Perspectives from Around the World

The German Path to the Energy of the Future: Reliable, affordable, and environmentally sound

German Ambassador to Japan

Never before has Germany's energy policy attracted as much attention in Japan as is the case today. Indeed, the law passed by Germany's parliament last summer constitutes a momentous decision. It expresses the will of Germany to significantly speed up the process of phasing out the use of nuclear energy. Supported by an overwhelming majority of the German public, it came in the aftermath of the Fukushima nuclear catastrophe and therefore is directly related to events in Japan on 11 March, 2011 and afterwards. At the same time, the need to translate this decision into reality constitutes a challenge of considerable dimensions for Germany's energy policy. A thorough analysis of measures to be taken and possible obstacles is therefore necessary.

Already in autumn 2010, the federal government adopted the "Energy Concept", which paved the way for the age of renewable energies. Yet, nuclear power here still has a "bridging role" until renewable energies can play their part reliably and the necessary energy infrastructure has been established. Today, we speak of fossil energy as the "bridge" we need until we are able to completely phase out electricity production in German nuclear power plants by the end of 2022 at the latest.

Phasing out nuclear energy more quickly means that we have to considerably accelerate the fundamental transformation of our energy system which we have already sketched out in the Energy Concept. We will therefore develop our Energy Concept further. The basic strategic approach - the switch-over to renewable energy sources and greater energy efficiency for a secure, environmentally sound and competitive energy supply--still applies and provides the foundation for today's decisions. The targets included in the Energy Concept are ambitious, but achievable.

Ambitious climate protection remains a decisive driving force for the transformation of our energy supply. It sends important signals encouraging investments in innovations and technological progress. This is why we are emphasizing the importance of the climate protection targets laid down in the Energy Concept. In particular, we want to reduce greenhouse gas emissions by 40% by 2020, 55% by 2030, 70% by 2040, and 80 to 95% by 2050, compared to the reference year of 1990.

The thorough restructuring of our energy supply represents, above all, an opportunity for the generations to come. Our country is a pioneer on the path towards the energy supply of the future. We can be the world's first major industrialised nation to accomplish the transition towards a highly efficient, renewable energy system. However, this will require a strictly realistic, judicious and common sense approach. Our focus is on innovation and advanced technologies, on effective and cost-efficient measures, and on pursuing a policy that is environmentally sound, climate-friendly and in line with market and competition principles.

To accelerate the transformation of our energy system, the federal government has taken the following decisions:

The central component of the energy supply of the future will be the continued and rapid expansion of renewable energy sources. To achieve this, we are laying the foundations for an electricity market that will consist more and more of renewable energies. This means that coordination of conventional power plants with electricity production from renewables needs to be optimised (market and system integration). Renewable energy sources must increasingly be able to generate electricity according to demand and provide system services to ensure grid and supply stability. At the same time, storage facilities and an ever more flexible fleet of conventional power plants are to play a greater role in balancing the fluctuating energy levels generated from renewables.

Expansion must be cost-efficient to guarantee affordable electricity prices. What is now a niche market must become a volume market. The quicker we succeed in this, the more the transition to the age of renewable energies will boost growth. It is crucial to exploit the available cost reduction potential to ensure that the surcharge under the Renewable Energy Sources Act, currently set at 3.5 cents/kWh, is not exceeded and can be lowered in the long term. Wind energy is the area that offers the greatest potential for a speedy and cost-efficient expansion of electricity generation from renewable sources.

With the amendment to the Renewable Energy Sources Act (EEG), the federal government is continuing the dynamic expansion of renewables, making them more cost-efficient and improving market and system integration, in particular with the following measures:

  • We will maintain the basic principles of the EEG, thus creating planning and investment security.
  • We will improve tariffs where they are currently insufficient, for example, those for offshore wind, hydropower, and geothermal energy. At the same time, we will restrict excessive funding and windfall profits.
  • For example, we will adjust the volume-based degression for photovoltaics ("flexible cap") every six months, drastically simplify the tariff system for biomass and limit windfall profits resulting from the green electricity privilege.

Renewable energies can make a growing contribution to energy supply security. We have set ourselves the target of increasing the share of electricity from renewable energy sources in gross electricity consumption from 17% today to at least 35% by 2020. By speeding up grid expansion, improving market and system integration and increasing the use of storage facilities, we plan to gradually align renewable electricity production more closely to demand. The Energy Concept also provides for a 10% reduction in electricity consumption by 2020. This is another contribution to ensuring supply security.

Germany's energy-intensive industries employ about one million people who make important contributions to value added in our country. The government will therefore lay down extensive provisions for compensating energy-intensive businesses for electricity price rises due to emissions trading, drawing on up to €500m from the Energy and Climate Fund, with the possibility of allocating additional funding from the federal budget where appropriate. This will be accompanied by complementary measures at the European level. Furthermore, the special compensation scheme to relieve the burden on energy-intensive industries under the Renewable Energy Sources Act (EEG) will be made flexible and more generous.

A special funding programme "Offshore Wind Energy" established at the Federal KfW Bank with a volume of 5 billion euros will support the construction of the first 10 offshore wind farms, allowing important experience to be gathered in this area. We must invest in this technology now. Only this will enable us to tap the tremendous cost reduction potential in the near future. With the amendment to the Offshore Installations Ordinance, we will considerably simplify and accelerate the approval procedures for installations to be constructed in Germany's exclusive economic zone (EEZ).

Expanding and upgrading the grid will play a key role in the expansion of renewable energy sources. We intend to adopt a Grid Expansion Acceleration Act (Netzausbaubeschleunigungsgesetz, NABEG) to create the prerequisites for a quicker expansion. This is particularly relevant for electricity transmission grids with the main function of transporting wind power from the northern part of Germany to the consumption centres of the south. The federal government proposes that the planning and approval procedure for long-distance lines should be carried out by the Federal Network Agency. A joint working group with the Länder will be established for this purpose, which will be chaired by the Federal Minister of Economics and the Head of the Federal Chancellery. The mandate of this working group is to agree, by consensus if possible, on the details of the planned legislative amendments. This would create a one-stop shop for approval procedures. Comprehensive public participation will be ensured from an early stage. The conditions for the construction of cross-border electricity lines and for the use of underground cables in the 110 kV range will be optimised. The connection of offshore wind farms to the grid will be made easier by allowing cluster connections to be used instead of costly individual connections. Incentive regulation provisions will allow municipalities to agree to financial compensation with grid operators for long-distance lines running through their territory.

The revised Energy Industry Act (EnWG) will create an even stronger basis for smart grids and storage facilities. Storage is crucial for the integration of fluctuating renewable electricity into the system. We therefore plan to exempt new storage facilities from grid charges that they would otherwise have to pay. For the first time, there is an obligatory and coordinated grid expansion planning (under the EnWG) for the major electricity transmission and long-distance gas lines (10-year network development plans). Network development plans will be drawn up to allow for the necessary level of grid expansion and increase public acceptance for the construction of power lines through comprehensive stakeholder consultations. On this basis, the need for grid expansion will be defined in a legally binding way in a requirement plan act (Bedarfsplangesetz). At the same time, the legal framework for the planning of low-loss, high-voltage direct current (HVDC) lines will be improved. Amendments to the Grid Expansion Acceleration Act and the Energy Industry Act will considerably facilitate the involvement of citizens at all stages of the grid expansion process.

It is essential that the fossil fuel power plants currently under construction are completed by the end of 2013. As an additional safeguard, we intend to add up to 10 GW guaranteed capacity by 2020 to the gas- and coal-fired power plants that are already being built. We are preparing a Planning Acceleration Act (Planungsbeschleunigungsgesetz) to help ensure that the required capacities are created quickly.

In the building sector, economic incentives and energy saving requirements laid down by law will remain important elements of our strategy for increasing energy efficiency and protecting the climate. Efficiency standards for buildings will be markedly tightened. In particular, the 2012 Energy Saving Ordinance (ENEV) will provide for a gradual harmonisation of standards for new buildings with the future European standard for nearly zero-energy buildings by 2020, as far as this is economically reasonable based on a balanced consideration of the burden imposed on building owners and tenants. The federal government is setting a good example. From 2012, all of our new buildings will comply with the nearly zero-energy standard.

Energy-related modernisation of buildings reduces CO2 emissions and energy consumption. Funding available under the CO2 building modernisation programme will be stepped up to 1.5 billion euros for the years 2012 to 2014, compared with 936 million euros in 2011. We will also introduce additional options for depreciations in the building sector. Furthermore, the federal government will review whether a budget-neutral solution can be applied from 2015 (e.g. white certificates).

Compliance with stringent energy efficiency criteria will be made a crucial, legally binding aspect in public procurement. In a first step towards this objective, we will adopt the necessary amendments to the Ordinance on the Award of Public Contracts (Vergabeverordnung). In essence, any products and services procured should have the best performance with regard to energy efficiency and fall under the highest efficiency class.

The generations using nuclear energy must also attend to the disposal of the resultant radioactive waste. This includes the further unprejudiced exploration of the Gorleben salt dome and a procedure to determine general geological suitability criteria and possible alternative disposal options. In this context, the federal government will present a legislative proposal by the end of the year.

We need intelligent distribution grids for the expansion of renewables and their integration into the system. Step by step, we are creating the prerequisites for a market-driven process to build up these grids, which guarantee data protection and data security, ensure decentralised generation and load management, facilitate the optimal integration of renewables, allow the best possible use of the grid and can tap the efficiency potential at the consumer end. We must develop and apply new storage technologies to balance the fluctuating electricity generation from renewables, and we need further progress in deploying renewables in Germany and Europe and their efficient cooperation.

Lastly, we need new strategies for more energy efficiency and updated standards that allow us to exploit the available potential both in the building sector and in electricity consumption. Equally, we need to redesign the electricity market to ensure that flexible and secure capacities remain available at all times when supply is primarily based on renewables.

Germany must approach the transition to a modern, low-carbon energy supply system from a European and international perspective. Our guiding principle in the face of the challenges ahead should be resolute implementation of the goals of the Energy Concept while giving a substantial boost to competition in Europe's energy and industrial sectors.

This is not an easy path to go. But both the government and the German parliament are confident that it is possible. After all, Germany today is one of the most productive and economically successful countries in the world. This would not be possible without a competitive supply of energy for our businesses. Our citizens rely on electricity being available at all times, in any quantity and at an affordable price. They must be able to continue to rely on that. In the end, we want our energy system to strengthen our economic base, give important impetus to innovation and technological progress, preserve the natural foundations of life and help protect our climate. An ambitious objective, yes, but it is achievable.

February 2012

February 1, 2012

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