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
f.matthes@oeko.de
www.oeko.de
twitter.com/FelixMatthes