How policy drives the German Energy Transition (Energiewende): lessons for SA

Since 1990, and particularly since Energiewende was launched in 2012, the share of renewable energy (RE) within Germany’s total energy supply has steadily increased. The most significant growth has been evident within the electricity sector, where the RE supply share has grown from a base of less than 5% in 1990, to 28% in 2014. Policy is now aimed at further growing this share to between 40 – 45% by 2025, and to 80% by 2050.

How has this growth been achieved thus far?

Feed-in tariffs (FiTs) supported by the Feed in law of 1991 guaranteed eligible RE plants grid feed-in premiums on top of electricity market prices, for 20 years, but a key early policy instrument for the expansion of renewable energy in the German electricity market has been the Renewable Energy Sources Act (EEG) of 2010. The EEG grants RE legal priority access to the national grid, as well as priority transmission and distribution.

In 2012 the Feed-in tariffs were reduced and the latest revision of the EEG in 2014 aims to further reduce costs and improve market integration of renewables. The 2014 amendment also prepared the way for a policy change from feed-in tariffs to auctions. This is a great illustration of how good subsidy design includes allowance for evolution or even phase out over time, so that technology learning can be taken into account and benefitted from fully.

Beyond policy, the transformation of Germany’s power sector arguably receives the largest share of public and political attention today. Taken together, the result is a broad high priority placed on the country’s energy transition so that progress is both widely debated, fostered and driven by common vision.

What are some of the specific targets for transition and how might these be achieved?

A closer look at the energy policy history and context reveals a comprehensive policy drive toward achieving the ambitious transition goal of phasing out both Coal and Nuclear power supply.

Increasing the share of RE in final energy consumption for heating and cooling by 14% by 2020 will require drastic changes in the fields of heating and cooling, transport and energy efficiency. The principal policy instrument to attain this goal is the 2009 Renewable Energies Heat Act (EEWärmeG) which includes key new building regulations (including public buildings).

Ensuring the transport policy goal that 10% of energy consumption in transport is based on RE sources by 2020[1] will require comprehensive changes within the sector, including that mineral oil companies supply a rising quota of RE sources within the overall transport fuel they sell. Electric mobility is another focus of transport policy, and government aims to have one million electric vehicles on the roads by 2020. Support for electric mobility includes research and development funding and tax exemptions.

Energy Efficiency (EE) has long been considered a central lever to cost-effectively cutting Germany’s GHG emissions and increase energy security. Efficiency improvements also contribute directly to overall energy demand reduction. The energy saving ordinance (EnEV) was introduced in 2002 to enhance EE in the building sector and to introduce energy performance certificates. The law sets minimum requirements for energy performance and its most recent amendment aims for all buildings to be nearly energy neutral by 2021. In addition, a modernisation programme for buildings was introduced in 2006, to incentivise efficient construction of new and refurbishments of existing buildings, along with a special fund aimed at enhancing EE in small and medium enterprises.

On mitigation, as a member state of the European Union, Germany has committed to reduce GHG emissions by 80 – 95% by 2050 (compared to 1990 levels). Expansion of RE to substitute fossil fuels is set to make a major contribution to meeting this commitment. In 2014, redeployment of RE avoided emission of 148 Mt CO2 equivalent. The main challenge is to reduce Germany’s emissions from coal firing which rose by 7% between 2008 and 2013, alongside phasing out of nuclear and rapid expansion of RE during the same period.

In July 2015 the German government adopted a policy which will result in Lignite power plants with a combined installed capacity of 2.7 GW being placed within a capacity reserve from 2017 onward. Plants within the reserve will not offer their electricity on the spot market, instead they will receive a fixed compensation for a period of four years at the end of which they will be closed permanently. Implementation of an agreement between the government and the lignite industry to provide additional reduction of 1.5 milliion tonnes of CO2/annum as from 2018, is currently underway.

For the energy sector as a whole, the overall target of halving primary energy consumption by 2050, with the intermediary target of 20% reduction by 2020 (compared to 2008 levels), has resulted in an initial achievement of 9% by 2014.

How are these costs covered?

The debate as to whether German citizens and businesses can afford the investments required for Energiewende is vibrant and focused mainly on electricity tariffs and changes within the employment sector. The RE sector as a whole contributed 100 000 nett[2] new jobs in 2015 (Kemfert et al, 2015). Continued growth in energy sector job creation is expected mainly in the construction, services, trade and manufacturing sectors.

Electricity levies, carbon taxes, new investments in restructuring power supply based on investment-friendly policies on transmission and distribution grids and steady growth in savings due to avoided energy imports all contribute to revenues relating to the transition. As the energy system changes to meet policy objectives, these revenue streams grow.

It is estimated that by 2025, investments in power sector transition are likely to reach approximately 15 billion Euros per annum (Agora Energiewende, 2015).

The knock-on effects of integrating a greater share of RE

The infrastructure challenge of integrating a growing share of fluctuating renewables into the grid is perhaps one of the most challenging ones, a subject equally relevant to South Africa’s flourishing RE sector. Even though RE integration has been prioritised in policy, the German national grid will ultimately need to be extended and reorganised technically. Regions in the north and east that generate large shares of renewable electricity will need to be connected to industrial clusters in the south. In parallel, electricity demand will need to become more flexible and adjust to intermittent supply from wind and solar plants.

In Germany it is widely understood that “intermittency” is not to be confused with “unreliability”, and that along with policy certainty and targeted infrastructure investments, intermittency can be managed with adjustment in demand patterns as well as optimally utilising the dispatchable nature of RE technologies.

And then there is the complex process of decommissioning nuclear power plants… The commission reviewing the financing of Germany’s nuclear phase-out has recommended to government on April 28th that the reactor owners pay some EUR23.3 billion ($26.4 billion) into a state-owned fund for decommissioning of the plants and managing radioactive waste. Nuclear power companies are starting to share data on actual decommissioning costs, and soon it will be possible to reliably assess whether countries planning to build nuclear power can in fact afford the full (present and future) costs of nuclear power.

I left Germany with these key insights:

  1. That, as in South Africa’s case where the RE Independent Power Producer Procurement Programme (REIPPPP) was initially influenced by SA’s climate commitments in Copenhagen, the German energy transition was directly linked to early climate policy. Today however, in both countries, climate policy is seldom linked to a growing domestic RE sector.
  2. That policy consistency, policy targets and clear leadership commitment to the energy transition provided significant and broad early assurance to all affected parties: citizens, industry and investors alike and this in turn had driven and fostered the sustained, measurable and visible transition unfolding in Germany.
  3. That well designed policy includes allowance for regular updates, for phasing out of aspects that do not favour astute transition and for evolution that is at least in step with evolving context.
  4. That German citizens have long understood that nuclear power comes with enormous risk and the success of the local anti-nuclear movement is self-evident. Now the significant associated costs of decommissioning is entering the terrain of public knowledge and the skills associated with this process are being developed recognised. Very soon, Germany will be in a position to offer the world data, experience and expertise on nuclear decommissioning.
  5. As we consider investing in a new nuclear build programme we should consider the emerging rule of thumb: that in Germany, costs of decommissioning are now estimated to almost equal build costs. We can learn from the experiences of others and need not make choices that leave us with consequences we could well have avoided.

Policies and policy instruments that have influenced the German energy transition:

  • RE Feed-in law, 1991
  • Renewable Energy Sources Act (EEG), 2000
  • Energy saving ordinance (EnEV), 2002
  • Modernisation programme for buildings, 2006
  • Renewable energies heat Act (EEWärmeG), 2009
  • Germany central strategy document for climate and policy, 2010
  • The Chancellor’s decision in 2012 to phase out all nuclear power supply by 2022 

Footnotes:

[1] By 2014, 5.4% had been achieved.
[2] The RE sector as a whole created 371,000 new jobs in 2013. After accounting for job losses in the conventional energy sector, this results in a nett of 100,000 new jobs (Kemfert, 2015).

References:

  • Agora Energiewende, 2015. The energy transition in the electricity sector: state of affairs, 2014.
  • Federal Ministry of Economic Affairs and Energy, 2015. Renewable Energy in 2014.
  • Federal Ministry of Economic Affairs and Energy, 2014. Second monitoring report: Energy of the future.
  • Kemfert C, Opitz P, Traband, T, Handrich L, 2015. Deep decarbonisation in Germany, a macroeconomic analysis of economic and political challenges of the Energiewende, Berlin Deutsches Institut für Wirtschaft.
  • Kraemer, R.A, 2012. Germany, Fukushima and global nuclear governance. Ecologic Institute, Berlin.
  • World Nuclear Association website: http://www.world-nuclear.org/information-library/country-profiles/countries-g-n/germany.aspx

 

Brenda Martin is an ERC researcher on policies related to nuclear and renewable energies and independent advisor on energy policy and practice. She recently represented SA on a 6-day study tour focused on the Energiewende in Germany. She writes in her personal capacity.