Energy Efficiency and Implementation of Energy Transition Among Top Priorities of Annual Economic Report 2015

Energy efficiency and the implementation of the Energiewende figure among the top priorities of the Annual Economic Report 2015 entitled “Investing in Germany’s and Europe’s Future”, which the German government presented yesterday. The government raised its 2015 growth forecast for the gross national product from 1.3% to 1.5%.

1. General Remarks

In view of challenges like the accelerating technological change and an aging society, investment and innovation were key to improving competitiveness, maintaining prosperity and a better quality of life for people living in Germany and Europe, the government said. Hence it wants to strengthen private and public investment in Germany and Europe.

The economic policy prioritises higher public expenses for education, research, energy efficiency and infrastructure as well as improving conditions for private investment. The government also announced to help industry and small and medium-sized companies to cope with the technological change. Furthermore the government said it wanted to continue with the Energiewende in a successful and cost-efficient way, providing investment security by setting clear frame work conditions. Besides, the government announced to spend more on education and labour market integration.

2. Energiewende and Climate Protection

By 2050 renewable energy shall account for 80% of Germany’s gross electricity consumption (cf. Section 1 para. 2 EEG 2014). The government calls the implementation of the energy transition (Energiewende) a “generation project” and says it wanted to balance affordability, security of supply and environmental sustainability. In particular with regard to the affordability the government points out that is was important to pay more attention to the cost effectiveness of individual tools as well as the total system (Gesamtsystem) as such, but also to “planning and investment security for all stakeholders, affordability (it remains unclear whether this redundancy is accidental or shall emphasise the point), public acceptance and a better coordination of the individual tools (Bausteine)”.

The government also wants to link the Energiewende more strongly with European and international energy policies.

Regarding climate protection the government announced to work towards an ambitious and binding climate protection agreement to be concluded at the Climate Conference in Paris at the end of this year (for more information, please see here).

On the European level the government strives for a reform of the European Emissions Trading System (EU-ETS) so as to increase the price of emission allowances and set stronger incentives for companies to invest in climate protection (for more information, please see here). However, an overhaul of the EU-ETS was not enough, national instruments like the Renewable Energy Sources Act (EEG) that promotes renewable energy, the Act on Combined Heat and Power (KWKG) and energy efficiency measures were also necessary, the government remarks, stating that all sectors had to contribute. In this regard the report mentions again an envisaged (but still unclear) additional reduction of 22 million tonnes of CO2 by 2020 by conventional power plants (please see here for more).

2. EEG 2014 Reform

The fundamental reform of the EEG that entered into force on 1 August 2014 (EEG 2014) had make renewable energy growth more predictable and manageable, linking it better with the rest of the energy system and reducing costs (the government specifically mentions changes to the “special equalisation scheme” contained in Sections 63 to 69 EEG).

The government also points out that as of 15 April 2015 financial support for PV power shall be auctioned (on average 400 MW annually in the years 2015 and 2016; regarding the ordinance regulating the matter, please click here). Based on the experience gained, support for the other renewable energy sources shall also be established in competitive bidding processes by the end of 2016, the government says. This is indeed a further fundamental change of the EEG funding system that already underwent a change from fixed feed-in tariffs to mandatory direct marketing topped up by a market premium in August 2014 (under the EEG 2012 direct marketing was still voluntary). The new shift is also necessary to bring the EEG in line with the with the European Guidelines on State Aid for Environmental Protection and Energy 2014-2020 (EEAG), which foresee that “during a transitional phase covering the years 2015 and 2016, aid for at least 5% of the planned new electricity capacity from renewable energy sources needs to be granted in a competitive bidding process on the basis of clear, transparent and non-discriminatory criteria” before competitive bidding processes become eventually mandatory (with limited exceptions) as of 2017 (cf. paragraph (126) EEAG).

As it wanted to retain a broad renewable technology mix, it had decided against a quota scheme, obliging utilities to buy certain quota of renewable energy, and also opted for holding individual auctions for the various renewable energy sources, thus not following the recommendations of the advisory committee (Sachverständigenrat), the government says.

3. Security of Electricity and Gas Supply

a) Electricity Supply

In view of more intermittent production, demands have been made in the past to create a capacity market that remunerates reliable production (particularly by conventional power plants that have come under financial pressure as renewables enjoy grid priority, cf. Section 11 para. 1 sent. 1 EEG). The transmission system operators had identified excess capacities of 10 to 12 GW in the period 2014 to 2016 that could help stabilise the grids, the government says. For the future one was assessing the options. In October 2014 a Green Paper on the future development of the German electricity market had been published. Following consultation it shall be followed up by a White Paper with specific proposals at the end of May 2015, based on which one would decide about legislative proposals.

b) Gas Supply

Regarding the gas supply that has come under threat due to the Russian-Ukrainian crisis, the government points out other supply sources, in particular from the EU. Besides, it mentions that Germany has the world’s fourth largest gas storage systems that are well filled, but says a further diversification was examined. The option to create a national gas reserve (which has been discussed lately) is not mentioned (cf. page 42 no. 182). At the Handelsblatt Annual Energy Conference last week, Jochen Homann, President of the ManyElectronics Regulator Bundesnetzagentur (BNetzA), touched on the subject, saying there was no need to create a national gas reserve.

4. Energy Efficiency

The report highlights the importance of improving energy efficiency to make the Energiewende happen. It mentions the main tool, the National Energy Efficiency Action Plan (NAPE) adopted in December 2014 which sets the course for the legislative term.

Source: Federal Ministry for Economic Affairs and Energy

Related posts:

• BNetzA President Homann on Options for Reform of Incentive Regulation
• BNetzA: Evaluation Report Incentive Regulation Published
• First Progress Report on Energy Transition: Much Has Been Achieved, Still a Lot on the Agenda
• Electricity and Gas Monitoring Report 2014: Energy Transformation in Electricity Generation Sector Well Underway, Grid Expansion Lags Behind