The German Energy Transition
(“Energiewende”):
A Modernization Strategy towards a
Low-carbon Energy System
Universitas Indonesia – Climate Action Day
» Green Growth – Our Future – Our Benefit «
Dr. Felix Chr. Matthes
Jakarta, 16th June 2015
Transforming the energy system
Economic background
• German population 81 million
• German GDP in 2,900 bn € (3,850 bn US$) in 2014
Highly industrialized (26% of GDP from industry)
• Strong manufacturing industry
• Strong primary industries (2014: Crude steel production
43 mln t, Primary aluminum production 531,000 t)
Strong net exporter (net trade surplus in 2013: ~ 217 bn €)
• Primary energy (2014): Oil 35%, natural gas (20%), hard coal (13%),
lignite (12%), renewables (11%) , nuclear (8%)
• Power generation (2014): lignite (25%), renewables (26%), hard coal
(19%), nuclear (16%), natural gas (10%), others (5%)
• Strong federal structures (significant impact of states on energy
legislation), strong municipalities (~900 municipal utilities)
• Member of the European Union (internal market, increasing
integration of energy and climate policies)
The historical context
Long history of CO2 emissions & ambitious goals
1,400
CO2 from other fuels
CO2 from gaseous fuels Post-war recovery
1,200 CO2 from liquid fuels
German unification
CO2 from solid fuels
1,000 World War II
Financial crisis
Great Depression
800
mln t CO2
Decarbonization
World War I targets
600
Industrialization
400
Data include the
German Democratic
200
Republic (GDR) for
1948-1990
0
1800 1825 1850 1875 1900 1925 1950 1975 2000 2025 2050 2075 2100
CDIAC, UBA, Öko-Institut
The historical context
Electricity generation & electricity policy
1.000
Break- Other renewables
Nuclear Policy through
Stagnation Phase-out
900
Mandatory use Shift to imported hard Decline & phase-out Biomass
Coal Policy of domestic coal coal & hard coal decline of hard coal and lignite
800
Take-off & Stabilized Main source of Solar
Renewables Policy breakthrough growth electricity
700 Wind
600 Hydro
TWh
500 Other fossil
Natural gas
400
Hard coal
300
Lignite
200
Nuclear
100
* 1950-1954: Western
Germany only
0
1950* 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050
Kohlenstatistik, Matthes (1999, 2015)
The political context
Key decisions
• Early 1990ies: Set-up of increasingly ambitious climate policies
National targets of the 1990ies and commitment under the Kyoto
Protocol to the UN Framework Convention on Climate Change:
Medium-term targets (2005, 2008/12, 2020)
National targets set in 2010, European roadmaps of 2011 and the
emerging Paris Agreement of 2015: Long-term targets (2030, 2050)
• Since the late 1970ies: Fundamental conflict on nuclear power
1990: Shut-down of the nuclear reactors in Eastern Germany
1994: Effective ban on new nuclear power reactors
2000/2002: Legally binding nuclear phase-out by approx. 2025
2010: Lifetime extension for nuclear plants
2011: Immediate shut-down of 40% of nuclear capacity and return to
the (accelerated) nuclear phase-out pathway
• Since the early 1990ies: Strong support for renewable energies
Roll-out and cost reductions – beyond all expectations
Energiewende – Energy Transition
The rise of an new energy policy concept
• The “Energiewende” concept
entered the German debate as the
title of a book by Öko-Institut,
(“Energy Transition – Growth
and Prosperity without Oil and
Uranium”) published in 1980
• The concept of an energy system
which is essentially built on
energy efficiency and renewables
promoted since the late ‘80ies
was streamlined to climate
policy in 1989
is considered as an serious
option since the early ‘90ies
was mainstreamed after 2000
is official German long-term
energy policy since 2011
Use of fossil fuels in Germany
Recent structures of consumption
5,000
Lighting
4,500
Information and communication
4,000
Mechanical energy - other
3,500
Mechanical energy - transport
3,000 Cooling
PJ
2,500 Other process heat
2,000 Water heating
1,500 Space heating
1,000 Other energy sectors
Power generation
500
Non-energetic use
0
Petroleum products Gases Coal
AG Energiebilanzen, Öko-Institut
Background: German policy targets beyond the
nuclear phase-out by 2022
GHG Renewable Energies Energy efficiency Nuclear
emissions Gross final Power Primary Space Final Power power
consump- generation energy heating Energy consump-
tion tion
2011 -41%
2015 -47%
2917 -54%
2019 -60%
2020 -40% 18% 35% -20% -20% -10% -10%
2021 -80%
2022 -100%
2030 -55% 30% 50%
2040 -70% 45% 65%
-80 to
2050 60% 80% -50% -80% -40% -25%
-95%
Base
1990 2008 2008 2005 2008 2010
year
BReg 2010+2011
The German energy transition
Potentials available & achievable, costs affordable
• All sectors need to contribute
Energy efficiency & (different) carbon-free energies for all sectors
High importance of timing (durable capital stocks, innovation)
• Energy transition is affordable
Total (long-term) costs not higher ~1…2% of GDP (w/o externalities)
Electricity costs not significantly higher than for the counterfactual
• The benefits
An (ultra-)low-carbon energy system
A low-risk and less vulnerable energy system (nuclear, price shocks)
A more decentralized coordination-intensive energy system based on
cutting-edge technologies
Increasing shares of domestic (and high quality) value added & jobs
Broader participation of society including economic participation
• The challenges ahead: many – but all of them manageable
Energy transition in Germany
Expansion of power generation from renewables
700
Historical Legal EU National
data committment goals
600 100%
Geothermal
Expansion corridor for
500 Landfill gas power generation from RES 80%
to 80-100% in 2050
Waste (biogenic)
400
Biomass
60%
TWh
Photovoltaics
300
Wind - offshore
Minimum expansion 40%
Energy Concept 2010/2011
200 Wind - onshore
Hydro Expansion corridor EEG 2014
20%
100
0 0%
1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050
BMU. BMWi, Öko-Institut 2014
The transition to a renewable energy system
An integrated view on costs & prices is needed
30
Value added tax (VAT)
Electricity tax
25
Offshore liability surcharge
Renewables surcharge
20
Demand response surcharge
ct / kWh
15 Cogeneration surcharge
Industrial network access
fee privilege ( §19) surcharge
10 Concession fee
Sales & profits
RES surcharge:
5 6.3 ct/kWh
Network access fees
1.4 ct for industrial privileges
Wholesale market price
~2 ct 0 for (global) PV take-off (previous year future)
(learning investment)
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
~1 ct reduction of wholesale
power prices
Öko-Institut 2015
The traditional power market structures
A dark and cold week in Germany
80
Peak
Week No. 50
Medium
70
Base
Load
60
50
GW
40
30
20
10
0
09.12 10.12 11.12 12.12 13.12 14.12 15.12
Öko-Institut 2014
The new power market structures
A dark and cold week in Germany - 2013
80
Week No. 50 Solar
2013 Wind
70
Residual
Load
60
50
GW
40
30
20
10
0
09.12 10.12 11.12 12.12 13.12 14.12 15.12
Öko-Institut 2014
The new power market structures
A dark and cold week in Germany - 2023
80
Week No. 50 Solar
2023 Wind
70
Residual
Load
60
50
GW
40
30
20
10
0
09.12 10.12 11.12 12.12 13.12 14.12 15.12
Öko-Institut 2014
The new power market structures
A dark and cold week in Germany - 2033
80
Week No. 50 Solar
2033 Wind
70
Residual
Load
60
50
GW
40
30
20
10
0
09.12 10.12 11.12 12.12 13.12 14.12 15.12
Öko-Institut 2014
The traditional power market structures
A windy and sunny week in Germany
80
Peak
Week No. 16
Medium
70
Base
Load
60
50
GW
40
30
20
10
0
15.04 16.04 17.04 18.04 19.04 20.04 21.04
Öko-Institut 2014
The new power market structures
A windy and sunny week in Germany - 2013
80
Week No. 16 Solar
2013 Wind
70
Residual
Load
60
50
GW
40
30
20
10
0
15.04 16.04 17.04 18.04 19.04 20.04 21.04
Öko-Institut 2014
The new power market structures
A windy and sunny week in Germany - 2023
80
Week No. 16 Solar
2023 Wind
70
Residual
Load
60
50
GW
40
30
20
10
0
15.04 16.04 17.04 18.04 19.04 20.04 21.04
Öko-Institut 2014
The new power market structures
A windy and sunny week in Germany - 2033
80
Week No. 16 Solar
2033 Wind
70
Residual
Load
60
50
GW
40
30
20
10
0
15.04 16.04 17.04 18.04 19.04 20.04 21.04
Öko-Institut 2014
Buying down the costs of solar PV
A major success of the last two decades …
10.000
1995
9.000
8.000
7.000 2000
6.000
EUR / kWp
2005
5.000
4.000
2010
3.000
2.000 2013
1.000
0
0 20.000 40.000 60.000 80.000 100.000 120.000 140.000 160.000
MWp (cumulative)
Matthes 2015
Beyond the economics of the system
New structure of players … and assets
• The traditional German power system
Running a (centralized) system based on 500 large generation units
• The emerging new power System in Germany (as of summer 2014)
approx. 1.2 million PV installations
approx. 30,000 wind power installations
approx. 10,000 biomass power plants
approx. 30,000 small- and medium-scale cogeneration plants
approx. 700 conventional power generation units
• The need for a new market design
for phase 1 of roll-out of renewables (0…25% market share)
investment certainty and broad economic participation are priority #1
for phase 2 a new balance needs to be found between priorities from
phase 1 and the increasing need for coordination and an appropriate
sharing of risks
Expansion of power generation from renewables
New structure of players & the need for coordination
Farmers 11%
Others 1%
Industry
14%
Individuals
35%
Total Capacity
Fonds / Banks 72,900 MW
13% (2012)
Other utilities
7%
Major four utilities Project developers
5% 14%
trend:research 2013
Long-term transition towards Zero-CO2
Beyond RES – need for strong carbon pricing
700 700
Net imports
600 600 Others
500 500 Renewables
Pump storage
400 400
mln t CO2
Petroleum
TWh
300 300 products
Natural gas
200 200
Hard coal
100 100 Lignite
0 0 Nuclear
CO2 emissions
-100 100
1990 2000 2010 2020 2030 2040 2050
Öko-Institut 2015
Long-term framing of low-carbon investments
Long-term caps as one of the key mechanisms
6,000
Aviation (national & international)
Non-ETS sectors
EU ETS (proxy data from 1990 to 2004)
5,000
2020 Goal
at least -20%
compared to 1990
4,000
2030 Goal 2050 Goal
at least -40% -80...-95%
mln t CO2e
3,000
EU ETS 2050: -75%
cap
2,000
Linear
1,000 Reduction
Back- Factor
loading 1.74% (-2021)
2013/2016 2.20% (2021-)
0
1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050
Öko-Institut 2015
Given all the challenges & complex processes,
what about the public support for Energiewende?
60%
The Energiewende is …
50% 49% 49%
47%
43%
41% 40%
40%
30%
20%
10%
10% 8% 7%
1% 2% 1%
0%
Jan Jun Jan Jan Jun Jan Jan Jun Jan Jan Jun Jan
2013 2013 2014 2013 2013 2014 2013 2013 2014 2013 2013 2014
… very important … important … less important … not important
BDEW Energiemonitor 2014
Given all the challenges & complex processes,
what about the public support for renewables?
60%
56%
52%
The expansion of renewable energies is …
50%
50% 47%
40%
35% 34%
33% 33%
30%
20%
13% 12%
10%
10% 7%
0%
Jan Jan Jun Jan Jan Jan Jun Jan Jan Jan Jun Jan
2012 2013 2013 2014 2012 2013 2013 2014 2012 2013 2013 2014
… too slow … just fine … too fast
BDEW Energiemonitor 2014
Energy transition in Germany
Success factors and drivers
• A resource-poor and innovation-based country
• Strong public awareness drove and drives policy
Environmental and nuclear awareness deeply rooted in society
Professional and strong NGOs
Progressive political parties took-up the issues quickly
• Strong analytical capacities brought the energy transition to the
mainstream
Pioneering research institutions started 35…40 years ago
Mainstream research institutions changed course after political and
economic opportunities became highly visible
• Enabling structures for pioneering and political innovation
Strong role of states and municipalities
Wide field for innovation among ~900 municipal utilities
Many innovative (technology & business) entrepreneurs
A robust regulatory framework for the phase-in period
Thank you
very much
Dr. Felix Chr. Matthes
Energy & Climate Division
Berlin Office
Schicklerstraße 5-7
D-10179 Berlin
[email protected]www.oeko.de
twitter.com/FelixMatthes