Insights from Germany s Energy Transition (Energiewende)

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1 Insights from Germany s Energy Transition (Energiewende) 06 December, 2016 Seite 1

2 Support to the Philippines in Shaping and Implementing the International CC Regime (SupportCCC II) Objective: The Climate Change Commission and other key stakeholders in the Philippines ensure a coherent implementation of climate change policy at national and subnational levels, and contribute to further development of the international climate change regime. Project components: 1. Implementation of the national climate change policy within the framework of the Philippine international climate change commitments 2. Climate-smart planning and economic development at the local level 3. Climate Finance 4. Renewable Energy and Energy Planning 5. Knowledge Management and Networking P 09/2015 to 02/ Million (5.437M+0.25M) CCC, DoE, NEDA, LGUs, and sectoral departments Seite 2

3 Component IV Renewable Energy & Energy Planning Module 1 RE Policy Implementation & Energy Market Design Module 2 Integrated Energy Planning Module 3 RE grid integration and management Module 4 GHG emission reductions from RE Seite 3

electricity generation by fuel 2015 Gross electricity

4 Renewables are the most important source in the electricity system followed by lignite and hard coal Share in gross electricity generation by fuel 2015 Gross electricity generation by fuel AGEB (2016) * preliminary AGEB (2016) * preliminary 4

The Energiewende means fundamentally changing the power system Gross electricity generation 1990, 2016 and 2050 Phase out of Nuclear Power Gradual shut down of all nuclear power plants until 2022

5 The Energiewende means fundamentally changing the power system Gross electricity generation 1990, 2016 and 2050 Phase out of Nuclear Power Gradual shut down of all nuclear power plants until 2022 Reduction of Greenhouse Gas Emissions Reduction targets below 1990 levels: - 40% by 2020; - 55% by 2030; - 70% by 2040; - 80% to - 95% by 2050 Development of renewable energies Share in power consumption to increase to: 40-45% in 2025; 55-60% in 2035; 80% in 2050 Increase in efficiency Reduction of power consumption compared to 2008 levels: - 10% in 2020; - 25% in 2050 AGEB (2016), BReg (2010), EEG (2014), own calculations * preliminary 5

Germany decoupled economic growth from energy consumption but there is still work to do to reach the 2020 efficiency targets Primary energy consumption, gross

6 Germany decoupled economic growth from energy consumption but there is still work to do to reach the 2020 efficiency targets Primary energy consumption, gross electricity consumption and GDP and efficiency target 2020 BMWi (2015) following AGEB (2016), AGEB (2015b), Destatis (2015c); BReg (2010) * preliminary 6

7 The Renewable Energy Act aims at increasing the share of renewables to 40-45% by 2025 and 55-60% by 2035 Share of renewable energies in gross electricity consumption and targets AGEB (2016), EEG (2017) * preliminary 7

8 Germany has introduced a very effective RE support framework Renewable Energy Act in 2000 to provide investment security for private RE developers Renewables gain priority access to the grid, in transmission and distribution Fixed Feed-in Tariff (FIT) valid for 20 years FIT differentiated by source and size of plant FIT financed through RE levy on electricity bill; independent from government budgets; energy intensive industries exposed to international competition are excluded from the levy Annual degression of all tariffs to transition to self-sufficient RE market Seite 8

actors Illustrative visualisation of the old and the new

9 The Energiewende implies a new energy world characterized by flexibility, decentralized structures and a wide variety of actors Illustrative visualisation of the old and the new electricity system high voltage medium voltage low voltage Own illustration 9

10 It s all about wind and solar! Gross electricity generation of renewable energies : AGEB (2015a); : own calculation on basis of BNetzA (2014)/BNetzA (2015b) * preliminary 10

Feed-in tariffs for Solar PV dropped massively since 2005 - and cost

installations 2005-2015 Expected cost degression for large-scale PV

11 Feed-in tariffs for Solar PV dropped massively since and cost degression will continue Average PV feed-in tariff for new installations Expected cost degression for large-scale PV systems ZSW et. al (2014), own calculations Fraunhofer ISE (2015) 11

12 Today, wind and solar are already cost competitive to all other newly built power plants Range* of levelized cost of electricity (LCOE) 2015 Agora Energiewende (2015e) * based on varying utilization, CO 2 -price and investment cost 12

The power system and power markets will need to cope with a highly fluctuating power production from wind and solar Electricity generation* and

13 The power system and power markets will need to cope with a highly fluctuating power production from wind and solar Electricity generation* and consumption* in three sample weeks, 2023 February 2023 August 2023 November 2023 Fraunhofer IWES (2013) * Modelling based on 2011 weather and load data 13

CHP) Grids and transmission capacities for exports/imports Demand Side Management Storage technologies (Batteries, Power-to-Gas)

14 Flexibility is the paradigm of the new power system baseload capacities are not needed any more Key flexibility options Electricity generation and consumption in a sample week with 50% RES share Flexible fossil and bioenergy power plants (incl. CHP) Grids and transmission capacities for exports/imports Demand Side Management Storage technologies (Batteries, Power-to-Gas) Integration of the power, heat and transport sectors (power-to-heat, electric cars) Own calculations on basis of Agora Energiewende (2015b) 14

15 After significant increases in previous years, household electricity prices are relatively stable since 2013 Average household electricity prices in a 3-person household BDEW (2015b) * preliminary 15

Voting results in the Bundestag on Energiewende Public

16 The Energiewende is based on a broad consensus - public discussion is focussing on the concrete implementation Voting results in the Bundestag on Energiewende Public opinion on Energiewende 2015 Deutscher Bundestag (2011) BDEW (2015a) 16

17 RE development is decentralized and rooted in Germany society Ownership structure of renewable power capacity in Germany Source: IRENA 2016, from BEE, Seite 17

18 Source: IRENA 2016, from BEE, Seite 18

19 More information on the German Energy Transition is available at Präsentationstitel hier eintragen Seite 19

20 As a federal enterprise, GIZ supports the German Government in achieving its objectives in the field of international cooperation for sustainable development. Responsible Michael Vemuri Author Michael Vemuri Published by Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH Registered offices, Bonn and Eschborn, Germany Support to the Philippines in shaping and implementing the international climate regime (SupportCCC II) Department of Energy, Renewable Energy Management Bureau Energy Center, Rizal Drive, Bonifacio Global City Taguig City, Metro Manila, Philippines T E Michael.Vemuri@giz.de I In cooperation with Seite 20

The nuclear energy act rules the nuclear phase out until 2022 with renewables overcompensating the loss in nuclear power Gross electricity generation of nuclear and renewables 1970-2025 Start Anti-

21 The nuclear energy act rules the nuclear phase out until 2022 with renewables overcompensating the loss in nuclear power Gross electricity generation of nuclear and renewables Start Anti- Start Anti-Nuclear Movement Chernobyl Chernobyl 1. Nuclear 1. Nuclear phase-out phase-out Fukushima Fukushima 2. Nuclear 2. Nuclear phase-out phase-out Withdrawal of Withdrawal of the 1. Nuclear the 1. Nuclear phase-out phase-out AGEB (2015a), AGEE (2015), BNetzA (2014), Statistisches Jahrbuch der DDR ( ), own calculations 21

22 Greenhouse gas emissions are currently at -27% compared to 1990 with the public energy industry being the largest emitter Greenhouse gas emissions by sector and climate targets AGEB (2015a), UBA (2015), own calculations * preliminary 22

23 Since 2002, Germany has produced more electricity than it consumes 2015 marked a new record with 8% of power production being exported to neighbouring countries Gross electricity generation and gross electricity consumption AGEB (2016) * preliminary 23

24 MW Wind Energy has become a mature technology, with windmills of 2-3 MW being standard Size development of wind turbines : up to 3.0 MW : up to 0.1 MW 1995: up to 0.3 MW 2000: up to 0.8 MW 2005: up to 1.5 MW 2010: up to 1.8 MW IEA (2013) 24

25 The integration costs of wind and solar (0.5 to 2.0 cts/kwh) do not change their overall competitiveness Overview of components discussed under integration costs Agora Energiewende (2015) Undisputed and rather low Disputed : experts disagree on whether the cost effect of interaction with other powerplants should be considered as Integration costs 25

consumption in a sample week 2023 G W Specific characteristics of Wind and Solar PV 1 2 3 Variable High

26 With wind and solar, the new power system will be based on two technologies that completely change the picture Gross electricity generation of renewable energies Electricity generation and consumption in a sample week 2023 G W Specific characteristics of Wind and Solar PV Variable High capital costs Very low variable cost AGEB (2015a), BNetzA (2014), BNetzA (2015b), own calculations Fraunhofer IWES (2013) 26

Challenge 1: Grids Build more grids to transport wind energy to the south of Germany in 2016 a new grid power plan is expected Installed wind capacity (103 GW, Scenario Best Sites ) 2033

power lines are necessary to transport wind electricity from north to south In 2016, the government will propose a new transmission power plan which will enable to use underground cable

27 Challenge 1: Grids Build more grids to transport wind energy to the south of Germany in 2016 a new grid power plan is expected Installed wind capacity (103 GW, Scenario Best Sites ) 2033 Planned transmission grid extensions until 2022 Wind power will be installed mainly near the coast in the north of Germany, but key consumptions centres are located in the south Additional power lines are necessary to transport wind electricity from north to south In 2016, the government will propose a new transmission power plan which will enable to use underground cable whenever necessary Fraunhofer IWES (2013) Bundesbedarfsplangesetz (2013) Measures to reduce consternation and compensation for concerned parties need to be considered from the very beginning 27

28 Challenge 2: Climate Targets Gradual reduction of coal use is needed in 2017, a coal reserve is planned, for 2030/2040 we need a coal consensus CO 2 emissions from electricity generation and climate targets** UBA (2015), own calculations *preliminary, **application of a sectoral 40%-target 28

29 Challenge 4: Power Market Design The government has decided in 2016 both on a new power market law and a new renewable energy law Schematic diagram of the power market design Coordinate supply and demand Managing the power fleet investments and retirements Reaching climate targets Power Market 2.0 (complemented by flexible markets for balancing energy) Securing Resource Adequacy Financing of New Renewables Smart Retirement of old Coal Plants Emissions Trading or Carbon Price Power Market 2.0 Power market is to become highly flexible, so as to continuously let fossil power plants, renewables, demand and storage interact with each other Resource Adequacy Peak prices in times of scarcity are to refinance fossil backup power plants; for emergency situations, a capacity reserve is installed Renewables Renewables receive 20year-market premium, support level for large wind and solar power farms is to be determined by auctions as of 2017 EU Emissions Trading and Smart Retirement Ambitious EU ETS reform to restore CO2 price and Plan for a Smart Retirement for Coal are still lacking. Meeting with PSE, 27 October 2016 Own illustration

30 Challenge 5: European Cooperation Further enhance the cooperation between neighbouring countries and deepen European power market integration Capacity mechanisms and RES support schemes 2013 Capacity mechanisms RES support schemes No capacity mechanism or discussion on an early stage Planned capacity mechanism Implemented capacity mechanism Implemented capacity reserve Feed-in tariff Quota Feed-in premium Combination of quota and feed-in tariff Combination of feed-in premium and feed-in tariff Own illustration 30

31 Renewables now account for about 60% of newly installed capacity in the power sector more than Coal, Gas and Nuclear together Global power capacity additions % 80% 60% 40% 20% 0% * RES % 19% 17% 23% 24% 31% 26% 28% 39% 46% 41% 49% 50% 58% 58% Non-renewables % 81% 83% 77% 76% 69% 74% 72% 61% 54% 59% 51% 50% 42% 42% RES GW Non-renewables GW IRENA 2014; *own estimate on basis of IRENA 2015a 31

32 Electrical Capacity in GW Up to now, development of wind and solar PV were systematically underestimated Actual capacity of wind & solar and WEO projections in NPS scenarios 5,000 4,000 3,000 2,000 1,000 0 WEO 2004 WEO 2008 WEO 2009 WEO 2010 WEO 2011 WEO 2012 WEO 2013 Metayer/Breyer/Fell (2015): The projections of the future of the WEO, IEA (2015): World Energy Outlook

Insights from Germany s Energiewende

Insights from Germany s Energiewende State of affairs, trends and challenges Christian Redl BUDAPEST, 3 NOVEMBER 2016 Agora Energiewende Who are we Independent think tank with more than 20 energy policy