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In Germany, there is a consensus to phase out nuclear power by 2022, and to expand the share of renewable energy sources to 80 per cent of the electricity consumption by 2050 – the so-called energy transition, or Energiewende. Just ahead of the federal elections on 22 September 2013 politicians are struggling to convince voters as to whose approach to a successful energy transition will work best for them.
In part one of this blog, I explained the thinking behind Energiewende, and explored how electricity prices could fall significantly when renewable energy output is at its greatest. Such situations could render fossil fuel plants uncompetitive, at times when their backup capacities are still in need.
One solution proposed by some Liberal and Christian Democrat politicians is to demand the feed-in tariff system be replaced with fixed prices while encouraging owners of wind and solar farms to adapt to “market signals”. This however could lead to a waste of eco-friendly electricity at times of surplus production and discourage investment in renewable energy.
In this second part of the blog, I will suggest recommendations for actions in the future. Many “green” politicians from different parties have suggested that the feed-in tariff system would work fine even with more than 30, 40 or 50 percent of renewable energy in the electricity market. They demand extra incentives for replacement capacity, flexible power plants and energy storages to secure supply in times of wind and solar shortages.
Both, continuing feed-in-tariffs and introducing so-called capacity mechanisms, would need to be financed by further levies on the price for electricity. The Social Democrats in particular would find it difficult to distribute these extra costs between private households with low income, the middle class, small or medium-sized companies and energy intensive industry without risking social and economic distortions in a common European market and globalised economy.
Therefore, the following tasks should be addressed immediately after the elections, no matter which parties form a new government:
- Improving the overall governance of the energy transition: make sure that regional energy concepts are better integrated into the electricity system and grid modernisation plans. This requires also the (re-)definition of the legal obligations of different market players for system operation;
- Increasing carbon prices for electricity from fossil fuels, thus minimising the generation of fossil energy in times when renewable energy is available;
- Avoiding windfall profits by reducing and focusing feed-in tariffs for renewables: they should reward flexible generation and use of energy but should also be differentiated fairly, correspondent to the regional yield of wind and solar energy;
- Introducing alternative instruments to better control the speed and spatial distribution of the further expansion of biomass and offshore wind, in order to lower the overall costs of these rather expensive technologies and the associated environmental impacts on maritime and terrestrial ecosystems;
- Deciding on the introduction of new mechanisms to reward flexible backup and storage capacities and to promote demand side management;
- Implementing a national transfer and clearing body to cope with regional conflicts as new facilities and infrastructure for the energy transition are planned and built;
- Ensuring that customers will benefit from lower prices at the electricity exchange and/or decentralised renewable energy by defining and enforcing the conditions of sale for electricity products.
Further information and studies available in English can be obtained through Agora Energiewende, e.g.:
12 Insights on Germany’s Energiewende
Cost-optimal expansion of renewables would save Germany up to two billion euros a year
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