Germany’s green woes

An update on the Energiewende

August 22, 2016

Roger Andrews

http://euanmearns.com/an-update-on-the-energiewende/

 

Germany is still pursuing its goal of shutting down its nuclear plants but refuses to shut down its lignite plants. It is slashing renewable energy subsidies and replacing them with an auction/quota system. Public opposition is delaying the construction of the power lines that are needed to distribute Germany’s renewables generation efficiently. Renewables investment has fallen to levels insufficient to build enough new capacity to meet Germany’s 2020 emissions reduction target. There is  no evidence that renewables are having a detectable impact on Germany’s emissions, which have not decreased since 2009 despite a doubling of renewables penetration in the electricity sector. It now seems certain that Germany will miss its 2020 emissions reduction target, quite possibly by a wide margin. In short, the Energiewende is starting to unravel.

This post discusses the Energiewende’s main problems under five subheadings, starting with arguably the most problematic:

Germany’s emissions are not decreasing:

Figure 1, reproduced from Climate Change News , shows Germany’s total greenhouse gas emissions from all sources from 1990 through 2015 in million tons of CO2 equivalent:

Germany 1

Figure 1: Germany’s greenhouse gas emissions, 1990-2015 and its 2020 and 2030 emissions targets.

Electricity sector emissions (the red bars at the bottom) decreased between 1990, the baseline year, and 1999 but have remained essentially flat since then. Emissions from other sectors decreased between 1990 and 2009 but have also flattened out since then. As a result Germany’s emissions are about the same now as they were in 2009. The increase in renewables generation over this period has clearly not had the desired effect.

The electricity sector presently contributes only about 45% of Germany’s total emissions. 100% decarbonization of the electricity sector, which is already about 45% decarbonized if we add nuclear, would therefore in theory reduce total emissions by only another 25% or so. Yet Germany’s efforts to cut emissions continue to concentrate on the electricity sector.

The chances that Germany will meet its 2020 and 2030 emissions reduction targets do not look good.

Renewables have not reduced emissions

Figure 2 shows the growth in renewables penetration in Germany’s electricity sector since 1990. The data through 2013 are from the German Federal Ministry for Economic Affairs and Energy and the 2014/15 data are from the Strom Report on Renewable Energy 
.

Germany 2

Figure 2: Growth in Germany’s renewable energy generation, 1990-2015

Since 1990 renewable energy generation has grown by a factor of over ten to the point where it now supplies 30% of Germany’s electricity. One would think that this would have had a visible impact on Germany’s electricity sector emissions, but as shown in Figure 3 it’s difficult to detect any impact at all. Despite the 20% absolute increase in renewables penetration between 1999 and 2014 electricity sector emissions have barely changed over this period, and had it not been for the 2008/9 recession they would probably have increased:

Germany 3

Figure 3: Percent renewables in Germany’s electricity mix versus total greenhouse gas emissions, 1990-2015, data from Figures 1 and 2.

The reason renewables have had no detectable impact is that the added generation has gone towards filling increased demand and replacing nuclear generation rather than generation from gas, coal and lignite, which remains about the same as it was in 1990 (Figure 4, data from Clean Energy Wire). This is in line with Germany’s goal of shutting down its nuclear plants but will of course do nothing to reduce emissions:

Germany 4

Figure 4: Gross electricity generation in Germany by source, 1990-2015

Investment in renewables is falling short:

Figure 5 summarizes investment in renewables in Germany between 2005 and 2015 with projections through 2020. The data are from a recent Climate Policy Initiative (CPI) report. Investment levels have declined by almost a factor of two since the subsidy-induced solar PV peak in 2010 but are expected to decline only slightly between now and 2020, although this may be an optimistic expectation:

Germany 5

Figure 5: Investment in renewable energy in Germany 2005-2015, with projections through 2020.

If we accept the CPI projections, which I have done for the purposes of analysis, Germany will spend approximately $20 billion on onshore wind in the next five years and approximately $15 billion each on offshore wind and solar. How much renewables generation will this add? I first estimated installation costs from the data provided in Table 2 of the CPI report, obtaining the following values:

  • Solar PV: $1,600/kW installed
  • Onshore wind: $2,600/kW installed
  • Offshore wind: $4,400/kW installed

I then used these numbers to calculated how much capacity could be built for the billions of dollars of investment projected to be available between 2016 and 2020:

  • Solar PV, $15 billion, $1,600/kW = 9.4GW
  • Onshore wind: $20 billion, $2,600/kW = 7.7GW
  • Offshore wind: $15 billion, $4,400/kW = 3.4GW
  • Total new renewable capacity = 20.5GW

And applied assumed capacity factors to estimate the addition to total annual 2020 generation:

  • Solar PV, 9.4GW installed, 12% CF = 9.9TWh
  • Onshore wind, 7.7GW installed, 25% CF = 16.8TWh
  • Offshore wind,3.4GW installed, 40% CF = 3.4TWh
  • Total new renewable generation = 38.7TWh

This added generation will increase renewables’ share of Germany’s total electricity generation from ~30% to ~36%, all other thing being equal. But by how much will it reduce 2020 emissions? If we assume that all of it replaces nuclear, which is what will happen if Germany continues to shut down its nuclear plants, there will of course be no reduction at all. If we assume (optimistically) that all of it replaces lignite and that none of it gets exported we come up with 15.5 million tons using the 4kg/kWh emissions factor for lignite supplied by Volker-Quaschning. But subtracting 15.5 million tons from the 912 million tons emitted in 2015 reduces Germany’s 2020 emissions only to 896.5 million tons, well in excess of the 749 million tons target (Figure 1). It seems that Germany will have to make heroic efforts to reduce emissions from its non-electricity sectors if it is to have any chance of meeting its 2020 goal.

Germany has also established quotas calling for the installation of 2.5GW of solar, 4.1GW (net) of onshore wind and 0.8GW of offshore wind capacity in each year between now and 2020. This will cost about $18 billion/year, about 80% more than CPI’s projections. It seems unlikely that this level of investment will be forthcoming, particularly in view of the uncertainties generated by Brexit. And even if the quotas are realized and all the added power is used to replace lignite Germany will still not meet its 2020 emissions reduction target.

Renewables subsidies are being discontinued:

The Energiewende has achieved what success it has because of the enormous sums of money lavished on it by the German government in the form of subsidies. Now Germany’s policy is changing in reaction to a 2014 EU decree that disallows the use of direct subsidies, such as feed in tariffs, in favor of “market responsive auctioning” based on “feed in premiums”, or in short a bid system. Interestingly, the EU decree was prompted by other countries complaining about unwanted renewable power surges from Germany. As Deutsche Welle put it in the article linked to above:

Although Germans accepted and in time came to appreciate the subsidy system, it was significantly less popular with neighbors – particularly Poland, the Czech Republic and the Netherlands. The European Union has a connected energy market, and they said German-subsidized renewable power was flooding their electricity grids and wreaking havoc. “There was increasing concern and anxiety from our electricity neighbors about the effect outside of Germany,” says Matthias Buck, an analyst with the Berlin-based energy think tank Agora Energiewende. “So they went to Brussels to complain about it. They said, ‘Germany didn’t consult us before they did this.’” Frustration with Germany’s unilateral approach to its enormously important power market at the heart of Europe boiled over in 2011 when, after the Fukushima disaster in Japan, Angela Merkel, backed by broad public support, made an abrupt u-turn on atomic energy, and decided to rapidly phase-out nuclear power in Germany. The European Commission, the executive branch of the EU, was sympathetic to complaints from Germany’s smaller neighbors. Although the EU does not have authority over national energy market choices, it does have authority over state aid used by EU countries to benefit their own industries. And so in 2014, the commission came out with a new set of rules for state aid to the energy sector.

Two rounds of auctions have already been held, but with disappointing results. According to Renewables International. The government originally hoped that auctions would bring down the cost of solar, but that goal has now been abandoned.” The hope that the auctions would bring down solar costs was frustrated by high bid prices, with solar bids coming in at up to €89.30/MWh, not that much less than the Hinkley Point strike price of £92.50. And Hinkley generation is of course dispatchable while solar isn’t.

It is in fact instructive to compare CPI’s estimates of the levelized cost of electricity for onshore/offshore wind and solar in Germany, which CPI assumes are “potential auction prices”, with the Hinkley Point strike price, which comes out at €107.30 when converted into euros using the current exchange rate of £1 = €1.16. The results are shown in Figure 6:

Germany 6

Figure 6: CPI estimates of levelized costs of electricity for German onshore wind, offshore wind and solar compared to Hinkley Point C strike price.

According to these results intermittent renewable energy has no clear cost advantage over baseload nuclear – even Hinkley Point nuclear. Moreover, if CPI’s estimates are indeed representative of future auction prices it’s difficult to see onshore wind and solar, and in particular offshore wind, attracting much investment. Unless, that is, the German government is willing to pay inflated prices for intermittent renewables generation as a means of furthering the Energiewende, whereupon it will just be replacing one subsidy with another.

Soaring electricity rates:

Germany’s has the second-highest (after Denmark) residential electricity rates in the EU, and as shown in Figure 7, reproduced from Euan Mearns’ Green mythology and the high cost of European electricity post, there is good evidence that these high rates are directly linked to the level of renewables penetration:

Germany 7

Figure 7: XY plot of installed wind and solar per capita versus residential electricity rates in EU countries

Now, however, the Energiewende blog Energy Transition is claiming that this is not the case. As evidence they cite Figure 8, which shows stable retail power rates since 2013 despite a one-third increase in renewables generation:

Germany 8

Figure 8: Cost components of Germany’s retail electricity rates, 2006-2016

But the chart clearly shows that almost all of the increase in retail rates between 2006 and 2013 was caused by growth in renewable energy subsidies that “more closely reflect (the) price tag for Energiewende” – clear proof that the Energiewende has been a major contributor to the price increases – and that the flattening after 2013 was caused by the fact that Energiewende costs did not increase over this period even though they remained at record levels. According to the chart the Energiewende was in fact responsible for over 40% of the 28.69 eurocents/kWh charged to Germany’s retail electricity consumers in 2015. And retail electricity rates approaching 30 eurocents/kWh – roughly three times current retail rates in the U.S. – are nothing to boast about.

Finally, Germany will discontinue direct renewable subsidies for new projects at the beginning of 2017. It will be interesting to see what happens to retail electricity rates as a result.

Summary:

Germany is a country of contradictions, at least as far as energy is concerned. Germans are in favor of more renewable energy yet oppose building the overhead power lines that are needed to distribute it. They are in favor of deep emissions cuts but also in favor of shutting down Germany’s nuclear plants, which will make the problem of meeting emissions targets far more difficult and costly. The government continues to pursue a nuclear shutdown but is unwilling to shut down Germany’s lignite plants. As a result of these conflicting and counterproductive viewpoints and policies the Energiewende has effectively gone nowhere. Despite the expenditure of many billions of dollars it has failed to achieve any visible reduction in Germany’s emissions or to make a meaningful difference to Germany’s energy mix (renewables still supply only 14% of Germany’s total energy). Its only demonstrable impact has been skyrocketing electricity bills.

And now Germany is discontinuing the direct renewables subsidies that have driven the Energiewende since its adoption in 2000. It might be premature to declare the Energiewende a failure, but things are certainly headed in that direction.

Endnote: The Energiewende has been discussed in three previous Energy Matters posts which reached similar conclusions:

Energiewende kaput

Energiewende, Germany, France and Spain

Germanys Energiewende as a model for Australian climate policy

 

About prosperitysaskatchewan

Consultant on Saskatchewan's natural resources.

Posted on August 25, 2016, in economic impact, miscellaneous, oil, other minerals, political, uranium and nuclear. Bookmark the permalink. Leave a comment.

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