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Press Fact Sheet

The German Energy Transition March 2016

Contents

COP21 and its implications for the German energy transition .................... 1

Energy Efficiency – The “twin pillar of the energy transition” ..................... 2

Renewable energies – the rise to market leadership ................................... 6

Transforming the energy system................................................................ 12

Future of renewable energy support schemes .......................................... 13

Acceptance in Germany and worldwide .................................................... 13

Contact & further information:

Berlin Energy Transition Dialogue press office

c/o Bundesverband Solarwirtschaft e.V.

Französische Straße 23

10117 Berlin, Germany

Email: press@energiewende2016.com

Phone: +49 30 29 777 88 80

During the conference on March 17 / 18 we can be reached at +491605866033

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COP21 and its implications for the German energy

transition The United Nations Climate Change Conference in Paris has proven that a worldwide

binding climate agreement is possible. For the first time in history, all countries

agreed to a climate accord in which they commit themselves to limiting global

warming to below 2 degree Celsius and less. The Paris Agreement links the upper

limit with a specific action target: global greenhouse gas neutrality by the second half

of the century. What are its implications for the German energy transition, the

Energiewende?

Paris has given a new impetus for Germany’s climate protection policies. The signal is

clear: in order to become greenhouse gas neutral, renewable energies have to be

expanded swiftly. This is a huge opportunity for the modernization of Germany’s

economy. The transformation of the energy system plays a vital role as a driver of

progress, innovation and jobs. However, there are several challenges which need to

be met: The Energiewende has only just begun. Growing shares of renewable energy

must be integrated in the electricity market and renewable energies’ shares in the

heating sector and transport are still low. Establishing nationally determined

contributions were also an element in the Paris Agreement. Germany’s contributions

to tackle climate change are manifold, but especially with regard to the energy

transition they are significant: By the year 2020, Germany’s greenhouse gas

emissions shall be reduced by 40% compared to 1990, until 2050 by 80 to 95%.

Energy Efficiency – The “twin pillar of the energy

transition”

High ambitions, high rewards

To achieve these targets, the energy sector must switch from fossil fuels to

renewable energies and energy consumption needs to be reduced simultanously.

“Energy efficiency is the twin pillar of the energy transition”, the federal government

declares in its National Action Plan on Energy Efficiency (NAPE). The government’s

Climate Action Programme, designed to get Germany back on track to reach its

2020 climate goals, claims that increasing energy efficiency can cut emissions by 25

to 30 million tonnes CO2 per year. Efficiency reduces costs and the environmental

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impacts caused by the energy system. Therefore Germany set itself ambitious

targets. Energy consumption is to be cut by 20% until 2020 compared to 2008, and by

half until 2050.

Energy efficiency is also seen as a lucrative business model. The German

manufacturing industry is a world champion on the international market of

innovations for energy-saving measures and green products. In 2013 environmental

products like insulation material or smart meters worth 82 billion euros were

produced and exports reached 50.3 billion euros in 2013. This equals 6% of overall

industrial production and German technologies account for 14.8% of worldwide

trade with environmental goods. The German Industry Initiative for Energy Efficiency

(DENEFF) estimates companies specializing in efficiency employed around 850,000

people in 2013. Investment in residential buildings reached 39 billion euros and 15

billion euros in non-residential buildings, according to the German Institute for

Economic Research (DIW). With interest rates being low, energy efficiency

investments can yield a higher rate of return than current long-term investments on

capital markets.

Still a hard nut to crack

Primary energy consumption in Germany reached 13.306 PJ in 2015. This equaled an

on-year increase of 1.3%, according to the Working Group on Energy Balances

(AGEB). Taking weather effects into account, however, energy consumption would

have dropped by 1.5 to 2%. Significant achievements have been reached in curbing

power (-4.6%) and heating demand (-10%) from 2008 to 2014. In transport energy

demand has been rising slightly since 2008. One reason is that progress in efficiency

has been outweighed by a trend to larger cars and an increase in the travelled

distances.

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A broad mix of policy instruments

Germany’s energy efficiency policy relies on the full range of policy instruments:

incentives by public funding and loans, regulatory measures as well as information

and consulting.

Reliable information and independent consulting shall lead businesses and private

households to smart investment decisions in energy efficiency measures. Financial

incentives like low-interest loans or investment grants enable target groups to carry

out those measures. Price signals can also set incentives for energy-efficient

behaviour. External effects, such as environmental impacts of energy consumption,

are partly internalized into energy prices through an energy use tax.

Another major approach is to set efficiency performance standards for new products

or investments. The Energy Saving Ordinance (EnEV) sets minimum requirements for

efficient energy use in new buildings and for large-scale renovations of existing

buildings. EU-wide provisions on energy labelling of products ensure transparency

and set incentives for more efficient products. Requirements to ecodesign set

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binding minimum requirements for the environmentally friendly design of energy-

related products.

Quantitative targets of the Energiewende:

2014 2020 2030 2040 2050

greenhouse gas emissions

-27% -40% -55% -70% -80% to

-95%

Energy efficiency

primary energy consumption (compared to 2008)

-8.7 -20% -50%

Electricity consumption (compared to 2008)

-4.6% -10% -25%

Energy demand in buildings (compared to 2008)

-14.8% -80%

Heat demand in buildings (compared to 2008)

-12.4% -20%

Energy consumption in transport

+1.7% -10% -40%

Renewable energies

Share in final energy consumption

13.5% 18% 30% 45% 60%

Share in electricity consumption

27.4%

(2015: 32.6 %)

35% 40%-45%

(2025)

55%-60%

(2035)

80%

Share in heating 12% 14%

Share in transport 5.6%

Increase number of electric cars

18.948 1 million 6 million

Source: BMWi, BDEW, Federal Motor Transport Authority (KBA)

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Renewable energies – the rise to market leadership

Renewables become dominant power source

Growth of renewables has been most dynamic in the power sector. In 2015,

renewables surpassed coal, nuclear and natural gas as Germany’s most important

energy source on the power market. The share in gross power supply reached 32.6%,

compared to 27.4% in 2014. On 23 August, the share of renewables set a record high

of 83.2% of power demand between 1pm and 2 pm. Power production from

renewables rose by 33.4 TWh from 2014 to 2015 due to a sunny and windy year.

Wind power production alone increased by 30.6 TWh (+50%). Photovoltaics (PV)

contributed 2.3 TWh more than in 2014. Biomass, water and geothermal power

production stayed roughly the same.

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The use of renewable energies avoided 167.5 million tonnes of CO2-equivalents in

2015, compared to 143 million tonnes in 2014. 122.1 million tonnes are attributed to

the power sector, 40.6 to the heat sector. 4.9 million tonnes have been avoided

through renewables in the transport sector.

The successful rise of renewables has not yet reached heat and transport. These two

crucial sectors for climate protection are still lagging behind. Climate friendly options

only contributed 13.2% to heat demand and 5.3% to energy use in the transport

sector in 2015. In renewable-based heat and cold consumption there has been a slow

increase, the numbers in transport have stagnated in recent years. The government

therefore raised investment grants for renewable heating systems in 2016. In the

transport sector, a biofuel quota applies and the government pushes electric

mobility to put one million electric cars on the road by 2020. Renewable energies’

contribution to primary energy rose from 11.5% in 2014 to 12.5% in 2015.

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Economic benefits

RENEWABLES – AN INVESTMENT HUB

The successful rise in power production goes hand in hand with investments in

renewable capacities. Installed capacity of wind, solar, biomass, water and

geothermal power more than tripled over the last ten years, from 28 GW in 2005 to

97.4 GW in 2015. The share of all installed capacity in the power market rose from

20% to 48%.

Investment in new installations of renewable energy plants increased to

18.8 billion Euro in 2014:

2000 2005 2012 2013 2014 2015

Wind energy 1.9 2.5 3.9 6.6 12.3 9.7

Solar energy (PV and solar thermal)

0.8 5.5 12.2 5.1 3.1 2.5

Biomass 1.1 3.3 2.9 2.6 2.4 1.4

Hydro 0.7 0.2 0.3 0.3 0.1 0.1

Geothermal and environmental heat

0.1 0.3 1.1 1.1 1.0 1.0

Total 4.6 11.9 20.3 15.7 18.9 14.7

Source: BMU/BMWi

Globally, investment in renewable energies reached record levels in 2015. According

to Bloomberg New Energy Finance (BNEF) investment increased to $329bn, an on-

year increase of 4%. In Europe, investment decreased by 18% to $58.5bn. On the

other hand the two other leading markets for renewables, China and the US, saw

investment rises to $110.5bn (+17%) and $56bn (+8%) respectively. The global

market for wind and solar energy grew by 30%. 64 GW of wind and 57 GW of solar

capacity were added in 2015. Solar and wind combined made up half of all capacity

added in all generation technologies in 2015.

RENEWABLES – A DRIVER OF INNOVATION

German companies are among global market leaders in many fields and a source of

inventions and innovation. The massive cost reduction in solar and wind power is one

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indicator of innovative capacity in the renewable energy sector. The provisions of the

German Renewable Energy Sources Act (EEG) have enabled German companies to

continuously improve processes and products. Economies of scale also play a major

role in cost reductions.

An obvious indicator of innovation in wind power is the impressive increase in plant

size and generator power. In the year 2000, the average generator power was about

1 MW. In 2015 it reached 2.7 MW. Improvements in technology lead to higher power

output. Electricity generation costs have reached grid parity in many areas around

the world. Wind power in Germany already has lower costs than new hard coal or

natural gas power plants at very good onshore locations. In Germany, a kilowatt hour

from onshore wind power cost 4.5 to 11 cents in 2013, depending on sites. The

highest cost reductions have been achieved in PV. From 2006 to 2015 average system

prices fell by more than 70 percent.

PROVIDING MORE ENERGY SECURITY

Currently, Germany imports more than 70% of its primary energy consumption.

Security of supply can only be guaranteed with renewables which are the only

domestic energy source sustainably available for future generations.

In large parts energy sources are imported from politically unstable regions with

mining conditions that carry heavy consequences for humans and nature.

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EMPLOYMENT AND NEW PERSPECTIVES FOR STRUGGLING REGIONS

Suppliers of chemicals, glass, steel, copper and electronics highly benefit from

growing demand for renewable technologies made in Germany. Wind power

producers are now among the most important customers of the steel industry. The

Energiewende creates jobs in manufacturing, the services industries, installation and

operation of the plants in many parts of the country, especially in remote areas

which have lacked perspectives for many decades. 355.000 were employed in the

renewable industry in 2015.

CITIZENS’ ENERGY

The expansion of renewable energy is accompanied by a shift in the ownership

structure of electricity production. Almost half of all renewable power capacity so

far installed in Germany is in the hands of private individuals, according to a study

by trend: research released in 2013. This is evidence that citizens can actively take

part in the growth of renewable energies.

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Those ownership structures point to the decentralized character of the

Energiewende. Studies have shown that the increase in renewable energy production

can generate double digit billion Euro benefits in terms of value added on the local

level.

RENEWABLES - AN EXPORT ENGINE

Renewable energies have been a reliable export engine not only for the German

manufacturing industry, but also for other sectors such as services. In the renewable

energy sector, export turnover in the areas of components production and energy

plant production amounted to some 8.6 billion euro in 2014, according to an

estimate from the German Aerospace Center (DLR). For all the major branches of

renewable energies, the export business has been a key pillar of success.

Export ratios of major renewable energy sectors according to industry estimates:

The German wind energy industry boasts an export ratio of some 66%, according to the

German Wind Energy Association (BWE).

The export ratio of the German solar industry was around 70% in 2015, according to the

German Solar Association (BSW).

In the German biogas industry, the export ratio will reach some 66% in 2016 according

to a forecast by the German Biogas Association (FvB) from September 2015.

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Some 120,000 heat pumps were manufactured in Germany in 2015, out of which 80,000

were destined for export markets.

Biodiesel producers in Germany reached an export ratio of more than 50% in 2015.

(all figures are based on industry estimates or forecasts)

Transforming the energy system Power production from wind and solar energy form the core of the future energy

system because of their low generation costs. In the course of a year wind and solar

roughly complement each other. However, fluctuating power production is the key

challenge for transforming the energy system. All other players and elements will

have to adjust accordingly and offer flexibility to the system to guarantee reliable

supply. Other renewable energy technologies such as biomass, hydro and geothermal

energy can ideally complement supplies from fluctuating sources. Furthermore gas

plants will play a crucial role as a supplement which will be fired with “renewable

gas” like bio-methane or synthetic natural gas in the future. Expanding wind and

solar power production will lead to growing supplies of excess power. Therefore

more short term storage technologies like pump storage and batteries will be needed

as well as long term solutions like power-to-gas. Cogeneration plants currently still

work heat led. In face of the system transformation they have to work more flexibly

and base their power production on the needs of the Energiewende. Some power

consumers already adjust their power consumption to supply (demand-side-

management). In the future, all consumers – from private households to industrial

large-scale consumers – will play a role in the power market by responding to supply.

The coupling of all three sectors, power, heat and transport, is another crucial

flexibility option. Marginal cost of wind and solar is essentially zero. Therefore excess

power from these sources should not be wasted by curtailing. It can be used in

heating technologies like heat pumps and district heating networks. In the transport

sector, excess power can be used directly in electric cars or indirectly by converting it

into methane, hydrogen or liquid fuels. Batteries in cars can also stabilize the grid by

feeding power back into the grid when solar and wind power production is low.

On 20 March 2015 a partial solar eclipse and storm “Niklas” at the end of the same

month put the flexibility of Germany’s power system to an unprecedented test,

which it passed with flying colours. Power production from renewable energies

fluctuated heavily, but the interaction of flexibility options worked smoothly. During

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the solar eclipse solar power production fell by 7.5 GW and ramped up by 11.3 GW

within just one hour.

Future of renewable energy support schemes Over the first two decades, the German energy transition focused on growth and

market access. Producing additional kilowatt-hours was the driver for achieving

leverage. The German Renewable Energy Sources Act and its guaranteed feed-in-

tariffs was the key for rapid growth of renewable power production by guaranteeing

reliable investment conditions. This highly successful instrument has been exported

into many other countries and regions across the globe. The power system changed

dramatically from centralized power production in only a few fossil and nuclear

plants to a more decentralized approach. Part and parcel of this decentralized

approach are 1.5 million solar power installations, 26.000 wind turbiness and around

8.900 biogas as well as 7.000 hydro power plants. While conventional power systems

respond to demand, the new system is based on fluctuating wind and solar energy.

Therefore many challenges lie ahead to transform the entire system. These

challenges range from grid infrastructure and digitization to market design. Germany

is now shaping the next era of the Energiewende. The German government currently

changes the legislative landscape of the renewable energy market. Feed-in-tariffs are

substituted by auctions to gain more political influence on the speed of renewables’

expansion and subject them to market forces. Exemptions apply to small

installations.

Acceptance in Germany and worldwide The transition to renewable energy enjoys continued strong support among the

German population. This is also the case when compared to other major economies

of the Western World. Regardless of their expansion status, renewables have a high

degree of acceptance with approval ratings well above 80 percent in most cases.

Targets for expanding the use of renewable energy are strongly supported, too. This

applies to European Union member states, Japan and, depending on the costs, also

to the United States, Canada and Australia.

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On average, 90 percent of the population in the EU perceived an increase of

renewables to be important, of which 49 percent voted for "very important" and 41

percent for "fairly important", as the “Eurobarometer” survey on behalf of the

European Commission shows. The highest degree of acceptance was shown in

Germany: here, 93 percent are in favour of further expansion of renewable energies.

In the UK and France, nearly 90 percent of respondents perceived renewable energy

targets for national governments to be “important” or “very important”. In countries

at the lower end, like Poland, still a third of the population thought that the

renewable energy targets of their government are “very important”, 55 percent

opted for “quite important”.

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However, this overall socio-political acceptance needs to be translated into an

increasing market-related acceptance which manifests itself in higher sales and a

more intensive market penetration. After 2020, there are currently no binding EU

targets for the further expansion of renewable energies in individual EU member

states. The goal set to date is a share of at least 27 percent of final energy

consumption from renewable sources by 2030 in the European Union as a whole. A

different approach is pursued in North America, where concrete expansion goals for

renewable energy have been set by state and provincial governments. These goals

also meet with very high approval. Overall the analyzed polls show that people do

not have any reserve when confronted with the dynamic development of renewable

energies. At the G7 Summit in June 2015 in Elmau and at the UN Climate Conference,

the international community committed itself to decarbonization and to limiting

global warming.

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This fact sheet has been prepared by:

Renewable Energies Agency

(Agentur für Erneuerbare Energien)

Invalidenstr. 91, 10115 Berlin, Germany

Email: kontakt@unendlich-viel-energie.de

Phone: +49 30 200 535 30

Web: www.renewables-in-germany.com

For BETD2016 related inquiries, please contact:

Berlin Energy Transition Dialogue press office

c/o Bundesverband Solarwirtschaft e.V.

Französische Straße 23

10117 Berlin, Germany

Email: press@energiewende2016.com

Phone: +49 30 29 777 88 80

During the conference on March 17 / 18 we can be reached at +491605866033