Montel Magazine 4 2021 - Nordic power spat - Page 19

“ It is incredibly ambitious , but there is also a lot of catching up to do due to the inactivity of the last government ”

Under new management

Germany ’ s first coalition of socialists , greens and liberals has aggressive plans to shake up the country ’ s energy and climate policies .
By Nathan Witkop
Berlin ’ s new energy plans are as sweeping as they are aspirational . A coalition of Social Democrats , Greens and liberal Free Democrats that took office in December aims to bring forward the country ’ s departure from coal ; massively expand solar and wind generation and decarbonise fossildependent parts of the economy that have seen their emissions stagnate for years . The centrepiece of this drive is a goal to secure 80 % of electricity with renewables by 2030 . This is not just a sharp increase on the previous administration ’ s target of 65 %. The goal is especially lofty because it assumes the government ’ s plans will swell power demand substantially . Germany will attempt a two-pronged assault that both rapidly cleans up the electricity mix and relies on power to replace combustion engines , gas boilers and other fossil inputs for transport , homes and industry .
Making electricity more attractive for these purposes will mean making it cheaper , or at least more competitive . The coalition will drop the renewable energy tax on power bills that has been used to finance expansion to date . Funding will instead come from the federal budget . The cost of investing in new solar and wind is far cheaper than it was two decades ago when Germany first introduced feed-in tariffs to support these technologies , paying their guaranteed prices via the Renewable Energy Act levy on electricity . Nowadays wholesale power prices are much closer to the long-run cost of building solar and wind , which have become the cheapest sources of new generation . To help make sure things stay that way , the coalition has flagged backstopping carbon prices on Europe ’ s emissions trading scheme at EUR 60 / t , even if it can only secure such a floor domestically . The coalition is confident recent reforms and new goals for the carbon market will keep CO2 prices higher anyway – but it wants an insurance policy against the risk of cheap fossil fuels obstructing its agenda .
Expensive CO2 will also make it cheaper to close the gap between where carbon prices are now and where they would need to stay to make a business case for investing in , say , a clean alternative to coking coal for steel production . The coalition plans to introduce so-called carbon contracts for difference designed to unleash just such investments . They would subsidise industry in the event Europe ’ s carbon market failed to generate prices needed to invest in cleaner technologies and they would reimburse the German government if CO2 prices began to trade above what industry needed . The coalition – the first of its kind at a federal level – plans to speed up changes across every aspect of energy policy . But at its heart , the programme relies on a massive rollout of clean power – Berlin will broadly need to double Germany ’ s renewable energy output in the space of nine years .
“ This is not impossible , but nothing less than a mammoth task ,” says Marcus Ferdinand of Thema Consulting in Oslo . It will mean speeding up administrative processes , resolving grid constraints and rolling out a fresh power market design in rapid time – all challenges that dogged previous conservative-led governments for much of their 16 years in office . “ With the Green party concentrating political power in key ministries related to the energy transition , this seems not completely out of reach , but will only be possible without losing much time in political and legislative processes ,” Ferdinand says .
Breaking down some of the targets illustrates the challenge . By 2030 , the coalition aims to have 15m purely electric vehicles on the road – it has fewer than 0.5m today . It aims to source half of heating through carbon neutral means – gas alone is presently responsible for this much . The coalition also aims to build 10 GW of electrolysis capacity – double a prior target – to use renewable energy to make green hydrogen , a clean-burning fuel . Aurora Energy Research , a consultancy , estimates annual German power demand is likely to rise by almost a third to about 720 TWh . To ensure it still meets its targeted share of renewables , the coalition aims to secure 200 GW of solar and 30 GW of offshore wind by 2030 . That is almost a four-fold increase on present capacity . A governing coalition deal failed to spell out a target for onshore wind , but the parties ’ overall goal
Montel Magazine 4 – 2021