Energiewende: from Wunderkind to Troubled Adolescent

November 18, 2013 | 00:00

The steps ahead for Germany’s clean energy shift

Energiewende: from Wunderkind to Troubled Adolescent

Germany’s Energiewende is no longer in swaddling clothes. Germany and its incoming new government face a set of issues very different from those of a decade ago. The questions now are: How must regulation change to meet the new goals for renewables? How will Germany cope as more nuclear reactors come off line? How will the country distribute ever more electricity generated by decentralized, small-scale producers? And, finally, how to cut back on the burning of coal?

(c) Viktor's view
It’s now 13 years since the Renewable Energy Sources Act (EEG) was passed, which lay the groundwork for Germany’s power supply to jump from just 6 percent of renewably generated power to 25 percent today. The key to this unexpectedly rapid expansion was the feed-in tariff (FiT), which incentivized rates for twenty years, giving investors across Germany the confidence to invest in clean energy technology.

Today though, Germany and its incoming new government face a set of issues very different from those of a decade ago. Germany’s next administration is currently deep in coalition negotiations. The new partners, the Christian Democrats (CDU) and the Social Democrats (SDP), appear to agree that the Energiewende is moving in the right general direction. Environment minister Peter Altmaier, who is in charge of energy for the CDU in the coalition talks, says he doesn’t want to abandon it, but rather make the Energiewende "more planned, predictable, and affordable in the long-term.”

Goals

There are a number of scenarios for launching Germany toward a future of low-carbon energy. The previous government felt that 80 percent clean energy was feasible by 2050, for example, while the Greens think the country could be all-renewable by 2030. One thing everybody agrees on is that nuclear power will be phased out by 2022.

The targets that the previous government devised in 2010 (and then updated in 2011) are those that have generally been used until now.

Just this week, the coalition negotiators agreed that Germany’s 35 percent goal of renewable electricity in 2020 should be upped to 40 percent. Yet when it came to bolstering the 2030 goals, the parties differed: the SPD backs a 75 percent goal, while the CDU favors upping the current 50 percent by just 5 percent target, if at all.

The parties’ negotiators, Altmaier and Hannelora Kraft (SPD), said that the 2020 goal of 10GW of offshore, wind-power capacity will be lowered to 6.5GW (this is in fact adjusting to reality rather, since offshore expansion is significantly delayed anyway). As for onshore wind, it too will face cutbacks, especially in regions with comparatively low wind, like in southern Germany. The tariff for PV will continue to decline at the currently foreseen rate until capacity reaches 52GW, which should take about three years.

Renewable Energy Support

The FiT may have catapulted Germany to the front of the world’s clean-energy leaders, but the time has come to retool – or trash it.

The coalition negotiators aren’t scrapping the FiT right away, which one might have assumed from the tenor of the election campaign. Rather they’re tweaking, for the time being. This means lowering incentives for renewable technologies like bioenergy and wind.

Also, renewable-energy plant operators will no longer be compensated when oversupply forces them to halt production. Moreover, new larger renewable-power plants will have to sell their output directly on the exchange rather than to TSOs. There will be a transition phase for smaller wind power stations, but by 2018 they too must compete on the market. And, finally, the new government will scrutinize and probably purge the 2,000-odd German companies exempt from FiT-related charges.

One of the ways that Germany could eventually go is the direction of a market premium model, an option supported by Germany’s biggest industrial lobby. Renewable energy producers in Germany already have this as an option, namely selling their product directly on the energy market and receiving a premium to top it off if the market price is low. Making this more market-oriented mechanism the rule rather than just an option would mean consigning the FiT to history’s dustbin. If it happens, it won’t be before 2015.

Another option envisions a fundamental overhaul of the EEG to the benefit of solar PV and onshore wind. The Berlin-based think tank Agora Energiewende proposes to limit future feed-in tariffs for renewable power to 8.9 cents per kilowatt-hour. The surcharge for costly technologies that haven’t panned out so far, like geothermal, biomass, and offshore wind, would be cut back dramatically.

“This new model would limit the surcharge to the level needed by onshore wind and PV solar since they are the most cost effective. And there’d be no cap on them in terms of overall volume,” explains Patrick Graichen, Senior Associate at Agora Energiewende. “It’s a radically simplified version of the EEG that would both promote the expansion of renewables and keep costs down.”

Transmission Grid

Germany had been playing catch-up with the grid since the chancellor’s decision in the wake of the Fukushima disaster in 2011 to shut down eight of Germany’s 17 nuclear plants.

New legislation and decisions by the Federal Network Authority (BNetzA) prioritized and accelerated the construction and upgrading of grid connections across the country. Three new corridors and 2,800 kilometers of new transmission lines are underway.

The incoming government’s commitment to reduce projections for offshore wind should impact grid plans.

The providing of back-up capacity grows larger the more renewably generated energy there is in the system
“One or maybe even two of the planned corridors are redundant if offshore is being scaled back,” says Peter Ahmels of the Berlin-based NGO German Environmental Aid (DUH). The DUH advocates a low-cost, decentralized smart grid with fewer large corridors. Germany’s major grid operators tend to favor large transmission highways based on the projection of more coal-fired plants in the mix. On another front, local activists and many municipal utilities are fighting for municipal or citizen ownership of regional transmission networks.

The Coal Question

Germany’s continued reliance on coal and its high carbon emissions is arguably the most vulnerable aspect of the Energiewende. The previous government refused to scrap subsidies for the coal industry and failed to help put the EU ETS, the bloc’s cap-and-trade system for carbon dioxide emissions, back on its feet. Both the CDU and SPD say they want to make this right again by “backloading” emissions certificates.

Should the ETS not be injected with more clout – or not enough – one proposal is to launch more rigorous interventions on the national level. This would entail new regulations to reduce the share of coal by explicitly capping coal-generated power.

Capacity Markets

The providing of back-up capacity grows larger the more renewably generated energy there is in the system. At the moment, flexible, modern gas-fired plants, Germany’s reserve of choice, aren’t profitable to run, much less build new. For now, there are a host of options under discussion.

One option is the “focused capacity market.” This design consists of two segments. The first, comprised of older incumbent power plants, would compete for capacity payments of one or four years. The second, made up of new, high-flexibility power plants, would compete for capacity payments of over 15 years. “The capacity payments of different duration increase planning security for investors and plant operators while decreasing risk premiums and thus the costs for electricity consumers,” according to the Institute of Applied Ecology, a German research institute that endorses the concept.

Another alternative is a “strategic reserve” that would directly compensate unprofitable gas works.

Germany’s energy transition, once the wunderkind of the nation, will probably prove much more difficult as a teenager. Getting its adolescence right though will determine whether it ever reaches adulthood.

 

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