Solar energy: Prospects, policy and experience The case of Germany RFF/IETA Side Event COP-16 Dr. Felix Chr. Matthes Cancun, 6 December 21
Structure of the presentation A numerical overview Renewables in the German power system PV in the German Feed-in tariff scheme (FiT) PV (FiT) costs compared to wholesale and retail market prices Who carries the costs? Some analytical remarks The policy and politics framework The recent challenges The emerging challenges The (unexpected) distributional effects
Power generation from renewable energies in Germany TWh 2 Geothermal 18 Waste (biogenic) Landfill gas 16 Biomass Photovoltaics 14 Wind - offshore 12 Wind - onshore Hydro 1 Share in electricitysupply Projection 2% 18% 16% 14% 12% 1% 8 8% 6 6% 4 4% 2 2% 199 1995 2 25 21 215 % BMU 21, IE (21
Blueprint Germany project (w/o CCS) Solar dynamics underestimated?! TWh 6 5 Geothermal Biomass Photovoltaics Wind offshore 4 3 2 1 Wind onshore Hydro Storage Oil & others Natural gas Lignite /w CCS Lignite Hard coal /w CCS Hard coal 25 22 23 24 25 22 23 24 25 History Reference scenario Innovation scenario Nuclear Prognos/Öko-Institut for WWF 29
Blueprint Germany project (/w CCS) Solar dynamics underestimated?! TWh 6 5 Geothermal Biomass Photovoltaics Wind offshore 4 3 2 1 Wind onshore Hydro Storage Oil & others Natural gas Lignite /w CCS Lignite Hard coal /w CCS Hard coal 25 22 23 24 25 22 23 24 25 History Reference scenario Innovation scenario Nuclear Prognos/Öko-Institut for WWF 29
Power generation from PV in Germany ct/kwh 1 9 8 1, roof Program StrEG EEG 2 EEG 24 EEG 29 EEG 21 Municipal FiTs 1, roof Program Feed-in tariff (roof top 3 kw) 7 6 5 4 3 2 1 199 1995 2 25 21 215 Bruns et al. 29, BMU 21
/ MWh / EUA Wholesale market price for electricity in Germany 1 9 8 7 Spot contract for power (base) Future contract for CO2 allowances (year+1, until 9/25 Spot) Short-term marginal costs hard coal power plant 1 9 8 7 6 5 Future contract for power (year+1, base) 6 5 4 3 Future contract hard coal (year+1, cif ARA) 4 3 2 2 1 1 1.1.23 1.1.24 1.1.25 1.1.26 1.1.27 1.1.28 1.1.29 1.1.21 Öko-Institut 21
Retail market price (household 3.5 MWh) for electricity in Germany (25)/M ct/kwh 8 Generation Network fees & sales RES-FiT CHP support Municipal tax Electrity tax VAT Electricity price 6 25 2 15 4 1 2 5 2 21 22 23 24 25 26 27 28 29 21 BMU 21, Öko-Institut 21
Solar energy (PV) in Germany Some analysis (1) The policy and politics framework Ambitious targets (Energy Concept 21) GHG emissions: -4% by 22 (compared to 199), -8 95% by 25 power production from RES: 35% by 22, 8% by 25 PV is highly prestigious for politics for investors PV plays an scientific and economic role strong research sector (epistemic community) strong regional interests (industrial cores in Eastern Germany) critical mass for strong industrial lobbying major cost reductions (could have been more?)
Solar energy (PV) in Germany Some analysis (2) The recent challenges PV support ran out of control Significant capacity additions: 2, (28), 3, (29), 6, 8, (21e), 6. 8,5 MW (211e) stop and go policy created a run for the higher FiT 5% of total FiT-payments for PV (<2% of FiT supported power generation) Adjustments of FiT-legislation sharp decrease of FiT elements of quantity control in an instrument of price control (if capacity additions exceed X MW, the FiT decreases by Y%)
Solar energy (PV) in Germany Some analysis (3) The emerging challenges PV and regional distribution networks management of large intermitting capacities at the low and medium voltage level potentially perverse effects from own-use incentives in the recent FiT legislation PV and the grid parity grid-parity could be achieved during the next ears Can recent infrastructure pricing survive if PV reaches the grid-parity, what does this mean for the economics of PV? What does this mean for public budgets (tax income)? PV and wind and it s effects on conventional investments wind pushs out base-load, PV shaves peak prices optimal mix of renewables and market design emerge as serious issues
Solar energy (PV) in Germany Some analysis (4) The (unexpected) distributional dimension FiT-costs are carried by non-privileged consumers (househoulds, SMEs, some industries with low energy/electricity costs) FiT-supported wind power and PV create significant merit order effects in the wholesale (spot) markets privileged consumers benefit from wholesale (spot) market effects but don t contribute to the FiT costs
Thank you very much Dr. Felix Chr. Matthes Energy & Climate Division Berlin branch Schicklerstraße 5-7 D-1179 Berlin f.matthes@oeko.de www.oeko.de