New renewable

energy policies in
Germany and their
perspectives
With a focus on the power sector

Dimitri Pescia, Agora Energiewende

REVISION 2016 CONFERENCE (JREF)
TOKYO, 09.03.2016
Agora Energiewende – Who we are

Think Tank with 20 Experts

Independent and non-partisan

Project duration 2012-2017

Financed with 14 Mio. Euro by
Mercator Foundation & ECF

Mission: How do we make the energy

transition in Germany a success story?

Methods: Analyzing, assessing,

understanding, discussing, putting
forward proposals, Council of Agora
The Energiewende in
the power sector in a
nutshell
The Energiewende means fundamentally changing the power
system from coal/nuclear to renewable energies
Gross electricity generation 1990, 2014 and 2050
Phase out of Nuclear Power
Gradual shut down of all nuclear power plants until
2022

Reduction of Greenhouse Gas Emissions

Reduction targets below 1990 levels:
- 40% by 2020; - 55% by 2030; - 70% by 2040;
- 80% to - 95% by 2050

Development of renewable energies

Share in power consumption to increase to:
40 - 45% in 2025; 55 - 60% in 2035; ≥ 80% in
2050

Increase in efficiency
Reduction of power consumption compared to
2008 levels: - 10% in 2020; - 25% in 2050
AGEB (2015a), BReg (2010), EEG (2014), own calculations * preliminary

4
Renewables are the most important source in the electricity
system – followed by lignite and hard coal
Share in gross electricity generation by fuel in 2015 Gross electricity generation by fuel 1990 - 2014

AGEB (2015) AGEB (2015)

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The key insight for the Energiewende:
It’s all about wind and solar!
Gross electricity generation of renewable energies 2000 - 2035

Cumulative installed Capacity in 2015

~ 85 GW variable renewables
41.6 GW onshore wind (2015 : +2,3 GW)
3.3 GW offshore wind (2015 : +3,5 GW net)
39.7 GW Photovoltaic (2015 : +1,5 GW)

2000 - 2014: AGEB (2015a); 2015 - 2035: own calculation on basis of BNetzA (2014)/BNetzA (2015b)

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Wind energy and solar PV are in most regions of the world the
cheapest low-carbon options and already cost competitive to
newly built fossil power plants
Range* of levelized cost of electricity (LCOE) 2015

Agora Energiewende (2015e) * based on varying utilization, CO2-price and investment cost
New renewable
energy policies :
moving towards
>50% renewables
Germany is currently refining its regulatory framework in order
to achieve a reliable power system, with high shares of
renewables and at low cost.
Schematic diagram of a new power market design Five elements are needed in order to get a good
market design for high shares of renewables.
2 These elements should not contradict each other
Coordinate
Power Market 2.0 (e.g. capacity payments for old coal power plants),
supply and
(complemented by flexible markets for balancing energy) but be mutually supportive.
demand

1 Recent and upcoming legislation improve the

Managing the Smart regulatory framework in this direction :
Securing Financing of
power fleet Retirement of
Resource New •1 Reform of the Renewable Energy Act (EEG
investments old Coal
Adequacy Renewables 2016)
and retirements Plants
•2 New electricity market law  reliance on
energy-only-market (EOM 2.0) + reserve to
secure supply in emergency situations
Reaching
climate targets Emissions Trading or Carbon Price •3 Climate Reserve (DE) and reform of the
Emission Trading Scheme (EU level) 
3
“Entering the coal exit” but long-term coal
phase-out plan is still missing (Agora proposal)
Own illustration
1 EEG Act

The Renewable Energy Act (EEG law) ensures a continuous

and sustainable growth of renewable energy
Share of renewable energies in gross power consumption 2000-2015 and targets 2025, 2035

Setting long-term renewables targets

allows actors to make efficient investment
decisions (both for RES and non-RES)

Key objectives of the current and upcoming

Renewable Energy Act (EEG law) :
• Paving the way for a sustainable and
long-term growth of renewables
• Minimizing deployment costs (in 2016,
the EEG Levy (EEG Umlage) reaches
6.354 cts€/kWh (i.e. 7.9 JPY/kWh)
• Maintaining actor diversity (especially
citizen cooperatives and small projects
developers)

AG Energiebilanzen 2015

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1 EEG Act

Both the previous and ongoing reform of the Renewable

Energy Act (EEG) foster market integration and increased
competitiveness
Main principles of the Renewable Energy Act (EEG) 2014 and 2016 (starting 2017)

Pre- EEG EEG EEG EEG EEG EEG

EEG 2000 2004 2009 2012 2014 2016

• FIT for small projects

• An auction system attributes the remuneration (CfD) for all
• Mandatory direct marketing (FIP/CfD) for larger projects large PV and wind (onshore and offshore) projects (>1 MW)
• Remuneration to RES is adjusted automatically • FIT remains for small installations
depending on the target achievement (yearly targets :
• Tailored auction for each technology (3-4 rounds a year, pay-
+2,5 GW PV, + 2,5 GW wind onshore, + 800 MW wind
as-bid, conducted by Federal Network Agency)
offshore + 100 MW biomass)
• Yearly capacity volume tendered in line with overall RES
• Discontinuation of FIT in periods of negative prices (>6h)
targets (PV – 500 MW, Wind onshore – minimum of 2 GW)
• Pilot phase for PV auctions (400 MW). Last round (Dec
• Project fulfillment insurance (collateral to guarantee
15) delivered a remuneration of 8 cts/kWh (~ 10
implementation, sanction when failure to respect commitments)
JPY/kWh)
• Special prequalification regulation for facilitating the
• Prosumers pay a small portion of the EEG surcharge /
participation of citizen cooperatives in wind auctions
privilege for industrial consumers maintained

Agora Energiewende from Federal Ministry of Economics and Energy (BMWi)

2 Electricity Market Law – Flexibility

On the way to a new Electricity Market Law (Strommarktgesetz)

Green Paper White Paper Electricity Market Law

October 2014 July 2015 Fall 2015 - Summer 2016 (July)

Referentenentwurf

Entwurf eines Gesetzes zur

Weiterentwicklung des
Strommarktes
(Strommarktgesetz)

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2 Electricity Market Law – Flexibility

Flexibility is the paradigm of the new power system.

The new Electricity Market Law enhances the flexibility of the
energy and balancing markets (EOM 2.0).
Electricity generation and consumption in a sample week with 50% RES share Key principles of the Electricity Market Law

The electricity market law reinforces the

role of short-term markets  key
coordination mechanism between the
large number of actors (RES, fossil
power plants, demand side, storage)
It enhances the flexibility of these
markets, with short trading products (15-
minutes), delivery close to real-time, and
removal of price caps.
Balancing market design is refined
(technology neutrality allowing access to
DSR and RES) and balancing
responsibilities are strengthened.
Better integration of markets across
borders

Own calculations on basis of Agora Energiewende (2015b)

2 Electricity Market Law

The new Electricity Market Law introduces also new reserves

to secure supply in ”emergency” situations
(”belt and braces approach”)

Grid Reserve
INTERPLAY
• Security of supply and grid reliability
(accounting for congestions in the Capacity reserve
grid) • Security of Supply (4.4 GW, through
New!
auction)
• Activated after market closure (only if
no clearing prices on day-ahead)

„Climate reserve“
• Transition period: the capacity
reserve has an additional function of
”climate reserve” (2.7 GW lignite for
four years) to contribute to reduction
in emissions

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2 How Germany currently cope with flexibility

Don‘t be afraid of the flexibility challenge:

How Germany coped with the partial solar eclipse
in March 2015
Solar power production on March 20, 2015 Due to the solar eclipse, electricity production from solar PV
ramped down 12 GW within 65 minutes, and ramped up again
roughly 19 GW within 75 minutes

These ramps are unusual today, but will occur frequently in

2030 in Germany, when roughly 50% of electricity will be
produced by renewables
19 GW
Electricity supply remained stable during the hours of the
eclipse. Flexibility was traded in the intraday market.
Solar power production on March 20, 2015
12 GW Prices and volumes traded on the Intraday market, March 20, 2015

Agora Energiewende (2015): Die Sonnenfinsternis 2015 www.epexspot.com

2 How Germany currently cope with flexibility

How the flexibility challenge is met today:

Fossil power plants reacting according to the wholesale power
price in the 60%-RES-situation in December 2014
Demand and power production on December 21-27, 2014 Conventional power and spot market price on Dec 21-27, 2014

www.agora-energiewende.org www.agora-energiewende.org
3 „Smart“ retirement of coal power plants

A gradual reduction of coal use is needed – in 2017, a “coal

reserve” will be implemented, for 2030/2040 we need a “coal
consensus”
CO2 emissions from electricity generation 1990 - 2014 and in scenarios 2015 - 2040

10%-point gap!

Agora Energiewende (2016), Enervis (2016)

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To sum up : Germany on its way towards a highly flexible
power system based on wind energy and solar PV.
What about Japan?
Historic development of variable renewables in Germany and Japan and 2030 targets (based
The German energy transition is an ambitious
on government objectives)
industrial and societal transformation process, with
clear political commitment and long-term targets. It
benefits from a strong support within the German
society.
The German Renewable Energy Act (EEG law) is
the legislative corner stone of the Energiewende.
The ongoing reform of the law fosters market
Germany integration and increases competitiveness.

Flexibility is the new paradigm of the power

system. Competitive and liquid short-term markets
are key to value this flexibility.
Japan

Reaching mid- and long-term German

decarbonization objectives may only be met
through a new consensus on the question of coal.
IEA (data for 2015 runs until 11/2015), German and Japanese objectives (indicative)
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Thank you for

your attention!

Questions or Comments? Feel free to contact me:

Dimitri.Pescia@agora-energiewende.de

Agora Energiewende is a joint initiative of the Mercator

Foundation and the European Climate Foundation.
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