUR 2014 Total electricity costs for final consumers (bn EUR) Total electricity costs relative to GDP Source: Energy Monitoring Commission (2012), Löschel et al.

Costs play a crucial role, distribution matters Willingness to pay unclear on average <<, but positive ca. 12 Euro/ton CO 2 but: more than 60% 0 EUR! 30 25 20 15 10 5 0 Electricity Price for Households ( ct/kwh) 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Generation, Transport, Sales VAT Concession Fee EEG Energy Tax Others Source: Data BDEW, German Statistic Office, Own Illustration Average Electricity Price for Industry ( ct/kwh) Average Electricity Price for Energy intensive Industry 16 14 12 10 8 6 4 2 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Generation, Transport, Sales Concession Fee EEG Energy Tax Others Source: Data BDEW, German Statistic Office, Own Illustration Source: Frontier / EWI (2012) 13

Real per unit energy costs in manufacturing sector Real per unit energy costs as source of comparative advantage 35% 30% 25% 20% 15% 10% 5% EU 27 USA CHN JPN DEU FRA GBR 0% Source: Germeshausen und Löschel (2015)

Energy costs in different manufacturing sectors 30% Nahrung, Getränke und Tabak Textilien und Textilprodukte 25% 20% 15% 10% 5% 0% 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Leder, Lederwaren und Schuhe Holz und Holz und Korkprodukte Papier, Pappe, Waren darauf, Druckerzeugnisse Chemie und chemische Produkte Gummi und Kunststoffwaren Andere nicht metallische Mineralien Metallerzeugung und Metallerzeugnisse Maschinenbau Elektronische und Erzeugnisse Kraftwagen, Kraftwagenerzeugnisse, sonstiger Fahrzeugbau Möbel und sonstige Waren Quelle: Germeshausen und Löschel (2015)

Real per unit energy costs in chemical sector Shale gas boom etc. vs Energiewende Energy per unit costs from gas and oil Energy per unit costs from electricity & steam France Germany France UK UK Germany Quelle: Germeshausen und Löschel (2015) 16

Energy innovation crucial for success Focus on renewable patents, high absolute numbers

Conclusion: Energiewende Gaps in climate target and efficiency Climate policies largely determined in ETS sectors focus on ETS reform and non ETS sectors Renewable policies not efficient use market mechanisms as far as possible (premia and market splitting) Grid extension as a bottleneck (also in EU) Total costs are still under control even though prices increased, costs for industry important (also consideration of energy poverty) Willingness to pay for climate measures in Germany to be seen acceptance unclear European vision is necessary harmonisation of renewable support and further development of internal market for energy 18