2014 – A more positive year for Germany’s “Energiewende”

Increasing energy production from renewables, increased exports, decreased carbon emissions, and decreasing consumer prices: the year 2014, was a memorable one for Germany’s transition to renewable energy. Indeed, for the first time ever, renewables led power production in Germany, generating 27.3% of the country’s electricity. Meanwhile, energy consumption dropped by 3.85%, and the economy grew by 1.4%. Little wonder then that the Berlin think-tank, Agora Energiewende, declared this batch of good news to be: “a sign that investments in energy-saving devices and equipment are paying off.”

During 2014, coal-generated power decreased, as did carbon emissions. In the years 2012 and 2013, more coal was used than the 2011 levels, and GHG emissions had grown, slowly but surely. This had been inherently damaging to the reputation of the ‘Energiewende’, both in Germany and abroad, with energy experts questioning the whole purpose of the policy, as emissions were clearly going in the wrong direction.

So, last year brought much needed relief for ‘Energiewende’ supporters, as the negative trends reversed, evidenced by the wholesale price for power dropping to a record low of EUR 33 per megawatt hour from EUR 38 in 2013. However, electricity prices for households were at an all-time high of 29.13 EUR cents in 2014 (the second-highest in the EU after Denmark, and 3rd highest, when also including Cyprus). Additionally, about 350,000 households in Germany were not able to pay their electricity bills, which was 23,000 more than in 2012, and 33,000 more than in 2011.

Germany also exported more power than ever before. It is, however, important to note that not all exports were voluntary, but rather, a necessity in order to maintain grid stability. As a result, some of the power that was exported actually had a negative price tag, that is: Germany actually had to pay to export this power. Moreover, neighbouring countries do not necessarily welcome these power exports, as they threaten to compromise their own grid integrity. As a consequence, some of Germany’s perforce customers, like Poland, had to install phase shifters to maintain grid stability.

Germany’s renewable energy laws (the EEG) were also reformed last year, with the ruling CDU-SPD coalition cutting back the feed-in tariff for solar and onshore wind, which might slow photovoltaic (PV) expansion. However, PV and onshore wind have been receiving subsidies for 25 years and their expansion over the past few decades has resulted in lower production costs. These should, to an extent, counteract the effect of lower subsidies and move the ‘Energiewende’ closer to achieving its goal of ‘taking the training wheels off’ renewables and making itself, in turn, redundant. The EEG reform also introduced auctioning as a mechanism to finance renewable generation. This measure favours large utilities at the expense of the smaller producers, who have been the backbone of the ‘Energiewende’ up till now. They are simply too small to compete for large tenders.

As for the immediate future, the government’s plans to carry out tenders for ground-mounted solar PV projects over the 2015-2017 period with 500 MW of solar capacities being tendered in 2015, followed by 400 MW in 2016, and 300 MW in 2017, have also met with criticism. The German solar industry association, BSW, feels that the volume will be too low to meet the 7.5 GW solar capacity target by 2017, despite the present scenario of falling panel prices.

Meanwhile, Germany is moving, towards a major drive for energy efficiency, pushing utilities to cut emissions more dramatically, which can only mean less coal-fired production. The electricity sector has been told to cut back an extra 22 million tonnes of carbon emissions by capping this type of generation. The new programme aims at slashing carbon emissions by between 62 and 78 million tonnes by 2020, with 25-30 million tonnes coming by way of energy efficiency. An additional EUR 70-80 billion will be spent on investment in efficiency between now and 2020.

The majority of the ‘Energiewende’ community warmly welcomed these measures, which appear to dispel doubts about the Merkel administration’s commitment to the project.

Peter Whiley, specialist Grupa LOTOS S.A.

Alexandru Zegrea, Consultant, Pflüger International Consulting GmbH