INTERNATIONAL ENERGY AGENCY

Energy Policies of IEA Countries

Please note that this PDF is subject to specific restrictions that limit its use and distribution. The terms and conditions are available online at www.iea.org/w/bookshop/pricing.html

GERMANY 2007 Review 001-014-Intro+ chap1(Germany)14/05/0715:48Page2 participates intheworkofIEA. participates are likelytobecomemembercountriesin2007/2008.TheEuropeanCommissionalso Switzerland, Turkey, UnitedKingdomandStates.TheSlovakRepublicPoland Korea, Luxembourg,Netherlands,NewZealand,Norway, Spain,Sweden, Portugal, Denmark, Finland,France,Germany, Greece,Hungary, Ireland,Italy, Japan,Republicof The IEAmembercountriesare:Australia,Austria,Belgium,Canada,CzechRepublic, To assistintheintegrationofenvironmentalandenergypolicies. • To improvetheworld’s energysupplyanddemand structurebydevelopingalternative • To oilmarket. systemontheinternational information operatea permanent • To promoterationalenergypoliciesinaglobalcontextthroughco-operativerelations • To maintainandimprovesystemsforcopingwithoilsupplydisruptions. • membercountries.ThebasicaimsoftheIEAare: OECD thirty It carriesoutacomprehensiveprogrammeofenergyco-operationamongtwenty-sixthe and Development(OECD)toimplementaninter-national energyprogramme. November 1974withintheframeworkofOrganisationforEconomicCo-operation EnergyAgency(IEA)isanautonomousbodywhichwasestablishedin The International United States. The European Commission takes part intheworkofOECD. United States.TheEuropeanCommissiontakespart SlovakRepublic,Spain,Sweden,Switzerland,Turkey,Portugal, UnitedKingdomand Republic ofKorea,Luxembourg,Mexico,Netherlands,NewZealand, Norway, Poland, Denmark, Finland,France,Germany, Greece, Hungary, Iceland,Ireland,Italy, Japan, The OECDmembercountriesare:Australia,Austria,Belgium, Canada, CzechRepublic, policies. identify goodpracticeandworktoco-ordinatedomesticinternational cancomparepolicyexperiences,seekanswerstocommonproblems, governments the challengesofanageingpopulation.TheOrganisationprovidesasettingwhere economyand theinformation suchascorporategovernance, developments andconcerns, respondtonew tounderstandandhelp governments is alsoattheforefrontofefforts to addresstheeconomic,socialandenvironmentalchallengesofglobalisation.TheOECD democraciesworktogether ofthirty The OECDisauniqueforumwherethegovernments ORGANISATION ANDDEVELOPMENT FORECONOMICCO-OPERATION energy sourcesandincreasingtheefficiencyofuse. organisations. andinternational with non-membercountries,industry No reproduction,copy, transmissionortranslationofthispublicationmaybemade International EnergyAgency(IEA),HeadofPublicationsService, International 9 ruedelaFédération,75739 Paris Cedex15,France. ihu rte emsin Applicationsshouldbesentto: without writtenpermission. to specificrestrictions thatlimititsuseanddistribution. Warning: pleasenotethatthispublicationis subject http://www.iea.org/Textbase/about/copyright.asp The termsandconditions areavailableonlineat INTERNATIONAL ENERGY AGENCY © OECD/IEA,2007

© OECD/IEA, 2007 5 4 3 2 1 ENERGY ANDTHEENVIRONMENT GENERAL ENERGYPOLICY EXECUTIVE SUMMARY RENEWABLE ENERGY ENERGY EFFICIENCY Recommendations Critique Taxation policy Security ofsupply Structure, oversight andreform inelectricityandgas markets Key energy policies leadership International institutions Government andregulatory Energy forecasts balance Supply-demand overview Country Key recommendations changepolicy Climate Energy market reform Nuclear phase-out Recommendations Critique Policies and measures Institutions Production Recommendations Critique Policies andmeasures Trends inenergy efficiency Recommendations Critique Measures toachieve emissionsreductions changepolicy Climate Carbon dioxide emissionsprofile ...... 35 ...... 72 ...... 61 ...... 51 ...... 65 ...... 66 ...... 34 ...... 20 ...... 15 ...... 32 ...... 8 ...... 41 ...... 26 ...... 77 ...... 63 ...... 52 ...... 65 ...... 53 ...... 9 ...... 68 ...... 53 ...... 13 11 ...... 45 ...... 7 ...... 26 ...... 16 ...... 53 ...... 15 ...... TABLE OFCONTENTS ...... 43 ...... 43 ...... 21 ...... 46 ...... 30 ...... 3

© OECD/IEA, 2007 11 10 9 8 7 6 COAL I ...... 85 OIL...... ELECTRICITY NATURAL GAS RESEARCH ANDDEVELOPMENT NUCLEAR ENERGY 4 Emergency response measures Transport fuels structure Industry Supply anddemand Recommendation Critique Subsidies structure Industry Supply anddemand Recommendations Critique Pricing andtaxes Trading Gas network Competition structure Industry Supply anddemand Recommendations Critique Market designandregulation Capacity, generationanddemand Institutions Policy objectives andpriorities Recommendations Critique Institutional andlegal framework Nuclear fuelcycle andradioactive waste management Nuclear policy General overview Recommendations Critique Prices structure Industry ...... 79 ...... 137 ...... 83 ...... 114 ...... 110 ...... 92 ...... 153 ...... 139 ...... 82 ...... 119 ...... 158 ...... 104 ...... 101 ...... 93 ...... 149 ...... 90 ...... 112 ...... 149 ...... 149 ...... 88 ...... 84 ...... 81 ...... 97 ...... 127 ...... 118 ...... 92 ...... 155 ...... 147 ...... 85 ...... 79 ...... 93 ...... 91 ...... 157 ...... 122 ...... 157 ...... 153 ...... 119 ...... 152 ......

© OECD/IEA, 2007 TABLES A D B C ANNEX: ORGANISATION OFTHEREVIEW ANNEX: ANNEX: ANNEX: 2 Cross-border congestionin Europe, and2005 2004 22. 1 Available transfercapacitiesbetween Germany anditsneighbours, 21. 2005 Capacityownership, 20. Balancingspreads inEurope, 2005 19. Electricitygeneration,1970 to2030 18. Generatingcapacityby type,2005 17. New storagecapacity 16. Domestictrunkpipelines 15. companies Refining by share ofcapacity, year-end 2004 14. 1970 outputandproduct exports, Refinery to2005 13. balance,1970 Oilsupply-demand to2030 12. balance,1970 Coalsupply-demand to2030 11. Biofuelsmixingobligations, 2007 to2015 10. 9. Feed-in tariffs by technology, 2006 Feed-intariffs 9. Electricitygenerationfrom renewables, 1970 to2005 8. Renewables supply, 1970 to2005 7. .CO 4. Tax 2007 asofJanuary rates 3. Alternative scenarioenergy forecasts to2030* 2. balance,2005 Supply-demand 1. .Future withquantifiable emissions actionsinnon-trading sectors 6. National allocation plans,2005-2012 5. Recommendations Critique Key projects andresearch areas Funding Review criteria Organisations visited Review 167 team ...... winter 2006/07winter reductions 2 emissions by fuel,1970 to2030 GLOSSARY OFABBREVIATIONS ANDLIST INTERNATIONAL AGENCY ENERGY “SHAREDGOALS” ENERGY BALANCES ANDKEYSTATISTICAL DATA BALANCES ENERGY ...... 164 ...... 159 ...... 50 ...... 169 ...... 132 ...... 165 ...... 168 ...... 110 ...... 108 ...... 127 ...... 35 ...... 17 ...... 161 ...... 66 ...... Tables andFigures ...... 124 ...... 119 ...... 69 ...... 120 ...... 44 ...... 48 ...... 86 ...... 72 ...... 167 ...... 80 ...... 22 ...... 177 ...... 133 ...... 87 ...... 67 ...... 171 ...... 89 ...... 175 ..... 5

© OECD/IEA, 2007 FIGURES 27. Federal fundingforenergy Federal R&D,2003to2008 27. 26. Residual electricity generation for German reactors andestimated ResidualelectricitygenerationforGermanreactors 26. Operatingandrecently shut-down nuclearpower plantsin 25. Transmission anddistributionnetwork fees 24. Electricitycustomerswitchingrates 23. 0 Consumptionsector, ofdieselandgasoline inthetransport 1990 10. 13. Gas transportation network Gastransportation 13. Final consumption ofnatural gas by sector, 1973 to2030 12. European gas demand,2004 11. 22. Estimated nuclearpower Estimated capacity, 2007 to2023 22. pricesinEurope, to2006 Industrialretail 2004 21. 138 pricesinEurope, Householdretail 2005 and2006 20. electricitypricesin Europe, 2006and2007.. Wholesaleday-ahead 19. by Electricitypricesforresidential component, customers 2005 18. MapofGermany’s transmissionzones 17. MapofGermany’s transmissiongrid 16. Trading volumes onEEX,2002to2006 15. Final consumption of electricityby sector, 1973 to2030 14. 6 .CO 6. Electricitygenerationby source,1973 to2030 5. Total consumption final by sector, 1973 to2030 4. Energy production by source,1973 to2030 3. Total energy supply, primary 1973 to2030 2. .MapofGermany 1. .Finalconsumption ofoilby sector, 1973 to2030 9. in2012 Forecast quantities andfeesoffeed-intariffs 8. EnergyinGermany intensity andinother IEAcountries, selected 7. 1973 54 to 2010...... dates ofshut-downdates underexisting legislation Germany to 2005 2 emissions by fuel,1973 to2004 ...... 91 ...... 150 ...... 14 ...... 105 ...... 93 ...... 136 ...... 128 ...... 45 ...... 131 ...... 126 ...... 142 ...... 18 ...... 18 ...... 151 ...... 20 ...... 160 ...... 141 ...... 19 ...... 152 ...... 88 ...... 140 ...... 70 ...... 121 ...... 94 ...... 137 ......

© OECD/IEA, 2007 notably, after installing anetwork regulator, installing notably, the after help improve competition initsnaturalgas andelectricitymarkets. Most To actionsto thegovernment enhanceeconomicefficiency, hasundertaken of supply, withGazprom, itslargest supplier. seekinggreater partnership thefocusofitsgas policyonsecurity hasmaintained countries. Thecountry ready torespond toany ofalloil-consuming oilemergency tothebenefit above the90-day oilstocks itsstrategic requirement,continuously maintained environmental sustainability. Inthearea ofsecuritysupply, Germany has energy and security,“3 Es”ofgoodenergy policy: economicefficiency Since ourlastreview itscommitment tothe in2002,Germany hasmaintained Europe asawhole. notthese areas, justforGermany, whichwefeelwillleadtobenefits butfor market design.TheIEAispleasedtoseethatGermany ismakingprogress in have soundenergy policiesandstrong thatthecountry energytherefore, vital intheeconomicregion and,by theworld. extension, great Itis, importance policy asGermany. ItslargepositionwithinEurope sizeandstrategic give it Only ahandfulofcountriescanhave asdramaticanimpact onglobal energy areas where the government should press forward with further improvements.areas where thegovernment withfurther should press forward In lightofitsevidentcommitment togoodenergy policy, thisreview highlights helping todrive market theinternational forcarbonreductions. purchases,atthesame time toexpandthe useofinternational starting sector theabilitytomeet itsgreenhouse gas commitmentsatalower costby isgivingtheprivate andenvironmental sustainability, thecountry efficiency isontherise.Linkingeconomic R&D fundingforrenewables andefficiency and targets oil,thegovernment hassetimported ambitiousenergy efficiency renewables reliance hasbeenrapid,biofuelsare on reducing thecountry’s is ontracktomeet itscommitmentundertheKyoto Protocol, growth of bringing environmental issuestotheforefront ofpolicymaking.Thecountry In theenvironment arena, few countriescanboastGermany’s record in economy. economicresources betterused elsewhere oftheGerman diverts tothebenefit thecoalmarket uneconomichardcoalproduction distorts and sustaining out ofhardcoalsubsidiesby 2018 as task –achallenging,butnecessary fairly. Agovernment agreement hasalsobeenreached tocomplete thephase- watch overeffectively themarket, makingsure marketbehave participants to thetoolsnecessary the governmentoffice isworking togive itscartel new entrantsandcreate robust andcompetitive energy markets. Inaddition, it isnow increasing theregulator’s power sothatitcanensure openaccessfor EXECUTIVE SUMMARY Bundesnetzagentur , in2005, 7 01 © OECD/IEA, 2007 NUCLEAR PHASE-OUT plants might have the biggest effect on itsenvironmental goals. Whilethe plants might have thebiggest effect environmental impacts ofenergy production, theshut-down ofnuclearpower of Germany’sIn thecontext to reduce ambitioustargets thenegative including renewabletechnologies, energy technologies. need fornew capacity, allowing forthedevelopment ofmore advanced productive fortheeconomy. Deferringtheshut-down would alsoreduce the companies toinvest therevenues from theplantsinways thatare more investmentsnear-term innew capacity, whilecontinuedoperationwould allow the economy. Theshut-down oftheseproductive assets willrequire additional wholesale electricityprices.Itwill,however, have negative on spillover effects the marginal priceofelectricity, on sotheirclosure will have effect alimited which meansthey baseloadpower. provide low-cost Nuclear plantsrarely set The marginal costsofnuclearplantsarerelative low tofossilfuels, andstable availablepotential toGermancompanies. generationoptionfrom aportfolio the eliminationofnuclearisaliabilityforenergy security, one asiteliminates capacity–mostlikely backupreserve coalandnaturalgas. Overall,necessitate thesupplyreplaced byFurthermore, windpower, source,will anintermittent Gazprom, acompany thatalready large provides sharesupply. oftotal avery inthefuture would likelyfossil imports raiseGermany’s reliance onRussia’s ofother fuels,suchasgas;need torely onimports increased dependenceon energy security. Asalargely domesticresource, nuclearpower reduces the of nuclearpower willleadtoreduced supplydiversity, negatively impacting environmental sustainability, thetenetsofGermany’s energy policy. Theloss plants comesatacosttoenergy and security, economicefficiency Regardless ofhow nuclearpower isreplaced, theearlyshut-down ofthese carbon dioxide emissions. planned power plantsleanheavily onthesefuels,leadingtohigheroverall ascompanies’ power currentfired ofproposed plants,particularly slate and likely thattheshut-down willresult inincreases hardcoal-andgas- oflignite-, role gains. forrenewables However, alongwithenergy efficiency inreality itis completed withoutincreasedtoagreater emissionsofcarbondioxide, thanks generation. Modellingresults suggestthatthenuclearshut-down canbe representing 12% ofelectricity supplyandover aquarter ofprimary energy mix, ofthecountry’s nuclear energy makes part upasignificant with complete shut-down tooccurby ofallplantsestimated 2022.Currently, willbeprogressively2000, nuclearpower stations shutdown asthey age– Under anagreement negotiated between thegovernment andtheutilitiesin market reform changepolicy. andclimate The three key policychallengesare thephase-outofnuclearpower, energy 8

© OECD/IEA, 2007 ENERGY MARKETREFORM security goals. economic,greenhouse gasof thephase-outoncountry’s andenergy Regardless ofthepathchosen,allcitizensshouldbewellaware oftheimpact parliament, andweencouragethegovernment toadhere tothisdeadline. todothisby ofintent theendofcurrent coalition onitsstatement radioactive waste disposalquestion. We therefore commendthegoverning hingesontheabilityofgovernmentacceptance tosuccessfullyaddress the shows thatinGermany, higherlevels asinmany ofpublic countries,obtaining the technology. Recentinformationonpublicattitudestowards nuclearpower energy mixwillrequirethe country’s gaining for increased publicacceptance changepolicygoals.Keeping climate nuclearin thecountry’s accommodate thelifetimepossibility ofextending existingplantsinorderto power inGermany’s paidtothe fuelmix,withearlyattention long-term The government abouttherole anationaldebate ofnuclear shouldinitiate well astoother concessions. plants, resulting ingreater overall carbondioxide reductions atnonet cost,as a reduction infree emissionallocationsfornew andexistingfossilfuelpower lifetime fortheseproductive extensions power plantscouldalsobelinked to decision tophaseoutnuclearpower. Changestothephase-outlaw and For thesereasons, westrongly encouragethegovernment toreconsider the emissions couldbecuteven further. over With thelonger term. nuclearinthefuelmix,Germany’s carbondioxide than today, prevent Germany from reaching itwillcertainly itsfullpotential phase-out threatens toresult inhigheroverall emissionsofcarbon dioxide transmission line networks for allmarketon anequaltransmission line networks basis. Open, participants functionalaccesstogasand gas is toinstitute pipelineandelectricity sectors Following thecreation ofaregulator, inreforming thenextstep theelectricity genuine competition initsenergy markets. Europe. We strongly urge actiontopromote thegovernment totake further aswellforthewholeof forGerman customers it willleadtobenefits competitive electricityandgas markets inGermany as cannot beoverstated, functionaland ofestablishing behaviour. theimportance Nevertheless, giving thecompetition authoritymore power toprevent anti-competitive energy markets andthegovernment isworking toenhancethisprogress by electricity sector, real progress hasbeenmade indeveloping competitive commitment togenuinereform ofitsgas andelectricitymarkets. Inthe energy markets were unsuccessful.Italsounderlinesthestrong government acknowledgement thatnegotiated reform regulation andinternal of the ofanetwork regulatorThe installation in2005signalsGermany’s 9

© OECD/IEA, 2007 of themany independentgrids andexistingzones. Thiswould allow more In thegas sector, wealsorecommend thatasingle operatorbegiven control operator.under asingle independentsystem encourage Germany toconsiderconsolidatingits electricitygrid management accomplished whenalltheinformation ismanagedby asingle entity. We together seamlesslyasifthey were one,butinpracticethisismore easily the widerEuropean grid. Intheory, couldwork Germany’s operators system the negative impacts ofanevent thatcouldhave from beenbetterisolated areasseamless co-ordinationacross was that exacerbated system onefactor in Europe ofmanagingagrid. highlightsthecomplex Thelackof task November 2006electricityoutage that rely onmore direct pathways), the4 are inherentlymeshed networks more (networks secure thanradialnetworks not along straightlines,butthrough flow Though highly meshed networks. four electricityzonesmake operationsmore complex system aselectricitydoes transaction costsandweakens thedominanceoflarge incumbents.Germany’s Increasing market sizeprovides greater economiesofscale, reduces foundation forcompetitive energy markets. Australia, ithasbeenfoundtolevel andcreate theplaying thenecessary field in many well-functioningenergy markets inEurope, theUnited and States oftheassetsownership themselves –would achieve this.Asthemodelinplace independent entitiescontrol over theoperationof network assets, butnot the forgas –giving operators andelectricity networks independent system Thecreation of accesstonetworks. incentives fornon-discriminatory unbundling. We encouragethegovernment toputinplacetheproper markets than theminimumrequirements –andnow gofurther forlegal competitive tocreate sufficiently –whichfailed accesstonetworks third-party market operations.Germany shouldlearnfrom itsexperiencewithnegotiated and amodelthatrequires oversight of andimperfect close,cumbersome means ofcomplying oftheEuropean withtheterms Union’s energy directives network assets from ofthebusiness.Thisisweakest thecompetitive parts The government through legal hastriedtolimitthisinfluence unbundlingof schedules. information, suchasaboutnetwork and flows greater accesstoimportant themselves, by operatingthesenetworks thecompaniesFurthermore, have provision andequal offair treatment inthenetwork bestinterests. operators’ the European Union becausetherightincentives are not inplacetomake the asrequiredpotential competitors cangain by equal accesstotransportation, that toguarantee integratedincumbents.Thismakesvertically itdifficult Germany’s gas are owned andelectricitynetworks by andoperated large will not as a competitive materialise market isimpossible. Currently, theirproducts tomarket.transport ofreform Without thisaccess,thebenefits incumbents aswellpotential andexistingnew entrants,withtheabilityto equal accesstothegrids provides allmarketincluding participants, 10

© OECD/IEA, 2007 CLIMATE CHANGEPOLICY and hasten thedevelopmentand hasten ofcompetition withinEurope. integrated European market oftheregion’s thatwillenhancethestability grid the incumbentsinGermany, towards an butalsohelppushthecountry and increased cross-border connectionswillnot only weaken thedominanceof toexpand this capacity. Together,country asmallernumberofmarket zones chronic congestionsignalstheneed formore capacity. We strongly urge the through cross-border toitsneighbours well connected connections,their ThoughGermany’sand electricityincumbentsinthecountry. electricitygrid is market concentrationwithinGermany, anecessitygiven thedominanceofgas Enlarging the market area forboth gas andelectricitywillalsoreduce the in normaloremergency conditions. storageassets manageinvestmentbottlenecks, thecountry’s andadminister fully independentoperatorwould, inaddition,bebetterabletoidentify gas inGermany flows have resulted inlittleinformationbeingpublished.A security andcompetitiveness. Current informationdisclosure requirements for information aboutgas whichisessentialinformationtoguarantee flows, between them.Asingle operatorwould have direct accesstomore ofeachcompanynetworks aswellenableinvestments in interconnections pipeline cheaperandsaferoperationoftheexistingseparated efficient, environmental ambitions is the country’s initialproposal totheEuropeanenvironmental ambitionsisthecountry’s its fullpotential foremissionsreductions. Another measure not inlinewithits of reducing greenhouse gas from emissions,preventing reaching thecountry For example, asdiscussedabove, thenuclear phase-outcomplicates thetask undermine many ofitsgoodefforts. sound policiesandactions,atthesametimesome ofitsother policies change with climate totackle spends alarge amountofmoney andeffort andintegratedenvironmental policy. aco-ordinated Germany lacks Whileit toGermany.environmental sustainability However, thiscommitment, despite impressive progress of towards theimportance adheringtothemunderscore energy –between 1990 and2020.Taken together, andthe thesetargets to doubleenergy productivity –ameasure ofeconomicoutputperunit sources by 2010. Finally, thegovernment hasset anambitiousdomestictarget meet itsdomesticgoalofproducing 12.5% ofelectricityfrom renewable supply by 2010, isalsoontrackto whichitsurpassedin2006.Thecountry European Union tohave target renewables energy provide 4.2%ofprimary 1990. tookonthe thecountry target, Inadditiontothisinternational ofa21%target reduction ingreenhouse gas emissionsin2012 compared to iswellonitsway toachievingitsKyoto change.Thecountry climate Protocol negative environmental impacts ofenergy use,especiallyitscontributionto Germany isworking tomeet many andobjectives targets thatwilllower the 11

© OECD/IEA, 2007 transmission system – rather than just accommodate it. –rather thanjustaccommodate transmission system regulations andoperationsinordertobetterintegrate windintothe wind specifically, thegovernment shouldcontinueitswork torevise grid rules, locations, andbringgreater competitive pressure tolower costs.Turning to intheright with incentives therightkindoffacilities tobuildand operate provided butintegration guarantees, would alsoprovide renewables suppliers promotion scheme relied more onmarket forcesandlessongovernment- market European withtheinternal market beeasierifitsrenewables thatrequiretechnologies it.Not onlywould integrating Germany’s electricity the fullelectricitymarket, providing additionalR&Dsubsidiestoparticular moving towards policythatmeshesrenewable amore flexible resources with increase to20%ofgeneration by 2020–thegovernment shouldconsider resources. Asrenewables inthemarket are wellestablished –they are set to developing itsrenewabledown thecostsofoperatingandfurther energy urge thegovernment market tofocusoncreating sustainable pressure tobring success atbuildingrenewable electricitycapacity inthecountry, andwe now hasbeena their reductions incarbondioxide emissions.Thefeed-intariff measures of costmultipleslessinterms comparison, many energy efficiency budget lessthan5%oftheresulting but contribute generation.In they highinrelationphotovoltaics willeatup20%ofthe tooutput; are very Inparticular, thesubsidiesprovidedwill costEUR68billionintotal. tosolar showat ahighcost.Estimates thatbetween 2000and2012, thefeed-intariff has resulted inrapiddeployment ofnew electricitycapacity, buthasdoneso forrenewables feed-intariff value expenditures. ofits limited Thecountry’s renewables policiesandother policies,asthiswillallow ittomaximisethe priority whenselectingpoliciestopromote renewables andbetween We alsoencouragethegovernment tomake ahigher cost-effectiveness trading scheme. ofthe itwillunderminetheintention carbon electricitysources.Inshort, orno- emissions, suppressing pricesignalsthatcreate incentives forlow- costs ofcarbonallowances, electricitypriceswillnot thecostofcarbon reflect scheme. Ifcompanies are prevented from passingthrough theopportunity ofundercuttingthepurposeEurope’s greenhousethe effect gas trading authority regarding the pass-through ofemissionpermitcostsmay alsohave costs ofcarbondioxide by emissions.Arecent thecompetition finding means other thanpoliciesdesignedtoprovide the pricesignalsthatreflect ofcompetitiveface andsecurityofsupplyconcernsshouldbedonethrough topromote generationinthe coal-fired and enhancesupplysecurity. Efforts reduce emissions,not asameanstoprotect generation andexpandcoal-fired European Union’s tradingschemeshouldbeusedtocreate incentives to more carbonthanother typesofpower naturalgas. plants,mostnotably The ofreducingthe target carbondioxide emissions,ascoalplantsemitmuch trading schemeforgreenhouse gas emissions.Thisisatcross-purposes with allowances tonew power coalandlignite plantsundertheEuropean Union’s Commission togive relatively generous conditionsfortheprovision ofcarbon 12

© OECD/IEA, 2007 KEY RECOMMENDATIONS KEY ◗ ◗ ◗ The government ofGermany should: renewables policy. respect to network access. playing forthedevelopment field ofgenuine competition, with particularly andcarbondioxide emissions. economic efficiency consequences ofitsunaltered implementation forsecurityofsupply, Ensure consistent, co-ordinated climatechange andcost-effective and Continue to reform theelectricityandgasmarkets inorder to setalevel Reconsider thenuclearphase-outinlightofpossibleseriousadverse 13

© OECD/IEA, 2007 Source: by theIEA. oracceptance endorsement Note: Theboundariesandnamesshown andthedesignationsusedonthismapdonot imply official * 14 Belgium Luxembourg Netherlands Länder France Saarland ot Sea North IEA. ot Rhine-Westphalia North Rhineland- of theformerGermanDemocraticRepublic (EastGermany). Palatinate Switzerland oe Saxony Lower Denmark Bremen Württemberg Hesse Baden- Map ofGermany Map Schleswig- Holstein Figure Hamburg GERMANY 1 Thuringia* Saxony-Anhalt* Mecklenburg-West Bavaria Pomerania* Berlin Brandenburg* Saxony* zc Republic Czech 04080 atcSea Baltic Austria Poland Km

© OECD/IEA, 2007 COUNTRY OVERVIEW COUNTRY Deutschlands 69 members ofthe members 69 composition ofthe that appointthemandcan remove themany time.Asaresult, the of the16 governments; cabinets regional they state ofthestate are members the holds anelection. Germany isafederaldemocracydividedinto16 regions or centre andtheBavarian Alpsinthesouthernregion. ofthecountry, alongwithhighlandsinthe part lowlands inthenorthern Germany isamixof hasalargely Its terrain temperate andmarineclimate. million). million)andLeipzig(1.2 million),Munich(3 Hamburg (4 million), (5 million),Frankfurt Germany includetheRhein-Ruhr area (10 ofGermany.from Bonn,theformercapital Otherlarge areas metropolitan in governmental institutions,ministriesandembassieswere moved toBerlin million.In1999, many whichhasgrowncapital, toapopulationof3.4 is forecast topossiblydeclineinthefuture. Thelargest cityisBerlin,the (East Germany) in1990, Germany’s and populationhasremained nearlyflat, ofGermanySince thereunification withtheGermanDemocraticRepublic Seas. and North 400kmofcoastlinealongtheBaltic hasalmost2 Netherlands. Thecountry Czech Republic,Austria,Switzerland,France, Luxembourg, Belgiumandthe France, Poland, withDenmark, the SpainandSweden),shares borders geography, intheEuropean Union (after country Germany isthefourth-largest intheworld. of Interms the third-largest intheOECDandfifth-largest of France andtheUnited Kingdom.Itseconomy isalsothelargest in Europe, millioneachinthenextlargest European countries compared withabout60 millionpeople, many measures (seeFigure 1).Itspopulationisover 82 The FederalRepublicofGermany isoneofthelargest countriesinEurope by Germany, theChristianDemocraticUnion ( of thisreview, agrand in coalitionwas inplacebetween thetwo mainparties Partei Deutschlands, Deutschlands, Partei assembly Soziale Union Soziale Bundesrat (Bundestag) , CDU) and the Social Democratic Party ( , CDU)andtheSocialDemocraticParty , CSU).Germany hasabicameralparliamentwithfederal are elected by popular vote and serve four-yearare The by terms. elected popularvote andserve Bundesrat Bundesrat SPD), alongwiththeChristianSocialUnion ( and federalcouncil GENERAL ENERGYPOLICY are not butbasedon the composition elected, can changewhenever one ofthe16 (Bundesrat). Christlich Demokratische Union Demokratische Christlich The 614 of members Sozialdemokratische Länder . At thetime Christlich- Länder 15 2 © OECD/IEA, 2007 ENERGY SUPPLY SUPPLY-DEMAND BALANCE .Forpurposesofcomparison, allpre-1990 throughout thisreport, have Germany data beenmodified 1. Republic (EastGermany). to includeboth theFederalRepublicofGermany (West Germany) andtheGermanDemocratic the reunification ofGermanythe reunification andtheagingofpopulation. of exceed from contributions, stemming benefits both theeconomiceffects challenges inmanagingitssocialpensions,asoutlays ofsocialsecurity unemployment (over 11% Germany in2005).Inthelong term, faces from high,thoughdeclining, relatively continuestosuffer steadily, thecountry vehicles andelectronics Whiletheeconomy manufacturing. continuestogrow The mainindustriesincludeiron, coal,cement,chemicals,machinery, steel, ofgrosseconomies, contributingaboutone-quarter domesticproduct (GDP). large role,sector continuestoplay compared avery tomany modern Germany advanced isamodern andtechnologically economy. Theindustrial a share ofTPEShasgrown from 13% in1985 decline thatislessdramaticthaninother countries.Similarly, naturalgas as share from ofcoalhasfallen 40%in 1985 in2005, a tolessthanaquarter remained relatively over steady thepastdecades.Lookingbackfurther, the As shown fuelsinGermany’s inFigure 2,theshares TPEShave ofdifferent comingfrom combustiblerenewableswith nearlythree-quarters andwaste. renewables initsTPES.Combined,renewables make upabout5%ofTPES, (12%). Compared highshare toother of IEAcountries,Germany hasavery more thanone-third,followed by coal(24%), naturalgas (23%)andnuclear balanced mixoffuelsinitsTPES,oilmakes upthelargest share ofTPESat equivalent (Mtoe)in2005(seeTable hasarelatively 1).Whilethecountry milliontonnesofoil energy supply(TPES)was 345 Germany’s primary total production ispresented inFigure 3. natural gas needs in2005,alongwithlessthan4%ofoilsupply. Energy alsoproduced 18%about 70%ofits82MtoecoalTPES.Thecountry ofits nuclear, Germany amountsofcoal.In2005,itprovided produces significant Germany forover relies onimports 60%ofitsenergy needs.Inadditionto to anaverage annualgrowth of10.1%. rate waste) have grown from 1.8% ofTPESin1995 to 4.6%in2005,equivalent (including biomass,solar, windandgeothermal, andexcluding non-renewable Renewables inTPEShave grown tremendously inrecent Renewables years. gas hasgrown dramaticallyover thelasttwo decades. increase butlesssothaninother IEAcountriessuchasSpainandItaly, where 16 1 to 23%in2005,asignificant

© OECD/IEA, 2007 Table 1 Supply-Demand Balance, 2005

Unit = Mtoe Total Oil Coal Natural Nuclear Biomass* Solar, wind, Hydro Geothermal Electricity Heat gas etc.

Supply Production 134.5 4.6 56.5 14.2 42.5 12.2 2.7 1.7 0.1 0.0 0.0 Imports (net of exports) 214.5 123.4 25.7 65.7 0.0 0.0 0.0 0.0 0.0 – 0.4 0.0 Other – 4.2 – 4.6 – 0.5 0.9 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Total supply (TPES) 344.7 123.4 81.7 80.8 42.5 12.2 2.7 1.7 0.1 – 0.4 0.0

Demand Electricity production** 58.3 4.0 67.6 17.9 42.5 5.3 2.5 1.7 0.0 – 52.7 – 30.5 Industrial consumption*** 83.2 26.9 7.3 21.4 0.0 0.0 0.0 0.0 0.0 20.0 7.8 Transport 63.3 60.0 0.0 0.0 0.0 1.9 0.0 0.0 0.0 1.4 0.0 Residential 63.7 16.9 0.5 29.0 0.0 4.8 0.2 0.0 0.1 12.2 0.0 Other sectors 50.7 8.1 0.4 10.9 0.0 0.0 0.0 0.0 0.0 11.0 20.4 Other (including losses) 25.5 7.6 5.9 1.7 0.0 0.1 0.0 0.0 0.0 7.8 2.4 Total 344.7 123.4 81.7 80.8 42.5 12.2 2.7 1.7 0.1 – 0.4 0.0

Fuel as share of total 100% 36% 24% 23% 12% 4% 1% 0% 0% 0% 0%

* Includes industrial and non-renewable municipal waste. ** The electricity generation row provides data on the fuel used to generate electricity and heat (141.5 Mtoe total from oil, coal, nuclear, natural gas, biomass, solar, wind, hydro and geothermal), the total output (83.3 Mtoe in the form of electricity and heat) and losses (58.3 Mtoe). *** Includes non-energy use. 17 Source: Energy Balances of OECD Countries, IEA/OECD Paris, 2007.

© OECD/IEA, 2007 200 300 400 100 200 250 100 150 50 0 0 9518 9519 9520 0521 0522 052030 2025 2020 2015 2010 2005 2000 1995 1990 1985 1980 1975 Sources: * negligible. Sources: * negligible. Mtoe Mtoe 9518 9519 9520 0521 0522 052030 2025 2020 2015 2010 2005 2000 1995 1990 1985 1980 1975 18 Energy BalancesofOECDCountries Energy Balancesof OECD Countries nryPouto ySuc,1973to2030 Energy Production by Source, oa rmr nrySpl,1973to2030 EnergySupply, Total Primary Figure Figure , IEA/OECDParis, 2007submission. and country , IEA/OECDParis,2007submission. andcountry 3 2 Nuclear and waste renewables Combustible Coal Gas Oil etc. Solar, wind, Geothermal* Hydro* etc. Solar, wind, Geothermal* Hydro* Nuclear and waste renewables Combustible Coal Gas Oil

© OECD/IEA, 2007 ENERGY DEMAND 100 200 250 300 150 50 0 9518 9519 9520 0521 0522 052030 2025 2020 2015 2010 2005 2000 1995 1990 1985 1980 1975 Mtoe Sources: sectors. agricultural,andother non-specified fishing * includescommercial,publicservice, diesel-fuelled vehicles. away trendaccelerated inroad transport from gasoline-fuelled andtowards gains, theconsumption toan declinecanalsobeattributed efficiency from Mtoe,incontrasttothetrend inmostIEAcountries.Apart 63.3 from sectorhasdeclinedby nearly6%,falling 67.2the transport Mtoeto Though TFChasincreased by over consumption 8%since2000,absolute in consumption hasremained over largely flat thelastdecades. sectorcomprised consumption. lessthan20%oftotal Residential transport since1995,flat thoughitscurrent share isanincrease from 1985 whenthe sectorhasremained relativelyThe share ofenergy consumedinthetransport from 38%in1985 to33%in1995, thenfelltojustunderathirdin2005. and2005.Theshare2004 ofTFCconsumedintheindustrialsectorhasfallen the lasttwo arelatively decades,thoughitexhibited large increase between Mirroring Germany’s TPES,itsTFChasalsoremained relatively flat over flat includingthecommercialsector.other sectors, (24% andresidential sectors transport each).Theremainder isconsumedby industrial sector, whichconsumes32%ofGermany’s TFC,followed by the of 3.3%over (seeFigure 2004 4).Thelargest share ofconsumption isinthe Total consumption final (TFC)inGermany was 261 Mtoein2005,anincrease Energy BalancesofOECDCountries oa ia osmto ySco,1973to2030 Total FinalConsumptionby Sector, Figure , IEA/OECDParis, 2007submission. and country 4 Residential Other* Industry Transport 19

© OECD/IEA, 2007 ENERGY SUPPLY ANDDEMAND ENERGY FORECASTS ELECTRICITY GENERATION 200 400 600 800 0 1995, risingfrom 3.9%in1985 to 4.9%in1995 andto10.1% in2005. renewable waste). Theshare hasgrown atanaverage of9%since annualrate renewables (includingbiomass,solar, hydro andwind,excluding non- mid-1980s. Thelargest growth from hasbeeninelectricitygenerated 27%, thesameasin1995. Thisshare hasremained relatively sincethe steady 1985 to11.3% in2005.Theshare from ofelectricitygenerated nuclearis fromelectricity generated natural gas hasmore thandoubled,from 5.4%in 62% ofelectricitywas from generated coal.At thesametime,amount of from coal,nearly50%.Thisrepresents alarge declinefrom 1985, whennearly 2000 (seeFigure 5).In2005,thelargest share ofelectricitywas generated Germany, aslightincrease from (0.5%)andan8.1% 2004 increase from ofelectricitywere in generated terawatt-hours (TWh) In 2005,over 613 forecast. Theforecast isnot done by thegovernment, butby independent Technology (BMWi) energy commissionsalong-term supplyanddemand ofEconomics and theFederal Ministry years, five Approximately every Sources: * negligible. 9518 9519 9520 0521 0522 052030 2025 2020 2015 2010 2005 2000 1995 1990 1985 1980 1975 TWh 20 Energy BalancesofOECDCountries lcrct eeainb ore 1973to2030 by Generation Source, Electricity Figure , IEA/OECDParis,2007submission. andcountry 5 Hydro etc. Solar, wind, Geothermal* and waste renewables Combustible Coal Gas Nuclear Oil

© OECD/IEA, 2007 GOVERNMENT ANDREGULATORY INSTITUTIONS .On average in2006, USD1=EUR0.80. 2. Small decreases are expected in the commercial and industrial sectors. Small decreases are inthecommercialandindustrialsectors. expected of consumption inthehouseholdsectorisprojected torisefrom 28%to30%. toclimbfromis expected slightlybelow tojustabove 30%.Similarly, theshare projected sector through 2030.Theshare ofenergy consumedinthetransport of over ofenergy 0.4%.Interms consumption by sector, littlechangeis declineofalmost13%,2030, atotal equivalent toanaverage annualdecline Mtoein Mtoein2000to193 Similarly, todeclinefrom TFCisexpected 221 to declinefrom above 38%in2000toslightlyabove one-thirdin2030. some ofthenuclearphase-out.Theshare ofoilinGermany’s TPESisprojected also riseslightlybetween 2000and2030,from 21.1% to22.5%,offsetting TPES in2000tonearly17% in2030.Theshare ofgas inGermany’s TPESwill than 12% in2030.Hardcoalsupplyisprojected toriseslightlyfrom 14% of cover someofthedeclinenuclear, risingfrom lessthan11% in2000tomore domesticallyproduced coalwithlow to energyisalsoexpected intensity) (a will gofrom 3%toover 15% over thesameperiod.Supplyfrom lignite TPES willgofrom 13% in2000tozero in2030,whilethe share ofrenewables by growth inrenewableswill beoffset supplyby 2030;theshare ofnuclearin come from nuclearandrenewables. Someofthesupplycomingfrom nuclear gains Themostdramaticchangesby inenergy fuelare efficiency. forecast to average annualdecrease of0.6%.Theoverall declinerepresents accelerating by 17.2% from Mtoein2030,equivalent 343Mtoein2000to284 toan According tothealternative scenario,TPES will declinethrough 2030,falling energypreparations summitandresulting forthefinal strategy. (GHG) emissionstradingwillexpand.Thealternative scenarioisthebasisfor forrenewablesgovernment willcontinueandthatgreenhouse support gas will bephasedout,accordingtothe1999 law. It also assumesthat scenario assumesanenergy policy 2030 ofUSD60perbarrel ofUSD37 instead perbarrel). asassumedinthereference forecastoil pricetrajectory (areal oilpricein are presented inTable higher 2.Thenew scenarioisbasedonasignificantly bysupplemented analternative scenarioinAugust2006,theresults ofwhich to 2030.However, inview ofthecurrent energy pricetrends, thisforecast was Economics (EWI)andPrognos AG, was released inMay 2005withprojections which was by conducted theUniversity ofCologne’s ofEnergy Institute Themostrecent forecast, adoptitsfindings. guidance, butdoesnot officially research Thegovernment institutes. scientific usestheforecast forpolicy for networks, the for networks, have remained largely the same,withtheexception ofanew federalregulator Since thelastin-depthreview in2002,energy policyinstitutionsandstructure Bundesnetzagentur status quo , which was established in2005. , whichwas established , includingthatnuclearpower 2 The alternative 21

© OECD/IEA, 2007 int 081. 181. . . . 0.5 0.7 –100 0.6 0.6 –100 –0.5 –0.5 0.2 –12.3 –0.4 0.3 –2.5 1.4 0.1 –0.6 12.6 0 0.8 –0.4 0.8 11.8 16.6 33.4 2.7 11.1 –0.2 17.5 34.8 22.5 10.0 10.8 15.2 36.9 22.3 12.9 20.6 14.0 38.3 21.1 % % –0.6 % % –0.7 % –0.9 –0.3 11 886 12 733 13 939 Nuclear energy 14 356 Lignite Hard coal Natural gas Oil PJ supply Total energy primary Electricity (middle voltage) Electricity (middlevoltage) aua a 492. 472. . 01–. –0.2 0.1 –0.4 –0.9 –0.1 0.4 –0.1 –0.8 0.2 –0.4 0.0 –1.3 0.2 0.1 –0.7 23.8 0.2 –0.7 –0.3 –0.4 34.1 –0.6 24.7 30.6 –0.2 –0.1 25.3 36.9 25.0 –0.1 29.5 14.2 24.8 42.1 0.8 28.9 24.9 15.3 5.7 24.6 29.9 45.1 15.9 29.8 3.4 26.1 30.4 16.0 5.6 30.6 8.2 –0.4 28.2 15.4 –0.6 % 11.0 –0.6 % % % –0.2 6.4 8073 % 8535 2.9 9088 % 9241 Natural gas Oil products Transport Industry Services % Households PJ Total consumption final Renewable energy 1.5 1.0 Electricity (highvoltage) 1.7 1.9 774 702 591 Gasoline (unleaded) 491 billion(t-km) Fuel oil(light) households(includingVAT),Prices 2000 real Carriage (tonnes-km) ulol(ih,idsr)ER(00/ 315 5. 6. 9. 38 . 22 2.0 2.2 0.1 3.8 695.3 560.9 556.4 381.5 EUR(2000)/t Natural gas (industry) Fuel oil(light,industry) asne asmlin4. 694. 720902–. 0.3 –0.1 0.2 0.1 0.9 –0.1 –0.1 47.2 0.1 –0.2 47.9 –0.1 –0.1 0.4 –0.3 0.0 1.3 46.9 39.7 1.2 –0.3 79.3 1.3 40.0 42.8 0.4 1.3 81.3 39.7 1.5 1026 82.4 1.4 1062 1.1 38.2 1093 0.9 82.3 2887 1051 2544 575 million 2197 506 1970 billion(p-km) billionEUR(1995) million 439 million Carriage (passenger-km) 403 Passenger cars billionEUR(1995) production (real 95) Industry GDP (real 95) Households Population Indicators Prices wholesale(w Prices Gas Electricity 22 Alternative Scenario EnergyForecaststo2030* Scenario Alternative ithout VAT), 2000 real Mtoe 342.9 332.9 304.1 283.9 –0.3 –0.6 –0.7 –0.9 e te207271239128–. 06–. –0.4 –0.6 –0.6 –0.2 192.8 203.9 217.1 220.7 Mtoe e e e e e e cn(00/W n.a.8.4 8.3 8.8 -cent(2000)/kWh n.a. -0.1 0.6 n.a. cn(00/W . . . 6.5 5.85.9 2.8 0.2 1.0 1.3 4.4 -cent(2000)/kWh cn 20)kh17 .223 .535–. 14 1.6 1.4 –0.1 3.5 2.75 2.39 2.42 1.71 -cent (2000)/kWh cn(00/100.0 123.6 126.4 1.1 1.0 139.2 0.2 2.1 2.1 2.2 0.2 -cent(2000)/ 75.0 3.8 59.4 60.3 40.8 -cent(2000)/ cn(00/W . . . 6.8 5.35.4 3.7 0.2 2.3 2.0 3.7 -cent(2000)/kWh cn(00/W 491. 631. . 03010.3 0.1 1.2 –0.3 16.4 16.3 16.8 14.9 -cent(2000)/kWh nt20 0022 0020-21-22-2000 2020- 2010- 2000- 2030 2020 2010 2000 Unit Table 2 bouevle Average annual Absolute values 0022 002030 2030 2020 2010 growth rate (%) rate growth

© OECD/IEA, 2007 CO administrative powers). The individual states are involvedadministrative Theindividualstates powers). in shapingenergy of nationallaw (althoughthecentralgovernment hassignificant legislation andthe In energy policy, isprimarilyresponsible forpassing thefederalstate te ...... 0.9 1.2 1.2 1.3 1.0 7.7 1.9 0.6 0.1 –0.5 1.4 3.5 2.0 8.7 0.0 –0.3 0.6 1.4 Forecast 2030, 4.4 0.5 2.4 0.9 –0.8 Sources: 7.7 1.7 1.6 934 15.7 0.2 –0.5 1.4 reference scenario. –0.1 0.9 1.6 15.8 0.7 6.1 6.8 847 3.6 PJ from IEAforecasts, as IEAforecasts =petajoule. n.a. =not usethe differ available. *Data 10 174 0.7 0.0 642 8374 11.2 –0.7 2.0 –5.7 738 6615 3.7 CO 0.5 0.6 6.7 643 10.2 1.8 7.3 1.6 –100 5736 29.6 645 5.2 –0.8 4.0 587 –100 8.7 1.1 11 765 10 5.0 049 1.7 –13.1 29.0 2.8 0.4 8206 30.8 –3.1 4.8 539 27.1 4.2 6992 7.7 0.9 5.0 0 33.1 –0.3 0.6 EUR/toe CO 25.8 8.6 27.8 –0.6 5.1 –0.2 4.7 0.4 t-km/kJ 5.3 0.1 % –0.3 0.6 10.5 Mtoe/capita 24.9 0.7 Carriage (tonnes-km)/TFC EUR/toe 5.1 0.0 6.0 p-km/kJ 21.6 0.0 8.0 0.6 Carriage (passenger-km)/TFC 3.2 % –0.1 5.5 production/TFC Industry 29.5 3.8 22.4 0.2 3.4 GDP/TPES 21.5 5.6 % 586 TPES percapita 2.3 % 3.5 20.0 indicators Efficiency 586 5.3 % 18.8 Other % 3.5 589 % 575 Wind Natural gas % Lignite Hard coal % % Nuclear energy % Hydro TWh generation electricity Gross Renewables District heating Electricity Coal CO 2 2 2 2 GPgER64383628–. 31–. –2.2 –1.4 –3.1 –1.4 –4.5 –0.6 248 –2.2 326 –4.2 9.0 388 10.2 614 10.3 15.9 g/EUR tonnes/capita /population /GDP msin ilo ons100838075–. 09–. –0.8 –0.7 –0.9 –1.6 715 830 853 1000 milliontonnes emissions niaos19 0021 0019-19-2010- 1990- 1990- 2030 2010 2000 1990 indicators Alternative Scenario EnergyForecaststo2030* Scenario Alternative Effects ofHigherOilPricesonEnergy SupplyEffects andDemand:OilPriceVersion oftheEnergy EWI/Prognos, prepared for the Ministry ofEconomicsandTechnology,EWI/Prognos, prepared fortheMinistry August2006 Länder nt20 0022 0020-21-22-2000 2020- 2010- 2000- 2030 2020 2010 2000 Unit are responsible foradministrative implementation Table 2 bouevle Average annual Absolute values 002010 2000 0022 002030 2030 2020 2010 (continued) growth rate (%) rate growth 002030 2030 1990- 23 .

© OECD/IEA, 2007 Agency ( –lieswith theFederalNetwork 000or more customers with100 operators inthecaseofgrids andforgrid thatspantwo ormore Germanstates – beeninforcesince29July2005.Enforcementofthenew legal framework has legislationongrid accessandtransitfeesforgas andelectricity secondary BNetzA are by appointed thegovernment, butcannot be dismissedby the be dismissedby the government. Thepresident andvicepresident ofthe oftheBNetzA are oftherulingchambers not andcannot appointed Members canbeappealedthroughby thecourts. independentruling chambers ( Act energy policyframework, andthenew Energy Industry oftheEUdirectiveImplementation ongas andelectricitygave rise to anew the civilcourts. Renewable Energy Sources Act( Umwelt, undReaktorsicherheit Naturschutz Environment, andNuclear Nature Safety ( Conservation research onrenewables forthe isoverseen by theFederalMinistry Technologie ofEconomicsandTechnologyMinistry ( At thenationallevel, responsibility forenergy policylieswiththeFederal atthenationalenergy summit. established andtheworking committees groupsgovernment recently and state policy through the the energy sector. Decisionsby the following aquasi-judicial procedure. Onesuchdecisiondivisionisresponsible for each make competition-related sectorofindustry decisionsforaspecific ( theenergy sector responsible forenvironmental regulation thataffects various decision divisions( the Federal Ministry ofFinance( the FederalMinistry Verbraucherschutz Protection ( forFood,Agriculturefuel strategy. andConsumer TheFederalMinistry und Stadtentwicklung ( Transport, BuildingandUrban Affairs buildings arefor dealtwithby both theBMWi andtheFederalMinistry nuclear safety andradiationprotection). Issuesconcerningenergy savings in Germany’s Competition Act( ( Office The FederalCartel agencies. its subordinate industry. The industry. like responsible forgeneralmatters monitoringforabusesintheenergy are authority, andcompetition agenciesintheindividualGermanstates 24 Energiewirtschaftsgesetz e.g. regulations changemitigation, relating climate topollutionabatement, Bundesnetzagentur , BMWi). Market adoptionofrenewable energy sourcesand Bundeskartellamt Bundesministerium für Ernährung, Landwirtschaft und Bundesministerium fürErnährung,Landwirtschaft , BMELV) to falls oversees biomassissues.Energy taxation Bundesrat , BMVBS).TheBMVBSisalsoincharge ofthenational , EnWG) entered intoforce on13 July2005.Key Beschlussabteilungen , BNetzA). DecisionsoftheBNetzA thatare taken Gesetz gegen Wettbewerbsbeschränkungen , ministerial-level conferences, arangeofjoint Bundeskartellamt looese egr nteeeg etrunder intheenergyalso oversees sector mergers Erneuerbare-Energien-Gesetz Bundesministerium derFinanzen Bundeskartellamt Bundesministerium für Wirtschaft und Bundesministerium fürWirtschaft Bundesministerium fürVerkehr, Bau , BMU). The BMU administers the , BMU).TheBMUadministers ) withinthe ), thenationalcompetition may be contested throughmay becontested Bundesministerium für , EEG)andisalso Bundeskartellamt , BMF)and ). The

© OECD/IEA, 2007 ( forRadiationProtection under thejurisdictionofFederalOffice forradioactiveconstruction andoperationofdisposalfacilities waste falls storageofnuclearfuelsand andintermediate Approval fortransportation inthisregard and instructed by theBMU. whichare supervised German states, and dismantlingofnuclearpower plants istheresponsibility oftheindividual Approval andmonitoringoftheconstruction,operation,decommissioning supply intimesofoilcriseslieswiththeBMWi. institution.Responsibilityfor many there regulatory years, isnodedicated the BMWi. AstheGermanpetroleum market hasbeenfullycompetitive for Responsibility formonitoringsecurityofsupplyingas andelectricitylieswith oncompetition trendsreports inthegas andelectricitymarkets. recommendation toevaluatecompetition inGermany andpublishbiennial by appointed thepresident atthegovernment’slegal experts The MonopoliesCommission( beoverruledcircumstances by thegovernment. Decisionsby therulingchamberofBNetzA cannotof ministers. underany withapproval terms government, specific from except thecabinet undervery Federal Statistical Office ( Office Federal Statistical fuels andcoal).Government role agencies with akey includethe advisory region andquantity, oil,naturalgas, nuclear ofenergy sources(particularly government onissuesconcerningthe global availability, both of interms und Rohstoffe for GeosciencesandNatural Resources( agencyistheFederalInstitute The government’s leading geoscienceadvisory German bankforreconstruction. jointly owned by theGermangovernment andtheKfWBankGroup, the andrenewablegovernment’s energy centre sources.Itis forenergy efficiency them under the Energy Act ( Statistics thedutiesassignedto whichperform intheindividualGermanstates, offices Environment Agency( The GermanEnergy Agency( emissions monitoringandreporting. administrationsare alsoresponsible forallissuesconcerning individual state the approval procedures setlaw. outunderpollutionabatement The greenhouse gas emissionallowances, thesebeinganintegral component of are responsible fortheapprovalauthorities inthevarious Germanstates of Authority ( Kyoto Protocol’s totheGermanEmissionsTrading mechanismsfall flexibility and cleandevelopment changeprojects mechanism(CDM)climate underthe Administration ofemissionstradingandapproval (JI) ofjointimplementation by theindividualGermanstates. activities inthissectorare performed Bundesamt fürStrahlenschutz Deutsche Emissionshandelsstelle , BGR). The BGR answers totheBMWi andadvisesthe , BGR).TheBGRanswers Umweltbundesamt Statistische Bundesamt Deutsche Energie-Agentur , BfS),whichisanarmoftheBMU. Supervisory Monopolkomission Bundesanstalt fürGeowissenschaften Energiestatistikgesetz , UBA).Thepollutioncontrol , DEHSt) withintheFederal ) isabodyofscientistsand , StBA) andthestatistics , DENA) isthefederal , DENA) ). Petroleum 25

© OECD/IEA, 2007 KEY ENERGYPOLICIES INTERNATIONAL LEADERSHIP ENERGY POLICYOBJECTIVES AGEB produces Germany’s nationalenergy balances. Working by theStBA. onbehalfoftheBMWi, the andissupported institutes associationsandenergy researchrepresentatives from theenergy industry Balances ( organisations includetheWorking responsible forstatistics Group onEnergy Control ( ofEconomics andExport are andkept collected statistics by theFederalOffice of market Investment decisions, forexample, participants. liesolely inthe manner.mitigation Acentralprincipleisindividualresponsibility inanefficient environmentenergy protection priceswitheffective change and climate German energy policyaimstocombine securityofsupplyandaffordable guide Germany’s energy policyforthecomingdecades. addition, anenergy policyroad-map iscurrently beingprepared thatwillhelp research programme withincreased R&Dbudgets hasalsobeenreleased. In Anew targets. energy ofnew energyenergy efficiency andtheestablishment anetwork regulatorinstalled (BNetzA), theexpansionofuserenewable Germany’s legislationin2005which energy policyare energy industry Since thelastin-depthreview in2002,themainchangeswithrespect to in 2007, sectors. emphasis onthebuildingandtransport puttingparticular Gleneagles, Scotland meeting in2005andtheSt. Petersburg, Russia meeting begun atthe2003G8meeting inÉvian,France andcontinuedatthe onenergyFor theG8presidency, efficiency Germany iscontinuingefforts forrenewablewide targets energies for2020. forheatingandcoolingfromtargets renewable energies andupdating theEU- power consumption, stand-by establishing labelling,tackling energy efficiency During theEUpresidency, Germany isworking torevise thedirective on improvement andtheEU’s energy international relations. inenergy efficiency electricity andgas markets, useofrenewables, expansionofcost-effective top priority, improvement particularly ofthefunctioninginternal world economy. Duringboth presidencies, Germany hasmadeenergy matters Kingdom andtheUnited thattogether represent States about65%ofthe a group madeupofCanada,France, Germany, Italy, Japan,Russia, theUnited months of2007. Forthewholeof2007, italsoholdsthepresidency oftheG8, Germany heldthepresidency six oftheEuropean Union (EU)forthefirst 26 Bundesamt für Wirtschaft undAusfuhrkontrolleBundesamt fürWirtschaft Arbeitsgemeinschaft Energiebilanzen Arbeitsgemeinschaft , AGEB), whichcomprises , BAFA). Other

© OECD/IEA, 2007 PHASE-OUT OFNUCLEARPOWER .Eurobarometer, 3. that are not yet ready forthemarket (suchasrenewables). technologies as emissionstrading)andtheprovision ofsubsidiesforcertain development ofmarket-based changemitigation instrumentsforclimate (such regulation ofnaturalmonopolies(suchasgas andelectricitygrids), the can produce economicallydesirableoutcomes.Theseconditionsincludethe it remains oneofitsresponsibilities tocreate conditionsinwhichmarket forces thegovernment believes Nevertheless, that hands ofprivateenergy suppliers. parliament. including high-level waste and spentfuel,withinthelifetime ofthepresent toresolve disposalofradioactivetheir intention waste, offinal thematter were solved. fuelmixiftheissueofradioactiveprepared waste toacceptitinthecountry’s of thosecurrently opposedtonuclearpower proportion would be significant according toEurobarometer, publicopinioninEurope, a whichtracks regarding thecontinueduseofnuclearpower However, inthecountry. oftheGermanpopulationhasstrong reservations Overall, alarge part with energy utilitiesaswellthephase-outlaw. includes languagemakingitimpossible toamendthephase-out agreement on theuseofnuclearpower, theirNovember 2005coalitionagreement inthecurrent governmentAs thethree donot parties share thesameopinion power stations. itisnot possible toforecaststations, precise shut-down forindividual dates around 2022.Asoutputallowances canbelegally transferred between power by inGermany allnuclearpower willbeoutofservice estimate, stations MW)in2005.Accordingtoarough andObrigheim(357 MW)in2004 (672 down. Sofar, line:Stade have two nuclearpower stations beentaken off intoaccounttransferred outputallowances,output, taking itmustbe shut 32-year theagreed hasgenerated lifetime. Whenanuclearpower station residual outputcorresponds electricityoutputsuchthattotal toanaverage inGermany.using nuclearpower stations isassigneda Eachpower station feature ofthelegislationisatimelimitforcommercialelectricitygeneration Atomic Energy Actenshrinedthenuclearphase-outinGermanlaw. Themain energy use forcommercialpower g inApril2002,setoftheplannedphase-outnuclear enacted outtheterms energy utilities, aswellresulting amendmentstotheNuclear Power Act AJune 2001country. agreement between theGermangovernment and In 1999, theGermangovernment decidedtophaseoutnuclearpower inthe //ec.europa.eu/energy/nuclear/waste/doc/2005_06_nucelar_waste_en.pdf 3 Radioactive Waste The coalitionagreement states between thegoverning parties , p.30,June2005;available from: eneration. TheApril2002changestothe 27

© OECD/IEA, 2007 AND POLICIES CLIMATE CHANGEANDENVIRONMENTAL GOALS ENERGY SUMMITSANDPOLICYROAD-MAP .Countriescanchoosetomeasure emissionsreductions ofhydrofluorocarbons (HFCs),perfluoro- 4. and efficiency inpreparation forthethree meetings. and efficiency issues, and research lookingatnationalissues,international were established, indrawing uptheenergy road-map.building blocks Three working groups governmental organisations were todevelop recommendations foruseas tradeunions,research andenvironmental andother institutes non- consumers, meetings, representatives from theenergy sector, industrialandprivate three energy summitsbetween April2006andtheendofJune2007. Inthese To underpinthisenergy road-map, thegovernment plannedtoholdaseriesof 2020. German government torelease intends anenergyroad-map policystrategy to planning horizon.Forthisandother reasons, inthesecondhalfof2007, the allow market players tobasetheirinvestment decisionsonalong-term thatmarketThe government believes andpolicyconditions itisimportant agreed toreduce itsemissionsby 21% from 1990, Under theKyoto Protocol andtheEUburden-sharingagreement, Germany rates arerates set are sothatalltechnologies elevatedtoalevel in playing field; photovoltaics, Thefeed-intariff andare, for20years. ingeneral,guaranteed 3.78 eurocents perkWhforbiomasstoahighof56.8eurocents perkWhfor rangefrom rates alow scheme,guaranteed of feed-intariff differentiated renewables Under the promotion policy, feed-intariff. adifferentiated Germany’s rapiddevelopment ofitsrenewables sectorhasbeendriven by its and 2005. nearly doublingthe1.8% ofimprovement annualrate seenbetween 1990 1990 tomeet, challengingtarget requiring and2020.Thiswillbeavery productivity –ameasure ofeconomicoutputperunitenergy –between 2010. Finally, thegovernment hasset todoubleenergy a domestictarget domestic goalofproducing 12.5% of electricityfrom renewable sourcesby which itsurpassedin2006.Germany isalsowellonitsway tomeeting its European Union tohave target renewables provide 4.2%ofTPESby 2010, tookonthe thecountry meet. target, In addition tothisinternational carbons (PFCs) and sulphur hexafluroride (SF carbons (PFCs)and sulphurhexafluroride 28 6 ) against eithera1990 ora1995 baseline. 4 a targetitisontrackto

© OECD/IEA, 2007 for upto20% oftheirCO mechanisms tousetheflexibility this, Germany participants willallow EU-ETS from phaseand toencourageprivatesectorengagement. Apart their start-up Testing Ground Facility andtheKfWCarbonFund), withthegoaltoassistin contributor totwo public-private carbonfunds(BASREC’s NEFCO-managed projects toother and technologies countries.Germany is,however, a international competitioninternational withcountriesthatdonot have CO installations free CO installations proposed asomewhat lessgenerous allocationforcoalplants,givingenergy NAP,Learning from itsexperiencewith the first itsrecent secondNAP quality. from stemming poordata partly and other energy installations, energy-intensive industry from CO industry energy-intensive including coal,for14 plants.To andlongerforsomespecific years, insulate levels free ofguaranteed allowances fornew plantsofalltechnologies, emissions. Inaddition,theproposal provided new entrantswithsignificant allocation ofcarbondioxide (CO Emissions Trading Germany gave Scheme(EU-ETS), generous avery oftheEuropean nationalallocationplan(NAP) UnionUnder thefirst oversubsidised. inordertoensure are fouryears thatindividualtechnologies not every programme bereviewedprogramme thatthefeed-intariff andmandates Erneuerbare-Energien-Gesetz andmarketlower inorderto account fortechnological rates learning. renewables goingonlineinfuture receive years installations progressively are (except alsoappliedtoalltechnologies smallhydropower), suchthat renewable energyAnnualdegression technologies. between rates 1%and5% between aninvestor ofprofit, thevariousterms shouldbeindifferent overall costofreducing CO (CDM). JIandCDMare market-based mechanismsdesignedtolower the (JI)andthe cleandevelopmentmechanisms, jointimplementation mechanism without aneedonthenationallevel torely ontheKyoto Protocol’s flexibility that Germany willbeabletomeet through itstarget domesticmeasures and independentstudiesby theIEAandEuropean Energy Agencyindicate agreement obligations. Forecasts andprojections ofthefederalgovernment designed toensure thatGermany meets itsKyoto and EUburden-sharing National ClimateProtection Programme aswellthe industriesunderthe EU-ETS energy sectorandenergy-intensive Germany’s changepolicies,especiallytheCO climate benchmarks. well astointroduce energy efficiency toamenditsproposedintention allocationschemeintheenergy sector, as tolowerits NAP theoverall allocation.Germany thenannouncedits November 2006theEuropean CommissionruledthatGermany mustamend take onlessstringentreductions infuture.installations However, in aswelltoensuretargets, fuelmix,undertheproposal adiverse these 2 allowances covering 85%oftheir2000to2005 2 emissions. 2 (EEG), theRenewable Energy Act,guidesthe emissions, aswelltospread CO 2 ) allowances power toitscoal-fired plants 2 costs given thatthey are subjectto for all other GHG-emitting sectors, arefor allother GHG-emittingsectors, 2 emissions capforthe 2 2 reduction -reducing 29

© OECD/IEA, 2007 MARKET STRUCTURE IN ELECTRICITYANDGASMARKETS STRUCTURE, OVERSIGHTANDREFORM MARKET OVERSIGHT transportation regardless oroperation. oftransmissionlineorpipeline ownership transportation andtransparent accessto “open access”.Thisregime gives allmarketnon-discriminatory participants .IntheUnited Australiaandsomeother States, markets, access”istypicallyreferred toas “third-party 5. obliged to provide third-party access obliged toprovide third-party Rather, andare theirown theBigFoureachoperate transmissionsystems oftheelectricity.three-quarters operator. There isnoindependentsystem Vattenfall (theBigFour).Combined,they have 70%ofcapacityandproduce Four companies theelectricitymarket, dominate E.ON, RWE, EnBW and marketElectricity discriminatory accesstothetransmissionnetworks. discriminatory Amongother are things,grid responsible operators forensuringnon- states. authorities intheindividualGerman BNetzA andby regulatory established areelectricity grid now operators subjecttoregulation by thenewly conditions forcompetition inGermany’s electricityandgas markets. Gasand legislationin2005were made toimproveChanges toenergy industry of municipalutilities,or through cross-ownership supplyanddistribution,inpart retail also dominate changes asdiscussedbelow. gas supply. TheBNetzA hasruledagainst requiring the current system, further dependentoncompanies arethat mostpipelineowners financially involved in toimplementgas aworkablegiven networkare system stilltrying operators pipelineshasbeenrequired 2006,buttheGerman transport from February tothe accesssystem third-party one ofthemega-utilities above. Anentry-exit by bylevel. localgovernment Inmostcasestheseare owned andpartly partly 750 localgas companies operatingwithgeographic concessionsat thecity Ruhrgas, Wingas, VNG/Ontras, BEBandRWE). However, there intotal are Five companies control thehigh-pressure gas inGermany (E.ON system market gas Natural namely transmissionanddistribution. their supplyandtradingarmsfrom themonopolysidesoftheirbusinesses, integratedcompanies areThese vertically required tohave legally unbundled networks. networkthe high-voltage and50%ofthemedium-low-voltage 30 Stadtwerke . Together RWE andE.ONcontrol 70%of 5 (TPA) TheBigFour totheirnetworks.

© OECD/IEA, 2007 has beengrid fees, whichare currently subjectto 2006,railway markets). January Aninitialfocusoftheregulator and, since1 industries inGermany (includingelectricity, gas, postal telecommunications, The Bundesnetzagentur The BNetzA proposal contains two tofullyimplementThe BNetzA steps proposal contains such legislation. BNetzA proposing by by between the 6%and28%.Following a2006report their grid tariffs the BNetzA ordered many large gas andelectricitynetwork tolower operators regulator-approved tocometheBNetzA toobtain customers In2006, rates. regulation requires accessandallows provide thatnetworks third-party model. InNovember 2006,theregulator ruledtheoptionmodelillegal and from theprevious regime, different thepoint-to-pointcity-gate was not very model,theso-called“option model”,which,inpractice, and usedadifferent was inOctober2006.However, tohave implemented taken effect theindustry modelrequiring onlyafeed-inand withdrawal contract based onanentry-exit The BNetzA hasalsobeguntofocus ongas sectorreform. TPA topipelines informational unbundlingprovisions. sensitive information.TheEnWG allows noexemption from theaccountand ofcommercially theconfidentiality unbundling through measures topreserve Transmission mustimplement anddistributionoperators informational of theirtransmissionanddistributionactivities(account unbundling). gas entitiesmustkeep accountingforeach accountsintheirinternal separate Besides thelegal measures forlegal andfunctionalunbundling,electricity completely exempted from thelegal and functionalunbundlingprovisions. are customers 000connected lessthan100 and gas entitiesserving July2007 whileintegratedelectricity the legal unbundlingprovisions until1 may of postponetheimplementation operators trading). Distributionsystem activities not relating totransmissionordistribution( made independent(through legal andfunctionalunbundling)from other integratedentities, they hadtobe ofvertically are part operators system anddistribution operators Actof2005. Where transmissionsystem Industry ofunbundlinginaccordancewiththeEnWG,implementation thenew Energy Responsibilities ofthe compared withcompetitors.on theirperformance imposition of“yardstick”regulation, whichrewards networkbased operators gains. foresees Thesecondstep efficiency attempt expected toreflect Progressivegrid operators. thatreduce therevenue x-factors capwould from outsideGermany. Therevenue revenues capwould limittotal earned by compared networks, tobenchmarking studies and, withrespect totransport across withinGermany grid operators ineconomicefficiency major differences arevenue istoinstitute step cap aimedatreducing based regulation. Thefirst Bundesnetzagentur ex ante ex was established inJuly2005toregulate allnetworkwas established Bundesnetzagentur incentive-based regulation, the BMWi isdrafting include supervision ofthe include supervision ex ante ex e.g. generation, supply, ex ante ex regulation. The incentive- 31

© OECD/IEA, 2007 SECURITY OFSUPPLY capacity, mightpromote competition. having foundthatmore information,suchasonelectricitygenerating way of the toexpandthepowers control, aswellmonitoringforanti-competitive are under behaviour. Efforts The Bundeskartellamt integratedgas andelectricityutilities. vertically unbundling, includinginformationalandoperationalwithin inordertobettermonitorandregulate functional compliance officers The BNetzA iscurrently conductingtrainingfortheenergy companies’ this was not addressed inthenew ruling. Germany, hadbeenakey problem fornew entrantsintheprevious modeland the gas in consumers intoandoutofthezones,aswelldelivering tofinal unlikely toreduce thenumberofzones.Thelogisticsactuallytransporting number ofzonesinarulingNovember theNuon proposal 2006,finding regulator thatthisnumberwas toohigh,buttheBNetzA declinedtolower the proceedings. Nuon Deutschland,anew energy market entrant,petitioned the of market zones.Ifunsuccessful,theBNetzA islikely toopenformal reducing thenumber meansoffurther market players aimingatavoluntary since beenreduced to17. with TheBNetzA isnow conductingconsultations modelwas originallytohave 19reached. Theentry-exit zones,butthishas October 2007, dependingonwhentherelevant TPA agreements were modelby Aprilor ordered tosolelyimplement grid operators anentry-exit renewables andwaste. comingfrom combustible about 5%ofTPES,witharound three-quarters been growing quickly inrecent and combinedrenewables years now make up from coal, naturalgas andnuclear. theshare ofrenewables Furthermore, has shareThere reliance ofsupplyisprovided isafalling onoil,andsignificant IEA countries,overall itrelies set onadiverse offuelstomeet itssupplyneeds. While Germany hasarelatively highshare ofoilinitsTPEScompared toother 40% ofsupply. energy supply, primary indigenousproductiontotal total now covers about Since then,ascoal,oilandnaturalgas production have declinedrelative to renewables) peaked in1985, consumption. whenitmet almost58%oftotal Germany’s indigenousproduction (including production from nuclearand The investigate andprosecute market power abusecases. 32 Bundeskartellamt Bundeskartellamt , the Federal Cartel Office, hasresponsibility formerger Office, , theFederalCartel is alsolookingintotransparency oftheenergy markets, Bundeskartellamt , makingiteasierto

© OECD/IEA, 2007 ELECTRICITY NATURAL GAS OIL COAL congestion on some of these interconnections limits import capacity andthe limitsimport congestion on someoftheseinterconnections supply securitygiven that Germany to11 hasinterconnections other countries, provides margin statistic amore indicationof limited Though thereserve reserves. GW ofcapacitywas available, indicatingsufficient an additional6 GW inDecember2005.At the time base intheEU. Peak loadhitalmost77 capacity Ithasthelargest GW installed in2004. capacity, upfrom 129.1 gigawatts generating (GW) ofinstalled In 2005,Germany had132.3 the largestinEurope. storagesites Austria inconjunctionwithanAustriancompany, RAG. Thesewillbetwo of Rheden inGermany andthesecondatHaidachGermanborderwith venture) iscurrently buildingtwo large at underground thefirst storagesites, increase reliance onRussian gas.further Wingas (aWintershall-Gazpromjoint line in2010, providing another route forgasthough this willlikely imports, under theBalticSeabetween Russia andGermany, tocomeon isexpected 2006Russia-Ukraine gas Nord dispute. Stream,January adirect pipeline Ukraine (theother through Belarus),Germany by was the negatively affected been increasing inrecent Asonesupplypipelinetransitsthrough years. thisshareGazprom has suppliesmore Furthermore, than40%ofthetotal. fromrelying countriestocover five onimports mostofitsneeds.Russia’s ofitsnaturalgas needs domestically,Germany produces lessthanone-fifth in2005. and Rita suchasthestock release following hurricanesKatrina disruptions iseffective, ensure thatcollective action by IEAmembercountriesduringsupply andGermany’s have neverstocks, below stocks fallen thislevel. Thishelps instorageasstrategic days ofnet oilimports Germany isrequired tohold90 domestically, ashare thatcontinuestodecrease. AsamemberoftheIEA, Germany isheavilyforitsoilsupply–itproduces reliant only37% onimports competitive market international forbituminouscoal. more minesare closed,Germanythegap willbeabletoeasilyfill from the competitive withtheworld market. Asthesesubsidiesare phasedoutand production requires ofthelatter production subsidiesasitisnot significant andbituminouscoal,though Germany oflignite hasample reserves 33

© OECD/IEA, 2007 TAXATION POLICY box 9.) inChapter information, seethe disconnection andreconnection tothegrid. (Forfurther andaninabilitytocontrol automatic oldwindinstallations’ operators co-ordinationbetween adjacenttransmissionsystem included insufficient European countries.Subsequent studiesalsofoundthataggravating factors ofseveral inparts millioncustomers 15 power lossesthateventually affected Germany resulted in In November innorth-west 2006,atransmissionoutage GW ofnew renewables capacity. planned, including20 GW ofnew capacityare supply. Electricitycompanies that40 indicate ability ofGermany to rely toenhancesecurityof ontheseinterconnections the ElectricityTax Act( former Petroleum Tax Act ( reformphase in2003essentiallycompleted project. theecologicaltax The that raisedthepricesofmotor fuels,heatingfuelsandelectricity. Thefinal reform aimedtoencourageenergy savingsThe ecologicaltax through taxes heating oil. onnaturalgas, rates petroleum liquefied petroleum tax gas (LPG)andheavy 2003,amongother thingsby raisingthe January reform fromeco-tax 1 Steuerreform to 10 mgperkg). Athirdlaw ( ofup 2003thosewithasulphurcontent January 50 mgperkg andfrom 1 ofupto fuels(initiallythosewithasulphurcontent lower onlow-sulphur rate ) witha1.53 accordingtosulphurcontent, rates separate eurocent perlitre ( November 2001 into two waspetroleum additionallysplitfrom tax 1 each year from 2000to2003.Inthecaseofgasoline anddiesel,the January were rate raisedinfourmore phaseson1 fuels andtheelectricitytax Steuerreform second law continuingthereform ( onmotor onelectricity.taxes andheatingfuelsintroduced atax Under a ökologische Steuerreform into force.Thelaw launchingthereform ( April1999, phaseofGermany’s reform entered ecologicaltax thefirst On 1 Standard tax rates formainenergy rates products are tax givenStandard in Table 3. increases inview ofrecent risesin energy prices. tax becausetheGerman government hasruledoutfurther and partly additional pensionpolicymeasures (mostlytoreduce pensioncontributions) reformchanges introduced are still neededtofund undertheecologicaltax revenues becausetheextratax from partly rates, prevailing tax standard Stromsteuergesetzes der Besteuerung undzurÄnderungdes von Energieerzeugnisse August 2006( inforcesince1 electricitytaxation and 34 , enacted on 23 December 2002) modified the fifth phaseofthe thefifth on23December2002)modified , enacted December1999), thepetroleum onmotor taxes on16 , enacted nce n1 July2006).Thisdidnot the alter on15 , enacted nce n2 March1999) raisedthepetroleum on24 , enacted Stromsteuergesetz Mineralölsteuergesetz Gesetz zurFortentwicklungderökologischen Gesetz zur Fortführung derökologischenGesetz zurFortführung ) amendedby anew actonfuel Gesetz zumEinstieg indie ) hasnow beenreplaced and Gesetz zurNeuregelung

© OECD/IEA, 2007 CRITIQUE regulator, the the IEA’s lastin-depthreview anetwork in2002. The decisiontoinstall The government progress hasmadesubstantial initsenergy policies since subsidy reduction andnational budget consolidation. obligation relief largely onbiofuels, advancing replaces theaimsof tax minimum of1.2% ofbioethanol by energyThebiofuels quota content. 4.4% biodieselby energyandgasoline content mustonaveragea contain minimum quota ofbiofuels.Dieselmustonaverageaminimum of contain 2007 isrequired January thepetroleum tomarket industry astatutory 1 changemitigation. supplyandclimate Inlinewiththeseobjectives, from of major policyobjectives besidescompetitive energy prices includesecurity fortheneedtosafeguardGerman industrialcompetitiveness.taxation Other The Germangovernment makes dueallowance inenergy andelectricity andfororganic motortransport, andheating fuels. andlocalpublic natural gas andLPGusedasmotor fuels,forrailtransport Tax relief isalsoprovided forcombinedheat andpower (CHP)plants,for purposes. ondieselusedforagriculturalpay orforestry areduced oftax rate competition. operators international facing Farmersenterprises andforestry make harmonisationintheEUonbehalfofbusiness upforthelackoftax they aimto andforestry; farming fuels andelectricityusedinmanufacturing, toreduce subsidiesgenerally. Themainexemptionsefforts applyforheating of reform. inthecontext Exemptions cut back in2003and2004 were further phaseoftheeco-tax objectives were reversed tothefifth by modifications economic, environmental orsocialpolicy exemptions tax serving Certain lcrct EUR20.50/MWh submission. Source: Country Electricity Heating fuels Motor fuels P EUR60.60/1000kg EUR5.50/MWh EUR61.35/1 000 EUR470.40/1 000 EUR654.50/1 000 Natural gas LPG Heating oil Diesel Gasoline Bundesnetzagentur Tax 2007 asofJanuary Rates Table 3 (BNetzA), not onlysets asound 35

© OECD/IEA, 2007 elimination of nuclearisaliabilitywith respect toenergy security, asthere capacity–mostlikelyreserve coal,butalsonaturalgas. Overall, the ofwindmeansthatcapacityalsorequiresintermittency backstop natural gas someofthe gap. the andbaseload coalplantsfill Furthermore, nuclear phase-outwillresult increase insomeabsolute ofemissionsas gains,combination ofrenewables inreality the andenergy efficiency all supplyfrom decommissionednuclearplantscouldbereplaced witha produce carbondioxide show emissions.Whileestimates thattheoretically changegoals,generationfromclimate nuclearpower plantsdoesnot lifetimes.)their rated More ofGermany’s importantly, inthecontext overall lifetime limit.(Many nuclearplants,ifrefurbished, safelybeyond operate safelyfordecadeslonger thanthe32-yearcontinue tooperate average baseloadpowergenerate atlow operatingcosts,many ofwhichcould these arefrom depreciated assets that thefuelmixcomesatacost.First, mix –12% supplyand27% ofprimary ofelectricity –andeliminatingit However, ofGermany’s current part energy nuclear makes upanimportant ofindividualcountries. nuclear power isapoliticaldecisiononthepart thatwhether tohave decided tophaseitout,andtheIEAdulyunderstands AnumberofIEAcountriesdonotplant owners. have nuclearpower orhave in thecountry, whichresulted ina2000agreement withnuclearpower the government passedlegislationtopermanentlyphaseoutnuclearpower fortheendofnuclearpower inGermany,Owing topublicsupport in1999 for allcountries. helpstoadvancethese technologies theirdevelopment andlower theircosts strong commitmenttorenewables deployment. Germany’s for strong support wecommendthegovernment’s policies more andcost-effective, co-ordinated tomake itsoverall climate believe efforts thatGermany shouldnow undertake being wellontheway tomeeting theelectricitygenerationgoal.Whilewe energyrenewables supplygoalearlyand –and formeeting targets itsprimary Turning torenewables, onambitious wecommendGermany fortaking competition law. monitoringandenforcementof the needforvigilantandeffective levels ofconcentrationinGermany’s gas andelectricitymarket underscore market power abuseinenergy andthehigh markets isnotoriously difficult of the toenhancethepower weare pleasedtoseeefforts Furthermore, networks. thehardwork ofregulating gas andelectricity it isalready undertaking investments.entrants andlong-term TheBNetzA’s show actionstodate that environment forenergy investment andtradeisinplace,encouragingnew markets todevelop asthey sendsignalstothemarket andstable thatafair forenergy the BNetzA; strong, independentinstitutionsare necessary energy market designandregulations right.We of applaudtheinstallation emerge, butalsosignalsthegovernment’s commitmenttogetting firm foundation forgenuinecompetition ingas andelectricity markets to 36 Bundeskartellamt , thecompetition authority. Detectingandproving

© OECD/IEA, 2007 transfer andpreferential treatment. Thedominanceof theBigFourelectricity toprevent information Chinesewalls unfair are necessary units. Effective ensure thatthere are strictChinesewalls, orseparation,between business to provides transparency limited ofbusinessoperations, makingitdifficult complying oftheEU’s withtheterms energy directives. Legal unbundling assets from of energy thecompetitive businesses, theweakest parts meansof asameansofseparatingmonopolynetworktransmission owner-operators implemented integrated legal andfunctionalunbundlingofvertically Lookingattheelectricitymarket,and electricitynetworks. in2005,Germany accesstogasGermany shouldnow turntoensuringopen,non-discriminatory condition forawell-functioningmarket. IEA welcomestherecent creation ofanenergy regulator, asitisanecessary conclusion aboutthenecessityofanenergy regulator. Asdiscussedearlier, the competitive marketsGermany hascometoasimilar forallparticipants. determining thatstrong institutionswere required toensureand fair forgas regulators andelectricityafter andestablished reversed course institution tomonitorandregulate energy markets. Recently, New Zealand liberalisationwithoutcreating astrongGermany originallyundertook to thesuccessofEU-widemarkets ingas andelectricity. AsinNew Zealand, location ofGermany’s gas andelectricitymarkets make theirsuccesspivotal a competitive market hasbeguntodevelop. Thelarge sizeand strategic reform intheelectricitysectorwhere sincethelastreview in2002,particularly Turning tomarket reform, theIEAispleased toseereal progress onmarket onenergy securityandeconomicgrowth.along withtheeffects of phasingoutnuclearpower onnational safety andenvironmental goals, Germancitizensshouldbeawarefuels intheirportfolios, ofthereal impacts corresponding exchange ofelectricitybetween countriesthathave different In lightoftheintegratednature oftheEuropean energy market, andthe economic,securityandenvironmental goals–willbe necessary. simultaneous fuelmix–given the abouttheroleinformed debate ofnuclearinthecountry’s should beencouragedtoadhere tothisdeadline.Engaging thepublicinan the endofcurrent parliamentisapositive andthegovernment step, As discussedmore 10, fullyinChapter todothisby ofintent thestatement government tosuccessfullyaddress theradioactive waste disposalquestion. hingesontheabilityof higherlevels ofpublicacceptance obtaining towards nuclearpower shows thatinGermany, asinmany countries, forthetechnology.acceptance Recentinformationonpublicattitudes decision tophaseoutnuclearpower. Thiswillrequire gaining increased public For thesereasons, westrongly encouragethegovernment toreconsider the commitment period. cutting carbondioxide 2012 emissionsbeyond thefirst Kyoto Protocol market. Itwillalsoprevent Germany from reaching itsfullpotential for begreater reliancewill inevitably onnaturalgasfrom theworld imports 37

© OECD/IEA, 2007 .As compared unbundlingoftransmissionassets, withownership toasystem 6. respect togrid investment costs. with generation,particularly operatorthatdoesnot ownsystem theassets itselftofavour certain operatorowns thenetwork, there andoperates system are somegreater incentives foranindependent restoration procedures developed by theUnion fortheCo-ordinationof highlightsGermangrid ofthe successfulimplementation operators’ customers reconnection ofall Therelativelyamong adjacenttransmissionsystems. swift bywas alackofco-ordination humanerror, was inpart, exacerbated, theeffect While theinitialcauseof4November 2006European electricityoutage conditions. access unbundling provisions, helpingtobuttress existingthird-party discrimination-free network accessinadditiontotheexistinglegalsupport anordinance to new entrants.TheGermangovernment iscurrently drafting –doesnot forpotential inspirethe transmissionsystem thesameconfidence ofthesameholdingcompanies thatalso operate are part generator-retailers –whereunbundling inplace,thecurrent dominantincumbent system transmission network onequal thelegal Despite terms. andfunctional canaccessthe as itprovides thatallgenerators confidence long-term market participants. genuinely level fornetwork playing field accesstoallexistingandfuture incentives from toset network a operationsandworks these distorted in many Canadianprovinces andinAustralia.Thismodellargely eliminates many locations,includingthroughout United inScotland, theeastern States, choices they make. operatoristhemodelinplace Anindependentsystem the incentivesnetwork donot thatmightinfluence have operators distorted Itistherefore stakeholders. besttoensure that todifferent and benefits costs operations–choicesthathavethis elementofchoiceinsystem different optionsonhow torunthegrid anditisimpossibledifferent tofullyremove make choicesamong mustoften Operators operations inallcircumstances. in electricity, itisnot rulesthatgovern possibletoset updetailed network from butdonot transmissionowners, own theassets themselves. Particularly assets withoutinfluence transmissionsystem manageandoperate operators assets, independentsystem that own transmissionsystem andoperate operator.independent system operators Asopposedtotransmissionsystem while stillnot requiring unbundlingisthrough ownership thecreation ofan amore complete access tonetworks, meansofachievingthis discriminatory While legal unbundlingoftransmissionassets alonecanresult innon- enforce legal unbundling. tocloselymonitorand network accessandoperations,aswellitsefforts oftheBNetzA asaregulator focusedon pleased toseetheinstallation new entrants.Thusweare access toallmarketparticularly participants, of transparency, makingiteven more criticaltoensure non-discriminatory companies thislack intransmission,distributionandgenerationexacerbates 38 6 We strongly encourageGermany tomove tothismodel, i.e. where atransmission

© OECD/IEA, 2007 compared to1990, toachieve full althoughadditionalmeasures are necessary its Kyoto Protocol ofa21% target reduction ingreenhouse emissionsin2012 stringent CO Germany change policyobjectives, hasambitiousclimate includingvery dominant incumbentsinthe gas andelectricityindustries. new entrantsinboth markets, reducing thelarge market shares ofthe continued development ofenergy markets Itwillencourage inthecountry. accesstothemwillhelpunderpin electricity andensuringnon-discriminatory for gas networks and Overall, reducing thecomplexity oftransportation setting thefoundationforacompetitive gas market todevelop. transmissionbooking, accessandco-ordinate ensure non-discriminatory atleastwithineachbalancing zone,would bebestableto gas transportation, possible. Asintheelectricitymarket, operatorforall anindependentsystem putting inplaceasoundframework foragas market todevelop asquickly as transmissioncompaniesdiverse remains open.Priorityneedstobegiven to capacity across various and issue oforganising andbookingtransportation balancing zoneswillinhibitthedevelopment ofreal competition, whilethe model inGermany in2007. weare concernedthatthenumerous Nevertheless, ofafunctionalentry-exit totheimplementation booking, andwelookforward encouraged by theBNetzA’s rejection oftheoptionmodelfortransportation network hasprevented development ofawell-functioningmarket. We are very Turning tothenatural gas market, thecomplexity ofGermany’s gas transport regions were merged intooneoperator,country’s NEMMCO. single entity, PJM, ortheexample ofAustralia,where responsibility forsixofthe were merged transmissionsystems intoa operationsofmany different system could looktotheexperienceinAtlantic region oftheUnited where States, areas are betterabletomanagehigherlevels ofwindpenetration. Germany highlights theneedforhighlyco-ordinated ofoperations.Therapiddevelopment ofwindcapacityfurther efficiency inordertoenhancereliability,operator inthelongerterm competition and encourage thegovernment toconsidermoving toasingle independentsystem individual zonesinGermany are larger thanmany European countries,we entity, thereby reducing transactioncosts.Whilethegeographic areas ofthe as marketwould transactionswithonlyone needtoco-ordinate participants spurcompetition, to onewould reliability helpalleviate concerns,andfurther within transmissionareas inGermany. Moving from fourtransmissionoperators both between Germany andneighbouringcountries ordination efforts, across regions. However, highlightsthelimitsofexistingco- theoutage co-ordinate thefourtransmissionoperators meshed, butoperationsare distinct; byoperated oneoftheBigFour. are physically Thetransmissionsystems each Germanybetween hasfourtransmissionsystems, neighbouringsystems. thiscanbedoneby reducing seams place.Inpart, occurring inthefirst theIEAurges more tobe donetopreventNevertheless, suchevents from Transmission ofthoseprocedures. ofElectricity(UCTE),andtheeffectiveness 2 targets in the long run. The country iswellonitsway toachieving inthelongrun.Thecountry targets system operations,aslarger marketsystem 39

© OECD/IEA, 2007 reduce thecostsoflowering CO help Market-based oftheEU-ETS instrumentslike thetradeablecertificates the market tomove energy towards sources. low-carbon would enhanceincentives to offsets orthroughdirectly tax backtocustomers to bepassedoninwholesaleprices,auctioningcoupledwithrevenue recycling revenue recycling. –willlikely Asallowance costs–real continue oropportunity allowedfullest extent by theEU, auctioningofcarbonallowances, perhapswith Finally,means other thantheEU-ETS. Germany shoulduse,tothe henceforward ofcompetitivethe face andsecurityofsupplyconcernsshouldbedonethrough policy in terms ofavoidedpolicy interms CO eurocents perkWhabove theaverage costofelectricity. ofthis Thebenefit 40 improvements. subsidisessolarPVat Forexample, Germany’s feed-intariff other policiesthatachieve thesamegoals,suchasenergy efficiency renewables aresupport compared not onlybetween eachother, butalsoto key Thiswillrequire, criterion. policies to forexample, ensuringthatdifferent changepoliciesacross climate theboardshouldmake a fact, cost-effectiveness In henceforward. suchassolarphotovoltaics,technologies isanissuetotackle ofstimulatingallrenewables,effectiveness includingthemostexpensive andrapidly.Germany hasadvanced substantially However, thecost- security forinvestments inrenewables. Clearly, theuptake ofrenewables in policythatprovides long-term renewables feed-intariff through aneffective We inpromoting commendGermany foritsleadership thedeployment of greenhouse gas emissionsreductions. compliance withKyoto objectives, aswelldrive market aninternational for asthese mechanismsprovidelimits undertheEU-ETS, acheapermeansof the cleandevelopment mechanism(CDM)inordertomeet their emissions to rely ontheKyoto (JI)and mechanismsofjointimplementation flexibility that thegovernment hasincreased thelevel atwhichcompanies are allowed reducing CO powercoal andlignite plants. Thisisatcross-purposes of withthetarget relatively generous conditionsfortheallocationofcarbonallowances tonew under theEuropean Union EmissionsTrading thatwould give Scheme(EU-ETS) in linewiththeseambitionsisGermany’s initialsecondnationalallocationplan intoaccount.Another targets take thechallenginglong-term measure thatisnot especiallywhenwe compliance. Thenuclearphase-outcomplicates thistask, to reduce CO naturalgas. shouldbeusedtocreate incentivesfuels, mostnotably TheEU-ETS elevating its importance to the international level totheinternational through itscurrent elevating itsimportance for Germany forputtingthisatthetopofitslist ofpriorities,inparticular isarenewed priority ofthecurrent government.Energy efficiency We commend oto U 000pertonne ofCO 1 cost ofEUR costs thatare 30to50timeslower ofreduced interms CO retrofits costs;evenabatement ofbuildings have relatively expensive efficiency improvements generation). Manyfired have efficiency negative carbon 40 2 2 emissions, ascoalplantsemitmuchmore CO emissions. Efforts toprotect andpromote generationin coal-fired emissions. Efforts 2 2 emissions corresponds toacarbon abatement emissions. Inthislight,weare pleasedtosee 2 abated (assumingsolarPVreplacesabated gas- 2 2 emissions. than other fossil

© OECD/IEA, 2007 RECOMMENDATIONS work toquickly how itwillensure detail itmeets itstargets. measures Thegovernment toachievingthistarget. thatwillcontribute should sound foundationisneeded.At present, littleisknown onthepoliciesand annually since1990 ambitiousone.To –isavery becomearealistic goal,a improvement annuallyuntil2020compared withanhistoricalaverage of1.8% energy productivity between 1990 and2020–equivalent toa3%efficiency presidencies ofboth theEUandG8.However, ofdoubling thetarget ◗ ◗ ◗ The government ofGermany should: ● ● ● ● ● ● ● ● ● gas market by: andCO economic efficiency consequences ofitsunaltered implementation forsecurityofsupply, Ensure aconsistent andcomprehensive climatechange policyby: Improve competition intheelectricitymarket andspurcompetition inthe Reconsider thenuclearphase-outinlightofpossibleseriousadverse genuine competition inthegasmarket. certain technologies, such as solarphotovoltaics.certain by reconsidering for scheme, inparticular thegenerous feed-in tariffs improve cost-effectiveness. joint implementation and the cleandevelopment mechanism (JI/CDM) to means other thantheEU-ETS. new nationalallocationplan;promoting coal-fired generation through irrespective oftechnology. abuse ofdominantmarket positionintheenergy sector. considering creating asingle independentsystem operator. electricity andgasgrids. accessto vigorously implementation ofnon-discriminatory effective pursue Making cost-effectiveness akeyMaking cost-effectiveness component oftherenewables promotion Making greater useofmarket-based instruments like tradeable certificates, Avoiding over-allocation of allowances to high-carbonpower plantsinthe energy use acrossSending thesamesignalsforlow-carbon theboard, theproposed lawPursuing changesto actagainst possible inthecartel Encouraging newentrants intheelectricityandgasmarkets. Giving absolutepriorityto puttinginplace Implementing genuinely independenttransmission system operations and empowering and,where theBNetzAto needed,further Supporting 2 emissions. a framework thatcreates 41

© OECD/IEA, 2007 © OECD/IEA, 2007 PROJECTED EMISSIONS HISTORICAL EMISSIONS CARBON DIOXIDEEMISSIONSPROFILE .Countries canchoosetomeasure emissionsreductions ofhydrofluorocarbons (HFCs), 7. perfluorocarbons (PFCs) and sulphur hexafluoride (SF (PFCs)andsulphur hexafluoride perfluorocarbons natural gas. decreasesmoderate inoilemissionsandmodest increases inemissionsfrom 18% and2030,assuminglarge between decreases 2004 incoalemissions, Prognos CO AG, energy-related by theUniversity ofCologne’s ofEnergy Institute Economics(EWI)and According togovernment projections basedonMay 2005studiesconducted natural gas combustion,whichgrew by nearly57% over the period. by increases inemissionsfrom nearly 7%.Someofthesedecreases were offset Emissions from thecombustionofoilalsodeclinedover by theperiod,falling emissions from plants,whichhave coal-fired by 32%since1990. fallen CO Republic (EastGermany), energy-related intheformerGermanDemocratic following particularly reunification, torestructuring andmodernisationinGermany’sOwing inlarge part economy greenhouse gas emissionsby 21% compared withthebaseyear 1990. Germany hastaken undertheKyoto onatarget Protocol toreduce its The lion’s sharedecline since1990 ofthetotal isfrom decreases inCO increasing atanaverage of0.6%. annualrate decline inthe1990s, since2000emissionshave beenrisingmodestly, 1.5%. theoverall Despite drop inemissionsbetween 1990 andthe and 2004 place inthe1990s, atanaverage whenemissionsfellsteadily of annualrate between 1990 (seeFigure and2004 6).Asshown inTable 4,thisdeclinetook number ofallowances given. However, theEUhasrequired tolower theoverall thattheplanbemodified ofallowances guarantee highlight ofwhichisthelong-term fornew entrants. andpowerallocation planforcarbonallowances plants,a given toindustry Emissions Trading Scheme,Germany hasrecently completed itsnational though someadditionalmeasures are needed.Under theEuropean Union’s isontracktoachieve thisgoal, thatthecountry indicate most recent data ENERGY ANDTHEENVIRONMENT 2 emissions are expected to fall byemissions are afurther tofall expected 6 ) against eithera1990 ora1995 baseline. 2 emissions fellby over 12% 7 The 43 2 3 © OECD/IEA, 2007 KYOTO TARGET ae(0423)–.%–.%04 0.0% 1.9% 0.4% 5.3% 4.0% 8 –0.6% Source: 8 0.0% forecasts are basedonthealternative scenario. 3.0% –1.7% presented inTable from 8 data differ usingtheIPCCSectoralApproach.* estimated Data 2,asthose –1.6% 203 8 9.7% 1.1% (2004-2030) rate 198 8 –0.1% Average annualgrowth 81.3% 190 9 (2000-2004) rate 261 –4.2% –14.1% 185 Average annualgrowth 10 283 –36.3% 56.6% 185 (1990-2000) rate 224 8 308 Average annualgrowth 165 281 5 304 –6.9% (2004-2030) 165 303 3 Projected change 310 –32.1% 0 158 351 Change (1990-2004) 319 118 342 2030 331 115 339 2020 325 28 339 2010 327 336 2004 391 517 2003 377 552 2002 581 2001 2000 1990 1980 1970 Unit :MtCO emissions by 21% by 2008 to 2012 compared with thebaseyear 1990 (and, sharing agreement, Germany toreduce hasatarget itsgreenhouse gas oftheagreement EUburden- andtheassociated 2002.Aspart May 31 Change (UNFCCC)on9 December 1993 andtheKyoto Protocol on Germany theUnited Nations ratified Framework Convention onClimate 44 CO 2 Emissions from Fuel Combustion 2 CO 2 olOlNtrlgsCmutbeTotal Combustible Natural gas Oil Coal msin yFe* 1970to2030 Emissions by Fuel*, Table , IEA/OECDParis,2007. 4 renewables and waste –18.0% –12.2% –0.8% –1.5% 1 061 0.6% 849 845 846 696 808 833 966 986 770 827

© OECD/IEA, 2007 INSTITUTIONAL ARRANGEMENTS CLIMATE CHANGEPOLICY 1 000 1 200 200 400 600 800 0 9317 9717 9118 9518 9919 9319 9719 012003 2001 1999 1997 1995 1993 1991 1989 1987 1985 1983 1981 1979 1977 1975 1973 CO WorkingThe Germangovernment theInterministerial Group established on control of theBMU. ofthiscoalitionagreement, the SPDhas (SPD).Aspart Democratic Party inGermany,parties theChristian DemocraticUnion (CDU)andtheSocial the timeofthisreview, agrand coalitionwas inplacebetween thetwo main ( fortheEnvironment, and Nuclear Nature Safety Ministry Conservation changemitigationClimate policyistheresponsibility ofthe Federal reduced itsemissionsby 18.5% ascompared withitsbaseline. gases) by 17.4%. ofland-usechangeare included,Germany Whentheeffects reduced greenhouse itstotal gas emissions (includingallsixgreenhouse additional policiesandmeasures are implemented. Through Germany 2004, Germany isontracktomeet by thistarget Agency report, 2010, assuming in somecases,1995). Accordingtothemostrecent European Environment Source: usingtheIPCCSectoralApproach.* estimated Climate Protection Programme including representatives from many federalministries,issueditsfirst Mt ofCO Bundesministerium fürUmwelt, undReaktorsicherheit Naturschutz 2 Reduction (IMACO CO 2 2 Emissions from Fuel Combustion CO 2 msin yFe* 1973to2004 Emissions by Fuel*, 2 ) in1990. Thegroup, headed by theBMUand Figure in 2000,which was revised in2005. , IEA/OECDParis,2007. 6 , BMU).At National Coal Oil Gas 45

© OECD/IEA, 2007 MEASURES TOACHIEVEEMISSIONS REDUCTIONS include: National ClimateProtection Programme andobjectives foradvancementactivities. Domesticcornerstones ofthe Germany tocontinue toplay aleadingrole changemitigation inclimate The grand coalition’s governing agreement ofNovember 2005callsfor POLICIES ANDOBJECTIVES and initiated cross-sectionaland initiated measures. In 2005,Germany published its energy, renewables, waste management andagriculture. Italsoidentified industry, 64measures households,transport, totalling for seven sectors: Programme To fullyachieve itsKyoto obligation, the ● ● ● ● ● ● ● ● ● ● ● ● 46 share fuelconsumption ofbiofuelsintotal to6.75%by theyear 2010. and toatleast10% by 2020. least 12.5% by 2010 andtoatleast20%by 2020. Kyoto Protocol. protection climate making iteasiertouseinternational projects underthe transparent andlessbureaucratic. for thepost-2012 periodby 2009. consumption ( Agentur towards aEuropean toprunnerprogramme forfueleconomy. CHP plants. unit ofGDP, by 2020compared with1990. Further developing withtheobjective thefuelstrategy ofincreasingFurther the Increasing theshare ofrenewable energy inTPEStoatleast4.2%by 2010 Increasing theshare ofrenewable energy inelectricitygenerationtoat inforeign markets forGermanindustry by Enhancing theopportunities ofallocatinggreenhouseMaking thesystem gas emission permitsmore protection climate ofaninternational regime theestablishment Supporting Continuing andexpandingtheGermanEnergy Agency( European initiatives toimprove andworkSupporting energy efficiency Promoting theexpansionofdecentralisedpower plantsandultra-efficient Promoting themodernisationofpower stations. building rehabilitation. Accelerating low-energy Achieving adoublingofenergy productivity, ameasure ofenergy useper , DENA) initiatives for energy conservation inbuildings,electricity initiatives, DENA) forenergy conservation was adopted on 18 October 2000, containing apackage October2000,containing was on18 adopted e.g. by cutting stand-by powerby consumption) cuttingstand-by andtransport. as set outintheagreement National ClimateProtection Deutsche Energie-

© OECD/IEA, 2007 EMISSIONS TRADING 8. In the second trading phase, the EU-ETS allows forauctioningofupto10% In thesecondtradingphase, EU-ETS ofemission allocations. 8. transport. covered by theEUEmissionsTrading Scheme,includinghouseholdsand andareasreduce thatare GHGemissions,primarilyinsectors currently not (MtCO allocation bereduced from 482to453.1 milliontonnesofcarbondioxide Germany’sCommission (EC)accepted overall plan,butordered thatthetotal new power themarket. plantsentering InNovember 2006,theEuropean for not plan,as wellasreserves coveredallocations toinstallations inthefirst allocation,including allocationrepresentstotal 7%lessthanthefirst allowances covered planby given over toinstallations by 12%. thefirst The both inTable plansare detailed 5.Thecurrent planreduces theamountof I).Total nationalallocation plan(NAP inthefirst allocationsfor contained those sets andupdates sectoralemissionstargets period oftheEU-ETS, approved by theGermangovernment inJune2006 for thesecondtrading The nationalallocationplancovering the2008-2012 II), period(NAP on negligible reductions infuture periods. competitive subjecttointernational industrial installations pressure willtake The governmentare the sameforallindividualinstallations. alsodecidedthat averages; they are not category 2000-05 emissions).These allocation factors of their2000-05emissionsandCHPplantswere given 98.75%oftheir were in both given sectors 100%2000-05 emissions(smallinstallations whereas power plantswere given allocationscovering 85%oftheiractual were given allocationsequalling 98.75%oftheiractual2000-05emissions, sector inthemanufacturing Installations relative toindustrialinstallations. In thesecondplan,government reduced allocationstopower plants allocation planwas criticisedasbeingtoogenerous power tocoal-fired plants. revised and larger power CO plants,covers about55%oftotal Germany, theso-calledtrading sector, whichincludesmostindustrialinstallations through lowerhave emissions cansellthemtothemarket. excess certificates In allowances canbuyfrom theEuropean emissionsmarket, andcompanies that subjecttoapprovalinstallations, by theEU. Companies thatexceed theiremission emissionpermitstotheirenergy countriesallocate andindustrial EU-ETS, Emissions Trading whichbegan Scheme(EU-ETS), operationin2005.Under the ofGermany’s emissionsreductions from total willstem A large theEU portion given forfree accordingtohistoricalemissions. Emission allowances are whichmeansthey grandfathered are toinstallations, asdiscussedbelow.guarantees, 2 ), a 6% reduction. In addition, the EC refused certain allowance ), a6%reduction. Inaddition,theECrefused certain National ClimateProtection Programme 8 , outliningmeasures to Germany’s first national Germany’s first 2 emissions. 47

© OECD/IEA, 2007 come, first-served basisuptothe17come, first-served MtCO source ortechnology, assumingan86%loadfactor. They are given onafirst- emissionsofnewfull estimated power plantsfor14 regardless years, offuel for new power themarket. plantsentering Theseallocationswould cover the the entire energy energy the entire Cap for installations Cap forinstallations equal to 20% of their initial EU-ETS allocation, or90.62MtCO equal to20% oftheirinitialEU-ETS emission allowances will beauthorisedtopurchasefrom the JI/CDMmarket, thatexceed their second nationalallocation plan,individualinstallations owntowards Kyoto thecountry’s However, target. undertherulesof emission permitsorcredits from market, theinternational whichcount canpurchase orinstallation these mechanisms,JIandCDM,acountry Through development limitations. mechanism(CDM)becauseoftechnical Protocol’s (JI)andtheclean mechanisms,jointimplementation flexibility nationalallocationplanwas not oftheKyoto abletotake advantage The first 14energy sectorforthefirst oftheiroperation. years allow Germany toprovide forfree allallocationsneededfornew plantsinthe However, years). theEChasrefused to (some ofwhichare forlongerthan 14 some plannedpower plantsthathave already received allocations guaranteed installations not installations Cap foradditional covered by NAPI MtCOUnit: oa a 9 8 453.1 482 submission. Source: Country 499 sectors and industry CO cap without EU-ETS Estimated emissions Total cap new entrants forpotential Reserve covered by NAPI Germany’s totheECset allocationplansubmitted aside 14 MtCO consequence oftheECdecision toreduce theoverall allowance cap;asa can make market). purchasesfrom unlimited the EU-ETS The 20% limitisa 48 2 reduction for reduction 2 /year NAP I (2005-07) NAP II (2008-12) EC-modified NAP II(2008-12) EC-modified NAP II(2008-12) NAP I(2005-07) /year ainlAlcto ln,2005-2012 Plans, Allocation National 9 5 425 456 495 0 9. 491.5 491.5 501 . 38.4 9.5 2 417011 17 11 Table 5 2 set aside as reserves, including set aside as reserves, 2 per year (they 2 annually

© OECD/IEA, 2007 OTHER SECTORS actions withquantifiable reductions inTable are detailed 6. sectors are: sectors already implemented thatare helpingGermany achieve inthese itstargets 2008-12 period.Sofar, emissionshave by 9.8%.Themajor fallen policies these sectors by 11.6%,these sectors equivalent to334MtCO overall Kyoto Germany target, hasset anobjective ofreducing emissionsin as outlinedinthe actions, needed toensure further fullcompliance. Asaresult, itwillundertake However, thegovernment determinedthatsomeadditional policieswere reductions thatGermany needstomeet innon-trading sectors. itstargets contributions toreduced emissions,are forecast toprovide the lion’s share of Taken together, thesepolicies,alongwith policies makingsmaller international market.international policies andmeasures willfullyachieve withoutrelying thetarget onthe itself willnot bepurchasingfrom theJI/CDMmarket asitforecasts thatits concession toindustry, the limitwas increased from 12%. Thegovernment ● ● ● ● ● produce theremaining 45%ofGermany’s CO notwill alsocomefrom covered thesectors by emissionstrading,which In additiontothereductions from reductions thepower and industrialsectors, In 1990, were 378 emissionsinthesesectors total MtCO andsmallbusinesses. transport emissions thelargest includehouseholds, single source.Thesesectors cheaper. (For further information, see Chapter 2.) information,seeChapter cheaper. (Forfurther Ecological tax reform makingenergy moreEcological tax expensive andemployment Kopplungsgesetz through theApril2002enactmentoflaw onCHP( 4.) see Chapter Gesetz MAP). (For further information, see Chapter 5.) information,seeChapter MAP). (Forfurther Expansion andmodernisationofcombinedheatpower (CHP)plants Promotion ofrenewables through itsrenewables law ( information, (Forfurther system. Strengthening ofthepublictransport Chapter 4.) Chapter saving information,see measures andother measures. (Forfurther forenergy- assistance financial the introduction ofenergy certificates, Improved inbuildingsthrough streamlined regulations, energy efficiency , EEG)andthe , KWK-G). (For further information, see Chapter 4.) information,seeChapter , KWK-G). (For further National ClimateProtection Programme 2005 Market Incentives Programme 2 emissions, withvehicle 2 ( Marktanreizprogramm per year, duringthe Erneuerbare-Energien- 2 ; tomeet its Kraft-Wärme- . Those 49 ,

© OECD/IEA, 2007 Household sector MtCOUnit: ● ● 15.3 ● ● ● its 2008-12 Thesemeasures targets. include: tomeet thesumofthesemeasures estimates, willbe sufficient conservative cannot bereliably Thegovernment calculated. forecasts thatonthebasisof sector, ofwhich actions willbetaken inthetransport thereduction effect further In additiontothemeasures forby accounted quantifiable effects, submission. Source: Country Total Transport sector 50 uttl10 5.5 1.5 5.3 3 0.4 2.8 1.3-1.5 0.7 Subtotal Driving habitinformationcampaign Fuel modifications Fiscal incentives Subtotal Reductions dueto higherenergy prices measures Regulatory measures Financial support Public relations campaign basis of different localandtime-related tollrates. basis ofdifferent efficiency. means oftransport. emissions innew vehicles. Upgrading toset upareal onthe ofthetollsystem road-pricing system Expanded fitting offuel consumptionin new vehicles.Expanded fitting indicators Introduction ofnew enginetypesandmeasures toincrease engine CO to reduce specific ofthepromise madebyRefinement the carindustry ofcompetitiveMeasures positionsbetween distortions different toeliminate Future withQuantifiable Actions inNon-tradingSectors 2 ya Emissionsreduction potential /year Emissions Reductions Table 6 2

© OECD/IEA, 2007 CRITIQUE industry from CO industry includingcoal. Toplants ofalltechnologies, energy-intensive insulate would new guarantee entrantsfree permitscovering allemissionsfornew emissions. Inaddition,provisions underGermany’s proposed secondNAP Given that the EU-ETS isatool tolowerGiven CO thattheEU-ETS reductions infuture periods. government will take onnegligible hasdecidedthattheseinstallations lower-carbon CO orcarbon-free sourcesby providing sufficient goal. Thepolicywould have toencourage neutralised theaimofEU-ETS plants–would havelonger forsomespecific worked atcross-purposes tothis permitsfornewCommission thatallocated power plantsfor14 –and years activities. Provisions totheEuropean submitted intheoriginalsecondNAP reduce CO the government to hasrevised thispolicy, asitundermines itscostlyefforts sources. Asrequired by theEuropean Commission, weare pleasedtoseethat would receive CO Almostallpowerallocation soughttocorrect plants theearlierdeficiencies. NAP,Learning from itsexperiencewiththe first initsrecent secondNAP, the plants, reducing theincentive towards lesscarbon-intensive power sources. generous allocationofcarbondioxide powera very permitstoitscoal-fired Germany gave oftheEU-ETS, nationalallocationplan(NAP) Under thefirst industriesandareas. particular manner. Within eachsector, across fairly burdens shouldbeallocated the allocationofexistingandfuture permitsshoulddiscourageCO CO relative toensure burdensbetween that thetradingandnon-tradingsectors between andweencouragecontinuedevaluation these twoofthe pillars like buildings.Thegovernment theburdenevenly hastriedtodistribute includingcross-sectoral areas householdandsmallbusinesssectors, transport, from theEUEmissionsTrading and reductions from Scheme(EU-ETS) the There are toGermany’s two pillars reductions approach tomeeting itstarget: even more ambitiousgoalsin thefuture. tomeet itsobjectives moreallow cheaply, thecountry aswellhelpitattain ofsomenewexisting policies,aswelltheimplementation policies,will Building onthiscommitment,theIEAbelieves thatsomechangestoits to real progress toreduce emissionsandlower thethreat change. ofclimate renewables andenergy intensity, Germany isshowing itspoliticalcommitment likely through toachieve. beyond itsadditionaltargets Furthermore, Kyoto, for on tracktomeet agoalthatmany itstarget, other IEAcountriesare not yet burden toreduce emissionsby 21% undertheKyoto is Protocol, thecountry There ismuchtopraiseinGermany’s environmental policy. aheavy Despite competition withcountriesthatdonot have CO 2 reductions areinthemostcost-effective from extracted allsectors 2 emissions through renewables production andincreased efficiency. 2 2 costs, given thatthey are subjecttointernational permits forfree covering 85%oftheir2000-05 2 emissions inEuropean countries, 2 reduction the targets, 2 permits toall 2 -intensive 51

© OECD/IEA, 2007 RECOMMENDATIONS spurring aglobal market CO forcost-effective CDM, both by theprivatesector andthegovernment itself,intheinterest of thegovernment shouldconsiderexpandingtheuseofJIand Henceforward, ofthismarket-basedadvantage meansofreducing greenhouse gas emissions. the Netherlands andtheUnited Kingdom,Germany takes relatively less ComparedEU-ETS. withother countriessuchasNorway, Japan, Spain,Italy, are allowed torely onJI/CDMtomeet theiremissionslimitsunderthe see thatthegovernment by whichcompanies hasincreased thepercentage projects to other andtechnologies countries.Inthislight,weare pleasedto overall cost of reducing CO mechanism (CDM)are market-based mechanismsdesignedtolower the The Kyoto Protocol’s (JI)andcleandevelopment jointimplementation supply concernsshouldbedonethrough meansother thantheEU-ETS. toprotect andpromote ofsecurity generationintheface coal-fired Efforts ◗ ◗ ◗ The government ofGermany should: incentives orcarbon-free tomove sourcesofenergy. tolow-carbon permits.) Auctioningwithproper revenue recycling would alsoenhancemarket discussionofpassingthrough thecostsofemission 9forfurther (See Chapter costs ofthepermitsinelectricityprices. they willstillpassontheopportunity greenhouse gases. Whilepower plantshave beengiven thesepermitsforfree, companies, pay andnot share theirfair foremitting justelectricitycustomers, –auctioningwouldpurposes, ordirectly ensure tocustomers thatall revenue –eitherbacktothegovernment tolower orforother generaltaxes allowances allowed totheextent by EUlaw. Coupledwithrecycling ofauction Finally, we encouragethegovernment toconsiderauctioningfuture carbon overall costofGermany’s own compliance. 52 of energy. incentives forcompanies to move towardsorcarbon-free sources low-carbon revenue recycling back to thegovernment orcustomers to create greater development ofamarket thatcanreduce CO clean development mechanism (CDM) projects, asthiswouldspur manner forGermany andtheworld. carbon market. required by theEuropean thefunctioning ofthe Commission,asthisdistorts Remove the14-year guarantee of Consider auctioningoffuture greenhouse gasemission allowances with Promote more strongly theuseofinternational jointimplementation (JI)and 2 emissions, aswelltospread CO emission permitsfornewpower plants,as 2 2 reductions andlowering the emissions inacost-effective 2 -reducing

© OECD/IEA, 2007 GOALS ANDSTRATEGIES POLICIES ANDMEASURES TRENDS INENERGYEFFICIENCY has beenemphasised inrecent Inthecoalition agreement years. of policy,Underpinning Germany’s which changepolicy isitsefficiency climate 2). in Chapter 2 by 1.9% peryear up to 2030underthealternative policyscenario (seeTable IV,Energiereport average energy consumption perunitofGDPwilldecrease tocontinueimproving. isexpected AccordingtothePrognosEnergy efficiency towards diesel-fuelledvehicles. trend toanaccelerated awaycan alsobeattributed from gasoline-fuelled and gains, theconsumption decline IEA countries.Inadditiontovehicle efficiency few sectorhasdeclinedby nearly6%,atrend invery exhibited the transport (TFC) ofenergy hasincreased by over consumption 8%since2000,absolute in sector. consumptionreduced consumption final Thoughtotal inthetransport group ofindustrialnations.Muchtheimprovement to canbeattributed was 1.8%. speaking,thisplacesGermany Internationally amongtheleading improvedsignificantly over time;theaverage improvement from 1990 to2005 USD isabove average forIEAEurope (0.15). Germany’s energyhas intensity product (GDP)–itsenergy of0.16 intensity tonnesofoilequivalent (toe)per (seeFigure 7).Germany’sindicators energy supplyperdollarofgross domestic comparisons energyinternational ofgenerallyaccepted efficiency interms largely ceased totrackeconomicgrowth. Germany doesrelatively wellin 3.3% over (seeFigure 2004 4).Energy consumption inGermany hasthus Consumptionyears. peaked in1979 andwas 261 Mtoein2005,adecrease of Energy consumption orslightlydecliningformany inGermany hasbeenstable fuelconsumption. andtransport on industry, buildingperformance policyfocuses additional policiesandmeasures. Germany’s energy efficiency toachieve without for2020,onethatwillbedifficult ambitious target output –hasalready beenimproving quickly, thegovernment hasset an policy. Whileenergy– intensity consumedperunitofeconomic overall energy inthecountry’s isincreasing inimportance energy efficiency ofGermany’sIn thecontext environment changeobjectives, andclimate ENERGY EFFICIENCY 53 4 © OECD/IEA, 2007 0.00 0.20 0.30 0.40 0.10 ● ● ● policy: and measures fornationalenergy efficiency November laiddown 2005,the governingthefollowing targets parties 11 Countries Sources: these countries. * excluding Luxembourg throughoutare andNorway not theseries, asforecast data available for 54 Energy IntensityinGermanyandOtherSelectedIEACountries, 9518 9519 9520 052010 2005 2000 1995 1990 1985 1980 1975 decentralised power generation and ultra-efficient CHPplants. decentralised power generation andultra-efficient increase of3%. energy use)by theyear 2020compared with1990, requiring an annual of doublingenergy productivity (ameasure ofGDPoutputperunit in 5%ofpre-1978 year. buildings every ofimproving forbuildings,withatarget energy passport energy efficiency measures accommodation);andintroduce andby includingrental an programme (forexample by switchingtoinvestment relief grants andtax 1.5 billionperyear; and attractiveness improve ofthe theefficiency EUR Modernise the existing stock of power stations and expandtheuseof Modernise theexistingstock ofpower stations Increase fundingforthe ofthenationaleconomy withtheobjective Increase theenergy efficiency (toe per thousand USD at 2000 prices andpurchasing(toe perthousandUSDat2000prices power parities) Energy Balancesof OECD Countries , OECDParis,2007submissions. andcountry CO 2 Figure 1973 to2010 Building RehabilitationProgramme , IEA/OECDParis,2007 ; 7 National AccountsofOECD IEA Europe* to atleast Germany Kingdom France United Italy

© OECD/IEA, 2007 INDUSTRIAL SECTOR with cleanfossilfuels. along ofbuildingsandtransport, ontheefficiency concentrating itsefforts Under onbuildingefficiency. theG8presidency, is thecountry efforts appliance labellingdirective, energy consumption stand-by andfurther With theEUpresidency, Germany isfocusingonrevisions totheEU’s scale. onaninternational energyEight (G8)andtheEUtofoster efficiency Germany isalsoworking touseitspresidencies in2007 ofboth theGroup of productivity willbemet. target how itsenergy policiesanddetail government’s energy efficiency 2007, whichwillbeacomprehensive and road-map ofthe stocktaking directive,the framework tobereleased oftheEU’s inJune energy services The government iscurrently preparing an (Environment Programme) reduce CO 1995, 1996, tovarious committed measures to 2000and2002,industry in theindustrialsector.improving agreements Inupdated energy of efficiency ● instrument forreducing CO have beentheprimary commitmentsby industry For many voluntary years, Voluntary agreements ● ● (SMEs). The smallandmedium-sized enterprises primarily targeting measures, often in theindustrialsectorare provided by various informational andfinancial incentives toimprove andimplementFurther energy savings energy efficiency Grants andloans sectionontheelectricitysector.later reductions, information,including expected seethe power (CHP).Forfurther combinedheatand electricitygeneration,particularly ofon-site efficiency agreements dealwithimprovementsSome aspectsofthevoluntary inthe hasalsoprovidedScheme (EU-ETS) akey incentive toraiseenergy efficiency. Theintroductionenergy efficiency. oftheEuropean Union Emissions Trading a monitoring report tobecompiled inthe nearfuture. a monitoringreport consumption ( Agentur a European toprunnerprogramme. Review undertheCogenerationAct(KWK-G) thefundingcriteria basedon Continue and step uptheGermanEnergyContinue andstep Agency’s ( European initiatives toimprove andworkSupport towards energy efficiency 2 , DENA) initiatives for energy conservation inbuildings,electricity initiatives, DENA) forenergy conservation emissions, many ofwhichare withimprovements associated in Kreditanstalt fürWiederaufbau e.g. by cutting stand-by powerby consumption) cuttingstand-by andtransport. provides forinvestment capital inenvironmental 2 emissions andhencetoagreat for extent Energy Efficiency ActionPlan Energy Efficiency (KfW) Umweltprogramm Deutsche Energie- 55 in

© OECD/IEA, 2007 RESIDENTIAL ANDCOMMERCIALSECTORS case of energy performance, legislation was transposed intothe case ofenergy performance, of buildingswere Inthe transposedintoGermanlaw atanearlystage. Several key elementsoftheEUdirective ontheenergy performance EU directive onthe energy performance ofbuildings buildings. 1.4 billionayear isnow available in forenergy rehabilitation of EUR 120 millionayear ofgovernment forenergy rehabilitation buildings,atotal relief andtheprovision forhome modernisation andmaintenance tax ofEUR of Germany’s emphasis coalitionagreement ofthegoverning andacentralelement parties’ tosave energy inthissectorisamajor effort Nonetheless, anintensified are set years. five atthefederallevel, mustberevised atleastevery exceed theminfuturecontinue tosignificantly Buildingcodes,which years. In asub-project underthe Public information andadvice and Nuclear Safety. fortheEnvironment, Nature byoperated theFederalMinistry Conservation canalsoapplyforgrants underthemarketcontractors incentives scheme KfW alsopromotes energy contractinginitsvarious programmes. Energy relief asacommonapplicationinindustrialenergy contracting. attract tax encourage itsmore widespread adoption.Forexample, block-type CHPunits exemptions inrecent amongother years, thingswitheco-tax to substantially up Promotion contractinghasbeenstepped ofenergy performance can befundedwiththecombinationofboth programmes. Saving Programme supplement the loanstoSMEscanbeused protection activities.Thelow-interest Udrciesrqieet o ulig agrta 0 m 000 EU directive’s requirements forbuildingslarger than1 the West. Germany alsohasstrong buildingcodes–current codesexceed the abandoned ordestroyed becauseofmigration ofpopulationfrom theEastto comparatively new. Inaddition,many buildingsintheEasthave been Germany’s primarilybecauseitis buildingstockisalready relatively efficient, Building sectorpolicies example suchaspumps inelectromechanical and fans. systems potential inthissector, theconsiderableenergy for efficiency is totap Theaim useofelectricityintradeandindustry. primarily toSMEsonefficient theGermanEnergyadvice Initiative) Agency, campaign, DENA, offers 56 National ClimateProtection Programme European Recovery Programme’sEuropean Environment Recovery andEnergy . Up to100% measures costofenergy-saving ofthecapital Initiative Energieeffizienz . Includingtheplanned (Energy Efficiency 2 , andwill

© OECD/IEA, 2007 and retail trades. and retail The resultingtechnologies. investment also helps promote theskilledcrafts thuspromoting up-to-date, technically theadoptionofnew energy-saving investmentsinterest inspecific beingmade.Therecommendations mustbe under theconditionthathe orshedoesnot have commercial apersonal asabuildingenergy to operate consultant accreditation who hasobtained Gebäudeenergieberater imHandwerk trainingand knowledgeengineer withspecific inenergy consultancy, ora leaves withtheconsumer. or canbeanarchitect Theenergy consultant explainsand outcome isacomprehensive thattheenergy consultant report includingoptionsforusingrenewables.insulation andheatingsystems, The recommendations in andaplan of actionforimproving energy efficiency paidforby theconsumerleadto partly andin-depthconsultation survey whichisprovided forexistingbuildings,adiagnostic service, consultation Under onindividualbuildingsand heatingsystems. the consultations also provides, amongother things,fundingforin-depthon-the-spot Control ( ofEconomicsandExport Working inco-operationwiththeFederalOffice energy use,includingtheuseofrenewable energy.efficient by theBMWi– mainlyfinanced –onallquestions related toeconomicand in400major cities working group, service provides anenergy advisory The saving constructionviaDENA. German government uppublicrelations planstostep activitiesonenergy- mostlyprovided the by andengineers, industry, architects consulting services To support. andfinancial require supplementthe additionaladvisory ofthemeasures implementation forexistingbuildingscontinuesto Effective Public information andconsultations sooninrevisionsfinalised totheEnEV. oftheseelementswillbe existingbuildings.Details forcertain passports andtheintroduction ofenergy andbuilt-inlightinginstallation systems thoseregardingnational law provision –inparticular forair-conditioning the legal elementsofthedirective framework into totransposefurther (Energieeinspargesetz) Act RevisionstotheEnergy Performance central heatingboilers. fornew buildingsandinspectionsof existing buildings,energy passports covered fornew buildingsandmajor relate toenergy to standards alterations transposed intothe progressaccount oftechnical Pollution in2004. control legislationwas Energieeinsparverordnung Verbraucherzentrale Bundesverband Bundesamt für Wirtschaft undAusfuhrkontrolleBundesamt fürWirtschaft Erste Bundesimmissionsschutz-verordnung , which was enacted in September 2005,established , whichwas inSeptember enacted (EnEV), enacted in2002andamendedtotake (EnEV), enacted – a member of the skilled crafts trade – amemberoftheskilledcrafts (VZBV), aconsumerassociation , BAFA), theBMWi . Theelements 57

© OECD/IEA, 2007 higher energy costs.The households). appliancesfor goods” (mostlykitchenandlaundry so-called “white ofitsEUpresidency toreviseadvantage thelabellingdirective andupdate for proved alarge successinGermany, andthegovernment iscurrently taking of theEuropeanImplementation Union’s directive onappliancelabellinghas Appliance standards andlabelling investment grants iscurrently underconsultation. billion.There-gearing of theprogramme toinclude 2 approximately EUR May 2006–more thantwo-and-a-half timesthefull-year of 2005figure billioninloanshadbeenapproved by theendof 5 sector, over EUR programmes positive response. Inenergy-related forthebuilding with avery CO pumps), amodernisationadviserandgrants guide. (new orreplacement),heating system apump check(forcentralheating forelectricalappliances,recommendations forthebestchoiceof database include aheatlosscheck(forinsulationinbuildings),best-practice recommendations foraction.Themainfeatures oftheonlinecampaign andprovides themwith online energy estimate efficiency helps consumers fortheEnvironment, andNuclear Nature Safety Federal Ministry Conservation The The stepping-up ofthe The stepping-up toincludeinvestmentbe extended grants. theprogrammeWhen themostrecent will federalbudget comesintoeffect, loansasithasdonesinceitslastrelaunchencompass in2001. low-interest billion.Infuture, theprogramme will 17 EUR applications totalling loan tosupport billionfor2006to2009.Thisis sufficient 1 EUR Building RehabilitationProgramme Construction andCO various KfW programmes (KfW’s HousingModernisation,Ecological is likely measures theincreased under toreflect fundingofenergy-saving received by mid-October alone.Therapidgrowth inthenumberofapplications in2005,8500applicationshadbeen 000in2004; in 1998 tonearly7 000 increased fromThe numberofapplicationsforenergy consultations 1 The Germangovernment hasincreased annualfundingfortheKfW ofexistingbuildings. rehabilitation whenitcomestothe important at thebeginningof2006isparticularly 58 Klima sucht Schutz 2 Building Rehabilitation ProgrammeBuilding Rehabilitation 2 CO (Climate Seeks Protection) campaign Seeks (Climate sponsored by the Building Rehabilitation programmes),Building Rehabilitation inaddition to CO 2 Building RehabilitationProgramme 2 Building RehabilitationProgramme rmapoiaeyER30millionto 360 from approximately EUR has so far met has sofar relaunched CO 2

© OECD/IEA, 2007 TRANSPORT SECTOR TRANSPORT 9. March2007Well-to-wheels CONCAWE/EUCAR/JRC, report, (Version 2c)available from in motor vehicles fortheperiod2002to2020. gains studyforecast major efficiency Findings from transport aninternational meansofreducingtechnical fuelconsumptionandheavy trucks. incars liesinexploiting gains inroad transport Most ofthescopeforefficiency trains (vehicle components, includingtheengineandtransmission). andpromotion ofalternative fuelsandinnovativemeans oftransport power- optimisationof energy technical efficiency, andincreaseintensity transport measures. Actionisfocusedonincentive mechanismstoreduce transport price policyandinvestment measures, alongwithpublicityandinformation broad-based policy, package ofmeasures comprised regulatory oftechnical, resources,environment thefederalgovernment a ispursuing andconserves To sectorinaway thatiscompatible structure thetransport withthe decline sincethebeginningofdecade. many onanupward years trend, hasbeenin consumption (TFC),andafter final sectoraccountsfor26%oftotal Energy consumption inthetransport EU’s voluntary agreement withindustry, ofwhichistoreduce thetarget EU’s the voluntary The fueleconomy ofGermany’s vehicle isgoverned fleet primarily by the Fuel economy standards andlabelling unpopular though several optionsarevery being discussedinternally. consumption andcarbondioxide emissions, thisproposed changeinpolicyis speed limits,both asameansofimproving safety andlowering energy inplace.Thoughthegovernmentsystems hasinthepastconsidered imposing control ofthe highway hasspeedlimitsandtransport system large part the vehicle speedlimitsformostmajor particularly motorways, Germany isuniquepassenger amongIEAcountriesinnot having mandatory sector. across toimprove theentire transport modes oftransport efficiency management)andmeasures spanningall organisational aspects(traffic use(mobilitypatterns), transport affecting circumstances personal targets actionnow volumes.been cancelledoutby growth Therefore, further intraffic gains haveemissions. However, largely efficiency ofpasttechnical theeffects consumption together withacorresponding reduction ingreenhouse gas resulting ofincrease inatrendrate invehicle reversal performance, infuel gains inmotor vehicles have efficiency Since 2000,technical exceeded the gains of13% to26%are assumedforspark-ignition engines. engines canbeimproved by between 16% and34%.Potential efficiency ies.jrc.cec.eu.int/wtw.html. 9 The efficiency ofdiesel The efficiency Autobahn . A 59

© OECD/IEA, 2007 ELECTRICITY SECTOR vehicle labellingwithinformationonfuelconsumption andCO agreement, Germany andEurope ofthisvoluntary are introducing As part standard. soldinGermany in2008willmeetthat allcars theEU’s 140 gperkm Europe succeededinlowering emissionsto161 gCO In2004, thistarget). offset per kmby 2008(theuseofbiofuelscanpartly average CO ● replace thefollowing previous objectives: CHPlegislation),which pursues cogeneration ( the government passedlegislationonthe modernisationandexpansionof relatively electricitygeneration.To smallshare ofthecountry’s promote CHP, ofelectricity generation,butat12%,efficiency itcurrently makes upa canimproveCogeneration orcombinedheatandpower (CHP)systems the stop onfoot. households take lessthan10 toreach minutes theclosestpublictransport 86%ofall facilities: toeasyaccesspublic transport that canbeattributed useincreased toover 10In 2005,publictransport billiontrips,anincrease Germany, resulting inabout19 millionavoided individualvehicle trips. in On adailybasis,about27 usepublictransportation millionpassengers Public transportation thatmeetemissionstandards. thelatest trucks revenue usedforhighway italsoprovides finance, economicincentives touse islargely designedtoproperly 2005.Whilethetollsystem increasing thecostsofroad usetodomesticandforeign trucks, apportion January 1 on onitshighwaysGermany forheavy launchedatollsystem trucks Toll roads and emissionfigures. Thelabellingmustfollow showingefficiency. auniformpattern consumption tomakeconsumers direct comparisons withregard between cars toenergy (passenger carenergy consumption labellingordinance),makes iteasierfor under the beingsold.Thelabelling, introducedfor new inGermany passengercars 60 financial add-onthatvaries byfinancial sizeandtypeofinstallation. Support fortheoperationof(oldand new) existingplants,through a fixed Support 2 Personenkraftwagenenergieverbrauchskennzeichnungsverordnung emissions from newly to140 registered passengercars gCO Kraft-Wärme-Kopplungsgesetz , enacted on19, enacted March 2002to 2 per km.Itisunlikely 2 emissions 2

© OECD/IEA, 2007 CRITIQUE 23 MtCO building new CHPplants,withreduction compared targets to1998 of by 2010. modernisingand by maintaining, istobeattained Thisfigure government and German industry inanagreementgovernment tocutCO andGermanindustry ofapackage ofmeasures by adopted theGerman The legislationispart ● action plan on energy efficiency thatthegovernment is preparing shouldbe action planon energy efficiency To other manner comparedthat end,the efforts. withthecountry’s effective toGermany’scontribute overall energy andenvironment goalsinacost- goals,ensuringthatthey are both realistic and the energy efficiency require acceleratingit even We further. encouragethegovernment toevaluate isalready improving pace andmeeting will thistarget atafast efficiency tomeet. Germany’s difficult we are willbevery concernedthatthetargets Weefficiency. commendthegovernment forsetting suchambitiousgoals,but provide animpetus tofocusgovernment onactions to improve attention set abaselinefrom whichchangescanbemeasured, butalsobecausethey since 1990. We acknowledge are thattargets helpfulnot onlybecausethey until 2020–ascompared withthe current ofincrease rate of1.8% peryear to 1990. Thiswould require a3%annualincrease inenergy productivity todoubleitsenergyambitious targets productivity by 2020,ascompared levels, Germany hassetother countries.Buildingonits own goodefficiency policyto output (usuallyGDP),andthiswork willhelpspread goodefficiency energy productivity, theamountofenergy consumedperunitofeconomic applauds. Germany isalready ofits aleaderamongIEAcountriesinterms the forefront ofEuropean policy, andinternational anemphasis theIEA to GermanyThrough iselevating itsG8andEUleadership, energy efficiency CO ● preferential tax treatment,preferential asthey are tax exempt from petroleum excise duties. approved underthenew legislation.Inaddition,CHPplantsreceive 000CHPplantshave been by measures inother areas. More than11 carbon dioxide (MtCO promote cogeneration.Theagreement callsforupto45milliontonnesof other ancillary requirementsother tobecomplied ancillary with. to have taken placenot than31 later December2005andanumberof operation oftheplant. ofcontinuous payments from years areoften thestart madeforatotal contrast, forsmallCHPplantsupto50kWandfuelcells,thebonus 2 MWmadeonadecliningbasisandending31 December2010; by 2 MW)andoffuelcells,thebonuspayments forplantsinthe50kWto Modernisation ofexistingplants;commissioningthemodernisedplants Additional constructionofsmallCHPplants(upto50kWor 2 reductions upto25MtCO totalling 2 a year overall andnolessthan20MtCO 2 ) peryear inemissionssavings from theenergy industry 2 a year asof2010 are tobeachieved 2 a year asof2010. Further 2 emissions and 61

© OECD/IEA, 2007 improve energy reduce efficiency, CO to Germany opportunities significant sectoroffers energy use, thetransport motorway speedlimitforpassengervehicles. itsalready Despite declining inWestern Europe Germany withoutauniversal istheonlycountry instance, sectorremains challenging.For inthetransport addressing energy efficiency infewexhibited IEAcountries.However, forculturalandpoliticalreasons, Total inGermany, sectorhasbeenfalling energy useinthetransport atrend beneficial. along withtheoverall mightalsobeconsidered target they totheextent are progress towards meeting itwillbemeasured andevaluated.Sectoraltargets needed toachieve thegovernment’s energy productivity andhow target, completed asquickly aspossible.Itshouldincludethepoliciesandmeasures manufacturers committed toreduce committed CO manufacturers agreement, car ofaEurope-wide voluntary As part efficiency. transport stronger policiessuchasroad tollsandspeedlimitsinordertoimprove policiesand,ifnecessary, considerimplementingreview ofitstransport-sector For thesereasons, arigorous weencouragethegovernment toundertake efficiency inbuildingsandencourage thegovernment its tomaintain efficiency foreseeable future. We are impressed withGermany’s overall focusonenergy building codes,more stringentthantheEUdirective requires now andforthe have beenabandonedordestroyed. strong Germany hasvery Furthermore, buildingsintheEast population from theEasttoWest, inefficient very account oftherelatively Inaddition,withthemigration new buildingstock. of inGermany.energy on efficiency Buildingsare already comparatively efficient toimprove large opportunity avery As inmany IEAcountries,housingoffers equipment. policies suchasgovernment procurement requirements forenergy-efficient appliance,anddomestic andnot by particular consumption by category powerapproach consumption, tostand-by whichaddresses energy at theEUlevel fora“horizontal” these products. Thisincludessupport devices, Germany andother countriesshouldconsider measures thattarget Considering theforecast growth inelectricityconsumption duetoelectronic criteria. stringentgiven cost-effectiveness are sufficiently appliance standards transparency ontheenergy useofappliances,andthatupdated sufficient the government toensure appliancelabellingrequirements thatupdated give encouraging theEU-widepolicyonappliancelabellingandstandards, update torevise and Germany’s goals.Thusweendorse efforts Germany’s efficiency appliancescanadvance ofhouseholdandoffice Improved efficiency Germany shouldtake aleadingrole inpromoting suchapolicyattheEUlevel. may now forpassengercars benecessary, and standards realised. Mandatory agreement, preventing fromtrack tomeet thevoluntary being thefullbenefits improvements totheEuropean are not vehicle EUcarmanufacturers on fleet, Thoughthisapproach fueleconomy hasbroughtof theircars. significant 62 2 emissions andenhanceenergy security. 2 emissions andraisethefueleconomy

© OECD/IEA, 2007 RECOMMENDATIONS long term. CHP,supporting asthey provide greater downward pressure oncostsover the manner.effective Market-based mechanismsshouldbeconsidered when inacost- Thegovernmentinstallation. shouldensure thatCHPissupported whichvaries by sizeandtypeof fixed add-onforCHPinstallations, Thegovernmentbenefits. isworking toincrease theshare ofCHPthrough a inFrance,high rates FinlandandtheNetherlands),itsefficiency despite (12%Germany’s electricityportfolio ashare versus of52%inDenmarkand Combined heatandpower (CHP)provides arelatively smallshare of incentives, suchmeasures totheextent financial are cost-effective. buildings, includingexpandingonitsinformationcampaigns orenhancing ofexisting improvealso explore policiesandmeasures tofurther theefficiency Thegovernment continuetodeliver theirfullbenefits. might that itsefforts monitoringandenforcementofbuildingcodesso rigorous, butcost-effective ◗ ◗ ◗ ◗ ◗ ◗ The government ofGermany should: without oversubsidising it. they areextent cost-effective. labelling andstandards, includingmaximumstand-by power use,to the agreementsvoluntary have proven ineffective. standards to establish where mandatory roleleadership inEUefforts sector. including interimmilestones. targets manner. inacost-effective efficiency suite ofpoliciesandmeasures selectedwillhelpGermany achieve its Ensure that support forCHPEnsure reflects thatsupport therelative ofthetechnology, benefits Work to revise withintheEUcontext andupdateapplianceefficiency agreements considertakinga Review voluntary withthecarindustry; Continue to policiesto develop improve effective inthetransport efficiency Consider establishing clearandachievable targets, sectoral energy efficiency Complete actionplan,ensuringthatthe andimplement theenergy efficiency 63

© OECD/IEA, 2007 © OECD/IEA, 2007 ELECTRICITY TOTAL ENERGYSUPPLY PRIMARY PRODUCTION IEA, following Denmark andSpain. IEA, electricitygeneration,4.4%,isthe third-largest sharewind initstotal inthe providing thegreatest share ofrenewables (seeTable 8).Germany’s share of now make upover 10% electricityproduction oftotal inGermany, withwind Growing atanaverage ofnearly12% annualrate since2000,renewables renewables intheheatingsectorwillalsoincrease. inthecoming decades,andthegrowthcontinue atthesamerate of forecast growthestimates that theabsolute oftherenewables sectorwill supply willcontinuetogrow of2.4%through atanannual rate 2030.Other growth ofrenewables will not keep pacewiththe12% annualgrowth rate, an average ofalmost12%. annualrate forecast Someestimates thatwhile Since 2000,Germany’s renewables supplyhasgrown by 75%,increasing at theUnited and Canada. States after terms that ofGermany. biomasssupplyisthethird-highestinabsolute Thecountry’s timesgreater withaTPESthatisfive-and-a-half than United acountry States, of allIEAcountries.Germany’s supplyofwindis52% more thanthatofthe Canada. Germany’s terms supplyofwind,2.3Mtoe,isthehighest inabsolute 15.9 MtoeputsitthirdamongIEAcountries,behindtheUnited and States Germany’s terms, amongIEAcountries.Inabsolute 2005, rankingsixteenth energy supply(TPES)inGermany in now primary makingup4.6%oftotal As shown inTable 7, continuedgrowth ofrenewables supplyhasresulted init in thefuture. European renewables andforecasts targets, show continued strong growth government tomeet, isontarget orhasalready exceeded, German and andwindintheelectricity sector. sectors The electricity andtransport amount ofrenewable biomassinthe energy initssupplymix,particularly Through ambitiouspolicies,Germany hasdramaticallyincreased the RENEWABLE ENERGY RENEWABLE 65 5 © OECD/IEA, 2007 INSTITUTIONS BIOFUELS INTRANSPORT 0489021418321144 33938223.8% 3.4% 348222 2.8% 3.2% 1.5% 2.6% 347 183 13 359 1.7% 1.8% 353519 345252 11 750 1.5% 356221 343 622 48 9743 10 893 360980 342398 1.4% 9091 5320 29 360385 6255 6095 1.3% 16 144 316 10 653 5405 0 5 141 448 304 4307 0 1 127 221 124 0 4044 212 0 123 7 123 0 1813 168 0 140 0 1657 2194 110 0 1989 1622 38 11 1955 0 0 1364 8940 1869 899 0 8090 1873 804 1499 0 7229 147 1494 6 2004 0 6614 1640 0 2003 6179 1467 0 2002 3913 1507 0 2001 3797 0 2000 4761 1995 3765 1990 2841 1985 2537 1980 1975 1970 Nuclear Safety ( fortheEnvironment,policy. and Nature TheFederalMinistry Conservation Multiple government authoritiesplay arole inrenewables promotion and fuelsby 2015.of alltransport biofuels quota in2007, biofuelsare forecast togrow to8%by energy content in2005.Owingtotheintroduction in2000to4.5%ofthetotal ofa content fuelconsumption hasgrowntransport from by energy 0.5%ofthetotal itsintroduction inGermany in1992,After consumption ofbiofuelsintotal 051 5 4 8 5 4 1 58134764.6% 4.6% 0.7% 746 344 0.0% 0.9% 15 891 0.0% 110 1.6% 0.1% 10.6% 148 14.7% 0.5% 254 0.7% 71.4% Growth rate 1684 in 2005 3.3% 2342 Share ofrenewables TPES in 2005 11 352 Share TPES oftotal 2005 of (all (renewables) PV Share thermal Total thermal Hydro Total Wind Solar Biomass* Geo-- ktoe Solar Unit: 20-5 29 38 21 83 .%8.%1.%0.1% 11.8% –0.4% 84.5% 5.5% 3.8% 18.3% 50.6% -2.1% 33.3% 23.8% Source: 25.7% * excludes industrialandnon-renewable municipalwaste. 2.2% 12.9% 62.9% (2000-05) Growth rate 5.0% (1990-2000) 66 Energy BalancesofOECDCountries eealsSpl,1970to2005 Renewables Supply, Bundesministerium für Umwelt, und Naturschutz Table , IEA/OECDParis,2007. 7 ore)inTPES sources) nryrenewables energy

© OECD/IEA, 2007 responsible forthe overall energy policy. Technology ( ofbiofuels.Finally, of Economics and particularly theFederal Ministry Finance ( of BMVBS) isincharge ofthenational fuelstrategy. TheFederalMinistry Source: * excludes industrialandnon-renewable municipalwaste. Growth (2000-05) rate Gesetz policy, includingtheRenewables Energy SourcesAct( Reaktorsicherheit 10.1% 2.1% 10.1% 0.2% 22.0% 613 164 2.2% 31.8% 61 625 Growth (1990-2000) rate 1282 44.2% 3.2% in 2005 13 533 Share ofrenewables generation 4.4% 19 581 in 2005 Share generation oftotal 27 229 2005 Unit: and Urban Affairs ( and Urban Affairs forTransport, ofthebiomasspolicy. Building and parts TheFederalMinistry Verbraucherschutz, ErnährungundLandwirtschaft for Food,Agriculture andConsumerProtection ( W idHdoBoas V(eeals nryrenewables energy (renewables) PV Biomass* Hydro Wind GWh 042 0 107937575 0 0 8 9.3% 7.8% 609988 7.8% 595646 56500 6.5% 6.3% 566905 46438 4.9% 3.5% 557 581 820 477 44 567 3.9% 122 333 532814 547 650 37 895 4.7% 35475 188 9357 520560 25932 19 4.7% 093 116 466340 7982 20203 60 6.5% 21 077 7 1 383770 5309 21 921 0 19 264 25509 308771 4590 18 156 23124 4331 0 18 859 20071 2004 0 2433 22733 1595 15 856 21 732 2003 2832 0 10 456 21 780 2002 17 2852 426 9352 17 371 2001 1103 1712 71 19 069 0 2000 2544 17 053 0 1995 17 527 0 1990 0 1985 1980 1975 1970 Energy BalancesofOECDCountries , EEG),the lcrct eeainfo eeals 1970to2005 from Generation Renewables, Electricity 38 21 56 45 17 .%9.9% 6.0% 1.6% 0.3% 11.7% 84.5% 6.4% 25.6% 50.6% –2.1% 10.5% 23.8% 2.2% 62.9% Bundesministerium derFinanzen Bundesministerium für Wirtschaft undTechnologieBundesministerium fürWirtschaft , BMU)istheauthorityresponsible forrenewable energy Market Incentives Programme Bundesministerium fürVerkehr, Bauund Stadtentwicklung Table , IEA/OECDParis,2007. 8 oa oa oa alShare of Total (all Total Solar , BMF)handlesenergy taxation, and R&D.TheFederalMinistry , BMELV) managesbiofuels Bundesministerium für Erneuerbare-Energien- ore)intotal sources) , BMWi) is 67 ,

© OECD/IEA, 2007 POLICIES ANDMEASURES ELECTRICITY feed-in legislation( TheEEGreplaced in2000,andamended2004. electricity EEG, enacted tooltopromoteGermany’s renewables primary intheelectricitysectoris byfor 2020adopted theEuropean CouncilinMarch2007. Germany’s forrenewables target asashare ofTPESishalf ofthe20%target 0 0 epewr ntefed fwih3 000work inthesolarsector. ofwhich35 000 peoplework inthefield, 200 inGermany.There renewable isnow asubstantial energy industry More than in transport. thatproduce heatfrominstallations renewables and thepromotion ofbiofuels other major policiesare aprogramme toprovide incentives for financial specific targets andobjectives: targets specific renewable energy sources.Thegovernment hastaken onthree renewables- development forthegenerationofelectricityfrom oftechnologies further towardscontribute avoiding over conflicts fossilfuels;andtopromote the to the nationaleconomy, effects; by external incorporatinglong-term inpart natureclimate, andtheenvironment; toreduce thecostsofenergy supplyfor development ofenergy supply, forthesake ofprotecting particularly the topromoteGermany asustainable works renewables tofacilitate energy policies.AccordingtotheEEG, changeandsustainable climate Promotion ofrenewable energy plays akey role intheGermangovernment’s same profit regardlesssame profit of thecostofeachtechnology, andtherefore be areof costacross rates set alltechnologies; should make sothatproducers the is based onequalisation and technology. oftariffs The relative differentiation by renewabledifferentiated energy sources,location,sizeoftheinstallation schedule forelectricityproduction rate according toatariff guaranteed Thislawproducers. was replaced by theEEG,whichprovided a producers between priceofelectricitytotherenewables 65%and85%oftheretail renewable energy sources(StrEG), power companies were obligedtopay 1990 underthelaw ontheobligation tocompensate fortheinput of inDecember whichwas originallyestablished Under Germany’s feed-intariff, ● ● ● 68 of biofuels in total fuelconsumptionof biofuelsintotal to6.75%by 2010. and toatleast10% by 2020. 12.5% by 2010 andtoatleast20%by 2020. Further develop withtheobjective itsfuelstrategy ofincreasingFurther theshare Increase theshare ofrenewable energy inTPEStoatleast4.2% by 2010 Increase theshare ofrenewable energy inelectricitygeneration toatleast Stromeinspeisungsgesetz , StrEG) in1990. enacted The

© OECD/IEA, 2007 ideeg ofhr)91/.9 0yas2.0%*** 2.0% 1.5% 20 years 1.0%** 20years 0% 20years 1.0% 20years 9.10/6.19* 30years 8.36/5.28* 3.78-21.16 15 years 7.16-15.00 Wind energy (offshore) 6.65-9.67 Wind energy (onshore) 3.62-7.51 Geothermal energy (<20MW) Biomass (<20MW) Small hydropower (<5MW) Large hydropower (5-150 MW) degression are rates provided inTable 9. developmentinto accounttechnical ineachtechnology. Tariffs, and terms declineannuallyaccordingtoafixeddegression totake rate on line,tariffs isfixedaccordingtotheyear itgoes installation amount paidtoaparticular betweenfor aterm 15 dependingontechnology. and30years, Whilethe guaranteed isbuilt,withrates depends ontheyear inwhichtheinstallation towards investing technology.indifferent inany Theamountpaid particular 10 associationof eurocents forecasts perkWh. Medium-term by thecountry’s ofelectricity,provided equivalent TWh 44 toanaverage ofnearly rate were aboutEUR4.4billionin2005 and Payments underthefeed-intariff 9.) information, seeChapter wind integration.designed toproperly (Forfurther handlesignificant iscurrently withtheNetherlands,not asthetransmissionsystem particularly 6.5% occurred withinGermany andatitsborder, transmissioneffects detrimental operation was not endangered atany time. However, insomecases areas, butsecure grid resulted inperiodsof highcongestionincertain totheGermanelectricitygrid capacityofwindconnected has The significant 20years are obligedtopurchase theelectricityproducedoperators from thesesources. prioritygridguaranteed access,transmissionanddistribution, andgrid Under oftheEEG,renewable theterms are also energy installations 40.60-56.80 submission. Source: Country in2008. *** starting in2010.** starting fortheremainder (20-x);xdependsonthequality ofthesite. (the basictariff) Yearly given thenthesecondrate forxyears, given rate (theinitialtariff) receive thefirst * installations Photovoltaics Guaranteed Tariff forinstallations Technology edi aif yTcnlg,2006 Feed-in Tariffsby Technology, ercnskh amnsrate payments (eurocents/kWh) Table ul n20 emo degression term of built in2006 9 69

© OECD/IEA, 2007 10 20 30 40 50 60 0 eeainPayment Generation to provide about650TWh. andisestimated andprivatecustomers, energy sources, tobepaidby industry from dependingonthepriceofelectricitygenerated conventional tariff, EUR 30to36billionabove thecostsofprocuring electricitywithoutafeed-in billion.Thisincludesadditionalcostsof 68 2012 amount to someEUR forrenewable energy production between 2000and under thefeed-intariff renewable electricity, fees.Total willtake upnearly20%ofthetotal payments payments (46%).Incontrast,solar, whichwillprovide 4.5%oftotal renewable electricity(over 58%),willalsotake upthelargest share ofthe According toVDN, wind,whichisforecast toprovide thelion’s share of kWh. 8.1 billion,equivalent tojustunder10 eurocents per and payments ofEUR ofelectricity Figure 8).TheBMUexpectssomewhat lower 82TWh figures: EUR 9.4billion,equivalent toanaverage of10.5 rate eurocents perkWh(see ofelectricitywithcustomerpayments amountingtoabout provide 89.4TWh thatin2012,network (VDN/VDEW)estimate operators will thefeed-intariff v.fekh(uo)831. . 607210.9 0.3% 7.2 2.7% 0.3% 46.0 19.9% 3.9% 7.3 4.0% 4.5% 27.1% 10.4 5.8% Source: VDN, 46.0% gas,* includeslandfill sewage sludgegas, biogas andcoal-bedmethane. 8.3 27.3% Avg. (Euro¢) fee/kWh 58.2% offees Share ofgeneration Share 70 52 idBoasHdoSlrGs Geo Gas* Solar Hydro Biomass Wind 4.3 Forecast QuantitiesandFees ofFeed-in Tariffs in2012 EEG-Mittelfristprognose Entwicklungen 2000-2012 24 2.5 5 0.4 Total payment=EUR9.4billion Total generation=89.4TWh Figure 4 1.9 8 3 0.3 , 29 September 2006. , 29September 0 thermal 0.0 5.0 0.0 0.8 2.5 3.3 1.7 4.1 (billion EUR) Payment (TWh) Generation

© OECD/IEA, 2007 TRANSPORTATION HEAT total value ofEUR741total millionwere granted. and smallhydropower plants.Between 2000and2005,2567 loanswitha larger plants forburningsolidbiomass,plantsusingdeepgeothermal heat loansanddebtrelief forbiogas low-interest systems, reconstruction, offers To Germany’s promote bankfor theKfW-Förderbank, larger systems, have beeninstalled. millionsquare metres, andover 60000small-scalebiomassboilers of 3.6 was provided formore than421 covering 500solarcollectorsystems anarea Since theprogramme was launchedin1999 untiltheendof2005,funding weretechnologies atthehighestlevels seensincetheprogramme started. decreased, were investment significantly and biomassheaters levels forthese heating decreased forsolarcollectors slightly. rates In2006,thoughsupport usedexclusively forsolarcollectors rates forwater increased, andassistance forcombinedwater-heating andspace-heating support solar collectors progressive environmental requirements. for rates InJuly2005,assistance programme openedittoalarger circleofeligibleapplicants,andlaiddown guidelinesforthe 2004 New 200millionin2004. January 2003, andEUR 190 millioninboth 2002and available undertheprogramme were EUR Thefunds geothermal energy assistance. inheatgenerationthrough financial Programme between biofuelsandfossil fuels. subject toadjustmentifitis foundtoovercompensate forthecostdifferential eurocents treatment ismonitored perlitre). and Thetax (currently 47.04 eurocents perlitre by 2012, fordiesel fuel rate almostmatching thefulltax 45 involve charged, reaching aphasedincrease inthe amountoftax Forunmixed fuelslike tax. oil,thiswill biodieseland vegetable proportionate for biofuelswas withdrawn on1August2006andreplaced by a riseinthepriceofpetroleumIn lightofthesteep exemption products, thetax the share ofbiofuelsinoverall fuelsupplyreached 3.8%. biodiesel withregular diesel,5% by volume, themaximumallowed. In2005, oilcompanies after, beganfuels. Immediately quantities mixingsignificant of quality bioethanol-based gasoline component thatcanbemixed withfossil (ETBE),ahigh- biofuels, includingbioethanol andethyl-tertiary-butyl-ether exemptionpetroleum tax forbiodieselwas tocover extended allkinds of To promote themarket adoptionofrenewable theexisting fuels,in2004 some German Promotion ofrenewables intheheatsupplysectorhasalongtradition (MAP) istopromote theuseofbiomass,solarenergy and Länder . TheprimeaimofGermany’s Market Incentives 71

© OECD/IEA, 2007 CRITIQUE Biodiesel (share ofdiesel n rbt fte obndupto8% 0.25% in2015 peryear, Additional 5.75% 6.75% 6.0% target 4.40% 3.60% N/A N/A combined submission. Source: Country Note: TheEUbiofuelsdirective doesnot biodieselorbioethanol settargets. specific 4.40% 3.60% above targets No one orboth ofthe 4.4% 3.0% requirescontent); exceeding and gasoline by energy 4.4% 1.2% Biofuels (share ofalldiesel gasoline by energy content) Bioethanol (share of by energy content) enacted policiesandtheEU’senacted biofuelsdirective targets. current obligations through 2015, alongwithGermany’s proposed and biofuels directive of5.75%forthesameyear. target Table 10 sets out the the two. The6.75%obligation for2010 aheadoftheEU’s puts itfurther individual bioethanol orbiodieselobligations, aswell by acombinationof 2015. Theoverall biofuelsobligation canbemet by eitherexceeding the the legislation,butraisedoverall obligation to6.75%in2010 and 8%in 6% by energyby content 2010. InDecember2006theparliamentenacted fuelsto originally proposed toincreaseshare thetotal ofbiofuelsintransport share ofbioethanol ingasoline risesto3.6%in2010. Thegovernment aminimumof1.2%contain ofbioethanol by energyTherequired content. minimum of4.4%biodieselby energyandgasoline content mustonaverage 2007, on1January and diesel.Starting dieselmustonaveragea contain obligation tomixbiofuelsintoregularpromoted gasoline viaamandatory treatment biofuelsareAs thepreferential hasbeeneliminated, now tax being meeting itselectricitygoal that,by 2010, atleast12.5% ofgenerationcomes minimum share isalsowellon itsway ofrenewables to inTPES.Thecountry increased by 70%andGermany hasalready reached its2010 goalfora4.2% renewablesstriking results total years –injustthelastfive supplyhas to increase therole ofrenewablesGermany’s initsenergy mixhave efforts had 72 ifesMxn biain,2007to2015 Biofuels MixingObligations, 0720 0021 002010-2015 2010 2010 2010 2007-2009 Table odplc)(e oiy (EUtarget) (newpolicy) (old policy) 10

© OECD/IEA, 2007 and 2012, willleadtopayments of forgrid operators thefeed-intariff byEstimates theassociationofnetworkshow thatbetween operators 2000 renewables online quickly, itdoessoby paying toproducers. highrates issuccessfulatbringinglarge amountsof system While thefeed-intariff subsidies. could begiven supplemental need additionalR&Dsupport market now that developing technologies inGermany andEurope. Particular and allow themarket forrenewables tointegratewiththewiderelectricity more onmarket forcesandincentives thatputdownward pressure onprices and subsidiesforsuppliers policies thatrely long-term lessonguaranteed share ofthemarket,up asignificant thegovernment mightconsiderfuture asrenewablesdownward costs.Henceforward, now make pressure onindustry levels and setting higher degressionreviewing thatputgreater rates tariff lessrigidbyThe government regularly isworking tomake thefeed-intariff ofandsubsidiesforconventionalexternalities energy sourcesare excluded). are stillhigherthanthosefor conventional power production (when costs. However, costsformostr entered themarket, andpushingdown helpingdrive learningcurve asteeper footing inthemarket. afirm technologies many have new Furthermore, actors successful, resulting inrapiddeployment ofrenewables, helpinggive the haveaccess totheelectricitynetwork.madefeed-intariff Thesefactors provide highinvestor security. Inaddition,renewables are priority guaranteed rates guaranteed for renewables intheelectricitysector. Thefeed-intariff’s meansofpromotingGermany’s renewables primary isthrough itsfeed-intariff along withitsoverall policyobjectives. measures are inplacesoGermany canachieve itsenergytargets andclimate policiesand ensure thatthey are realistic. Itshouldalsoensure thatsufficient government shouldcontinuetoevaluateallrenewables projections and variable sources ofenergy, suchaswind,intotheelectricitygrid, the integrating large amountsof electricity plantsandthepotential difficulties role.more However, significant andgas-fired inlightoftheplannedcoal-fired carbon emissions.Inparticular, renewables are forecast totake onamuch that nuclearpower canbefullyreplaced inaway thatavoids anincrease in Germany iscurrently phasingoutnuclearpower, withsomeforecasts showing andsecurity.supply diversity the impact ofenergy consumption ontheenvironment, butitalsoenhances source of energy.making renewables animportant Not onlydoesthisreduce for2006.TheIEAcommends Germanysuccessin target onitssignificant policy, wasprevious oneofonlytwo tax thatmet theEU’s biofuels thecountry toreplacebiofuels salestarget treatment. thepreferential Under tax its renewable energy R&D.Recently, thegovernment haspassedamandatory through the butalso promote feed-intariff, renewables, adifferentiated mostnotably from renewables. Thegovernment has donethisthrough strong policiesto Market Incentives Programme enewable energy sourcesforpower generation , the tax reduction forbiofuelsand , thetax 73

© OECD/IEA, 2007 0 Ifrenewables were generation,thecostwould todisplacecoal-fired beEUR350-400pertonneof 10. have energy thescopetodeliver savings, significant andtherefore major CO EUR 20to30pertonneCO retrofit projects havethe more expensive costsonlyupto buildingefficiency measures haveexample, negative whilemany building efficiency costs,even U 000pertonneofCO 1 EUR future receive years progressively lower inordertoaccountfor rates suchthatrenewablesto mosttechnologies, goingonlinein installations –annualdegression between rates 1%and6.5%arehenceforward applied to lower thecostsofprogramme undertaken We commendthe efforts inGermany, forsolarPV.industry asisthegoalofcurrent feed-intariff development, aworld-class energy lower efficiency theircostsand install policiesandmeasures couldhelp drive technology forefficiency support in additiontobeingmuchcheaperthanrenewables policiesnow, enhanced noting thatrenewables policyisnot onlytoreduce intended CO valuable tocompare thecoststoother policies toreduce CO forsolarphotovoltaics, itis Considering thehighcostsoffeed-intariff billionperyear. to3 2.5 EUR about billionintotal, 30to36 electricity inGermany willbeEUR a result, between 2000and2012, theexcess costofpromoting renewable eurocents perkWh.As fuels suchasnuclear, coalandgas costsabout4to5 electricityfrom conventionalGermany’s power plantsrunningon feed-intariff, 5% oftheelectricity. Incomparison tothepayments forrenewables under butprovide lessthan expenditureeat up20%ofthetotal feed-intariff eurocents perkWhin2012, solarwill just deployment. With payments of46 development, isusedtofundtechnology not becausethefeed-intariff in part Solar isthemostexpensive andwilldeliver arelatively smallamountofpower, kWh isforecast topeakin2009,andwillbehigher2012 thanin2005. billion 9.4 in 2012, billionin2005toEUR anaverage annualgrowth of10.5%. rate Theaverage payment per 4.4 Annual payments willgrow from EUR these payments duetoexcess costsaboveelectricityprovision standard costs. ofelectricity–anaverage TWh eurocents and53%of perkWh–withbetween 44% payment ofabout10 billionandprovide about650 68 EUR the very negativethe very rangetoupwards ofEUR100 pertonneofCO emissions reductions. costsofthesepoliciesrangefrom Thecarbonabatement gas-fired generation). expensive than the feed-in tariff for solar PV in terms of abated CO ofabated forsolarPVinterms expensive thanthefeed-intariff terms ofavoidedterms CO per kWhabove theaverage costofelectricity. ofthispolicyin Thebenefit subsidisessolarphotovoltaics atabout40eurocents Germany’s feed-intariff 74 a fulllife-cycle basis. lowwould levels bemuchhigherasnuclearproduces ofemissions,even onlyvery whenviewed on CO 2 abated. Ifrenewablesabated. were todisplacenucleargeneration,thecostpertonneofCO 2 10 emissions corresponds costof toacarbonabatement In comparison, many efficiency improvementIn comparison, many policies efficiency 2 2 abated (assumingsolarphotovoltaicsabated replace , makingthesepolicies30to50timesless 2 2 emissions, emissions. 2 . Overall, 2 2 abated . For 2

© OECD/IEA, 2007 electricity market, particularly one that is beginning to reflect the cost of electricity market, onethat is beginningtoreflect particularly forrenewables promotion.support Itisalso more compatible withaliberalised working toapproximate market outcomes,helpingensure public long-term prices through reliance onmarket forcesratherthangovernment actors promising results. Thismodelprovides downward sustainable pressure on and theUnited (includinginTexas States andCalifornia)have produced Market-basedcustomers. renewables promotion schemes inSweden,Australia fixed andoperatingcosts–passingthosesavings ontoGerman renewables tocompete producers against eachother onpriceby lowering electricity from renewable forcesprivate sourcesbepurchased.Thissystem move towards suchapolicy, whichrequires thatapredetermined share of thegovernment could promotion. Building onthesuccessoffeed-intariff, such asarenewables obligation scheme,inthenextphaseofrenewables government toconsidermore market-based renewables promotion policies, As Germany’s renewables weencouragethe supplyisnow wellestablished, intherightlocations. kind offacilities provide renewables withincentives theright tobuildandoperate suppliers market forcesandlessongovernment-provided butitwould guarantees, also European market beeasierifitsrenewables promotion schemerelied more on only would integrating Germany’s electricitymarket withthewiderinternal should beintegratedwiththewidermarket Not ofbeingwalled instead off. this amountisset togrow toatleast20%by 2020–renewables supply inconsequential intheGermanmarket –italready makes upover 10%, and programme managedby thegovernment. Asrenewable electricityisnolonger market governed isanadministrative by competitive forces,thefeed-intariff remove. ismoving Whereas towards Germany’s aliberalised electricityindustry to sector, difficult suchsubsidiescaneasilybecomeentrenched andvery class ofenergy thatrequires asseeninthecoal fixedsubsidiestosurvive; and isasecond-bestproxy foractualmarket itcreates a prices.Furthermore, conditions andavoid oversubsidisation, theprocess relies onbestestimates market reflect thataccurately rates government aimsatsetting feed-intariff rather thanletting market costsdynamically. forcesreflect Thoughthe andrelies onthegovernmentflexibility todetermineelectricitypayment rates, limitsmarket paidforsolarphotovoltaics, highrates thefeed-intariff very the In additiontothehighpricespaidrenewables particularly producers, construction andoperatingcosts. existing andnew renewables projects willdecrease becauseofreductions in few reaching years, itsmaximumin2017. Ontheother hand,thecostsfor willincrease over costsforGermancustomers electricity –thetotal thenext –includingcost-intensiverenewables solar promoted by thefeed-intariff reductions inoperatingcosts.Asaresult, withtheincreasing share of willcontinuetoreceive producers for 20years; any despite thesamerate totheproducer isguaranteed for15tariff with mostguaranteed to30years, andmarkettechnological learning.However, feed-in oncegiven, aparticular 75

© OECD/IEA, 2007 networks within thecountry, aswell with thoseofneighbouringcountries. networks that end,Germany shouldensure comprehensive integration ofits electricity European market istheabilitytoreliably managegreater amountsofwind. To among themanyfor securityofsupplyalarger, benefits more integrated the GermanEnergy Agency, work inthisarea. Inaddition, hasundertaken of balancingcostscouldberevised. Thusweare pleasedtoseethatDENA, example, rulesontheprediction of wind,timingofgate closures andcharging For it–shouldbe undertaken. –ratherthanjustaccommodate system tobetterintegratewindonthetransmission 9,efforts discussed inChapter as Germany’s Furthermore, neighbours. reliability affects andadversely growing share ofrenewables doesnot result indispatchthatthreatens grid allpoliciesandmeasures shouldensure thatthe onthegrid. Inshort, effects tobuildinlocationsthat donot causenegativewind energy installations sothatitprovidesimplement signalsto revisions tothecurrent feed-in tariff withother Europeanat itsborders countries.Thegovernment should transmission effects pricing onitselectricitynetwork, thisleadstodetrimental access, transmissionanddistribution.Combinedwiththelackofcongestion produced from renewables prioritygrid butitalso guarantees installations, scheme placeanobligation topurchase the electricity ongrid operators increasing amountsofwindenergy onthegrid. Not onlydoesthefeed-in ofthe ofrenewables area ofconcerninthe field istheeffect One particular subsidies. targeted that are not yet competitive withother renewables couldbegiven additional technologies forparticular inthisdirection.taken policysteps R&Dsupport credit forwind;DenmarkandSpainhavein theUnited viaatax States also tothemarketstill exposesoperators priceforelectricity. Thismodelisinplace renewables andprovides more investor securitythananobligation but system, moving towards whichgives add-onfor apremium aguaranteed system, entrenched subsidisation.Thegovernment long-term mightalsoconsider mightalsobeconsidered enddate to avoidas possible.Afirm theriskof continue toimprove asmany itsothatincorporates market-based elements shouldbemadeto continue,efforts measures. Shouldthefeed-intariff asacriticalcomponent whendecidingbetween policiesand cost-effectiveness Regardless ofwhatschemeischosen,thegovernment shouldalways keep renewables promotion schemecan. is not dynamicchangesinmarket abletoincorporate conditions,buta forgains feed-intariff European from trade.Astatic continental opportunities could beeasilylinked withthoseinneighbouringcountries,creating renewables willbecomecomparatively cheaper. aquota system Furthermore, fossil sourcesbegintotake intoaccountcostsforcarbonemissions, carbon emissionsthrough theEUEmissionsTrading Scheme.Aspricesfor 76

© OECD/IEA, 2007 RECOMMENDATIONS ◗ ◗ ◗ The government ofGermany should: photovoltaics. ofaliberalisedfuture, electricitymarket. inthecontext particularly moving towards amore market-based meansofpromoting renewables inthe and cost-effective policiesandmeasuresand cost-effective are inplaceto meetthem. Consider policies other than very high feed-in tariffs to promote solar highfeed-in tariffs Consider policiesother thanvery ofpoliciestoEvaluate thecost-effectiveness promote renewables; consider Ensure thatlong-termtargets forrene wables are realistic, andthatsufficient 77

© OECD/IEA, 2007 © OECD/IEA, 2007 PRODUCTION SUPPLY AND DEMAND 12. XXXIV–Bundesrepublik Deutschland– Heft Länderstudien, Rohstoffwirtschaftliche 11. betweenproduction hardcoalandlignite thehighenergy reflects content The large massdifferential of hardcoalandlow oflignite. energyandhighwater content content osofiuto 2005 Rohstoffsituation that German hard coal reserves totalled 152 totalled that Germanhardcoalreserves Mtattheendof2005, forGeosciencesandNaturalThe FederalInstitute Resources(BGR)reports Reserves tonnes (Mt)ofhardcoaland177.9 Mtoflignite. On atonnagebasis,2005coalproduction inGermany 28.0million totalled energy source inGermany. whichhasrisenbylignite, over domestic 6%since2000,andisasignificant by arevival in theproductionThis declineinproduction of hasbeen offset bituminous coal).Since2000,production ofhardcoalhasdeclinedby 25%. coal, withtheremainder and beinghardcoal(includinganthracite basis,moreenergy-equivalent thantwo-thirds orbrown ofwhichislignite, As shown inTable 11, Germany produces about70%ofitscoal supplyonan phase outcoalsubsidiesby 2018. 2007,production. InFebruary thegovernment reached anagreement to hardcoal economically viableandunsubsidised,heavy subsidiessupport of thissupplyisproduced domestically. Whileproduction is oflignite supplyandfuellinghalfofitselectricitygeneration.Over two-thirds of primary Coal provides alarge share ofGermany’s energy supply, comprising aquarter 76 billiontonnes. provisions. resources Germany’s nationallignite are around substantial withplanning operationalsites inpermitted, ofopencastlignite reserves 41.2 globally. billiontonnes,rankingGermany first 6556Mtare Ofthetotal, are reserves thatGermanlignite indicates is uneconomic.Thesamereport that shouldbetreated withsomecautiongiven thatcurrent production , Bundesanstalt für Geowissenschaften und Rohstoffe, Hannover, undRohstoffe, 2006. fürGeowissenschaften , Bundesanstalt 11 COAL 12 a figure 79 6 © OECD/IEA, 2007 IMPORTS ANDEXPORTS IMPORTS rdcin1151311186. 825. 775. 655. 5241.8 45.2 51.5 56.5 58.3 57.7 58.4 58.2 60.6 121.8 143.1 151.5 2030 2020 2010 2005 2004 2003 production 2002 2001 2000 Indigenous 1990 1980 1970 Supply Mtoe Unit: upgrading products were solddomesticallyin 2005 and15% exported. andupgrading nearmines.Some85%oflignite in power facilities stations over uneconomical.Accordingly, longdistances isused transportation lignite (approximately incrudelignite content 50%)andlow energy density makes trade,asthehighwater and export import isnotLignite subjecttosignificant unsubsidised coalfortheheatingmarket. 85% compared withthe1.85 in1995. Mtexported comprise Allexports were 255000tonnesin2005,areduction ofoverGerman hardcoalexports provided over 75%ofimports quotas. In2005,Poland, SouthAfrica,Russia andAustraliacombined have more thandoubledfrom 1995, thelastyear inwhichthere were import 0.1 3% from theprevious year, butanincrease ofover 36%from 2000.Imports 0.2 over ofhardcoaltotalled 38 Mt in2005,adecreaseGerman imports ofover 0.4 0.2 0.2 5.9 0.4 5.1 55.5 69.9 0.9 6.3 9.8 75.4 1.3 81.7 5.5 10.5 85.8 11.9 1.1 85.0 7.6 7.3 0.0 Development ofEnergy Markets upto 2030 84.1 45.4 1.1 7.1 0.0 59.0 Sources: 7.0 86.5 62.6 1.3 0.0 7.3 84.8 6.6 67.6 128.5 141.0 72.3 147.8 13.1 1.3 Total consumption –0.5 6.9 71.1 14.8 –0.2 16.6 70.7 7.3 20.8 2.2 (including losses) 70.3 0.0 34.0 7.7 1.3 68.9 Other 0.0 84.0 20.7 81.0 2.5 0.0 26.1 66.1 Other sectors 32.9 2.5 –0.6 13.8 24.8 –0.6 3.4 Industrial sector 23.9 –0.6 –0.8 26.4 –0.7 28.3 0.2 Electricity 25.7 –0.5 25.1 –0.6 Demand –8.2 26.3 1 –15.8 141.0 22.2 –20.4 11.5 147.8 Total supply(TPES) 14.4 16.6 Other Exports Imports 80 Energy Balancesof OECDCountries olSpl-eadBlne 1970to2030 Coal Supply-DemandBalance, 858. 658. 508. 177. 9955.5 69.9 75.4 81.7 85.8 85.0 84.1 86.5 84.8 28.5 Table , EWI/Prognos, 2005. , IEA/OECDParis,2007;submissionand country 11

© OECD/IEA, 2007 RAG STRUCTURE INDUSTRY CONSUMPTION nitrous oxides (NO Verwaltungsgesellschaft RAG-Beteiligung mbH –65%ofwhichisownedVerwaltungsgesellschaft by ofRWE AG, ownssubsidiary 8.3%;ThyssenKrupp AG owns 20.6%;and 39.2%; RWE AG owns 21.9%; Nouvelle Société Sidéchar, awhollyowned ofE.ONAG, owns mbH,awhollyowned subsidiary Beteiligungsgesellschaft the large incumbentelectricityandgas companies inGermany. E.ONRAG- ofRAG, ofwhichthemajority arewhich ispart shareholders E.ONandRWE, Nearly allproduction ofhardcoaliscarriedoutby DeutscheSteinkohle (DSK) and development 11.) informationseeChapter inthissector. (Forfurther capture andstorage.TheGerman government provides fundingforresearch gains have reducedneeds, theefficiency emissionsofsulphurdioxide (SO in Germany from withcommissioningdates 2010. Inaddition tolower coal of46-48%andthere rates are anumberofnew project proposals efficiency achieve power stillinoperation).Modern,hardcoal-fired stations stations (compared rates with30% inthefew 50-year-old power43-45% efficiency improved currently inGermany. powerachieve lignite stations State-of-the-art hascontinuously power andcoal-fired oflignite stations The efficiency Power plantefficiency has increased by nearly6%inrecent between years, 2000and2005. consumption decreased by nearly50%between 1990 and2005,thoughit nearly 6%between 2000and2005by nearly20%since1990. Lignite Total hardcoalconsumption, by includingforelectricitygeneration,hasfallen industrial sector. for83%ofconsumption,electricity sectoraccounted with11% usedinthe In2005,the Nearly allcoalisusedintheelectricityandindustrialsectors. gasification by combined-cycle 2014, (IGCC)power station complete withCO tobuilda450-MW(360-MWnet)announced in2006itsintention integrated combustion.RWEwith development ofnew forlow-carbon technologies along power stations, push development forhigh-efficiency oftechnologies andlower emissions,thegovernment’s aims to cleancoalstrategy efficiency lower carbondioxide (CO limits as regards efficiency andCO limits asregards efficiency have powerCoal- andlignite-fired stations not yet reached theirtheoretical x ) and particulates, improving regional) andparticulates, airquality, aswell 2 ) emissions. 2 emissions. To improve further power plant 81 2 ), 2

© OECD/IEA, 2007 SUBSIDIES LIGNITE PRODUCERS subsidies by 2018 towards step realising theseplans. isanimportant coal activitiesare stillsubjecttonegotiation. Thedecisiononphasingoutcoal from energy and2%fromquarter property.itsnon- RAG plansforspinningoff sales revenue; over halfofsalesrevenue camefrom chemicals,more thana Immobilien). In2005,miningmadeup20.5%oftheGroup’s EUR21.9 billion (RAGdivisions forenergy (STEAG), chemicals(Degussa)andproperty governmentsubstantial subsidies.InadditiontoDSK,theRAG Group has withproduction costsrisingabove revenues, difficulties requiringfinancial Rhine-Westphalia. Thecompanyand inIbbenbüren continuing inNorth faces intheRuhrIt now eightdeep coalminesatsites andSaarregions operates In 2005,DSKhadannualsalesofEUR4.5billionandaworkforce of37 890. –owns 10%. subsidiaries and35%ofwhichisowned indirectly by RAGARBED S.A. AG through conditions, costs ofextractinghardcoalin Germanyexceed the significantly productionLignite isunsubsidised.However, geological becauseofitsadverse bywhich isoperated Romonta. companies, NRG Energy andWashington Group andoneof International, (MIBRAG),Braunkohlengesellschaft acompany owned by two American two of whichare byGerman coalfield, operated Mitteldeutsche new There powerare three station. opencastminesin theCentral one thatwas mothballed in1999, butwillreopen in2010 tosupplya Vattenfall fouropencastminesandownsLusatian coalfield, operates another opencastmineareHelmstedt small,producing 2.1 Mtin2005.At the Bergwerke, ofE.ON. Miningoperationsatthe awhollyowned subsidiary reduced toasingle opencastminebelongingtoBraunschweigische Kohlen- extractionhasbeen lignite coalfield, IntheHelmstedt Rhineland coalfield. company RWE miningthe lignite. three operates opencastminesinthe processed products. Inmostcasesthesepower plantsare owned by the with theoutputmainlyusedforpower generationatnearby plantsand Five companies opencastminesinthefourprincipalminingareas, operate (32 000tonnesin2005),exclusively fortheneedsoftwo clay works. 30 November isminedonasmallscaleinBavaria 2003.In addition,lignite Brandenburg andSaxony. ceasedon miningintheHessecoalfield Lignite andSaxony,mining area inSaxony-Anhalt andtheLusatianminingarea in Westphalia, miningarea theHelmstedt inLower Saxony, theCentralGerman isprimarilyproduced Rhine- Lignite from fourregions: theRhinelandinNorth 82

© OECD/IEA, 2007 CRITIQUE Westphalia andSaarland(thetwo German In 1997, Rhine- governments theGermangovernment, ofNorth thestate covered by government aiduptoanapproved ceiling. the basisofaverage world market priceandthecostofproduction is world market between thesalesrevenue on price.Thedifference generated than planned. in mineclosures andreducedcoalmines are output. Infact, closingfaster government continuestoreduce theamountofsubsidiesprovided, resulting purchasing thesameamount ofcoalontheworld market. However, the provided forhardcoal production are nearlydoubletheactualcostof Subsidies currently –annualsubsidies drive Germany’s hardcoalindustry region andlower emissionsofcarbondioxide. produce moreinthe electricitywithlesscoal,lower emissionsofairpollutants power ofcoal-fired toimprove plantswillhelpGermany theefficiency efforts energy prominentcontinue tohave mix.Current role inthecountry’s avery Germany isforecast todeclinesomewhat inthecomingdecades,itwill energy supplyandfuelshalfofelectricitygeneration.Whilecoal’stotal role in Germany’s energy sectorrelies heavily of oncoal.Itprovides nearlyaquarter long-term restructuringlong-term planforGermancoalminingupto2010. have beenapprovedthe coalindustry by theEuropean Commission,ashasa domesticindustries,subsidiesto aidtoparticular Under ruleslimitingstate ofmineworkers. decided, butthere willbenolay-offs Exactsubsidiesasfrom 2009have muststill be finalised. not been industry Rhine-Westphalia andSaarlandby 2018. oftheagreement Somedetails with subsidies, resulting intheshut-down oftheremaining eightplantsinNorth 2007, thegovernment reached an agreement tophaseoutall In February 516 millionin2008. 540 millionin2007 andEUR will grant EUR 564millionin2006,and Rhine-Westphalia granted EUR ofNorth The state 150 millionperyear. aid from 2006to2008.RAG AG iscontributingEUR TheGermangovernmentin 2004. is granting in uptoEUR 5.699billiontotal approved aidfor2006to2008was State officially achieved withoutlay-offs. until 2012. Hard coalextractionistobescaledback16 Mtin2012, tobe coalmining The Germangovernment decidedin2003tocontinuesupporting 102 coalmining. millionayear tosupport of 43%.From 2001 to2005,theRAG Group EUR 2.7billionin2005–adecrease additionallycontributed 4.7billionin1998 toEUR from EUR subsidies upto2005.Under thecompromise, annualsubsidieshave beencut unionreached andtheGermanminers’ acompromise oncoal mining industry Länder with major the coalfields), 83

© OECD/IEA, 2007 RECOMMENDATION off, itcouldaddtocompetition intheGermanelectricitymarket.off, The company currently sellsitsgenerationtoE.ONandRWE, butifitwere sold electricitycompany inGermany.subsidiary, STEAG, would bethefifth-largest Germany’s electricitymarket. company, Asastand-alone RAG’s generation implications for couldhave oftheRAG important The details sell-off energy market. tominingareas doesnot havesupport onthe thesamenegative effects coal subsidiescanbereplaced withdirect socialsubsidies,asproviding social thisdecision.To tofinalise steps complete necessary, thenecessary theextent subsidies by 2018 iswelcomenews. We encouragethegovernment to economy. Inthislight,therecent government decisiontocompletely eliminate economicresources betterusedelsewhere oftheGerman diverts tothebenefit thecoalmarkethard coalproduction distorts butitalso,more importantly, themarketcan manipulate inanyway. significant uneconomic Sustaining world coalmarket andcompetitive. isdiversified No single supplierorcountry securityofsupplyasthe for domesticsupplywillnot diminishthecountry’s hard coalisadomesticresource forthecountry, substitutinghardcoalimports Though this–butitisnecessary. experience ofother IEAcountriesconfirms feattoaccomplish –the The phase-outofcoalsubsidiesisapoliticallydifficult ◗ The government ofGermany should: 84 necessary as part ofthestructural change. aspart necessary eliminate hard coalsubsidiesby 2018, where providing social support Complete the necessary steps to theagreement finalise Complete thenecessary to completely

© OECD/IEA, 2007 IMPORTS SUPPLY SUPPLY AND DEMAND 2000 and31% lower thanat thepeakin1986. been decliningsincethemid-1980s. in2005were 17% Imports lower thanin increased in2005over haveimports product by 2.6%,total 2004 imports andtheformerSoviet Unionimports for7%.Thoughproduct accounted came from theNetherlands. Belgiumprovided 11% ofGermany’s product nearly35MtofproductsGermany in2005,nearly60%ofwhich imported 2000 and27.5% since1990. ofcrudehave increasing, imports beensteadily risingbytotal 8.3%since To make upfordecliningdomestic production andlower product imports, covered 14% ofsupply. Supplyfrom 45%ofsupply. OECDcountriestotalled countries intheOrganization Countries (OPEC) ofthePetroleum Exporting (12%),Norway theUnited Kingdom(11%) andLibya (9%).Supplyfrom Soviet Union (33%),followed by theNetherlands (14%, mostlyproducts), including crudeandpetroleum products. Thelargest sourcewas theformer 151 imported needs domesticallyin2005.In2005,thecountry Mtoeofoil, allitsoilsupply, virtually Germany producing imports just3.7%ofitsoil at anaverage of0.7%,or13.9% annualrate intotal. 2010Government forecasts thatoilsupplywilldeclineafter estimate to2030, 1.4% from theprevious year, 6.3%from 2000and2.4%since1990. making up36%ofTPESallfuels.Supplyin2005represented adeclineof peaking inthe1970s (see Table 12). supplywas In2005,total 123 Mtoe, Total energy supply(TPES)ofoilhasbeengenerallydecliningafter primary of 90days ofnet imports. level are above consistently emergency theIEA-mandated oilstocks country’s ofallpassengervehicles. The than halfofallnew andnearlyaquarter Europe. diesel-fuelledvehicles; Germanpolicyfavours dieselnow fuelsmore alarge product amountofrefined to to meet itsoildemand,butexports relies almostentirely onimports number ofmarketThecountry participants. Germany’s oilmarket by isfullyliberalised,andcharacterised arelatively large OIL 85 7 © OECD/IEA, 2007 CONSUMPTION OUTPUTANDPRODUCTEXPORTS REFINERY over consumption halfoftotal in2005,followed by theindustrialsector largest share sector, of consumption was for inthetransport whichaccounted demand inTable 12 includeselectricityand other transformations).The Total consumption final (TFC)ofoil was 112 Mtoe in2005(seeFigure 9;total in 1990. output,compared to10% refinery oftotal now represent overexports afifth ofproducts haveExports more than doubledsince1990. At more than26Mt, representing a7%increase from 2000anda17% increase from 1990. outputinGermany was 124 refinery In 2005,total Mt(seeTable 13), icuiglse)2. 968890998797961. 01918.3 9.1 6.1 10.1 7.5 11.6 9.6 9.3 9.7 8.1 8.7 8.5 110.1 118.5 127.9 123.4 125.2 9.2 9.9 126.5 128.8 134.5 131.7 126.5 9.4 147.1 9.0 15.3 137.9 17.2 8.8 10.4 19.9 19.6 27.0 9.1 16.9 Total demand 28.0 17.7 21.9 13.2 27.5 –4.4 53.5 19.6 18.5 –3.6 (including losses) 26.9 56.7 20.0 16.8 27.4 61.1 –3.0 Other 22.6 27.1 60.0 –4.6 62.1 19.8 27.6 –1.6 18.4 60.9 0.6 27.6 Other sectors –4.2 25.5 63.1 28.2 27.1 0.1 1.8 27.3 63.9 37.0 Residential sector 3.0 65.6 –2.4 58.8 40.6 0.4 4.6 46.5 Industrial sector* 31.4 –0.9 4.4 –7.9 Transport 4.4 sector –5.3 4.2 Demand –2.8 4.0 1 116.8 124.2 147.1 131.6 –3.9 137.9 150.9 147.8 –3.7 Total 146.1 supply(TPES) 3.9 144.7 152.8 –27.5 149.6 132.9 –25.3 160.6 4.7 –19.8 145.0 –20.2 Other 5.7 –19.8 –22.2 –10.2 –11.2 7.9 –9.8 Exports Imports 2030 2020 2010 2005 2004 2003 production 2002 2001 2000 Indigenous 1990 1980 1970 Supply Mtoe Unit: Sources: * includesnon-energy use. 86 Energy Balancesof OECD Countries i upyDmn aac,1970to2030 Oil Supply-DemandBalance, 65117145188165152134179185110.1 118.5 127.9 123.4 125.2 126.5 128.8 134.5 131.7 26.5 Table , IEA/OECDParis,2007submission. andcountry 12

© OECD/IEA, 2007 Table 13 Refinery Output and Product Exports, 1970 to 2005

Unit: kt 1970 1980 1990 2000 2001 2002 2003 2004 2005

Gas and diesel oil 42 049 48 128 40 668 46 445 46 943 47 455 48 638 49 836 52 839

Exports 1 792 2 123 3 518 5 448 5 576 6 242 6 328 8 150 10 003

Motor gasoline 16 088 25 051 24 317 26 972 26 021 25 970 26 449 26 511 27 500

Exports 1 097 1 451 1 841 4 609 4 659 4 397 4 153 5 263 5 706

Residual fuel oil 39 855 34 607 13 075 13 068 13 192 12 183 12 232 14 013 13 340

Exports 3 131 4 801 2 318 4 397 4 066 3 611 4 004 5 377 5 668

Naphtha 4 918 9 371 8 554 9 024 8 495 8 663 8 693 9 389 9 063

Exports 1 517 575 290 1 047 919 954 962 1 285 1 215

Refinery gas 4 211 4 793 3 480 4 106 3 888 4 196 4 452 4 425 4 365

Exports 0 0 0 0 0 0 0 0 0

Jet fuel 1 781 1 451 2 610 4 311 4 195 4 157 4 194 4 424 4 252

Exports 110 61 83 289 513 384 289 534 455

Other products 12 234 13 111 13 253 12 047 11 558 11 459 11 507 11 685 12 278

Exports 1 887 2 170 2 103 2 811 2 762 2 996 3 110 3 210 3 254

Total 121 136 136 512 105 957 115 973 114 292 114 083 116 165 120 283 123 637

87 Exports 9 534 11 181 10 153 18 601 18 495 18 584 18 846 23 819 26 301

Source: Oil Information, IEA/OECD Paris, 2007.

© OECD/IEA, 2007 UPSTREAM STRUCTURE INDUSTRY 100 150 50 0 rdcinws36Mtin2005,withmost production inthe concentrated production was 3.6 Germany upstream haslimited explorationandproduction activities.Total arelativelyretains large numberofplayers. major in2002,Germany’sDespite mergers corporate downstream oilmarket The Germanoilmarket isfullyliberalised,withnogovernment ownership. level intheIEA. fourth-highest residential2004, oilconsumption madeup15% oilconsumption, of total the residential energy demand,45%,ranking itseventh amongIEAcountries.)In highest oftheIEA’s 26countries.(Natural gas makes upthelargest share of share ofresidential energy demandfrom oilwas rankingninth- 28%in2004, Consumption inGermany’s residential sectorwas 17.7 The Mtoein2004. has declined. sectorhasbeenincreasing, it whileinother sectors oil usedinthetransport (24%) andtheresidential sector(15%). theshare of Asistrueacross theIEA, Sources: sectors. agricultural,andother non-specified fishing * includescommercial,publicservice, 9518 9519 9520 0521 0522 052030 2025 2020 2015 2010 2005 2000 1995 1990 1985 1980 1975 Mtoe 88 Energy Balancesof OECD Countries ia osmto fOlb etr 1973to2030 Final ConsumptionofOilby Sector, Figure , IEA/OECDParis,2007submission. andcountry 9 Transport Other* Industry Residential

© OECD/IEA, 2007 REFINING ANDRETAIL Source: Country submission. Source: Country France had13.3% ofoutputandBEBErdgas undErdölGmbHhad11.5%. activity, with39.2%and32.0%ofoiloutput,respectively, in2005.Gazde AG 2006.Wintershall andRWE DeaAGas of1January upstream dominate Mtannually. Known 46.4Mt andlikely totalled crudeoilreserves about 1.6 whereproduction outputisplannedtoreach field, centres ontheMittelplate Länder stations anda45%stake intheBayernoilstations ConocoPhillipsacquired refinery. the its positioninGermany andespeciallyinBavaria by acquiring about250filling inMarch2003.Similarly, stations of around 500filling OMVhasstrengthened PKN Orlen,aPolish oilcompany, entered theGermanmarket withapurchase Currently,years. there are companies ninerefining inGermany (seeTable 14). 115 Mtinthelastfew No years. major expansionsare plannedforthenextfew capacityhasincreased slightlyfrom 113plants, refinery Mtin2000toaround andexpansionmeasuresHelped by inexisting theeliminationofbottlenecks along withthesaleof45%BP’s equity stake in theBayernoil refinery. of5.3%and4%,respectively,parties network, station ofShellandBP’s filling approvalauthority’s includedthesaletothird regulatory for the mergers tothecompetitionwith considerablemarket Theconditionsattached influence. Oel AG by GermanBP on1October2002,creating two strong oilcompanies takeovers ofDEAMineralölAG by ShellinGermany on1July2002andVeba Major changesintheGermanoilmarket structure cameaboutwiththe obr eiey4% 3% 2% 8% 8% 9% 25% 11% 31% ConocoPhillips Germany GmbH Agip DeutschlandGmbH Holborn refinery Esso DeutschlandGmbH OMV DeutschlandGmbH Wilhelmshaven refinery Total Deutschland GmbH Deutsche BPAG Shell DeutschlandOilGmbH eiigCmaisb hr fCpct,Year-endRefining Companiesby Share ofCapacity, 2004 of Schleswig-Holstein andLowerof Schleswig-Holstein Saxony. Germany’s offshore limited Table 14 89

© OECD/IEA, 2007 TRANSPORT FUELS 13. AAA(AssociationAuxiliaire del’Automobile), fuels market. Shell with21%. Medium-sizedbusinessesaccountfor20%ofthetransport fuelsmarketconsumer transport are heldby BP/Aralwithabout22%and followed by Shell/DEAwith2220.Thelargeststations, shares ofthe sectorwas BP/Aral,with2522filling station largest operatorinthefilling from 16 in2000to15 404 187 atthebeginningof2006.In2006, remains onagradual stations downwardThe numberoffilling trend, falling ofthisinvestment oncapacityare noteffects yet quantifiable. distillationplantoverinvestment thoughthe thecomingyears, intherefinery’s 10.3 asof1March2006andplansmajor MtWilhelmshaven refinery fuelled by diesel-fuelled passenger cars andincreasingfuelled by useofalternative fuels. diesel-fuelled passengercars annualmilesdrivenin total perpassengercar, greater substitutionofgasoline- assumeareduction The mostrecent forecasts long-term from theoilindustry behind theUnited Kingdom. rates price ofgasoline and55%ofthepricediesel,second-highesttax forover accounted 62%ofthe of2006,tax the EU. Inthesecondquarter petroleum products.pricesinGermany Pre-tax have beenamongthelowest in The pricesofgasoline anddieselfuelsare largely determinedbyon taxes 5.) informationonbiofuels,seeChapter (For further ondieselconsumption. inthestatistics with dieselandhencecounted as high1.8 Mtin2005.Thisincludes0.7soldamaximum 5% mix Biodiesel now fuel,withconsumption plays anincreasing role asatransport for France). (for example are therates 75%forLuxembourg, 73%forBelgiumand69% thatare ofnew fuelledby cars diesel ofthepercentage countries interms relatively low uptake ofdieselvehicles, rankingeighthoutof17 European 30.3% in2000.Compared toother European countries,Germany hasa ofallnew passengervehicles44.2% upfrom purchasedwere diesel cars, 23% ofallpassengervehicles inGermany are fuelledby diesel.In2006, also beguntoslow theincrease indieselconsumption. Slightlymore than have (except fortheswitch to dieselcars) cheaper fuel.Thesamefactors upon crossing theborderintoneighbouringcountriestofill numbers growing andincreased ofmotorists switchingtodieselcars numbers changes inconsumertravel inresponse patterns torisinggasoline prices, vehicles, tomore efficient consumption hasbeenonthedecline,thanks diesel inpassengervehicles. Asshown inFigure 10, inrecent gasoline years policy,Under along-standing theGermangovernment promotes theuseof 90 13 New Passenger CarRegistrations , 2005.

© OECD/IEA, 2007 EMERGENCY RESPONSEMEASURES 16 20 24 28 32 9019 9219 9419 9619 9819 0020 0220 042005 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995 1994 1993 1992 1991 1990 disruption. ofacollective response actiontoaregional orglobalpart oilsupply available market totheinternational process stocks of makingstrategic as more towards domesticevents. Improvements the were madetofacilitate thatstockrelease oilevents,international arrangementswere finding geared toitsresponse protocol modifications for in2005,GermanyStates undertook intheUnited hurricanesKatrinaandRita Following theoilstockrelease after been wellabove IEArequirements. in1998.eliminated have always heldby EBVandindustry Combinedreserves 100%maintaining ofthestockrequirement; producer obligations were TheEBVisresponsiblecountries hold90days for ofnet oilimports. EBV) are in compliance consistently withtheIEA’s obligation thatmember Oil stocks heldby Germany’sOil stocks stockholding agency( diesel by 12% between 2005and2025. consumption ofgasoline inGermany by 42%andconsumption willfall of oilconsumption overtransport-sector thenextfew estimatingthat years, drop in expectsafurther According tothecurrent forecast, theoilindustry Source: Mt Consumption ofDieselandGasolineinthe Transport Sector, Annual OilStatistics , IEA/OECDParis,2007. Figure 1990 to2005 10 Erdölbevorratungsverband Gasoline Diesel 91 ,

© OECD/IEA, 2007 CRITIQUE RECOMMENDATIONS sector as discussed in Chapter 4,helpingreducesector asdiscussedinChapter oilconsumption. Finally, thegovernment couldwork inthetransport toimprove efficiency care thatanytaking incentives manner. are implemented inacost-effective alternative sourcesforheating,suchascombined heatandpower (CHP), government mightconsiderstrengthening incentives toincrease theshare of increase diversity, butalsoreduce The negative environmental effects. asmovementheating andindustrialboilers, away from thisfuelcouldnot only Germany applications,suchas couldwork toreduce theuseofoilforstatic to decrease thisshare, enhancingoverall supplydiversity. Forexample, weencouragethegovernment toconsidermeasurescountries. Nevertheless, The share ofoilinGermany’s TPES(36%)issimilartothatofmany IEA the relative ofGermany’s benefits treatment preferential fordiesel. tax ofthedieselmarketoptions. Thepossibletightening couldunderminesomeof ofother and technologies benefits oftheenvironmental andefficiency context care toconsiderthepromotionbeing met, taking ofdieselvehicles inthe could evaluateitscurrent policiesandmeasures toensure itspolicygoalsare to other European countries,thisshare issomewhat low, andthe government ascompared purchasedarehalf ofallnew fuelledby cars diesel.Nevertheless, andalmost ofallcars policynearlyaquarter as aresult ofthislong-standing The Germangovernment promotes theuseofdieselinpassengervehicles, and functioning oilmarket andhelpunderpinglobal securityofsupply. awell- tomaintain protocols. TheIEAcommends Germany forits efforts respond emergencies, tointernational andproactively improved itsrelease in2005,thegovernment areas whereand Rita identified itcouldbetter to oilmarket hurricanesKatrina disruptions.Following thestockrelease after the IEArequirement, ensuringthatitisready andabletorespond effectively above itsemergencythe governmentoilstocks maintained hasconsistently product toEurope. supplyanddiversity that provide Furthermore, important Germany hasacompetitive, oilmarket well-diversified withmodernrefineries ◗ ◗ The government ofGermany should: 92 by strengthening incentives to increase theuseof alternative energy sources. sector.transport incentives andalternative toeffective engines inthe promote efficient Consider measures to substitute theuseofoilinstatic applications, such as dieseluptake; policiesto support Evaluate existing considerproviding cost-

© OECD/IEA, 2007 DEMAND SUPPLY ANDDEMAND Source: for 18% (seeFigure oftheEuropean in2004 11). total Kingdom intheEuropean Union (EU).Germangas consumption accounted largest gas market Europe, andaclosesecondtotheUnited incontinental 2003 andabout91.7 bcmayear and2005.Thismakes in2004 Germany the Domestic naturalgas consumption 90.0billioncubicmetres totalled (bcm)in millionover thelast20years. supplied withgas hasincreased from 7.3 to15 in 2005.Consumption andthenumberofhouseholds hasrisensteadily energy supply(TPES) Natural gas primary forabout23%oftotal accounted produces about18% ofdemand domestically. theUnited KingdomandtheNetherlands, andcurrentlyEuropean Union after indigenous production. Germany hasthethird-largest inthe gas reserves Sea,theNetherlands andRussia aswellfromsupplies from theNorth At thegeographical centre ofEurope, Germany hasgoodaccesstonaturalgas Belgium Czech Republic Turkey 3% Hungary 4% 3% 2% Energy BalancesofOECDCountries Poland Netherlands Spain 3% 6% 8% Austria 2% uoenGsDmn,2004 European GasDemand, France 9% Figure Other (9countries) Total =473Mtoe , IEA/OECDParis, 2007. 11 8% NATURAL GAS 15% Italy United Kingdom 19% German 18% 93 y 8 © OECD/IEA, 2007 10 20 30 40 50 60 70 0 information, see Chapter 9.) information, seeChapter HammUentrupandanumberofother locations.(Forfurther Hürth, makes New up22%ofthetotal. gas-fired are powerplannedin stations energy supply,As ashareprimary oftotal gas electricity usedtogenerate ofbuildingsimproves.energy efficiency in2010 starting tofall isexpected per capita forthenexttwo decadesasthe representpublic sectors, 31% consumption. oftotal Residentialgas demand up 18% ofconsumption. includingthecommercialand Theremaining sectors, 47% ofthemarket. Industrialconsumption (excluding non-energy use)makes The largest share ofconsumption isintheresidential sector, whichcomprise Total consumption final ofnaturalgas in2005was 61.3 Mtoe(seeFigure 12). storage aswellsupplyflexibility. highseasonalityofgas usage. Peak– avery gas demandismet through gas 2006 wasGerman gas 2.7times thatofAugust2005 consumption inJanuary Peak demand gas Sources: sectors. agricultural,andother non-specified fishing * includescommercial,publicservice, 9518 9519 9520 0521 0522 052030 2025 2020 2015 2010 2005 2000 1995 1990 1985 1980 1975 Mtoe 94 ia osmto fNtrlGsb etr 1973to2030 GasbyFinal ConsumptionofNatural Sector, Energy BalancesofOECDCountries Figure , IEA/OECDParis,2007submission. andcountry 12 Res Othe I T ndu ran id spo st r e * r n y t r ia t l

© OECD/IEA, 2007 SUPPLY gas volume ofthisupward trend, butnot thenumberofcustomers. inheating appliances andinsulationwillputaslightdamper onthe efficiency Germany, atrend Increasing thatissetincomingyears. toaccelerate progressively replacing heatingoilasthemainresidential heatingfuelin growth. ofthislimited be themaindrivers Inthedomesticsector, gas is (seeTablein comingyears 2).Electricitygenerationanddomesticheatingwill energy in the future willamounttoamodestincrease innaturalgas demand awayIn thealternative scenarioforecast, from theshift coal,oilandnuclear Demand outlook sectionsonhubsandliquidity,later aswellpricing.) is noconsumerresponse visibleinthemarket.informationsee (Forfurther gas relying hubs,instead ontheirexistingcontractstoprovide flexibility, there do not yet tobalancedemandforthemselves through have theopportunity disturbances thatcannot becorrected by market-based means.Asconsumers actiontocontrolprovides consumption onlyintheevent forstate of volume ofgas sales.Legislationsafeguardingtheeconomy attimesofcrisis equipment. contractsare toaccountfor10-20% Interruptible estimated by switchtoalternative fuelsby usingdual-fuel whocanoften customers, contractsareInterruptible generallyonlyentered intowithindustrial customers gas Interruptible daily, hourlyormonthlypeakconsumption value available. are onlyavailablepeaks forindividualcompanies. There isnoconsolidated aswellmonthly impossible todetermine.Coincidentdailyorhourlypeaks make cumulative gas peakwinter demandforallgas inGermany suppliers government, andasynchronous the large loadpeaking numberofsuppliers consumption are not asreliable asinother IEAcountries.Accordingtothe As withmany other areas oftheGermangas on industry, statistics level ofcurrent gas tomake pricesisexpected enhancedextraction techniques that theproduction 1970s. sincethelate trend hasbeenflat However, thehigh about 17 bcm peryear, production conditionsmean thoughincreasingly difficult Germany’s at270 naturalgas reserves bcm.Thecurrent is annualextractionrate forGeosciencesandNaturalThe GermanFederalInstitute Resources (BGR)puts Saxony between theDutchborderandElberiver. ofLower state all ofGermany’s are inthenorth-western located reserves are thethird-largest, behindtheNether supply from domesticresources. Within theEU, Germany’s natural gas reserves gasGermany producer, isasubstantial providing approximately 18% ofits lands andtheUnited Kingdom.Nearly 95

© OECD/IEA, 2007 Companies are required to reserve sufficient storageandtransportation Companies are required sufficient toreserve agreements withdomestic andforeigncontracts. andinterruptible producers; gas routes; long-term supply ofsourcesandtransportation diversification Security ofgas including storage, supply isbasedonseveral pillars, anddiversity Security supply thisinformationtothemarket. legally unbundledfrom supply companies, andshould,therefore, beforcedto grid operator, avoiding anyissues.Germany’s confidentiality are grid operators Incompetitivethe fact. markets, netare flows provided by theindependent after areflows publishedin real are timeandactualflows publishedshortly Indicative are rates. capacity andflow flows publishedinadvance, estimated onavailable gas online accesstodata transport standardised, to offer gas marketson supplyanddemand.Ingeneral,mostcontestable are required withaone-dayon awebsite delay, givingcompanies muchbetterinformation are published system andexitpointtoeachtransport ateachentry daily flows the gas doesnot always physically flow alongthecontractualpath. In France, occurinGermany, Physical swaps suppliers. often meaningthat Norwegian and as thosewhere gas importers transits Germany between Italian Nonetheless, informationaboutsomecontractsisavailable tothepublic,such tofind. areas oftheGermangas market,difficult isvery informationonflows gasRussian andis,therefore, andNorwegian Aswithmany anexporter. other While Germany isalarge gas consumer, for italsoactsasatransitcountry andlengths. contractterms of contracts,includingdiverse portfolio ofadiversified until atleast2030.Thisunderlinestheimportance and Wingas tolastuntil 2035.ContractswithVNG have alsobeenextended contractswithE.ONRuhrgasMeanwhile, Gazprom itsexport has extended between 2015the Netherlands willphaseouttheirexports and2020. offuture demandcoveredproportion by thesecontracts, butitisknown that are not data available toshow the to thepriceofoilproducts. Sufficient gas oflong-term Germany supplycontractsthatare pegged are madeaspart in 2005decreased to by 0.7%from Imports Mostimports 2004. imports. (mostlyDenmarkandtheUnited supplyand others Kingdom) for4%oftotal supply(24% theNetherlands for20%oftotal of imports), and ofimports) for24% Norway supply(42% ofimports), 35% oftotal supply(29% oftotal geographical sources,withRussia accountingfor spreaddiversified ofimport ofdomesticdemandin2005.There isabroadly met overImports four-fifths Trade andimports these are currently protected by theFlora-Fauna law. Habitat ifthey were allowed Seamightyieldreserves tobedrilled– areas intheNorth discovering inonshore Germany new reserves seemsunlikely. However, offshore ofnaturaldeclineover time.Theprospect of theeffect viable, countering 96

© OECD/IEA, 2007 INDUSTRY STRUCTURE INDUSTRY diversification ofsources. diversification large storage volume section onstorage)andrelatively (seelater broad placed onthegrounds supplyagreements, ofitslong-term acomparatively Act.TheBMWi believes Germanythe BMWi undertheEnergy iswell Industry Responsibility formonitoringsecurityofsupplyingas andelectricitylieswith inordertoreach Germany.borders andDutchgasthrough doesnot transitcountries.Norwegian cross any transit 2010, providing aroute forRussian gasthatavoids imports goingoverland under theBalticSeabetween Russia andGermany, isduetocomeonlinein transitingeithertheUkraineorBelarus.Nord Stream,systems adirect pipeline share reach isincreasing. Germany Russian imports viatwo pipeline separate 35% ofitsgasfrom onecompany, supply(42%ofimports) Gazprom, andthis oforigin,Germany gets ofcountry While relatively interms welldiversified capacity equivalent toabout80days ofGermany’s average demand. situations ( includinginexceptionalcapacity toensure securityofsupplyforcustomers, the current issues affecting thesector(seebox). the current issuesaffecting The historicaldevelopment ofGermany’s hasalarge impact gas on industry quickly became theagentforDutchgas salescompany, Gasunie. better geographically placedthanitsmajor competitor, Thyssengas and marketing agentfor Dutch naturalgas inWest Germany. Ruhrgas was Groningen to actasa concession(ShellandExxon) andconverted company, Ruhrgas, strengthened was by financially ofthe the owners (less amarketing discount toaidpenetration). Aprivatelyowned equivalent onanenergy basistodelivered pricesoffueloilandgas oil were withdelivered signedforperiodsof25years pricesofgas set tobe gas long-term deals Thefirst heating andfueloilforindustrialboilers. gas oilandfueloil.At thetime,gas oilwas themainfuelforresidential Dutch gas was marketed inGermany tocompete withexistingmarkets for in 1967. neighbour, theNetherlands, inthe1950s, gas imports leading tothefirst to amajor energy provider, inits oftheGroningen was field thediscovery thepenetrationaccelerated ofGermangas, moving itfrom anichefuel accounting forover that 23%ofTPESin2005.Thecriticalfactor reliant onsmallamountsofmanufacturedgas intheearly1960s to Gas demandinGermany hasgrown rapidlyfrom beingpredominantly Historical developmentHistorical sector ofthegas e.g. supply stoppages).Currently, Germany hasgas storage 97

© OECD/IEA, 2007 PRODUCTION DEA, Gaz deFrance andWintershall. DEA, The remaining 20%issplitbetween smallergas includingRWE- producers, asDutchgas content andisproducedcalorific onshore. Germanoutput.Mostgas80% oftotal has thesamelower-than-standard the unbundledpipelinebusiness, aswelltheproduction, amounting to marketing businesswas split.Ajointventure ofExxonMobil andShelloperates sold toRuhrgas Exxon boughtMobil,the underatake-or-pay contract. After and market Germany. naturalgas innorthern 50%ofthejointproduction was and Shell,50%)Mobil(Exxon, 25%).Thesecompanies alsodistribute Natural gas production inGermany was previously by dominated BEB(Exxon 98 by contractswithpricesdetermined by long-term thoseofdelivered oils. the value chainfrom producer toend-user–thechainisboundtogether to therelatively complicated shares ownership ofgas companies across and hasalsorecently beenstrengthened. Thishistoricaldevelopment led from theearly1970s hassurvived structure oftheindustry tothisday, Although underpressure collaborative from theEC,samevertically market by volume. Gazprom alsocontinuestosupplyRuhrgas. rolesettled into amorewith established than12% oftheGerman Wingas ofgas isnow thesecond-largestinGermany, importer andhas from poorcredibility inthemarketplace,network. Initiallysuffering tosecurefailed accesstoexistingpipelinesandsobuiltitsown German Thiscompany,they ofovercharging suspected foritsservices. Wingas, ofthechemicalgiantBASF)tocompete withRuhrgas, whom affiliate In 1991, Russia’s Gazprom formedajointventure (an withWintershall Wintershall. includingRuhrgasseveral parties, andamajor interested supplier, Germany were intothegas consolidated company VNG, withequity from production by the1960s. thegas reunification, assets ofEast After 20-year contracts.Meanwhile, Germandomesticsupplies were in and West Germany in1973, gas joinedby in1977, Norwegian both under sensitive andcomplicated negotiations, flowed toEast Russian gas first gas onthebasisofsamepricingprinciple.Following extremely negotiations began withtheSoviet Union inordertoimport andNorway With thesuccessofmarketing operationforDutchgas, inthe1970s Stadtwerke stakesandlocalmunicipalities, inregionalit tookfinancial distributors costs) totheproducer ontheoil-equivalent basis.Inordertoachieve this, ensuring thehighestnetback price(thepaidlesstransportation volumes ofgas tomarketGerman soil,forguaranteeing andfor certain Ruhrgas assumedresponsibility forbuildingandoperatingpipelineson , and converted themtousinggas., andconverted

© OECD/IEA, 2007 THE “THREELAYER” SYSTEM 4 Such aswater, andinternet. waste, telephone 14. the area. The in somemedium-sized industrialusers on behalfofcityresidents and,often, or distinct levels. At thelocal,orthird,level, approximately 700municipalities, demand inordertopromote gas marketing, demandissplitintothree semi- Germany, competitive market. ratherthantocreate anefficient, To aggregate was organisedsystem toaggregate demandsothatgas couldbemarketed in is relativelyThe structure oftheGermangas complicated becausethe industry Demand from themajority of the localgovernment. In turn,theregional utilities,large Rhein Ruhr. suchasAvacon theirregional distributors, (E.ON),E.ONHanseorRWEserve been creating midstream andtrading companies thathandleimports butbothchain alsousedtobeshorter, E.ONRuhrgas andRWE have recently like RWE/Thyssengas, ofimporters Berlin. Inthetraditionalterritories the forexample Hannover, Stadtwerkeimporters, Düsseldorf, KielandGASAG large poolofgas demandontheirownvery andbuydirectly from the and larger clientsdonot needthislevel ofaggregation asthey represent a ( aggregated by 30orsoregional gas utilities representing thesecondlevel more profitable demandcentres, switchedfrom suchas largemore industrial users, profitable degree ofcompetition amongthemainplayers resulted, meaningthat A with“strandedgas” volumes thatwere not tobeleft taken. not afford upstream andcould supplycontracts from tolong-term further committed This sparked aseriesofsimilarmoves by itsrivals, eachofwhichhad Stadtwerke market andaggressively builtmarket share by selling gas directly to by Wingas, pipelinefrom whichbuiltitsown Russia the import toenter The relatively neatorderoftheGermangas was upset system inthe1990s distributor. VEW andThyssengas tobecome an importer, aswellRuhrgas’s largest other major player isRWE (10%), intheGermangas industry whichbought from domesticproduction owned sites largely by ExxonMobil andShell.The utilities sourcethegas take-or-pay underlong-term contractsfrom abroad or Gas AG (VNG, 10%) andWingas GmbH(11%). Inturn,these supra-regional key level: E.ONRuhrgas players atthefirst AG (55%by volume), Verbundnetz take gasindustrial users owned from by themainpipelinesystems thethree e.g. Stadtwerke Gas Union, Bayerngas GmbHandSaarFerngas AG). Some , industrial users andregional utilitieswherever, industrialusers itbuiltpipelines. Stadtwerke , aggregate thedemandforgas andother goodsandservices companies themselves are by usuallymajority-owned Stadtwerke Stadtwerke and someother is large users and even some very large and even somevery Stadtwerke 99 14

© OECD/IEA, 2007 GAS HUBS 100 Wingas. foreign player asare Ruhrgas isabletocompete across thecountry and assets rather thangrow anew businessinGermany. Still, nodomesticor to theirhomemarkets suggeststhatmost Germany.northern Thegeographical locationofmosttheseentrantsclose foreign entrantsare GDF, ofthecountry, andDONG, in inthesouthernpart France Eni.Thelargest (GDF),DanishDONG, DutchEssent,BPandItalian foreignSome limited penetration ofthesectorhasoccurred by French Gazde by majority-owned municipalities. companies, often stock exchange; themunicipalutilitiesoperatingonthirdlevel are private distribution levels onthe are insomecaseslisted commercialenterprises, The companies andsecond comprising theproduction andthefirst to aggregate itsdemand). medium-sized industrialuserleaving theumbrella ofa their traditionalsupplier, whileother demandcentres disaggregated ( secure transportation capacityontheE.ON Ruhrgas network. secure transportation two annualauctions were unpopular asthewinningbidder was not ableto market, butwas poorlydesigned– the quantities ofgas released by thefirst implemented. Thishad theaimofboostingcompetition intheGermangas controversial takeover ofRuhrgas by E.ONin2003,agas release schemewas except in thecaseofcompetition law. oftheremedies forthe Aspart liquidity inthegas market cannot bedirectly implemented by thegovernment As gas availability policies toimprove isthedomainofprivateenterprise, three levels ofgas companies isnot addressed inthelegislation. across and between the Theproblem ofarrangingtransportation operators. This platformmustbelinked tothetradingplatformsofneighbouringnetwork anonlinetradingplatformforcapacity rightswithintheirown network. install are requiredtrading platform.Until operators then, transmissionsystem to verordnung legislationgoverning accesstothegasSecondary grid ( demandforhubservices. sothere wasthe pipelinesystem insufficient owingfailed toalackofliquidity. Too few players were abletoget accessto forseveralBunde operated withminimaltradingvolumes years andthen have success.Forexample, beenfoundedbutwithlimited theEurohub in are readily available. Several hubs suchasstorageandtransportation services becauseassociated cantransact,inpart andsellers ofbuyers numbers pointswhere deep,liquid large tradinghubs.Hubsareto establish delivery management ofgas demandandsupplyfrom thebottom up,makes itdifficult The given collaborative structure oftheGermangas industry, andits , GasNZV) requires system operators to install acommononline , GasNZV)requires toinstall operators system are onlyabletoleverage existing Stadtwerke Gasnetzzugangs- that used e.g. a

© OECD/IEA, 2007 COMPETITION develop. have access(TPA), allowed successfulthird-party andhencealiquid hubto negotiated business by thesecompanies onleaving thegas transportation network by Shell andExxon. formerowners Theequal accessconditions ofthecountry, whichcameaboutwiththedivestiture oftheBEB part western The onlyrelatively liquid hubinGermany hasbeentheBEBhubinnorth- GasNEV). line feesforwhichapproval ( mustbeobtained GasNZV, andonelaying down method abindingcomputation forthetrunk- accesstothegas grid,ensuring transparent andnon-discriminatory regulation legal andunbundlingofoperationsintoseparate entities–one focusonnetwork Actwiththeprimary based onthenew Energy Industry The government issuedtwo piecesoflegislationinthesummer2005 as 1998. The Federal Cartel Office ( as 1998. Office TheFederalCartel The legal framework toopenuptheentire market retail was inplaceasearly locking companies intobuyingalltheirgas needsfrom onesupplierfor long the availability offree gas. The for theirgas are already “fully booked” by theincumbent.The secondissueis line,many thatpipelines new downneeds toflow entrantsfind aparticular theamount ofgascustomer toacompetitor that obviouslydoes not affect forseveral Whilelosinga years. legal unbundling has beenmandatory competitors from that thefact gaining despite accesstothis pipelinesystem, there isalarge incentive forthesecompanies toobstructpotential thecontracts.Inorder toprotectsale tofulfil theexistingcustomerbase, gas from thepointofpurchaseto neededtotransport systems is network access.Gascompanies currently own thepipeline andoperate Two key issueshave hindered thedevelopmentissue of competition. Thefirst illegal by the discussed below, domesticgas theselong-term contractswere recently ruled capacity rightsforthegas tobedelivered alltheway totheconsumer. As and covered allthegas needsofabuyer, provisions includingflexibility with market. Thesedomesticcontractsfrequently covered periodsof20to30years inthevalue chain,tieupthe links supply contractsbetween thedifferent instrumentsofcollaboration,thelong-term collaborative history, andthevery Gas-to-gas competition isnew totheGermangas sector. Thesectorhasa Germany’s Competition Act. The are alsoresponsible formonitoringmarketstates abuseintheenergy industry. competition authority, andcompetition agenciesintheindividualGerman Bundeskartellamt Bundeskartellamt also oversees mergers intheenergyalso oversees sectorunder mergers . Bundeskartellamt Bundeskartellamt eznglvrrnn Gas Netzentgeltverordnung ruled inApril2006that ), thenational 101 ,

© OECD/IEA, 2007 LIQUIDITY 5 Within Germany, thesecontractscover allgas requirements ofthecustomerand function astake-or- 15. 102 provide flexibility. both sideswith significant andgenerally individual circumstances tofit butare tailored are across not theindustry standardised componenttypically aflexible tothe contractthatcanberequested ifneeded.Take-or-pay contracts gas topay and buyers volumes, forthecontracted whether thebuyer takes themornot. There is Take-or-paypay contractsforgas importers. contractsrequire volumes tosupplycontracted of sellers competitive market. changing theGermangas market from itscollaborative structure towards a towards step significant contracts withonesuppliermay well beavery conducive tocompetition, changingitandprohibiting domestic long-term of theGermangas However, industry. sincetheexistingstructure isnot any changeinthecontracts would seriouslyjeopardisetheexistingstructure and thereby prevent new upstream andmidstream investments, noting that ofdemand, thestability argue thatthisrulingmightaffect Gas importers cover more than50%. cover more annualvolume, than80%oftotal norfour-year contractsifthey cannotmarket. signtwo-year totheruling,suppliers contractsif they Further thepotential periods oftimewas anti-competitive sealedoff asiteffectively The long-term contracts The long-term favour of the affiliated supply company.favour oftheaffiliated entitycreates incentivesfinancial forthenetwork owner in todiscriminate having thetrading company andthe network managerowned by the same preventingsystems, liquid markets from developing. Inalmostallcases, islikelytraders tobeamajor inthelackofTPA factor tothoseregional by ofregional the major –theownership guarantee pipelinesystems gas network However, to was easy toobtain. thisaccesshasbeendifficult sofar would create incentivesconsumers fortradingifaccesstothetransportation foroptimisationbetween the gas price.Theopportunity slightly different trading withinthisstructure –eachofthesemarketwillhave a participants Yet there are commercialincentives forcompanies toengage insecondary down thechain. tosupplythose ofcontractshasenoughflexibility withaportfolio importer tomanageitsvolumegas requirements. toorfrom athirdparty Similarly, an This meansthatanindividual themaximumrevenueguarantees totheproducer, thechainisself-sufficient. entirethat theconsumer’s needsare met through thiscontract,andthatit traditionally soldgas ona“100% ofrequirements” Given basistocustomers. then timeperiod.Theimporter andpaidforover acertain the importer consistofaminimumvolume ofgasGerman gas tobedelivered industry to 15 that form the links between eachchainofthe that formthelinks Stadtwerke should have noneedtobuyorsell

© OECD/IEA, 2007 TRANSPARENCY CUSTOMER SWITCHING supply company, information. publishessuchflow-based advance. BEB,theonlynetwork inGermany not by majority-owned one in in theUnited Kingdom,nominations andcapacityare reported onadailybasis,and are flow France, reported capacity andtotal total has not seen informationofthisnature forGermany. For comparison, in grid mapforallof Germany. aswellajoint,detailed systems, TheIEA capacity available and theamountofavailable capacitybetween sub- and interruptible amountoffirm on adailybasis,includingthetotal companies data needtopublishother system transport circumstances, Gasnetzzugangsverordnung viathe pipeline operators incentives, minimuminformationdisclosure obligations are imposed on whichwould provide networks, these separation ofthetransportation market exchanges through trading.Intheabsenceofcomplete andwhere pricesare set inopen itsservices incentive toadvertise unlike inacompetitive market, where theregulated network hasahuge little incentive orneedtoshare informationoutsidethevalue chain, pointinGermany totheburnertip.Underimport thismodel,there is isdesignedformarketingThe Germansystem from gas the vertically improve transparency. customerswitchingshould and automate tostandardise The efforts United Kingdomwhere are customerswitchingrates thehighestinEurope. in lower transparency andcompetitive pressure thaninmarkets suchasthe theGermanconsumer.benefiting Thismay bethecase,butitalsoresults thediscountsandrenegotiations thatare consumer switchingunderstate many companies on suggestthatthefigures Because ofthiseffect, pipelines, ithasanincentive andanabilitytoprotect itsown market share. thecustomeradiscounttodoit.Ifcompany alsoownsoffer thegas themarketeat intoitsown margins topreserve volume, andwilloften rigidity ispassedtothewholemarket. Themarketer isgiven incentives to companies ownimporting aminoritystake indownstream companies, this (it mustpay forthegas whether ornot itsellson).Given thatmost volume large ofgas,market thecostoflosingitscustomerisvery acertain existing supplier. contract to hasalong-term Given thattheimporter seenisthattheyfar have beenabletonegotiate betterpriceswiththeir ofthelevel ofliberalisationso toconsumers benefit theprimary Instead, theprocess process toauniformautomated acrossstandardising Germany. switched supplierin2005.TheBNetzA iscurrently working on ofcustomerswitchingislowThe rate inGermany –302customers . These stipulate that,undercertain . Thesestipulate Gasnetzentgeltverordnung and the 103

© OECD/IEA, 2007 TRANSPORTATION GAS QUALITY REGULATION GAS NETWORK 104 (For further information, see the later sectiononpricing.) information,seethelater further (For ofpoliciestolower from trunk-line seeingthebenefit customers fees. a smallshare ofthedelivered gas price,thecurrent structure may prevent onconsumerpricesasthey onlymakeaccess charges have effect up a limited company, withminimalimpact on theconsumerprices.Thoughchangesto savings may bepassedupthechaintoproducer by orretained thegas anabuseoftheirmarketconstitute competition, position.Without effective monitorabuses, to xpost ex Bundesnetzagentur Land entirely operatingwithinasingle and Post totheBMWi. (RegTP),anagencysubordinate Regulationofentities Bundesnetzagentur Regulationiscarriedoutatthefederallevel by the transportation.) sectionon information,seethelater (Forfurther existing system. However, coverage isstillpatchy, regulatory withtrunklinesexcluded from the regulation inaccordancewiththeEuropean Union’s secondgas directive. ActofJuly2005brought thegrid sectorunderdetailed The Energy Industry and plannednatural gas infrastructure isshown inFigure 13. pipelines.Amapofexisting 000km(35%)oflow-pressure and about127 bardown to100 mbar) km(39%) ofmedium-pressure pipelines(1 000 150 is madeupofhigh-pressure pipelines (100 bardown 000km (27%) to1bar), about 103 000km.About lengthofthegridThe total isabout380 for gas. gas-quality thus creating asinglewhere intersect, market different networks quality couldbeusedatpoints Furthermore, conversion facilities networks. andRussian, couldbeeasilymixedNorwegian andcarriedinthesame thatthetwoIt isgenerallyaccepted higher-quality ofgas, specifications oneofthethree. are distinct,andcurrently individualgas onlycarry networks gas, gas. whichisinturnhigherthanDutchlow-quality Thethree gas qualities gasby value having thesource–Norwegian thanRussian a highercalorific sector, regional gas are withthequality operated systems ofgas determined For thesamehistoricalreasons thatunderpinnedthedevelopment ofthegas , except The where ithasconferred ontheBNetzA. thesepowers and toapprove i.e. , the former Regulatory AuthorityofTelecommunications, theformerRegulatory has powers to ensure non-discriminatory grid access toensurehas powers non-discriminatory to forbid grid operators fromto forbidgrid engaging operators inpracticesthat ex ante ex trunk-line fees.Under theEnWG, ithaspower Land is done by regulatory agenciesinthat is doneby regulatory

© OECD/IEA, 2007 Source: by theIEA. oracceptance endorsement Note: Theboundariesandnamesshown andthedesignationsusedonthismapdonot imply official BELGIUM NETHERLANDS u.City Lux. LUX.

Düsseldorf

Natural GasInformation

Aachen (36)

negon a storage gas Underground plant processing gas Major const. under or planned pipeline Gas pipeline Gas

NORPIPE TENP

Bern EUROPIPE FRANCE (36)

Köln

(20)

(38) (36)

Bonn

Emden (40) (40) Werne

04080 (36) Sea North Lingen

Karlsruhe

Wilhelmshaven Dornum (36)

Km SWIT. (12) NETRA NetworkGas Transportation

Stuttgart (24)

Zürich WEDAL , IEA/OECDParis, 2007. (48) GERMANY

Bremen Hannover RHG Würzburg MIDAL

(28)

(48) (44) (40) Figure

LIECH.

DEUDAN SEL (12) Schlüchtern DENMARK Hamburg

(40) EVG

(48)

(20) (48) NETRA 13

Lübeck MEGAL

Kiel (36) (42 or 56) (10) (36)

Munich Nürnburg (24) Erfurt

(24)

STEGAL (24) Rostock

N emnlplanned terminal LNG route import Gas (inches) diameter Pipeline planned storage gas Underground (12)

Waidhaus (32)

(32) (20) (20) (44)

Trelleborg (32) Leipzig

(24) Greifswald (36) BGI Sayda JAGAL ZC REPUBLIC CZECH AUSTRIA Berlin (16) Schwedt Prague RNGSI&II & I TRANSGAS NORD STREAM Ystad Wildenranna POLAND Görlitz Szczecin

Frankfurt WA

105 G /

© OECD/IEA, 2007 106 regulation. Nonetheless, therefore thesepipelinesare temporarily not subjectto where several competition, pipelinesruninparallel,thisconstitutes and functioning competition atthatlevel. Wingas andE.ONhave argued that supplylevelbasis. Thisdoesnot ifthere isproperly applyatthelong-distance Trunk-line feesrequire principle”triedinAustria. “rucksack transferred toanother withthegas the supplycontract–thiswillemulate withonesupplierisautomatically arrangement underwhichcapacityreserved by an Supplier switchingunderthenew two-contract modelwillbefacilitated isstillrelatively andthesystem new.find to are difficult been doneonthetwo-contract modelin2006,althoughdata 2006/07 gas year, andthere isnoevidencethatany successfultradeshave companies have toberelatively foundthissystem unworkable inthe thechange, model).Despite simple, two-contract model(aso-calledentry-exit accessisnow basedona model was ruledillegal Third-party by theBNetzA. the samemodelfor2006/07 gas year, butinNovember 2006,theoption touse intended the way level. upthechaintogas Theindustry importer marketing company attheirlevel, aprocess thatwas thentoberepeated all called optionmodel,whichrequired tosignacontractwiththe consumers Octoberofeachyear, implemented theso- theindustry 1 year, whichstarts Forthe2005/06gasGrid accessisnow intransitiontoa regulated system. company suit. files entities caninvestigate andforceactionontheirown orwhenanother companies independentlyfrom operate theirparent supplycompanies. Both Bundeskartellamt Thecompetition 000customers. authority, the supply fewer than100 except ofregional where andlocaldistributors, thesenetworks by spin-offs are Theregional run andlocaldistributionnetworks the transmissionsystems. the major gas legal utilitieshaveseparate entitiestooperate eachestablished Act,whichrequiresIn compliance withthenew Energy unbundling, Industry Emden is the terminal fortheNorpipeEmden isthe terminal gas pipelinefrom theEkofisk in field Germany. Emdenand Dornum,bothGermany: in north-western located There from are terminals two whichgas significant comesashore directly to Beach imports energy providers toaccessthenetwork. drop theirgas grid accesscharges by 8-18%, reducing pricesforsmaller In October2006,theBNetzA ruledthat regulation. tariff ante of theinvestigation, allmajor trunkpipelinesare currently excluded from ex by the Bundeskartellamt , andtheBNetzA are responsible forensuringthatthese ex ante ex ex post ex are applicable.Asaresult, pendingthecompletion approval, andfeesare computed onacost-plus abuse control by theBNetzA andpricecontrol the fourregional must grid operators ex ante ex tariff

© OECD/IEA, 2007 regulation, only market inGermany. At present theselinesare not subject to these pipelinesinthefuture may determine thesuccessofcompetitive gas routes forgas (seeTableimportant 15). Whathappens totheoperationof Within Germany there are several major trunkpipelinesthatare very pipelines(transmissionsystemoperators) Domestic trunk of thecontracts. meaning thatthegasbuyers, doesnot necessarilyfollow theoriginalroute there are several large swap arrangements betweenEuropean thewestern isnotInformation onphysical flows available by pipeline.Furthermore, Europe towestern (Germany,dedicated France, theNetherlands andItaly). bcmperyear, butonly70%ofthiscapacity is joint annualcapacityof120 European nationsviatransitthrough theUkraine.Together, they have a Transgas Siberiangas whichlinkwestern production systems, towestern but mostRussian gas arrives inGermany through theBrotherhood and per year ofRussian gas from Siberiathrough western BelarusandPoland, bcm The Yamal Europe pipelinehasacapacitytobring approximately 30 Overland imports is undergoing afeasibilitystudy. recently revived asGermany’s dependenceonRussian gas hasincreased and AfricanLNG toGermany were dropped. North Theprojectto import hasbeen (LNG) (atWilhelmshaven) terminal 1970s sincethelate whenitsnegotiations E.ON Ruhrgas hasowned onwhichitcouldbuildaliquefied naturalgas asite per year, butitisforeseen that thiswillbedoubledby loopingtheline. phaseofNord Streamfirst isplannedtohave aninitialcapacityof28bcm pipelineisset tocommencein2008.The 200-kmsea-floor approximately 1 Russia ontheGermanBaltic coast.Constructionofthe toGreifswald A new pipelineproject, gas Nord Stream, from in Vyborg isplannedtocarry only 25bcmpassedthrough themin 2004. nations. Thepipelineshave combined capacityof54 bcmperyear, atotal but companies, usuallyrepresenting consumer theinitialproducer andfinal ofprivate consortium isowned byEach ofthepipelinesystems a different system. Dornum from Europipe Germany IIisrouted toeastern viatheNetra pipeline Dornum from Europipe Iisrouted toGermany viaEmden.Gasbeachedat lines thatcameonstream in1995 and1999 respectively. Gasbeachedat Hydro. fortheEuropipe Dornumistheterminal IandEuropipe IIgas trunk Gas,whichisownedIt belongstoNorsea by Conoco,Total, Statoil, Agipand 1977. SeathatcameonlineinSeptember sectoroftheNorth the Norwegian Bundeskartellamt ex post ex . abuse control by theBNetzA andpricecontrol by the ex ante ex tariff 107

© OECD/IEA, 2007 108 tgl98CehRpbi Germany CzechRepublic 9.8 Stegal ia 28NrhSa Ludwigshaven Sea North 12.8 Midal monopoly ownership ofindividualroutes.monopoly ownership Open seasonprocesses are required markets incontestable toprevent by sellingfuture pipelinecapacitybefore constructioncommences. parties commitmentsfromrequires multiple financial apipelinebuilder toobtain markets. practice incontestable Aregulated openseason process standard their respective there owners; was no“openseason”fortheseprojects, asis The Stegal, Wedal, Megal andTENPpipelinesare currently beingexpandedby Sources: Company websites, country submission. Sources: Company country websites, EP7NtelnsIay 94E.ON 51% 1974 Netherlands Italy Ruhrgas 7 TENP aeCpct rmT tr we Share Owner Start To CapacityFrom Name aa I2. aa tgl19 igs100.0% 40% Wingas Wingas 1999 Hamburg 1994 100.0% Stegal Wingas Midal 1996/7 Jagal I Brandenburg 0.8 Poland (Oder) 23.7 23.7 RHG Jagal II Jagal I ea 2CehRpbi Fac 18 .NRhgs50% E.ONRuhrgas 1980 France CzechRepublic 22 Megal er 14NrhSa ihlsae 19 .NRhgs41.7% E.ONRuhrgas 1995 Wilhelmshaven Sea North 21.4 Netra Wedal 10 Aachen, Bad Aachen, Salzuflen 10 Wedal (bcm/year) 66ttl oncint Connectionto Connectionto 16.6 total lo)JglMdl20 igs100% Wingas 2006 Midal Jagal (loop) Dru)BB29.6% BEB (Dornum) emn emn Mdl 969 igs100% Wingas 1996-98 Germany (Midal) Germany Edn na wteln)19 igs100% Wingas 1993 (nearSwitzerland) (Emden) Domestic Trunk Pipelines Domestic Trunk Table Mdl aa)19 igs100% Wingas 1992 (Midal, Jagal) 15 .N60% E.ON tctn ea 2.0% Stichting Megal a eFac 43% Gaz deFrance nentoa 49% International Snam Rete Snam Rete tti 21.5% Statoil yr 7.2% Hydro M 5% OMV

© OECD/IEA, 2007 INVESTMENT STORAGE 6 ERGEG, 16. who have toconsumers. historicallyprovided aone-stop-shopservice builtupby thelarge importers ofthesupplyportfolios adds totheflexibility accesstopipelines.Storage forthird-party can beproven thatitisnecessary accesswhere it third-party negotiated, non-discriminatory tooffer operators addition, thegovernment haspassedlegislationrequiring storagefacility indirectly to their system, thoughsome indirectly totheirsystem, directly connected or 000customers withfewer than100 within theirborders Länder than Gasversorgung Waldbüttelbrunn GmbH. 1 800,300timesless.E.ONHanseAG hassalesvolumes 8000timeslarger a smallmunicipal large like regional distributors EWEsupplyaround 620000households, While 000heatingstations. with 100 and50 000industrialcustomers 15About millionhouseholdsare suppliedwithnaturalgas inGermany, along toexpandthegasby thelarge utilitiesthatbuiltthepipelinesystem market. grids. Thesecompanies by municipalitiesandpartly are usuallyowned partly whosupplygas ontheirindividuallow-pressure distributors toendconsumers include someofGermany’s large incumbentutilities.There are over 700local from themedium-pressure grid. Thesecompanies that are owned by consortia supplymunicipalutilities,aswellconsumers Some 30regional distributors systemoperators) (distribution Domestic distribution much more scarce,henceexpensive, is andnew storagefor Germanconsumers Inthe south,geologicalstorageis storage facilities. subterranean of further ofGermany,In thenorth geologicalconditionsare favourable fortheaddition capacity onGGPSSOterms, have operators signedanagreementutilities. Moststoragefacility tooffer RWE, andregional andmunicipal operators aswellby independentfacility are by operated major gas utilitiessuchasE.ONRuhrgas, Wingas, VNG and days ofGermany’s average demand.Storage facilities 20 bcm,orabout80 working gas capacityof 32.58bcmwithatotal with atotal capacityof United Russia States, andUkraine.There are 43naturalgas storagefacilities Germany gas hastheworld’s storagecapacity following fourth-largest the powers to the BNetzA. totheBNetzA. powers Guidelines forGood TPA Practice forStorage System Operators (GGPSSO) are entirely operated tasked withtheregulation ofdistributionsystems Stadtwerk 16 although this is a voluntary agreement. In although thisisavoluntary like Weisswasser only GmbHmightserve Länder have totransferthese elected , 23March2005. 109

© OECD/IEA, 2007 TRADING 110 expand by 670 mcm.Table 16 current andplannedstoragecapacity. details developed, adding130 mcmofcapacity, set to withcapacityatexistingfields 620 millioncubicmetres isbeing storagefacility (mcm).Onenew depletedfield of 3.2bcm.Capacityatexistingsaltcavern istoexpandby facilities arestorage facilities currently plannedorunderconstruction,withacapacity saltcavern inAustria–tiedonlytotheGermangrid.being constructed Fifteen were not designedtomesh witheachother. nationwide qualities have scale astheregional networks ofgas, different and source todemandcentre. They also argue that competition isimpossible ona optimised tothegreatest gas possibleasthey extent were builttoimport from Major gas companies inGermany suggestthattheirgas are already networks improve tradingandliquidity. accessbeingimplemented shouldsignificantly new regulated third-party or time,therefore competition.rights over stifling distance The asignificant transportation firm European toobtain gas directive, whichmadeitdifficult thefirst after access toitsnetworks Germany fornegotiated third-party opted one regional exchange, BEB.Themajor reason forthelackofactivityisthat domestic consumption istradedongas exchanges, withthemajority ononly neighbouring BelgiumortheNetherlands –currently lessthan1%of Gas tradinginGermany hasnot enjoyed therelative successseenin atcvr trg 0 4 10 351 3648 Total storage Additional storage 6703 Existing storage Salt cavern storage mcm Unit: oa 90844823516 4448 13 165 19 068 800 Source: 12 365 Total storage Depleted field prtoa 0 2 7323 620 6703 Operational prtoa 90812020358 3158 13 035 1290 130 3158 670 19 068 130 3028 0 12 365 3028 0 Planned/under construction Operational 0 Planned/under construction Operational Planned/under construction Untertage GasspeicherungUntertage inDeutschland (Planned orunderconstruction) New StorageCapacity Table 16 , Erdgasspreicherung, Tables 4and5,2006.

© OECD/IEA, 2007 LONG-TERM CAPACITY SHORT-TERM CAPACITY ANDBALANCING neighbouring countries. interoperability ofGermanregional grids witheachother andwiththoseof direction thatwillleadtowards aEuropean-wide gas market, leadingtothe The Germangovernment andtheEuropean Commission have apolicy pursued higherthan thepeakdemandofEUregioncountries isfar asawhole. as thesumofindividualpeakgas demandsacross individualEuropean Countriescanrely ontheslackinneighbouringsystems, electricity networks. been theexperienceofother their IEAmembercountriesininterlinking andcostsavings, whichhas benefits couldbringefficiency interconnected, gas prices.Further, itisargued if thatthedistinctregional systems, paidrecord high less than50%capacityin2005whenGermancustomers pipelineswere usedat import Forexample, Norwegian toobtain. difficult very are underused,implying alackofoptimisation,althoughdata the mostpart, Proponents ofcompetition pipelinesare, for inGermany thatimport counter portfolio to seven unnamed bidders who took delivery over athree-year whotook delivery toseven period unnamed bidders portfolio bcmfrom its provided andwas fullysubscribed.E.ON Ruhrgas auctioned3.7 capacity In May 2006, theannualauctionwas withtransportation conducted unsuccessful. programmes were under-subscribedandthey were regarded by themarket as capacity, however, transportation associated release meantthatthe first gas three within Germany. saw years E.ONoffer 2008. Thefirst A lackof of19 a total toselloff E.ON committed bcminsix annualauctionsuntil merger ofE.ONandRuhrgas was madesubjecttoagas release programme – brought aboutby large-scale capacityswaps andrelease programmes. The tradingthathastaken placehasbeenaroundThe limited asset ownership companies. stake inthetransportation has afinancial incaseswhere theincumbentsupplier Thisismademore difficult the system. within services transportation rights across themultiplecompanies thatoffer forcompanies withcompletely capacity toco-ordinate new customers difficult principle,itisparticularly constrained pipelinesaccordingtothe“rucksack” capacityon over togain taking existingcustomers transportation for suppliers liquid markets intheUnited KingdomortheNetherlands. Whileitispossible arethe mainplayers buttheserates highcompared atpublishedrates, with are providedbuild abusinessasdependablesupplier. by Balancingservices foranew entrantbecausenew entrantsrequireworthless capacityto firm market capacityisalmost basis.Thisinterruptible onaninterruptible capacityfrom tothe timetobecomesavailable, and isoffered Short-term 111

© OECD/IEA, 2007 PRICING PRICING ANDTAXES INVESTMENT 112 discussed above. majority ofthisgas willnot bedelivered inGermany forthesamereasons order totransitgas from theBelgianhubatZeebruggedown toItaly. The inthepast capacityontheTENPsystem managed topurchaselong-term toget accesstocapacityinGermany. have sometraders try Nevertheless, Netherlands toliquid hubsintheUnited Kingdom,BelgiumandFrance than the Germanmarket. Traders itthrough the itmucheasiertotransport find and Emden.WhenEmdenisthepointofauction,gas isunlikely toenter E.ON Ruhrgas itsauctionpointannuallybetween Waidhaus mustalternate from thelesssuccessfulauctionin2005. cubic metre (mcm)carry-over million bcmbasicvolume, plusa570 sales covering thisyear’s entire 3.13 arrive. higherthaninprevious Demandwas with imports significantly years fromandDutch October2006atBunde/Emden,where Norwegian starting competition inGermany. Thisisperhaps theclearest signalthattheresuppliers. isalackofgas-to-gas between gas supplyanddemand andtheprice,hasnot been changedby market share, thispricingmethodology, any whicheliminates interaction marketstable share compared tooil.Thoughgas now hasasubstantial helpingachieve quarter. Thistypeofpricingensures volumeevery offtake, are linked tothepriceofgas oilandreset electricity prices.Domestictariffs of oil.Forexample, inaminorityofcases,thepriceis linked tocoalor prices forfueloilandgas as well, instead oil.Otherelementscanbereflected basisrelative totheaveragequarterly oftheprevious sixorninemonthsof oil prices.Natural gas inGermany are pricestoindustrial consumers set ona oil, thoughthere isatimelagfor gas pricestochangefollowing changesin which iseithergas oilorfueloil.Thusthepricesforgas are directly linked to customer shouldpay nomore andnolessthanthecostofcompeting fuel, Gas pricinginGermany isbasedonthe“market value” principlethatthe gas market was by pipelinesystem. constructingaseparate was seeninthe1990s, theonlymeansforWingas tobreak intotheGerman companies asnew entrantscannot get accesstotheexistinginfrastructure. As in Germany willlikely have tobedriven by oneofthelarge incumbent capacity asinliquid gas markets inIEAcountries.New large-scale investment ofauctioningunused infrastructure There whenthey isnosystem seefit. oftheoldgasversions model,andenhancetheirpipelinesystem German gas companies havetheir commitmenttothenew maintained

© OECD/IEA, 2007 TAXES 17. Natural GasMarket Review the relevant unreasonable. border. MBtu atNBPintheUnited KingdomandUSD8.31 perMBtuattheGerman per 7.36 7.08 perMBtuforLNG purchasedinJapan,USD United USD States, Hub inthe 6.57 permillionBritishthermalunits(MBtu) atHenry were USD In 2006,theunweighted average wholesale pricesinmajor IEAgas markets havesuppliers breakdown followed suit,publishingadetailed oftheirtariffs. Germany’s second-largest gas company, RWE, andanumberofmunicipal the company topublish itsgas pricecalculationsinNovember 2005. ofgas major E.ONRuhrgas Germansubsidiary led ofanorthern rising tariffs against Germanconsumers the A class-actionlawsuit by anumberofnorthern company itsown customers. inordertouse itsgrid toserve market share from E.ON.Commercially, itmakes littlesensetobuyfrom a entrants have proved sofar unwilling tocontractfrom E.ONinordertotake Ruhrgas aso-calledchoicemarket installed totradegas quantities, butfew competition asthey mightlosemarket sharepenaltyclauses.E.ON andface have not yetmeaning thatsomeimporters risked openingtheirnetwork to volumes ofgas by way intocertain oftake-or-pay clauses, tie importers oil tradingtopricingbasedongas trading.Unfortunately, thesamecontracts Germany, thisclausecould be triggered, switchingfrom gas pricingbasedon the righttorenegotiate thecontract.Thus,ifagas hubwere set upin changeinthegas marketsubstantial conditionsinGermany, has eitherparty However, intothesamepricingcontractisclausethat ifthere written isa 8-18% in2006. prices have not thedecrease changeddespite inregulated accesscharges by customer by meansofamarketing discount.Itisforthisreason thatcustomer has littleincentive toeatintoitsmargins andreduce thepricefor the value chain.Without gas-to-gas provider competition, thetransportation provider increasingrevenue, thecostssomewhere elsein orthetransportation pressure grids islikely toresult ineithertheproducer getting more netback costonhigh- gas. Therefore,and transporting reducing thetransportation the samepriceforgas asforoilproducts irrespective ofthecostproducing According tothe“market value” principle,theconsumerin Germany willpay increased dramatically since 2000. The only tax increase thatdirectlyincreased affects dramaticallysince2000.Theonlytax many direct butoilproducts Germanecological taxes, have seentheirtaxes Having alow carbonfootprint, naturalgas not hasso far beenthefocusof Domestic consumerpricesare controlled 17 Länder , IEA/OECDParis, 2007. cartel authoritiesandcanbeforbiddenifproven cartel ex post ex by the Bundeskartellamt and 113

© OECD/IEA, 2007 CRITIQUE SUBSIDIES 114 added tax (VAT)added tax ongas consumption. 5.50perMWh.Inaddition,Germany alsoleviesavalue- natural gas are EUR for rates increases inview tax ofrecent risesinenergy prices.Thestandard among other things.TheGermangovernmenttax hasnow ruledoutfurther onnaturalgas,rates liquefied petroleum gas (LPG)andheavy heatingoil, 2003.Thislaw raisedthepetroleum tax January asfrom 1 effective eco-tax the December2002thatmodified natural gas was thelaw on23 enacted gas for only26%ofitsgas supplies.Expanding the sizeofliberalised market reform, asthesingle European gas market isdependentonRussian GermanyGazprom. shouldpress aheadwith Inordertomitigate thiseffect, increase GermandependenceonRussian gasfurther and,therefore, on Stream pipelinewillhelpincrease ofsupplyroutes, diversity itwillinevitably degree ontheactivities ofonecompany, Gazprom. WhiletheplannedNord thatitssecurityofgasGermany supplydependstoalarge shouldbewary supplier isRussia, with35%of theGermangas market (42%ofimports). frominterconnections avariety ofcountries,butnoLNGThelargest terminal. German gas supplyisrelatively withpipeline welldiversified, single European gas market. German policymakers have togain realised thatthey similarlyfrom stand the and securityoftheEuropean power market, anditisimpressive toseethat in companies are from already andconsumers theopportunities benefiting market isessentialfortheprogress ofthesingle European gas market. German development ofcompetitionFor thesereasons, intheGermangas thefurther is itslargest gas consumerandishometosomeofitslargest gas companies. Sittingattheeconomicandgeographical centre of Europe,exports. Germany sector, andRussian gas beingafoundationcustomerforDutch,Norwegian Germany hasplayed aleadingrole inthedevelopment oftheEuropean gas shares inenergy businessessuchas Becauselocalmunicipalitiesownsector) subsidiselarge industrialusers. Effectively, (predominantly thismeansthatother inthedomestic consumers competitivenessdesigned toaidtheinternational of Germanindustry. companiesmanufacturing pay only0.2196 eurocents perkWh.Thispolicyis iscurrently 0.3659eurocentsup duetothetax perkWh,capmeansthat on theadditionalmark-up Astheadditionalmark- duetotheecologicaltax. sector hasitsgasThe manufacturing cappedbecauseofa40%refund taxes transport, subsidisingtheprovision ofpublictransport. transport, suchas loss-makingsectors businessestosupport income from energy-related Stadtwerke , they are abletousetheir

© OECD/IEA, 2007 pipelines stilldonot have accessinGermany remains akeyThird-party unresolved issue.Major trunk competition accessto pipelines. intothegas sectoristoenforcethird-party inintroducing step Experience ofIEAcountrieshasshown thatthefirst thispaceofreform.therefore needstomaintain these reforms. WhileGermany itstillhasmuchtodoand iscatchingupfast, interests, theGermangovernment shouldbepraisedfortheintroduction of available capacity. Given thesizeandstrength oftheentrenched corporate in principle)hasbeenimplemented tomanageshortages (the “rucksack” entrants regarding access topipelines.Acapacitymanagementmechanism method decisionshave illegal. beenmadeinfavour Several court ofnew model,rulingthehistoricalcontracting gas tradingbasedonanentry-exit a regulator anddevolved power tothatentity, andithasalsoimplemented progress impressive thatGermany hasmadeinthistimeisvery –ithasset up the gas sector, andisnow catchingupwiththeEuropean average. The In thepasttwo however, years, reforms toaccelerate in Germany hasstarted switching intheIEA. highest wholesalegas pricesandsomeofthepoorest ofcustomer rates little reform Asaconsequence, toolate. Germany hassomeofthe implementing too the lastdecade,Germany haslaggedbehind,often many IEAcountrieshave implemented reforms totheirgas over sectors toGermany withinacompetitivesuppliers market framework. While andenergydiversity securitycanalsobeimproved through new provides securityofsupplythrough fullycompetitive markets. Supply and demand.Recently, ithasrefocused which oneconomicefficiency, The Germangas market isheavily onsecurityofsupply concentrated terminals. asEurope hasaccesstoglobal through LNGexisting imports particularly Germany willlower Germany’s Gazprom supplydependence, effective European gas market by genuinelyimplementing gas-sector reforms in between these providers, but this voluntary initiative isunlikelybetween tobe theseproviders, butthisvoluntary the many networkisbeingadvanced by operators aco-operationagreement To toremedy this problem, greater co-ordination ofpipelineaccessacross try the BNetzA. unavailable ortooexpensive, sothecompanies would thenhave toappeal access,capacitymay be if itwere toattempt to gain transportation required. Even have thelarge effort theresources ortheincentive toundertake company would choosethissecondoption).Asmallcompany isunlikely to tonegotiate onitsbehalf(thoughitisnotthe mandate clearwhy a orgive theTSO operators must negotiate withmultipletransmissionsystem a new gas supplycompany across more totransport thanonemarket area, it For thatmayto entry. create barriers system contract” modelisacumbersome ex ante ex regulated rates. The industry-drafted “two- Theindustry-drafted regulated rates. 115

© OECD/IEA, 2007 116 in the interim). More effective Morein theinterim). effective companies mustimplement theregulator’s decisions (though transportation basis to appeal,inwhichcasetheregulator mustruleonacase-by-case ex ante ex linked toapply inany way Theregulator istrying withtheexistingoperators. accessthatisnot operator–tomanagesystem called independentsystem better forGermanyIt would befar to set upanautonomousentity–aso- to bookcapacitywithinamarket area, butmore work stillneedstobedone. Recently,entry. improvements have beenmadetoreduce theburdenrequired layers, agas theGermanmarket shipperentering may alarge barrierto face ofvarious sizesspreadgas operators across themarket’s system three different have With minority stakes inmostgas over operators. system 750separate providers, especiallyastheincumbentholdingcompanies still transportation Questionsstillremain astotheindependenceofthese sufficient. operators to publish this information, but only under certain circumstances. to publishthisinformation,but onlyundercertain operators InGermany, terms. discriminatory there isanobligation forsystem that they have deniedaccess togrids been unfairly orgranted access on players tostudythe market andchallengenetworkifthey believe operators two Flow minutes. informationenables allmarketon theinternetevery informationisposted IntheUnited Kingdom,flow-based of historicaldata. is available onthesame day years that alsocarriesfive onapublicwebsite incumbent networkInFrance, operators. informationondailyborderflows Turning totransparency, muchmore informationshouldbeprovided by the operator.system one market area orhubby assigningthejobofquality conversion tothe ifmultiple gasworld bebeneficial qualities within couldbeinterchangeable of thegas qualities (TTF),themainDutchhub.It atthetitletransferfacility quality gas gas tolow-quality whenrequired, isconverted andtomatchone one commodityfortradingpurposes.Forexample, inthe Netherlands high- at grid points,thethree interconnection gas qualities canberepresented as development ofasingle balancingzone.Through theuseofquality conversion gas ofthree qualitiesexistence different inGermany doesnot prevent the trading.The transaction costsandincreasing thenumberofcounterparties wholesale markets becausethesizeofeachmarket isexpanded,lowering Fewer balancingzonesgreatly improve liquidity andtransparency inthe Ultimately, Germany shouldaimtocreate asingle zonefortradingpurposes. operator.zone withonesystem similar annualgas consumption toGermany’s andusesonlyonebalancing cheaplyandsafely.efficiently, Forcomparison, theUnited Kingdomhasa operatorwould allow thegridindependent system ittooperate more companies. Finally, enlarging thesizeofgas market through one procedure mechanism,anadministratively cumbersome forall “rucksack” auctionofcapacitywouldprocess. avoid Furthermore, theneedfor regulation of pipelines, but transportation companies are allowed regulation ofpipelines,buttransportation ex ante ex regulation couldprevent thislaborious

© OECD/IEA, 2007 trunk pipelines, effectively imposing trunk pipelines,effectively automating thecustomer-switchingprocess, implementing regulation of includingreducingby thenumber of balancingzones, theBNetzA, current Germangas market model.There ismuchongoingwork inGermany the government have already recognised someoftheweaknessesin there are encouragingsignsthatbothdecade. Nevertheless, theBNetzA and making thesamemistake itdidwithnegotiated pipelineaccessinthepast –by Germany optingfornegotiated access tostoragefacilities risks history There isreason tobecautiousaboutGermangas market reform given its through themin2004. bcmpassed bcmperyear, butonly25 have combinedcapacityof54 atotal from Norway imports low asset utilisation.Forexample, pipelinescarrying be drawn from pipeline regulation where contractshave long-term resulted in companies bookthemajority contracts.Alessoncan ofcapacityonlong-term onanannualbasistoallmarket players ratherthantoletthis service such awealthofstoragecapacityinGermany, itshouldbepossibletoauction andtherefore Withsupply are essentialtocustomers essentialtosuppliers. andflexible access.Storage services supply policy–isopentothird-party sector toensure thatastoragemarket –apillarofgovernment securityof integrated utilities.Thegovernment willneedtomonitordevelopments inthis trading. Existingandplannedstorageinvestments are controlled by vertically storagewillquickly becomearestrictivepipelines isestablished, ingas factor providing acushionagainst accessto upstream problems. Once third-party and itisapromising signthatmany new storageprojects are underway, gasGermany currently storagecapacityintheworld, hasthefourth-largest ofcompetitiontrunk lines,forthebenefit andsupplysecurity. disclosure requirementsput inplacemandatory thatapplyatleasttoall impossible burdentoovercome. authoritiesto We encouragetheregulatory access relies ontheregulator toinvestigate allpotential abuses,an third-party Without orconsistent. thisinformation,effective forthcoming becausetherelevant informationisnot These regulations are insufficient contestable gas marketcontestable inGermany andEurope. toafully Thisisthecriticalstep accesstonetworks. genuine third-party toimplementits powers afunctionaltwo-contract model thatprovides and beingconsidered. Mostimportantly, theIEAurges theregulator touseall reason place tobecautiouslyoptimisticaboutthereforms currently taking ofaslowOverall, Germany’sapproach despite toreform, there history is market. ofoversightpowers todetectandprevent ofinterest inthe possibleconflicts oftheregulator by thefindings providinggovernment more tosupport eagerly awaits theresult oftheseandother investigations andurges the overseeing TheIEA theco-ordinationagreement operators. between system ex ante ex network tariff rates and rates network tariff 117

© OECD/IEA, 2007 RECOMMENDATIONS 118 ◗ The government ofGermany should: ◗ ◗ ◗ ◗ ◗ ◗ ● ● demonstrate to themarket that: market value,forexample through auctionsofstandardised units. accessible website. flow informationavailableby pipelineonadaily basisviaapublicly gas transmission network. balancing zones,withanultimategoalofcreating asingle balancingzone. competition authorityandgive themthepower to act Germany. investment innewinfrastructure, terminalsin includingLNGimport encourage newgassources to enterthe Germanmarket, Europeanaccess to existing LNGterminals. as thiswillenhancesupply forGermany, diversity such asthrough gaining Ensure non-discriminatory third-party accessto gasstorage third-party Ensure non-discriminatory facilitiesatfair Ensure thatallpipelineoperators make andexit historical andcurrent entry Consider establishing asingle independentsystem operator forthecountry’s system andreduce thenumberof Implement afunctioningentry-exit Ensure thatadequate resources are av Monitor theincreasing and gassuppliers concentration ofexternal Press aheadwithmarket reform andinterconnections withtherest ofEurope, Unbundling ofgasnetwork companies isenf areGas networks subjectto practical accessconditions. third-party ailable to thenetwork regulator and orced required. to theextent e.g. ex ante by greater to

© OECD/IEA, 2007 ELECTRICITY GENERATION CAPACITY CAPACITY, GENERATION ANDDEMAND oa 2. 100% 122.6 since 1985, when nearly62%ofelectricity was from generated coal.At the electricity (50%)was from generated coal.Thisrepresents ageneraldecline 29% over 15%, atanaverage of1.4%. annualrate In 2005,thelargest share of Table 18). Over electricityconsumption thelastdecade, total hasgrown by Germany, aslightincrease from andan8.1% 2004 increase from 2000(see 6% ofelectricitywere in generated terawatt-hours (TWh) In 2005,over 613 7.4 submission. Source: Country Total Hydro, biomassandother renewables gas, whichprovides about11% ofgeneration, had14% capacity. ofinstalled renewable energyaconsequence technologies, oftheirintermittency. Natural oftimeaplantisgeneratingpower outofthemaximum– percentage 15%.with windalonetotalling thelow –the Thisreflects capacityfactor electricity generation(seeTable 18), itrepresented alarge share ofcapacity, While combinedrenewables (excluding hydro) provided about10% of 36% ofcapacity. nuclearcapacitycomprised 17% Installed capacity. oftotal Coal madeupthelargest share; together, had bituminouscoalandlignite Germany hadover 120 gigawatts (GW) ofcapacityin2005(seeTable 17). id1. 5 17% 38% 81% 86% 15% 14% 16% 17% 18.4 51% 17.2 83% 19.6 20.8 20% 12% 24.5 14.7 Heating oil,pumped storageandother Natural gas Wind Lignite Nuclear Bituminous coal eeaigCpct yTp,2005 by Capacity Generating Type, Table 17 aaiy hr fttlCapacity Share oftotal Capacity G)cpct factor capacity (GW) ELECTRICITY 119 9 © OECD/IEA, 2007 120 rate (2010-30)rate Average annualgrowth 002143. 4. 842. 96421.3 0.2 4.2 0.0 0.0 4.3 0.0 29.6 10.6 0.0 10.1 26.2 0.0 4.7 16.6 24.9 0.0 4.3 16.0 0.0 23.1 68.4 4.8 14.7 19.6 0.0 4.8 12.5 0.0 21.1 9.0 44.2 148.3 28.5 12.4 0.0 19.3 10.4 10.1 101.6 26.1 0.0 23.1 9.6 31.9 7.7 69.4 0.0 19.2 22.7 26.7 5.2 63.0 130.1 21.7 16.0 291.4 31.7 4.5 58.5 163.1 21.8 10.6 37.7 5.4 292.9 54.5 9.4 167.1 17.4 2020 3.1 305.4 58.4 1.7 165.1 2.5 17.4 2010 306.6 19.1 52.5 0.1 164.8 2005 314.2 17.1 43.2 171.3 0.0 2004 17.5 291.5 0.0 40.5 169.6 2003 301.6 0.0 wind,etc. 28.0 153.1 2002 0.0 299.0 66.0 gas 152.5 2001 Total 296.4 65.0 138.6 Oil 14.6 2000 Geothermal 321.6 55.6 1995 Biomass* 322.4 24.1 1990 6.5 Hydro 293.5 1985 242.8 Solar, 1980 229.9 Natural 1975 1970 Nuclear GWh Coal Unit: Sources: 5.1 * includingindustrialandnon-renewable municipalwaste. n.a.=not applicable. 3.7 31.6 24.9 97.2 195.0 0.0 232.0 Share in2005 2030 largest growth from hasbeeninelectricity generated renewables (including fromgenerated nuclear(27%) hasremained since1985. mostlysteady The doubled, from 5.4%in1985 to11.3% in2005.Theshare ofelectricity fromsame time,theamountof electricity generated natural gas hasnearly Change (2010-30) (1985-2005)rate Average annualgrowth Change (1985-2005) Energy BalancesofOECDCountries 2.%–0.%9.%100 .%2.%–48 156 –5.3% 2125.6% –14.8% 20.7% 8.0% 120.0% 92.0% –100.0% –20.8% 98 66 13 .%32 .%17 0.0% 1.7% 2.7% 3.2% 4.6% 11.3% 26.6% 49.8% 02 .%31 ..04 .%03 ..0.5% n.a. 0.3% 4.4% 17.8% 0.4% n.a. n.a. 10.3% 3.1% 264.9% 12.7% 0.5% n.a. –0.2% 148.0% 17.6% –5.3% 12 100 .%40 .%09 08 68 –0.3% 16.8% –0.8% 0.9% 0.4% 4.0% 3.3% –100.0% –1.2% lcrct eeain 1970to2030 Generation, Electricity Table , IEA/OECDParis,2007submission. andcountry 18 600.0 622.5 595.6 566.9 532.8 520.6 466.3 383.8 308.8 589.5 610.0 581.8 613.2 547.7 567.1

© OECD/IEA, 2007 DEMAND 20 30 40 50 10 0 9518 9519 9520 0521 0522 052030 2025 2020 2015 2010 2005 2000 1995 1990 1985 1980 1975 Mtoe increases inallother fuels. decreases inelectricityproduced from coal,oilandnuclear, alongwith generation isforecastby anaverage tofall of0.3%,reflecting annualrate In ordertomatchdecliningdemand,from 2010 electricity to2030,total 3.9% in1985 to4.9%in1995 to10.1% in2005. share hasgrown atanaverage of9%since1995, annualrate risingfrom biomass, solar, hydro andwind, excluding non-renewable waste). The Sources: sectors. agricultural,andother non-specified fishing * includescommercial,publicservice, 200MW. 700MW, aslightdecrease from peakof77 the2004 76 Germany’s highestpeakloadin2005was recorded on15 Decemberat by smalldecreases inresidential andother sectors. tobeoffset expected 2010 and 2030.Smallincreases inconsumption intheindustrialsectorare Total between consumption toholdflat final (TFC)ofelectricityisexpected followed by theresidential sectorandother sectors. annually. Thelargest share ofelectricity, sector, 45%,isusedintheindustry in thelastdecadeoutpacedgrowth from 1985 to1995, whichaveraged 0.4% average annualincrease of1.4% over thelastdecade(seeFigure 14). Growth Total consumption an Mtoein2005,reflecting final ofelectricitywas 44.5 Energy BalancesofOECDCountries ia osmto fEetiiyb etr 1973to2030 byFinal ConsumptionofElectricity Sector, Figure , IEA/OECDParis, 2007submission. and country 14 Residential Other* Industry Transport 121

© OECD/IEA, 2007 REFORM ANDREGULATION MARKET DESIGNANDREGULATION 122 regulatory agencyintherelevant German regulatory mostly households.Increases insuchpricesrequire approval from the However, – pricecontrolsforthesmallestconsumers are stillmaintained began in1998. are Currently free allcustomers tochoosetheirown suppliers. Germany iscontinuing theprocess ofliberalisingitselectricitymarket, which unbundling to legal unbundling. unbundle from 13 July2005andwillnot berequired tostrengthen this were required 000customers toaccount withfewer than 100 operators July2007. Distribution system they are required tolegally unbundlefrom 1 required were customers toimplement functional andaccountunbundlingfrom 13 July2005; 000 withmore than100 operators Distribution system 2005. July were required operators system tolegally unbundlefrom 13 withrespect to EUrequirements.of theindustry, thestandard Transmission implement legal from unbundlingofmonopolynetworks thecompetitive sides inside andoutsidetheenergy sector. Overall, Germany to haselected transit fees,andseparatingnetwork operationfrom companies’ other activities The mainfeatures ofthenew legal framework relate tonetwork accessand 000customers. regulating networkwith fewer than100 operators are responsible for agenciesintheindividualGermanstates Regulatory 000customers. andnetwork withmore than 100 operators German states and railway spanningtwo ormore postal networks telecommunications, (the fees forelectricityandgas. Enforcementlieswiththenetwork regulator under it(inforcesince29July2005)governing grid accessandtransmission in forcesince13 legislationenacted July2005)together withsecondary framework Act( by thenew Energy Industry As aresult, theenergy sectorinGermany was given anew regulatory marketsecond internal directive. accesswas oftheEU’s madewiththeimplementation regulated third-party access,was Theswitchfrom untenable. negotiated to negotiated third-party agreement, whichprovided forcomplex,determined thatthevoluntary associations.However, with theindustry through consultation in2003itwas ung 2+ subsequently twice.Under updated thethirditeration, agreementeliminating theneedforgovernment was regulation. Thefirst (VDEW,associations ofpower andindustry producers BDIandVIK), under Initially, access(TPA) third-party was tohave beenprovided andregulated electricityatmarket andhencetoobtain also free prices. toswitchsuppliers Bundesnetzagentur ebneeenaug1 Verbändevereinbarung , grid companies set theirown grid accessconditionsandgrid fees , BNetzA), whichregulates electricity, gas, , a1998 agreement between voluntary Land Energiewirtschaftsgesetz . However, are thesecustomers Verbändevereinbar- , EnWG,

© OECD/IEA, 2007 MARKET DESIGN either ontheEuropean Energy Exchange (EEX),where Germany’s electricity is buyand sellelectricity entitiesandgenerators load-serving Instead, country. Germany doesnot have asingle market designated operatorfortheentire withmarket consultation participants. after decisions concerningthedesign ofGermany’s electricitymarket are made marketestablish designfeatures. Forlegal aswellpracticalreasons, The 2.) information, seeChapter tolower theirgridoperators feesby between 6%and 28%.(Forfurther in progress attheseagencies.RecentBNetzA rulingshave required electricity Approvals agenciesintheindividualGermanstates. are currently regulatory Responsibility forapproving electricitytransitfeeslieswiththeBNetzA and overruled by thegovernment. the rulingchamberofBNetzA cannot be underany circumstances withapproval terms specific Decisionsby from thecabinetvery ofministers. the government, butcannot bedismissedby thegovernment, except under government. Thepresident andvicepresident oftheBNetzA are by appointed whoare not by appointed andcannot bedismissedby the officials oftheBNetzA are oftherulingchambers Members through thecourts. BNetzA that are canbeappealed taken by independentrulingchambers withquasi-judicialare rulingchambers independence.Decisions of the ofEconomicsandTechnology.the FederalMinistry Itsdecision-makingbodies Telecommunications, TheBNetzA isapublicagencyunder now theBNetzA. AuthorityforPosts and ofthethenRegulatory department When thenew actcameintoforce,energy regulation was madeanew and toexpanditinlinewithdemand. secure, thisnetwork reliable, high-capacityenergy supplynetwork, tomaintain while assuringsecurityofsupply. Networkare required operators a tooperate provides theBNetzA withaclearlegal tokeep mandate down transitfees, andenvironmentally compatible supplyofgrid electricityandgas.efficient It consumer-friendly, possible,asecure,public with,totheextent affordable, ante ex time,electricityandgas transitfeesare generallysubjectto For thefirst Under the power abusecases. the aredownstream underway energy of toexpandthepowers markets. Efforts control, aswellmonitoringforanti-competitive behaviour inupstream and Bundeskartellamt Bundeskartellamt regulatory approval.regulatory Thenew EnWG hastheobjective ofproviding the Netzzugangsverordnung , makingiteasiertoinvestigate andprosecute market , thecompetition authority, hasresponsibility formerger , theBNetzA hasconsiderableauthorityto 123

© OECD/IEA, 2007 124 € owymre or2 90 4 29 16 0 41 28 79 29 39 28 – 23 32 68 9 5 1hour 55 69 102 1hour – 2 27 45 market 1/2hour 1/4hours 1/4to3 2 Day ahead market hour 1 market market 70 Norway 36 50 market United Kingdom market day 3timesduring Sweden 6times duringday market Spain 1/2hour market Netherlands Italy 5 market Germany 27 France market day 24 Finland market 51 27 Denmark 1/2 ahead Belgium hybrid 12 44 “ex-post” 56 Austria hour 32 the TSO boughtpower). the TSO rather theaverage soldpower andtheaverage pricewhentheTSO pricewhen Europe in2005(they are not two prices,but necessarilyreflecting separate their scheduledeviations.Table 19 provides average balancingpricesacross balancing market. orloadare charged Generators thefullcostsincurred from procures themissingsupplyfrom, orsellsthe excess supplybackto,the operator schedule,thetransmissionsystem fromdeviates itsday-ahead deviations following thistrading,operating inreal time.Ifageneratororload balance. Abalancingmarket couldbeusedtomanage supplyanddemand inordertobe quarter-hour before minutes every their schedulesupto45 Intraday tradingmakes itpossibleforGermanmarkettochange participants loadisscheduled. models are runafter dispatch security-constrained Instead, generation orloadcanbeserved. dispatchmodelsinadvance todetermine ifthescheduled security-constrained operatordoesnotin any run tradingmechanism; thetransmissionsystem Germany’s electricitygrid doesnot currently exist,itisnot taken intoaccount Ascongestionon parties. by contracted EEXorthebilaterally country inthe operators directlybe submitted tooneofthefourtransmissionsystem to tradeviaEEX.Theday must before, balancedschedulesforindividualhours (directlytraded, orcontractbilaterally witheachother); there isnoobligation oadmre a ha 72 13 24 37 day ahead market Poland /MWh of fixed closure TSO sell TSO buy TSO sell TSO closure of fixed aktGt vrg vrg Spread Average Market Gate Average rcsprice prices aacn ped nErp,2005 Balancing SpreadsinEurope, Table 19 € /MWh price € /MWh

© OECD/IEA, 2007 8 Over-the-counter (OTC) tradesare outsideaformalexchange, tradesconducted typicallybilaterally 18. explicitly matcha buyer andaseller anonymously. exchanges Inrecent tohedgecredit someelectronic years, risk. OTC platformshave emerged, which from formal willpurchasecredit clearingservices counterparties Often between two counterparties. counter trades. counter forover-the-trading inelectricityfutures. It alsoprovides clearingservices aswell provides ormulti-hourblocks, trading forsingle hours day-ahead of turnover, secondonlytoNord Pool. IntheGermanelectricitymarket, EEX through Europe theEEX,leadingenergy exchange interms incontinental Market canbuyandsellpower inGermany’s participants market day ahead all Germancontrol areas hasbeenintroduced. acommonbalancingmarketrequirements Furthermore, for forparticipation. including makingsmallerunitsforbidspossibleandlowering thetechnical Inaddition,theconditionsfornew entrantswere improved, blocks). minute periods,suchas15- (mostcountriesuseshorter products to4-hourblocks orduration,of theterm, andshorten will addtransparency tothesystem The BNetzA hasrecently approved changestothebalancingmarket, which tosecure supply.payments tobenecessary comparable markets. Ontheother capacity hand,someconsiderguaranteed energy only). Theresult seemstobemore expensive balancingthaninother thebalancinggroup responsible pays forbalancing the transmissiontariffs; market’s are includedin energy trading(thoughcostsforcapacityreservations are coupledwiththebalancing thesecapacityreservations reserves, minute unpredictable disturbances.InGermany’s control markets and forsecondary asaback-stop incaseof toserve asoperationalreserves separately reliably andatlow costby allowing fortrade inreal time.Capacityistendered energy was Inmostmarkets ratherlimited. itispossibletobalancethesystem addition, in2005,thenumberofmarketproviding balancing participants balancing energy market andamarket In forcapacityoperationalreserves. amixture ofapure real-time of EUR46perMWhcouldbethatitis,ineffect, Germany’s balancingmarket anddeviationfrom theaverage 2005spot price oftheexplanationlarge spread in at roughly thesameprice).Part ( average spot priceandthatthespread between thetwo converges towards zero energy market isthatitsaverage buyandsellpricesconverge towards the Thesignofawell-functioningandcompetitiveoperating efficiently. balancing large inGermany,2005 was very indicatingthatthebalancingmarket was not Compared withother countries,thespread between thebuyandsellpricesin price forallpower boughtorsoldinthathour. tothemarket themarket, andEEXclears postoffers providingsellers asingle price separationbetween thefourareas postbidsand (orAustria).Buyers trading inthefourtransmissionzonesofGermany, butthere hasnever been in2006(seeFigure 15). in2002tonearly600TWh TWh EEXoffers 150 i.e. buyers werebuyers were generallyabletobuypower abletosellpower andsellers 18 Liquidity inthismarket hasbeenincreasing, risingfrom 125

© OECD/IEA, 2007 TRANSPARENCY 200 300 400 500 600 700 0 ERGEG, 20. 19. 100 0 126 Montel Power News commercially sensitive and that unit-specific commercially sensitive andthatunit-specific against provision, onespecific are notingparticular thatgeneration data things. Many Germancompanies have argued against theguidelines,in generationandbalancing energy,access tointerconnections, amongother load,transmissionand onsystem forpublicationofdata minimum standards inspection. ante ex publishing E.ON, hasrecentlypublicly released. started OneGerman TSO, all European electricitymarkets. acommonframework(ERGEG) issuedtransparency for guidelinestoestablish In August2006theEuropean Group Regulators’ forElectricityandGas available capacityinreal time,aswell and beginninginApril2006,includinginstalled the postingonEEXofdata The transparency ofGermany’s electricitymarket hasimproved recently, with Source: VDEW(associationofpower producers). about 55%ofGermany’s capacity. total are provided that data association,estimates for industry energy-intensive VIK,the onthewebsite. amountsofcapacitywere misreported significant there have isperformed; beencaseswhere ofthedata verification third-party andno aresuppliedby generators voluntarily by fueltype.Data differentiated Markets TWh 33 0220 0420 Halfyear 2006 2005 2004 2003 2002 117 , 2August2006. Guidelines ofGoodPractice onInformationManagement andTransparency inElectricity 150 data ongenerating capacity,data in suchasthermalpower plant blocks , “Intheslow lane?”,p.6,December2006. orfast 49 rdn oue nEX 2002to2006 Trading Volumes onEEX, 342 391 60 Figure 338 20 398 The guidelines,whichare set voluntary, 15 19 86 516 602 ex post ex ex ante ex 43 net production data, 556 data shouldnot be data 599 market Futures Total market Spot

© OECD/IEA, 2007 GENERATION STRUCTURE INDUSTRY 21. Data for2012 Data and2016 before the release ofGermany’s were reported revised secondnational 21. allocation plan under the EU-ETS.. allocation planunder theEU-ETS.. oa 2. 100.0% from natural gas and8%from lignite. be online,with34%coming from hardcoal,30%from renewables, 26% MWofnew capacitywill 500 By2016,lignite. forecasts that44 the industry from hardcoal,26%from renewables, 24% from naturalgas and9%from 122.6 500MWofnew capacityisplannedtobebuiltby 2012,31 with39%coming that future capacityadditions.The Germanelectricityassociationreports these plantswillnot bebuilt,theplansprovide ultimately anindicationof forclosure. nuclearplantsslated Whilemany of existing plants,particularly currently intheplanning,preparation orbuildingphaseinordertoreplace projects forpower plantsusingboth conventional fuelsandrenewables are Though demandforelectricityisforecast toremain relatively construction flat, New generation submission. Source: Country Total producing foritsown sellingbacktothegriduse. andindustry generators self- in 2005;theremainder industry camefrom independentgenerators, (see Tablein thecountry 20).Over 85% ofgenerationcamefrom theBigFour EnBW andVattenfall). ofgeneration Combined,theBigFourhave three-quarters Four large electricitycompanies generationinGermany dominate (E.ON, RWE, and distribution. cross-ownership there by issignificant theseincumbentsinretail Furthermore, capacity andalsoown apieceofthetransmissionnetwork. andoperate integration, withlarge incumbentsthatown themajority ofthegenerating Germany’s electricitymarket by ischaracterised ahighdegree ofvertical tes3. 25.8% 27.7% 21.2% 74.2% 13.9% 11.4% 31.6 34 26 91 17 14 Others (BigFour) Subtotal RWE E.ON Vattenfall EnBW aaiyOnrhp 2005 Ownership, Capacity Table aaiy(W Share Capacity (MW) 20 21 127

© OECD/IEA, 2007 128 Source: Country submission. Source: Country by theIEA. oracceptance endorsement Note: Theboundariesandnamesshown andthedesignationsusedonthismapdonot imply official Bel. Lux. Neth. France 2 kV 220 kV 380 ot Sea North ao substation Major station Converter line/cable overhead HVDC Essen

Saar Cologne Ems Moselle voltage Operating

Karlsruhe Switzerland Rhine

Neckar ofGermany’s Map Transmission Grid Ruhr Dortmund

Bremen Weser Frankfurt Hanover Figure Stuttgart

Denmark

Fulda Werra Hamburg

16 Aller

Main Lech Elbe

Danube Nuremberg

Munich

Saale Havel

Peene Isar Leipzig

Inn Elbe Berlin oSweden To zc Republic Czech Dresden 04080

atcSea Baltic Oder Austria Km Poland

© OECD/IEA, 2007 TRANSMISSION 2 IntheUnited Australiaandsomeother States, markets,access”istypicallyreferred to as “third-party 22. European countries(seebox). ofseven inparts millioncustomers 15 thateventually affected an outage Germany resulted in In November innorth-west 2006,a transmission outage between one another governing theirinteractions. have operators formalagreementsIn addition,thefourtransmissionsystem from andcentralEurope. countriesinwestern operators transmission system for theCo-ordinationofTransmission ofElectricity(UCTE),anassociation oftheUnion theiroperationsundertheterms co-ordinate four grid operators discriminatory third-party access third-party discriminatory Figure 17). mustprovide operators non- Thefourtransmissionssystem managed by Vattenfall andoneinsouthernGermany managedby RWE (see zones, plustwo smallzones,onecovering theHamburg area metropolitan and Vattenfall Europe Transmission, dividedintofourlarge withthecountry unbundled companies, E.ONNetz, RWE Transportnetz, EnBW Tranportnetze The BigFoureachown vialegally theirown andoperate transmissionsystems Transmission systemownershipandoperations ratherthanbeingmanagedwithinGermany.pushed totheborders situation withinGermany, likely congestionthatisbeing internal reflecting made available forcross-border tradevaries accordingtotheoperational transmission constraintsare not publiclyavailable. Transmission capacity on littlecongestion,butdata very transmissionlines.Germanyvoltage reports 000kmofhigh- presented inFigure 16. Thenetwork ismadeupofover 110 Germany’s transmissiongrid, includingmajor is generationfacilities, transportation regardless oroperation. oftransmissionlineorpipeline ownership transportation andtransparent accessto “open access”.Thisregime gives allmarketnon-discriminatory participants ehia alr.Acrigt hsivsiain rdsafddntmake not did failure.According tothisinvestigation,technical grid staff E.ONinvestigationinternal tohumanerror andnot theoutage attributes were by backonline.An less thantwo whichtimeall customers hours, in andnormalconditionswere 38minutes established after stabilised procedures, werepass. Following generally theinstalled systems across theEmsRiver Pearl inordertoallow cruiseshipto theNorwegian scheduled deactivation transmissionline by E.ONofanultra-highvoltage asMorocco. asfar Thecontrolledextended loadsheddingfollowed the of Germany andseveral other Europeanparts western countries,and On 4November hit15 2006,anelectricityoutage million householdsin The November disturbance 2006electricity 22 to their networks for all generators. The forallgenerators. to theirnetworks 129

© OECD/IEA, 2007 130 actual availability capacity, oftheallocated network investments and the capacitycanonlybeusedforguaranteeing the allocationofcongested backtothemarket.must beoffered Under EUregulations, revenue from as there isnocongestion)underuse-it-or-lose-itprovisions; unusedcapacity withcongestion (auctions are notborders usedattheborderwithAustria using explicitauctionsat Cross-border tousers capacityisallocated Republic. theNetherlands andtheCzech withDenmark, the timeonborders 22).Cross-border between capacity iscongested 63%and100% of (see Table by theEU(seeTabletargeted 21). However, congested thiscapacityisoften to about16% capacityandabove oftotal the10% level interconnection capacityin2005 wasconnections. Interconnection 15 to17 GW, equivalent Germany’s network islinked power toitsneighbours’ grids viacross-border Cross-border transmission transmission system operators are beingimproved. operators transmission system shedding andtheinvestigations, forco-ordinationbetween standards procure additionalresources from other areas. Asaconsequence oftheload for dealingwithtransmissioncongestion,includingmarket optionsto disconnection andreconnection tothegrid, rangeofoptions andalimited aninabilitytocontrol automatic oldwindinstallations’ operators, system co-ordinationbetween adjacenttransmission includedinsufficient factors cause ofthedisturbance.Italsofoundthataggravating about theprimary oftheE.ONinvestigationElectricity (UCTE)concurred withthefinding investigation by theUnion fortheCo-ordinationofTransmission of Apreliminary transmission lines,control ormonitoring systems. being improved noevidenceofany malfunction ofthe technical are operators forco-ordinationbetween transmissionsystem standards other areas. Asaconsequence oftheloadshedding andtheinvestigations, congestion, includingmarket optionstoprocure additionalresources from the grid, rangeofoptionsfordealingwithtransmission andalimited control automaticdisconnectionandreconnection to oldwindinstallations’ the causeof primary aninabilityto operators, ordination between adjacenttransmissionsystem the about co- investigation disturbance. Italsofoundthataggravating includedinsufficient factors E.ON the for theCo-ordinationofTransmission ofElectricity(UCTE)concurred with of finding the investigation Apreliminary control by ormonitoringsystems. theUnion was there no evidenceofany malfunctionofthetransmissionlines, technical but analysis, situation use ofalloptionsforacomprehensive and UCTE, Source: E.ONNetz, System Disturbance on4November 2006 E.ON Netz reports onstatus ofinvestigationsE.ON Netzreports , Interim Report, 30November 2006. Report, , Interim , press release, 4December2006

© OECD/IEA, 2007 Source: Country submission. Source: Country by theIEA. oracceptance endorsement Note: Theboundariesandnamesshown andthedesignationsusedonthismapdonot imply official Belgium Luxembourg Netherlands France ot Sea North Dortmund 3 Map ofGermany’s Map Transmission Zones Switzerland 1 Stuttgart Figure 2 Denmark 4 17 Bayreuth 3 4 3 2 1 atnalErp rnmsinGmbH Transmission Europe Vattenfall GmbH Strom Transportnetz RWE GmbH Netz E.ON AG Transportnetze EnBW Sa fVDN) of (Seat Berlin 4 zc Republic Czech 04080 Austria Km Poland 131

© OECD/IEA, 2007 132 Länderregulierungsbehörde appealed totheBNetzA ortherespective regional regulator, the All decisionsongrid accessandfeescanbe currently beingdrafted. ordinance thatgoverns grid accessfornew power is plantsinmore detail Industry Actandtherespective ordinance( Industry accordingtotheEnergymet. Costsforgrid connectionsare apportioned minimumconditionsare network ifcertain accessandmustbeconnected Connections ofrenewables underspecialrules,asthey operate have priority free accessofnew generationguidesgrid investment andconnections. Actandtherespective ordinancerulefordiscrimination- The Energy Industry accessandinvestmentGrid transmission tariffs. thattheremaining revenue report wasoperators usedtoreduce orbuildnewexisting interconnections ones.Thetransmissionsystem revenue, thetotal EUR20millionto30was spenttoreinforce Of congestion revenues ofEUR400millionto500 from auctions. earned three thatmanageinterconnectors Germangrid operators intoenergy markets, 2006sector inquiry from 2001February to2005the AccordingtotheEuropean Commission’s network tariffs. country’s orincreasing capacities,orto reduce interconnector the maintaining wdn60600 1200 14 950 550 800 3300 3800 600 2400 1100 16 960 1600 700 550 1200 2850 3000 availableSource: ETSO; from www.etso-net.org/NTC_Info/map/e_default.asp. 4000 forBelgiumnotNote: available. Data 1400 2260 All neighbours Sweden From Germany Poland Denmark-East Denmark-West Netherlands France To Germany Switzerland Czech Republic Austria Available capacitiesinMW Available Transfer between Capacities Germany n t egbus Winter 2006/07 and itsNeighbours, . Table 21 Netzentgeltverordnung ). Anew

© OECD/IEA, 2007 zc eulc— lvka2 1% 7% 11% 10% 12% 18% 19% 16% 33% 2% 33% 1% 30% 0% 27% 35% 8% 37% 16% 0% 41% 36% Czech Republic—>Slovakia 30% Slovakia —>CzechRepublic 63% 48% 81%Czech Republic—>Poland France —>Belgium 64% —>Spain Portugal 68% 32% Poland —>CzechRepublic Spain —>Portugal 0% 90% 0% 30% 96% Poland —>Slovakia 100% 63% Spain —>France** 100% 35% France —>Germany 100% 100% United Kingdom—>France 63% Germany —>Czech Republic** 69% Czech Republic—>Austria Germany —>France** 88% 95% 96% Belgium —>Netherlands 99% Netherlands —>Germany** 100% Czech Republic—>Germany 100% France —>Spain Germany —>Netherlands** France —>United Kingdom Netherlands —>Belgium Germany —>Denmark France —>Switzerland Slovakia —>Hungary emn >Asra0 0% 0% electricity markets Source: European Commission, toanaverage** Refers ofmore than Thearrows TSOs. thedirectionhours. indicate perborder, by different insomecasesreported whenrequested* Hours capacityexceeded available ofall cross-border capacityasapercentage Germany —>Austria egu >Fac %0% 0% 0% 1% 0% 0% 0% 0% 1% 0% Belgium —>France —>France Italy Switzerland —>France Austria —>CzechRepublic France —>Italy G e r m a n y

— > rs-odrCneto nErp,2004and2005 Cross-border CongestioninEurope,

S w i t z , Table 23,16 2006. February e r l a n d * * Sector Inquiry under Art. 17 under Art. Sector Inquiry Regulation 1/2003onthegasand one interconnector betweenone interconnector two adjacent borders. Table a-a 04Jan-May2005 Jan-May 2004 22 0 % Share congested* ofhours 1 % 133

© OECD/IEA, 2007 134 implement between two tofully 6% and28%.TheBNetzA steps proposal contains by large gas andelectricitynetworktolower theirgrid operators tariffs subject to Currently, grid feesare operatorandthen set by eachtransmissionsystem fees across European countries(seeTable 24). comparingnetwork grid sectiononprices,includingatable fees,seethelater discussionof transmission same foralldistributioncompanies. Forfurther isthe oftheUnited Therate States. similar tomethods usedinmany parts perkWofmaximumdemand, rate atasingle rate, stamp” flat “postage Transmissionrates. charge distributioncompanies operators viaa system to distributioncompanies,viaretail whichpassthemontoend-usecustomers Grid fees,whichcover transmissionoperationsandinvestments, are charged fees Grid lines were added. 200kmofnew transmission ofthisinvestment, 1 in 2002and2003.Aspart withinvestmentnetworks, and2005being32%above in2004 investment over EUR4.9 billiontoupgrade transmission andexpandtheirhigh-voltage Nonetheless, inthe seven between years 1999 and2005,they have spent Transmission nocongestionintheirgrid areas. report operators system the grid, with spillover effects to neighbouring countries, particularly the toneighbouringcountries, particularly the grid, withspillover effects tohighlevelsamounts ofwindgeneration cancontribute ofcongestion on Large making managinggrid andoperationsmore voltage difficult. asproduction rampsintermittent, upanddown withlittleadvance warning, operations, thoughgrid securitywas never inseriousdanger. Wind energy is grid tothegridwind capacityconnected at theendof2006–hasaffected capacity thathascomeonlineinrecent –there years were over 20GW of transmission ofallelectricityby suchplants. Thelarge amountofwind prioritypurchaseand andtoguarantee rates atstandard their system required toconnectplantsgeneratingelectricityfrom renewable sourcesto Under theRenewable are Energy operators SourcesAct(EEG), grid system Wind power integration compared withcompetitors.performance “yardstick” regulation, whichrewards networkonthebasisoftheir operators gains. foresees Thesecondstep imposition of efficiency expected reflect Progressiveoperators. thatreduce therevenue x-factors capwould attempt to Germany. Therevenue revenues capwould limittotal earnedby grid compared networks, tobenchmarkingstudiesfrom outside transportation across withinGermany grid and,withrespect operators to efficiency arevenueinstitute ineconomic capaimedatreducing major differences ex ante ex ex ante ex cost-plus regulation. In2006,theBNetzA ordered many incentive-based regulation in 2009. The first step isto step incentive-based regulation in 2009.Thefirst

© OECD/IEA, 2007 DISTRIBUTION ANDRETAIL following conclusions: the tooptimisewindpowerdisregards integration, offers opportunities addresses theexpansionofwindpower between 2005and2015 and ofthestudy, part which as wellgrid Thefirst and power plantoperators. national grid, withthe involvement ofrepresentatives from thewindindustry commissioned by theBMWi ontheintegration ofwindpower intothe theGermanEnergy Agency,In thislight,in2005,DENA, publishedastudy negativeoperations couldalleviate aspectsofwindintegration. togridNetherlands andAustria.Modifications rules,regulations and Stadtwerke manyelectricity sectorthroughregional andlocalutilities,or thecountry’s cross-ownershipThere inGermany’s ofdistributionandretail issignificant both on13 large andsmalldistributionnetworks July2005. must onlyhave functionalandaccountunbundling,whichwas phasedinfor until1July2007.activities willnot comeintoeffect Smalldistributionnetworks from retail 000customers) large distributionnetwork(more than100 operators transmission islegally unbundledfrom other activities,fulllegal unbundlingof There are over 400distributionnetworkinGermany. operators While ● ● ● 100 000 customers), butthe 000customers), 100 (including many smalldistributionnetworkwithfewer than operators across European countries(see Table 24). comparing grid sectiononprices,includingatable fees, seethelater fees discussionofdistribution network accesstotheirgrids. Forfurther third-party aboveownership are 20%). Distributiongrid obliged to provide operators theBigFourare not requiredonly applieshenceforward; todivest existing operatorisaminoritystake of20%orless(this Four inadistributionservice restrictive initsapproval even ofsuchmergers ifthestake ofone oftheBig provide power. therequisite balancingandreserve legal approval procedures fornetwork mustbeaccelerated. extension, the ofplanningandinvestmentimplementation decisions,particularly ambitious. network isvery extension with thenew constructionofrecent thetimeframefornecessary years, network, there Compared are torapidimplementation. various bottlenecks measuresextension accountforonlyabout5%oftheexistingtransmission transmission networkgrid of850km.Althoughtheidentified by atotal No additional conventional willneedtobebuiltinorder power stations development ofwindpower,In ordernot toendangerthefurther ongoing new grid constructionsupto2015The necessary theexisting willextend . TheBigFourhave of stakes inalarge percentage Bundeskartellamt has becomemore andmore Stadtwerke 135

© OECD/IEA, 2007 136 payment conditions.The BNetzA iscurrently working tostreamline and administrative burden,including onerous informationexchange protocols and foundthatGermany’sinquiry switching procedures involved aheavy is not butishandledmanually. automated, TheEC’s 2006energy sector tocomplete a customer switch–switching It takes aboutsixweeks electricity. renegotiated contracts.Table 23shows by customerswitching rates volume of only 2%sincemarket opening,thoughthisdoesnot take intoaccount Customerswitchingisquite lowswitched suppliers. inthehousehold sector: sector, have allcustomers negotiated new contractsandover 40%have that have orrenegotiated switchedsuppliers theircontracts.Inthe industrial A major indicatorofacompetitive market retail isthenumberofcustomers Customer switching ntdKndm>5%>0 48% 19% 11% >50% 0% 44% 29% 9% Source: European Commission, >50% 22% isprovided.categories 0% separately, theaverage eachcategory doesnot across report twoNote: orthree Where thecountry – 0% 5% > Norway 3% >50% United Kingdom Sweden > – 15% Spain 25% 16%Portugal 0% Netherlands – 1% 7% 50% 4% Luxembourg 25% 0% Italy 50% 30% Ireland 56% 0% Hungary Greece 2% 5% Germany 41% 29% France 0% Finland > 82% Denmark > Czech Republic Belgium c. Austria 29% 50% 50% 20% Volume ofliberalisation sincestart consumptionswitchingsuppliers ofelectricity Electricity CustomerSwitchingRates Electricity ag nutil n uiesandhousehold andbusiness large industrial ag n eySalmdu nutilVery smallbusiness Small-mediumindustrial Large andvery Implementing theInternalEnergy Market Table 60% 32% 15% 23 , Annual Report 2005,Table, AnnualReport 3.1. c. 15% 10%

© OECD/IEA, 2007 WHOLESALE ELECTRICITYPRICES PRICES formats. ofuniformbusinessprocesseswas anddata madeforthespecification decisionasfrom theswitchingprocedures. 11standardise Afirst July2006 Source: VDEW/VDN, Germany. slightly above themasFrench priceshave more fallen quickly than thosein German priceshadbeenbelow those ofFrance, buthave recently climbed hydro),has ahighshare oflow-cost butbelow thoseoftheNetherlands. Wholesale pricesinGermany are above thepricesinNordic market (which greenhouse gas permits,butrecovered somewhat by theendof2006. Aprilbecauseofthesharpdropcrashed inlate inpricesforEuropean Union 2006, buthave generallylevelled, anddeclinedsomewhat, in2007. Prices Germanelectricitypriceswere mostlyonarising trend throughday-ahead European countries,are provided inFigure 19. Aswithpricesacross Europe, Wholesale electricitypricesinGermany, alongwiththoseofneighbouring mana lcrct rcsfrRsdnilCsoesb opnn,2005 forby Prices ResidentialCustomers Component, Electricity Me Co ge a Re Elect s urin m n n cess ew e 11% 10% ri n g, e c t, a 7% i i ty t o ble E n n n etwo fee a e x r Facts andFigures: inGermany ElectricityNetworks in2006 gy n e r r k b da gy So T 3% urn t i ll a in 14% ove ur g D ces Act(EEG) i st r t ri 4% a b x u Figure Total =18.69EUR/kWh t i o n 18 Coge n (2%) e ra t i o n Act P r ov 20% , p.9. Netwo i s i o n 29% r k ch ar ges 137

© OECD/IEA, 2007 Figure 19 138 Wholesale Day-Ahead Electricity Prices in Europe, 2006 and 2007

EUR/MWh 80 Endex

70

EEX 60

Powernext 50

40 Nord Pool

30

20

10

0

06 April 06 May 06 June 06 July 06 March 06 August 06 January 06February 06 October 06 January 07February 07 September 06 November December 06

Source: EEX.

© OECD/IEA, 2007 CRITIQUE NETWORK FEES RETAIL ENERGYPRICES this commitment and press forward with continuedreforms. this commitment andpress forward of anetwork regulator.establishment We urge the government tomaintain therecent inparticular topushliberalisationforward, necessary are pleased toseetheGermangovernment provide thestrong politicalwill Europe by lowering thecostsofsupplying power andensuringreliability. We integrated market, andallof Germancustomers something that canbenefit Suchimprovementssignificant. are criticalforEurope tocreate a genuinely the progress madetowards aliberalisedmarket sincetheIEA’s lastreview is Given thelargelocationofGermanelectricityindustry, sizeandstrategic Commission, covering both transmissionanddistributiontariffs. Grid feesacross Europe are presented inTable 24, by theEuropean asreported and2006bybetween 9%between 2004 2005and2006. 14% higherthanEuropean prices.Average pricesinGermany rose by 19% countries (seeFigure 21). and2006,Germany’s Between 2004 priceswere 10- Similarly, are alsohigherthaninneighbouring pricesforindustrialcustomers Averagelimited. pricesrose by 4%between 2005and2006. Cogeneration Act.Therefore, comparability topricesinother countriesis EEGand induced charges, suchastheconcessionfee,electricitytax, pricesforGermany Eurostat alsoincluderelativelyand Denmark. highfiscally twelve European countries,aswellhigherthanintheNetherlands, Belgium were more than25%above theaverage in pricefordomesticcustomers are quite customers high(seeFigureand industrialretail 20).In2006,prices Compared toother nearby countries,Germany’s electricitypricesfordomestic eurocents perkWh. 0.5 asofDecember2006,thechargeyears, was cappedatamaximumof hadtopay asmuch2eurocentsindustrial customers perkWhin recent Whilesome for theEEG,whichfundsGermany’s renewable feed-intariff. the government mustpay hascappedtheamountthatindustrialcustomers In ordertokeep Germanindustriescompetitive withthoseofother countries, remaining 10%. up thelargest shareOtherfeesmake (nearly40%)ofthetotal. upthe bill.Inaggregate,total government-mandated andother taxes charges make Following network charges, theprovision ofenergy takes upabout20%ofthe network charges, whichmake upalmost30%of themonthlyenergy bill. As shown inFigure 18, foradomesticcustomer, thelargest single costisthe 139

© OECD/IEA, 2007 140 Figure 20 Household Retail Prices in Europe, 2005 and 2006

EUR/kWh 0.16

0.14

0.12

0.10 Average 2005 0.08 Average 2006 0.06

0.04

0.02

0 Germany Netherlands Belgium Denmark Italy France United Kingdom Europe*

* includes Austria, Belgium, France, Germany, Finland, Ireland, Italy, Luxembourg, the Netherlands, Portugal, Spain and the United Kingdom. Source: Eurostat.

© OECD/IEA, 2007 Figure 21 Industrial Retail Prices in Europe, 2004 to 2006

EUR/kWh 0.12

0.10

0.08

Average 2004

0.06 Average 2005

Average 2006 0.04

0.02

0.00 Germany Italy Netherlands* Belgium Denmark United Kingdom France Europe** * data not available for 2004. ** includes Austria, Belgium, France, Germany, Finland, Ireland, Italy, Luxembourg, the Netherlands, Portugal, Spain and the United Kingdom. 141 Source: Eurostat.

© OECD/IEA, 2007 142 and underpinning agenuinelycompetitive market. level forallmarket reducing playing market field participants, concentration the regulator, achievement, isanotable asitwillhelpcreate a theBNetzA, anyto alleviate highconcentrationin themarket. of Thus,theestablishment themarket,competitively toenter whichwillhelp andpotential participants This encouragesexistingmarkettooperate the longterm. participants environment willbeinplacefor regulatory andstable thatafair participants functioning market, butalsoprovides signalstoexistingandfuture market independence from thegovernment not onlyhasthetoolstoensure awell- A regulator strong thathasaclear mandate, andsufficient powers wdn1141 740 33 37 – 40 17 72 34 39 67 50 25 – 30 10 – 62 69 4 41 48 62 11 48 184 – 48 48 51 313 – 7 37 36 13 9 – 53 170 Sweden 1 25 2 12 40 Spain 1 – 8 10 26 3 Portugal – 173 1 Norway 9 1 19 Netherlands 1 12 6 11 10 Luxembourg 2 1 3 1 Italy 950 120 Ireland 1 161 1 Hungary 53 26 91 327Greece 1 10 Germany 4 France 1 1 51 10 3133 Finland 1 1 Denmark Czech Republic Belgium Austria vrg 33 46 17 72 38 11 62 13 2 17-34 69 11-23 5-12 17 Source: European Commission, Average Lowest 3 Highest United Kingdom Transmission Network andDistribution Fees rnmsindsrbto o ag sr o-otg low-voltage for low-voltage large transmission distribution users ubro Nme fApoiaeApoiaeApproximate Approximate Approximate Number of Number of opne opne ( companies companies euae rgltdntoktrf ntoktrf o network for tariff network for tariff network tariff regulated regulated Implementing theInternalEnergy Market Table 24 € Mh omril residential /MWh) commercial , Annual Report 2005,Table, AnnualReport 6.1. ( € Mh ( /MWh) € /MWh)

© OECD/IEA, 2007 allowing themtotake betterinvestment monitor decisions. Whileregulators theirpoweroperate plants,forexample. They alsohave more information overgrid, givingthemadvantages competitorsof how interms besttobidand the generation dispatchdecisions are taken andhow affect transmissionflows in themarket mostprofitably. Thesecompanies have betterinformationonhow companies withouttransmission assets, giving key insights onhow tooperate have more market accesstosignificantly informationthangeneration Germany’s BigFourelectricitycompanies,ofthetransmissiongrid, asoperators incentives discouragecompetitionwhere isaccesstoinformation. distorted ensure equal access totransmissionforallmarketOneexample participants. to allefforts minimum requirementsaccess,butnot undertake forthird-party individual companies’ incentives are suchthat they willimplement the the terms, access toallmarketonopen,non-discriminatory party participants generation assets. Whilethetransmissioncompanies are third- required tooffer by theBigFourcompanies, of all whichcombinedhave three-quarters oversight. Ascurrently structured, transmissionassets are owned andoperated generation assets thisneed forastrong underscores regulator andclose The current reliance onlegal andfunctionalunbundlingofnetwork and and prices,helpingthembettermonitorthedevelopment ofcompetition. market. Thiswillalsoallow theseentitiestoconductfrequent ofcosts analyses andresources powers toproperly oversee andregulatehave the sufficient The government shouldensure thatboth theBNetzA andthe market anddiscourageappropriate investments innew energy infrastructure. harmthecarbonmarket, theelectricity such interference itwould alsodistort market theEU-ETS andleadtonon-competitiveaffect outcomes.Not onlywould competition authoritytorefrainany from actionthatwillnegatively taking orno-carbonenergy sources.Weuptake oflow- strongly encourage the cost ofCO that power are producers abusingtheirmarket positionby passingthrough the place.However,the first therecent decisionby the fromenhanced oversight exercising toolswillalsodeteractors market power in without creating undueburdensonmarketare welcomed.These participants inelectricitymarkets, sostrongernotoriously toolstomake difficult thiseasier implemented assoonpossible.Detectingandproving market power abuseis investigate andprosecute market power abusecases;thislegislationshouldbe ofthe expand thepowers thelegislationcurrently westrongly beingdeveloped to Furthermore, support Bundeskartellamt underway bySimilarly, thecompetition authority, weapplaudtheefforts the of CO market willunderminethevalue oftheschemeitself,whichistomake thecosts Bundeskartellamt by the costs.Interference costs –whether real costsoropportunity conditions, companies are topassthrough expected theirmarginal operating 2 emissions transparent tothemarket inordertocreate incentives forthe 2 allowances received forfree istroubling. Under normalcompetitive , tobettermonitorlegally unbundledbusinessunits. into thefunctioningofEUEmissionsTrading Scheme Bundeskartellamt in ordertomake iteasierto Bundeskartellamt Bundeskartellamt Bundeskartellamt that finds 143

© OECD/IEA, 2007 144 current effort is voluntary, reliability have isvoluntary, andincompleteness ofthe data current effort transparencytrade inthemarket requirements. subject tomandatory Asthe make initiative. theability to Marketdevelop often thisimportant operators isawelcome development.website TheIEAencouragesEEXtofurther Germany’s tradingplatform, toimprove electricitymarket transparency onits To byplaying creatingadvantages. field unfair thatend,theinitiative by EEX, the amongmarketdistorts As discussed,informationasymmetry participants a positive step. action planoftheEuropean Commissionincludesproposals alongtheselines, Therecentcross-border forthelongterm. 10 electricityflows 2007 January andreliable toensure efficient andenforceablereliability standards mandatory neighbouring countriesandtheEUtodevelop andimplement comprehensive, energyintegrated internal market, thegovernment shouldwork withits –withpenaltiesfornon-compliance. AstheEUmoves towardsmandatory an blackout, Germany shouldmake meeting UCTE,orother reliability standards, them. Aswas recently doneintheUnited following States theAugust2003 inplace,butdoesnothas reliabilityhave standards theauthoritytoenforce inEurope, operators UCTE, theassociationoftransmissionsystem mandatory. tohelpimproveimmediately securityistomake system reliability standards operator.single independentsystem thatshouldbeundertaken Onestep encourage Germany toconsiderconsolidatingitsgrid managementundera that couldhave from beenbetterisolated thewiderEuropean grid. We areas thenegativeco-ordination across exacerbated system impacts ofanevent Europe ofmanagingagrid; highlightsthecomplex thelackofseamless task November in 2006electricityoutage is managedby asingle entity. The4 butinpracticethisismoreflows, easilyaccomplished whenalltheinformation work together seamlessly, providing constantly informationaboutcross-border could operators Intheory, allsystem and managementoftheusereserves. to more allowing informationaboutelectricityflows, betterscheduledispatch andsafely, thegridoperate more asthey efficiently would have direct access the sizeofelectricitymarket footprint to would operators allow system covering allfourregions would have Mostnotably, many advantages. enlarging the current fourregions inGermany, operator asingle independentsystem couldbeputinplaceforeachof operators independentsystem While separate strongly urge Germany tomove tothisgrid managementmodel. Australia andinthePJM market intheAtlantic region oftheUnited We States. unbundling isthemodelinplacemany successfulmarkets, includingin operations withoutownership unbundling.Independent system ownership incentives forcompetition todevelop withoutrequiring of thethorny task operator managesthegrid would accomplish thegoalofcreating theright the monopolytransmissionassets toonewhere anindependentsystem wherefrom business unitsofgenerationcompanies asystem own and operate Moving andimperfect. practices,thisprocess iscumbersome discriminatory oflegalthe implementation andfunctionalunbundlingtoprevent

© OECD/IEA, 2007 transparency thelengthofindividual trading tothe market andshorten market Theproposal doesnot efficiently. by operate theBNetzA toadd merged many functionsintoonemarket, withthe result thatthebalancing securityinthecaseof emergency events.manage system Germany has other markets capacity, needed to forreserve suchasoperationalreserves from separately conditions whensupplyand demandchange–isoperated for balancingenergy –energy usedtobalancethegrid undernormal Germany’s balancingmarket isahybrid market. Inmostcountries,themarket through auctionrevenues orother means. torequire toexpandthiscapacity, transmissionoperators country either security.manage supplyanddemand,aswellsystem We strongly urge the rely oncheaperoutsidegeneration andalarger, integratedmarket to help expansions would provide asGermany greater could tocustomers, benefits transmission Instead, asitissocialisedacross thewholesystem. tariffs internally, onactual thishasasmalleffect are usedtoreduce network tariffs revenue Whiletherevenues toexpandtransmissioncapacityalongitsborders. smallamountof congestion, Germantransmissioncompanies useavery the Despite capacity, network tariffs. butalsotoreduce acountry’s purposes accordingtoEUlegislation,includingexpandcross-border capacity. Currently, revenues from cross-border auctionscanbeusedforthree exceeds theEUrequirement, thechronic congestionsignalstheneedformore market from thewiderEuropean one.WhileGermany’s cross-border capacity However, Germany’s separates congestionatmany borderpointseffectively commitment todeveloping market-based meanstomanagetransmission. helping improve competition inGermany, onits andwecommendthecountry capacityatGermany’s ofauctionstoallocate is implementation borders cross-borderthe widerEuropean The interconnections. market andsufficient through expansionoftherelevant market –through policyharmonisationwith reduced The highconcentrationofgenerationinGermany canbeeffectively Commission alsoincludessuchproposals, whichweapplaud. therecent 10reliability standards, 2007 January actionplanoftheEuropean market operations.Inaddition togrid couplingandenhancingsystem transparency provisions inallEuropean countries,betterenablingsmooth tohave standardised theopportunity transparency guidelinesoffer market informationisprovidedthat important manner. inaverified ERGEG’s andprovide generationdata theaggregatedspecific tothemarket, data so couldalsoaggregate thedata real-time unit- thatchecks Athirdparty status. available capacity, onlinepublicationofany withimmediate changestoplant provided Thedata shouldatleastinclude accuracy ofthedata. andtorequireverify the thatanindependent thirdparty mandatory standards gain.personal We encourageGermany tomake minimumtransparency themarket todistort for obligation toprovide creates anopportunity alldata, toprovide butnot the somedata, theopportunity Infact, participants. atlevelling formarket theinformationplaying field itseffectiveness limited ex ante ex 145

© OECD/IEA, 2007 146 no room for retailers to competeno room onprice. forretailers impedeImplementing competition regulated priceswould further by leaving they infact would theproblem exacerbate inthelongterm. customers, rising world energy prices.While suchpricecontrols would appear toprotect impose pricecontrols ofpoliticalpressure retail intheface from stemming to We are pleasedtosee thatthegovernment any efforts hasnot undertaken and incumbentutilities. for marketincludingwindgenerators participants, wind onthegrid shouldrely asmuchpossibleon incentives andpricesignals balancing costscouldberevised. Rules andregulations toseamlesslyintegrate rules ontheprediction ofwind, timingofgate closures andcharging of it.Forexample, –ratherthanjustaccommodate into thetransmissionsystem through revised grid rules,regulations andoperationsthatbetterintegratewind onnetwork security, canbemitigated effects detrimental butthese effects work tobetterintegratewindintothenetwork. Highlevels ofwind can have We theGermanEnergy Agency, are pleasedtoseethatDENA, hasundertaken enough infrastructure isbuiltin theplaceswhere itisneeded. investments ingenerationandtransmission–ensuringthat cost-effective government toputinplacemarket-based incentives thatdrive sensibleand andtheneedforcostlynew transmissionlines.Wesystem encouragethe signals willresult inhighercosts–both oftheoperationexisting interms need forlocationalsignalstoinvestors willrise.Acontinuedlackoflocational transmission. Astherapidpaceofbuildingnew windplantscontinues,the tobuildnew transmissioninplaces whereoperators itwillalleviate have policiesthatcreate incentives forthetransmissionsystem systematic in locationswhere they themarket are needed.Furthermore, designdoesnot are nomarket signalstoprovide incentives forinvestors tobuildpower plants Currentterm. market designwillnot helptomanagethislopsidedgrowth; there transmissionlinesoverlikely thelonger addtocongestionalongnorth-south ofthecountry, thiswill of Germany’s electricitydemandisinthesouthernpart Asmuch ofthecountry. part expansions are mostlyplannedforthenorthern windandcoal atthesametimethatexpected ofthecountry southern part phase-out ofnuclearpower willresult intheremoval ofgeneration from the theplanned the Netherlands andAustria.Furthermore, countries, notably congestionwithinGermany’screated thatspreads significant toother borders has,attimes, the country, thoughthelarge amount ofwindinthesystem congestionwithin limited very report Germany’s operators transmissionsystem and provide greater liquidity, helpingtolower overall costs. existing balancingmarket willincrease transparency ofhow energy istraded outcomes.ChangestoGermany’s todeliverAustralia thattend low-cost alternative balancingmarket designsinEurope, theUnited and States canlooktomany capacity.products, examples suchasreserve of Thecountry marketmaking itagenuinelyenergy-only thatdoesnot includeother shouldconsiderrevamping thebalancingmarket thecountry Furthermore, by andshouldbeimplemented step withoutdelay.periods isagoodfirst

© OECD/IEA, 2007 RECOMMENDATIONS ◗ ◗ ◗ ◗ ◗ ◗ ◗ ◗ ◗ ◗ The government ofGermany should: possible onmarket incentives andpricesignals. through revised grid rules,regulations andoperations, relying asmuch as resist efforts to impose regulatedresist pricesinthefuture. efforts add to congestion. built inlocationswhere they are needed–andnot inplaceswhere they will standards withclearpenaltiesfornon-compliance. basis. a non-discriminatory marketsufficient informationiseasily availableto allmarket on participants network. creating asingle independentsystem operator fortheelectricity transmission competitive electricitymarket. more inincreased interconnection capacityto reduce congestion. neighbouring markets, by encouraging companies inparticular to invest Promote competition through theremoval ofany regulated retail prices and Continue to work to betterintegra Provide market signalsto encourage newgeneration andtransmission to be Reform thebalancingmarket by creating agenuinely market. energy-only Require transmission system operators reliability to implement mandatory Work actively integra to further Work to improve transparency ofthewholesaleelectricitymarket sothat Implement independenttransmission system operations andconsider oversight andregulationEnable effective ofthemarket by: to improve framework develop theregulatory a Continue efforts to further ● ● ● ● outcomes, such asby unduly limitingpass-through ofenvironmental costs. or thecompetition competitive authorityinaway thatdistorts market as by conductingfrequent analyses ofcosts andprices. abuse ofmarket power. to thecompetition authorityto monitor, and competition authority. Refraining from interference inthemarket by thegovernment, regulators Monitoring pricesandcompetition intensityinthewholesalemarket, such Implementing theproposed powers legislationthatwillprovide sufficient Ensuring thatadequate resources are av te theGermanelectricitymarket with te windinto thetransmission network ailable to thenetwork regulator detect, punishandprevent the 147

© OECD/IEA, 2007 © OECD/IEA, 2007 NUCLEAR POLICY GENERAL OVERVIEW force fortheduration ofthecoalitiongovernment. was thattheexistingpolicy towards accepted nuclearenergy mustremain in majority inthe present parliamentforachange intheAtomic Energy Act,it issue ofnuclearpower. Given this situation,where there isunlikely tobea donot agree2005 federalelection,acknowledged thattheparties onthe The coalitionagreement ofthepresent government, negotiated following the Germany underexistinglegislation. nuclearpower plantclosure ofthe final date in 2022, theestimated estimations, Figure 22provides nuclearcapacityforecasts for2007 to of88%.Usingtheseclosurebased onthe2005loadfactor date Germany’s nuclearpower oftheirclosure plants,as well asestimates dates Table 26provides ontheremaining generationallowances data for issues surrounding itslicensing. linein1988operation fortwo before years beingtaken off becauseoflegal down oftheMülheim-KärlichPWRowned by RWE, whichhadonlybeenin Obrigheim in2005).Theagreement alsoprovided forthepermanentshut- havereactors beenshutdown sincethelaw was in2003and amended(Stade thus requiring allnuclearplantstobeclosedby theearly2020s.Two older generation allowance toeachplant,roughly equivalent toa32-year lifetime, Act by aresidual anamendmentinApril2002.Thisallocated lifetime generation, theprovisions ofwhichwere intotheAtomic Energy incorporated government andtheutilitiesin2000fororderlyphase-outofnuclear ending theuseofnuclearenergy. Anagreement was negotiated between the The 1998 federalelectionresulted inacoalitiongovernment to committed 300MW have acombinednet generatingcapacityofaround 20 11 pressurised (BWRs), (PWRs)and6boilingwater water reactors reactors The 17 nuclearpower plantsinoperationGermany, comprising generation. 88%. Overall, baseloadpower theplantsprovide almosthalfthe country’s electricity generationwithacombinedavailability of 26.6% oftotal factor byoperated theBigFourprivate-sectorutilities.In2005,they contributed Siemens Group) inthe1970s and1980s, andare almostentirely owned and Table ofthe 25).Allwere by constructed domesticsupplierKWU(part NUCLEAR ENERGY e (see 149 10

© OECD/IEA, 2007 150 Sources: International Atomic EnergySources: International Agency, E.ON, EnBW, RWE andVattenfall websites. hlpsug2PR13218 nWEnBW EnBW EnBW EnBW EnBW E.ON(75%), 1984 EnBW Vattenfall (50%),E.ON(50%) 1979 EnBW Vattenfall E.ON E.ON 392 EnBW 1 890 1989 1983 E.ON 1988 1976 PWR 305 1977 260 1 BWR 1 400 1 RWE (75%),E.ON(25%) 785 Philippsburg 2 RWE (75%),E.ON(25%) 878 PWR BWR E.ON RWE Philippsburg 1 PWR PWR RWE (87 RWE 2 Neckarwestheim E.ON(100%) E.ON(83.3%), 1984 1984 BWR 1 Neckarwestheim RWE 1984 E.ON Krümmel 360 288 1 E.ON(80%),Vattenfall (20%) 1 Vattenfall (66.7%), Isar 2 1988 RWE 284 1981 Vattenfall 1 E.ON PWR RWE BWR Isar 1 329 RWE 1 1976 275 BWR 1 Gundremmingen C 1986 RWE 1976 Gundremmingen B 771 PWR PWR 370 1974 Grohnde 1 240 1 Grafenrheinfeld BWR 167 1 PWR Ownership Emsland PWR Operator PWR Brunsbüttel Year ofgrid Capacity Brokdorf Biblis B Type Biblis A Plant name where itinvolves atransfer from anewer 2006, toanolderunit). InSeptember E.ON(66.7%), to another (althoughthisrequires approval specific from thegovernment in thatitprovides forgenerating allowances tobetransferred from oneplant E.ON The Atomic Energy inthe closure Actdoes allow ofplants, forsomeflexibility E.ON EnBW 1972 E.ON EnBW 640 1978 1968 345 340 Total 1 PWR (shutdown) Stade PWR PWR Obrigheim (shutdown) Total in operation Unterweser Operating andRecentlyShut-DownOperating Nuclear Power Plants (MW 0339 20 1319 21 e e)connection net) Table in Germany 25 Vattenfall (33.3%) Stadtwerke München(25%) Stadtwerke Bielefeld(16.7%) E.ON (33.3%) .5%), E.ON(12.5%)

© OECD/IEA, 2007 td 31 .9— — closeinthenextfew years. plants thatwill otherwise — likely beyond thenextelection.Applications were forfurther alsoexpected three whichis years, allow the planttocontinueinoperationforafurther 1580.34 RWE appliedtotransfersomeallowance toits BiblisAplant,whichwould 4.79 2021 2020 2022 0.00 623.31 2 2020 107.25 23.18 2018 2018 157.68 2016 155.60 8.70 residual 107.25 generationdata. fortheEnvironment, andNuclear Nature Safety (BMU)for Source: FederalMinistry Conservation 166.88 144.74 allowances between plants. 230.07 assuming88%capacityfactor, closure calculated * estimated dates andnotransferofgenerating 231.21 2016 129.53 2016 2012 129.40 2015 236.04 97.76 2011Total 217.88 2012 Mülheim-Kärlich Stade 200.90 198.61 Obrigheim 158.22 2009 2009 103.17 2009 94.77 56.81 2008 2 Neckarwestheim 84.22 34.18 Emsland 38.71 Isar 2 168.35 Brokdorf 160.92 117.98 150.03 16.25 26.03 78.35 Philippsburg 2 17.70 14.87 87.14 Grohnde Krümmel Gundremmingen C 81.46 47.67 57.35 Gundremmingen B 62.00 Estimated Grafenrheinfeld Unterweser Philippsburg 1 Isar 1 1 Neckarwestheim Brunsbüttel Residualelectricity Biblis B Biblis A Nuclear power plant Residual Electricity Generation for German Reactors andEstimated for Generation Reactors German Residual Electricity Dates ofShut-DownDates UnderExistingLegislation t1JnayAt 31 July At 1January 002006 2000 Table eeain(W e)closure date* net) generation (TWh 26 151

© OECD/IEA, 2007 MANAGEMENT NUCLEAR FUELCYCLEANDRADIOACTIVEWASTE 20 000 24 000 12 000 16 000 4 000 8 000 0 152 MW use incountries around theworld. gradually over Theplantsuppliesenricheduranium for thecomingyears. separative work units peryear, tobe implemented andthisisexpected a licencetoincrease thesite’s capacityfrom 1.8 millionto4.5 Westphalia, whichbegan operations in1985. In2005Urenco was granted Rhine- alargeoperates centrifuge enrichmentplantatGronau in North The British-Dutch-Germanuraniumenrichmentcompany Urenco owns and purchased from Canada,whichprovides slightlylessthanhalfofthesupply. and other nuclearplants.Most raw oryellowcake, uraniumconcentrate, is plantatLingeninLowerfabrication Saxony, whichproduces fuelforGerman France (66%)andSiemens AG (34%).Thisincludes thenuclearfuel owned by Areva NPGmbH,whichisjointlyowned by theAreva Group of restructuring oftheFrench nuclearindustry, theGermanoperationsare now Group were merged withtheFrench company Framatome in2001. Following The reactor constructionand nuclear fueloperationswithintheSiemens residual generationdata. fortheEnvironment, andNuclear Nature Safety (BMU)for Source: FederalMinistry Conservation generating allowances between plants. Note: assuming88%capacityfactor, closure calculated Estimated dates andnotransferof 0720 0921 0121 0321 0521 0721 0922 0122 2023 2022 2021 2020 2019 2018 2017 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007 20 339 e 19 172 19 16 376 16 siae ula oe aaiy 2007to2023 NuclearEstimated Power Capacity, 15 498 13 263 Figure 11 988 22 8 156 5 404 2 634 1 305 0

© OECD/IEA, 2007 CRITIQUE INSTITUTIONAL ANDLEGALFRAMEWORK individual by the activitiesinthissector are performed for radioactive waste. Supervisory responsibility forconstructionand operationofstorageanddisposalfacilities underthejurisdictionofBfS,whichalsohas nuclear fuelfalls storageofspent andintermediate power plants.Approval fortransportation present parliament. waste –includinghigh-level waste andspentfuel–withinthe lifetime ofthe toresolvedisposalofradioactive theirintention offinal thematter states suspended. However, thecoalitionagreement between thegoverning parties toallowyears thedisposalconcepttobere-evaluated, anditremains at Gorlebenwas suspendedin2001 foraperiodofbetween three andten forallclassesofwaste (includinghigh-level waste andspentfuel) repository However, thisissubjecttocontinuinglegal proceedings. Development ofa Lower Saxony andmedium-level wasteinMarch2006. was forlow- confirmed On radioactive waste disposal,planningapproval in fortheKonrad repository plant site. haveadditional facilities beenorare ateachnuclearpower beingconstructed Rhine-Westphalia andatGorleben, operation atAhausinNorth are disposal.Centralstoragefacilities in storagependingfinal in interim 1 July2005(onceexistingcontractshadexpired) andspentfuelisnow kept spentfuelforreprocessing asfromAct prohibited thesending offurther storage atGorlebeninLower Saxony. However, theamendedAtomic Energy high-level waste are currently beingcarriedout.Theseare sentforinterim France andtheUK,return ofvitrified shipmentstoGermany ofcanisters Spent fuelfrom was Germanreactors inthepastsentforreprocessing in generation over with theresult thecoming years, thatcarbon dioxide nuclear plantswillresult inincreased reliance forpower oncoalandlignite greaterDespite supplyfrom renewables andnaturalgas, theclosure of The phase-outofnuclearenergy inGermany challenge. presents asignificant in each However, theregulations are actuallyappliedby theresponsible department fortheEnvironment, andNuclear Nature Safety (BMU). Ministry Conservation Under regulations are thislegislation,detailed publishedby theFederal originally passedin1959 amendedin1985 andsubstantially and2002. intheAtomic Energy Act, The mainnuclearenergy legislationiscontained framework, the forRadiationProtection (BfS).Within this including theFederalOffice Land Land , under the general supervision oftheBMUanditsagencies, , underthegeneralsupervision . Länder authorities are responsible forthelicensingofnuclear 153

© OECD/IEA, 2007 154 present law foresees theclosure ofover 7000MW have behigherthanthey would been.The otherwise emissions willinevitably to thephase-outlaw andlifetimeforexistingpower extensions plantscould andtheeconomy,diversity Germany shouldreconsider thephase-out.Changes In lightofthenegative consequences forcarbondioxide emissions,supply nuclear programmes. countries, includingneighbouringare launchingnew orexpanded unchanged, Germany itselfphasingoutnuclearpower may whileother find building new nuclearplantsorare already doingso.Ifpresent policyremains Among G8countries,allexcept are Germany actively considering andItaly are reconsideringseveral theirpolicytowards memberstates nuclearpower. to renewed interest innuclearpower inmany IEAcountries.Within theEU, and theneedtocurbcarbondioxide emissions have led inthelastfew years Increased concernsaboutsecurityofsupply pricesforfossilfuels, heightened including renewables. needed, allowing forthedevelopment ofmore advanced technologies, Deferring theshut-down would alsogive more timeuntilnew capacityis revenues from theplantsinways thatare more productive fortheeconomy. other assets, whilecontinuedoperationwould allow companies toinvest the investmentsadditional near-term inconventional plantsand baseloadlignite ontheeconomy.effects Theshut-down oftheseproductive assets willrequire nuclear plantsrarely set themarginal price,itwillhave negative spillover onhourlyelectricitypricessince nuclear power plantswillhave effect alimited which meansthey baseloadpower. provide low-cost Whiletheclosure ofthe marginal costs ofnuclearplantsarerelative low tofossilfuels, andstable potentially capableofmany more ofsafeandeconomicoperation.The years from premature closure offullydepreciated generatingassets thatare An additionalconsiderationisthepossiblelossestoGermaneconomy This willrequire greater investment costsfornew transmission. ofthecountry. while muchoftheincreased demandisinthesouthernpart Germany most plannedcapacityadditionsofcoalandwindare innorthern todeveloptransmission lines,whichisexpected over the nextseveral as years, thecongestiononnorth-south willexacerbate ofthecountry southern part supply diversity. theclosure ofseveral Furthermore, nuclearplantsinthe supplies over reducing thecountry’s athirdofGermany’sgas, further imported likely result ingreater reliance ongas from Gazprom, acompany thatalready fuels. Inparticular, thehighergas needsthatwillarisefrom thephase-outwill through offossil increased reliance onimports energy suppliesinthecountry A nuclearphase-outwillalsoreduce energy security, reducing of thediversity with increases inrenewable capacityandenergy efficiency. commitmentforemissionsreductions undertheKyotocountry’s Protocol, even end of2012, addtothechallengeofmeeting the whichwillsignificantly e of nuclearcapacityby the

© OECD/IEA, 2007 RECOMMENDATIONS waste disposalissue. fornuclear power istiedtosolvingthenuclear suggest thatincreased support from 2,recentEurobarometerdiscussed inChapter publicopiniondata the government shouldbeencouragedtoadhere tothisdeadline.As todothisbyintent theendofcurrent parliamentisapositive and step, including spentfuelandhigh-level waste from of reprocessing. Thestatement disposalofradioactive wastes, forthefinal need todecideonaway forward Irrespective ofwhether thephase-outgoesaheadasplanned,Germany will atpresent.widely debated would require anamendmenttotheAtomic Energy Act,whichisnot being lifetime (beyond ofgeneratingallowances) extensions those duetotransfers lifetimes andinmany of atleast40years, However, casesupto60years. such these plants.Inother countries,similarplantsare tohave expected operating wouldyears) allow theoptiontobekept thelifetimes openofextending closeinthenextfew to someoftheoldernuclearunits(whichwillotherwise approval term, ofapplicationstotransfergeneratingallowancesIn theshorter changepolicygoals. climate thecountry’s plants inordertoaccommodate thelifetime paidtothepossibilityofextending existing early attention abouttheroledebate ofnuclear power inGermany’s fuelmix,with long-term fuel mix.We encouragethegovernment toengage thepublicinanational willbecriticaltokeepingconcessions. Publicacceptance nuclearpower inthe resulting ingreater overall carbondioxide reductions, aswellother also belinked toreduced emissionallocationsforfossilfuelpower plants, ◗ ◗ ◗ The government ofGermany should: framework to accomplish this. disposal withinthelifetime ofthepresent parliament andestablish alegal objectives. to betteraccommodateenergybe extended andenvironmental policy withwhethertheoperating plantsshould lifetimesmix, starting ofexisting security ofsupply andeconomiceffects. Adhere to thecommitment to onradioactive decideonaway forward waste Initiate anationaldebateonthefuture role ofnuclearpower intheenergy Reconsider thenuclearphase-outinlightofitslikely negative environmental, 155

© OECD/IEA, 2007 © OECD/IEA, 2007 POLICY OBJECTIVESANDPRIORITIES Current priorityfundingareas include: andresearch. ongoing evaluation process jointlyby thatisconducted industry energy supply. Forthisreason, theenergy research programme issubjecttoan breakthrough intheenergy sectorthatwillassistinsecuringasustainable areas assoonthere inspecific toallow are fine-tuning signsofa flexibility provides Thisdualstrategy asprioritytechnologies. ahighdegreeclassified of Second, arelatively broad not approach sectors istaken totechnology andsecure energy supply. toasustainable willcontribute medium term or thatineithertheshort clearpriorityisgiven technologies toselected First, The government relies inpromoting onadualstrategy energy technologies. ● ● ● ● ● ● ● programme, energy research The government’s energy research policyrests onitsfifth following goals: for modernenergytheGermangovernment technologies, the ispursuing Throughthe comingyears. thefundingofresearch anddevelopment (R&D) 2008. Theprogramme alsoformsthebasisfornational fundingpolicyin totheEUforperiodup announced inJune2005andsubmitted and storage. consumers theabilitytoadaptnew trends.consumers and responsiveness inenergy supplytoallow andflexibility industry related greenhouse gas (GHG)emissionsatminimumcost. productivity, raisetheshare ofrenewables andsecure reductions inenergy- primarily involves securingabalancedenergy mixtoincrease energy Fuel cellsandhydrogen. wind energy. Offshore Solar-thermal power stations. Photovoltaics. usingcoalandgas,New technologies power including CO station Securing andexpandingavailable toimprove technology both current policyrequirements,Making asoundcontributiontofulfilling which Innovation andNewEnergy Technologies RESEARCH ANDDEVELOPMENT , whichwas 2 capture 157 11

© OECD/IEA, 2007 INSTITUTIONS 158 research onnuclearfusion. geothermal, etc.); research onnuclearsafety andnuclearwaste disposal;and allother renewable energycommerce, tradeandservices; sources(hydro, solar, The programme inindustry, technologies alsoencompasses energy-saving ● ● Alongside theGermangovernment, theindividualGerman on energy. BMWi) andnuclearfusionresearch. TheBMBFalsofundsbasicresearch renewable energy sources,nuclearsafety (incloseco-operation withthe energy conversion, energy research covering for efficient technologies Bildung undForschung ofEducationandResearch( The FederalMinistry for Food,Agriculture andConsumerProtectionFederal Ministry (BMELV). sources. Responsibilityforproject-based fundinginbioenergy lieswiththe responsible forproject-based fundingrelating torenewable energy Environment, andNuclear Nature Safety (BMU)is Conservation forthe in nuclearsafety andnuclearwaste disposal.TheFederalMinistry energy research energy (excludingconversion and renewables), inefficient BMWi isalsoincharge ofproject-based R&Dfundinginnon-nuclear ofEconomicsandTechnologylies withtheFederalMinistry (BMWi). The energy research policyandthefederalenergy research programme itself ministries. Sincethen,responsibility fortheprogrammatic of orientation redesignated in2002andspread across anumberofgovernment Responsibilities forthefederalenergy research programme were promotion needfortargeted specific ofR&Dby thegovernment. responsibility,While R&Disprimarilyanindustry thegovernment seesa importantly as a means of accelerating market entry forenergy asameansofaccelerating market technologies. entry importantly butmore fundingtomaximumeffect, touselimited only asanopportunity offunding.TheGerman government worthy seesthisnot particularly andscience are considered from industry projects withpartners conducted public andprivateresearch and private businesses.Joint institutes researchNational fundingprogrammes andstate are open touniversities, projects onenergychangemitigation. andclimate level, sometimes fundedby publicmeans,fundresearchnational andstate regions. Publicresearch totheirspecific foundationsatbothbenefit the energy research energy thatare forselected technologies ofparticular Technologies andprocesses foruseofbiomassenergy. Technologies buildings. andprocesses forenergy-optimised , BMBF)isresponsible forinstitutionalfundingof Bundesministerium für Länder also fund

© OECD/IEA, 2007 FUNDING between 2005and2009. EUR 2billionbetween a30% increase 2006and 2009,reflecting on Hydrogen andFuel Cells Germany underthe Table 27 provides ageneralpicture offederalfundingforenergy R&Din works onsolarenergy,works research associationssuchas promotion Inaddition,through ofnew technologies. power station hydrogen andfuelcellissues,COORETEC,whichoversees the National Hydrogen andFuel CellStrategy Council,whichadviseson boardssuchasthe approval procedures,advisory speciallyestablished need forcareful co-ordination.Thiscomesintheformofstandardised involved actors Given intheenergy therangeofdifferent sector, there isa ● ● based ontwo policyinstruments: The Germangovernment’s promotion ofR&D fornew energyis technologies Energy Research Programme other activitiestouchingenergy research but not includedinthe billionforenergy R&Dbetween 2005 and2008.Consideringall 1.7 EUR Energy Research Programme receive thelargest shareR&Dfundingin2008.Within oftotal its fromwill renewables. fusion, renewables Apart andenergy efficiency increase willbeinfundingforbiofuels,alongwith largest percentage generally, beyond 2008.The tobeincreased andisexpected further institutes joinforces. institutes nuclear energy, andAG Turbo, onturbines,businessesand whichworks near-to-market issues. whosework anduniversities focusesmoreinstitutes onapplication and by conducted businesses, research subjectmatter and clearlydefined the handsoflarge research centres. of theircomplexity, equipment sizeandspecific needs,are bestplacedin mostly focusesonbasicresearch andtakes uptypicalissuesthat,because approach strategic intheenergythe long-term research community. This Project funding for particular research projects lifecycleProject withalimited fundingforparticular ofresearch and institutes Institutional funding,whichbooststheexpertise Fifth EnergyFifth Research Programme Kompetenzverbund Kernenergie , thefederalgovernment willprovide almost ) thefederalgovernment willprovide about ( e.g. Forschungsverbund Sonnenenergie the ainlInnovation Programme National . Funding hasrisen , which works on , whichworks , which Fifth Fifth 159

© OECD/IEA, 2007 160 Table 27 Federal Funding for Energy R&D, 2003 to 2008

Unit: Thousand euros Actual Planned Projected Share of Change (2003-2008) 2003 2004 2005 2006 2007 2008 2008 total Total Annual BMWi Efficient energy conversion 65 958 78 496 71 244 70 994 70 994 70 994 17% 8% 1% Nuclear safety and repository research 24 125 25 500 23 605 23 480 23 480 23 480 5% —3% —1%

BMU Renewable energies 67 798 60 083 80 394 83 366 88 366 93 366 22% 38% 7%

BMELV Biomass and biofuels 5 422 5 117 10 000 10 000 10 000 10 000 2% 84% 13%

BMBF Centres of the Helmholtz Association Efficient energy conversion 36 621 39 607 42 155 42 012 42 134 44 270 10% 21% 4% Renewable energies 24 396 26 442 28 267 28 307 28 613 30 271 7% 24% 4% Nuclear safety research 29 260 31 178 31 147 31 133 31 126 31 022 7% 6% 1% Fusion research 115 298 115 000 115 000 115 000 115 000 114 900 27% 0% 0% Networks of basic research into renewable energy and energy conservation 6 600 9 830 11 100 10 100 10 100 10 100 2% 53% 9%

Total 375 478 391 253 412 912 414 392 419 813 428 403 14% 3%

Note: Table does not include Länder government funding, or funding from outside the specified energy research programme (e.g. it does not include funding from the National Innovation Programme on Hydrogen and Fuel Cells). Source: Innovation and New Energy Technologies: The Fifth Energy Research Programme of the Federal Government, BMWA, p. 22, July 2005.

© OECD/IEA, 2007 RENEWABLES FOSSIL FUELS ENERGY EFFICIENCY KEY PROJECTSANDRESEARCHAREAS cases theindividual German geothermal energy, hydropower andcross-cutting research activities.In some BMU alsofundsprojects onsolar-thermalenergy, solar-thermalpower stations, The windfarms. and windenergy, theadvancement ofoffshore particularly among other things.In2006,research fundingagain photovoltaics targeted geothermal energy, solar-thermal heatingandsolar-thermalpower stations, approved more than100 new projects involving photovoltaics, windenergy, transferfrom rapidtechnology research tomarket.facilitate In2005,theBMU toimprovetechnologies, integration ofrenewables intothepublicgrid andto advancementsenvironmental andclimate-friendly inrenewable energy renewable energyandincrease tomake technologies theirefficiency, The mainaimsoffundingforrenewables research are toreduce thecostsof COORETEC (CO 2020. TheBMWitodevelop andresearchers hasworked the withindustry representing capacity, aroundstations, 40GW installed mustbereplaced by thatmoreThis islargely duetothefact than30%ofGermany’s power ofcoal-andgas-fired power plantsby 20%overefficiency thenext15 years. By fundingresearch anddevelopment, thegovernment planstoincrease the buildingrehabilitation. andsustainable options forsystematic ofexistingbuildings,theaimisoverallto rehabilitation improvement in today’s levels. objective The long-term iszero-emission buildings.With regard power,conditioning, lightingandauxiliary by another halfcompared with forspaceheating,water heating,ventilation, air- the energy necessary energy requirements,of new buildings,thegoalistoreduce primary including building.Inthecase andprocessesfocus istechnologies forenergy-optimised Within thegeneraltopicofenergy oneofGermany’s efficiency, mainareas of discussed below. While R&Dfundingspansmany areas, technology somekey research areas are and storage technology isapriorityresearchand storagetechnology area. goal istoproduce zero-emission power plants.Development ofcarboncapture coal andgas usedin,andthecostsof,electricitygeneration.Thelong-term programme’s aimsistoimprove reducing efficiency, theamountof facility 2 Reduction Technologies) programme. Oneofthe Länder are alsoinvolved inprojects, as isthecase 161

© OECD/IEA, 2007 NUCLEAR HYDROGEN ANDFUEL CELLS 162 of theresearch activitiesfundedby theBMELV. formerly non-productive land,suchasreclaimed mineland,are another focus forest timberpotential andtheplantingoffast-growing timbercrops on biomasslogistics,improved andanenergy useof material source.Efficient of thecompeting usesfordomesticbiomasspotential asafoodsource,raw role.fuel, play istheissue Ofgrowing anincreasingly important importance New processes tousebiogas gas infuelcellsor, cleaning,asanengine after ofbiogas facilities. increase both theeconomicandenvironmental efficiency in project approvals. Anelementofpriority isplacedonprojects designedto energy. intheuseofbiomassforenergy Improved plays akey role efficiency The BMELV promotes projects fortheuseofbiomassasaraw andfor material intoelectricityviaaturbine. thatwillthenbeconverted steam generate of a50-metre solartower. Theresulting hightemperatures willbeusedto three football pitches)willfeedsolarenergy intoareceptor atthetop located 000square metres (aboutthesizeof areain Jülich.Areflector measuring20 Rhine-Westphalia andBavaria andby ofNorth thecityutilityservices states thermal power tower inJülich.Theproject isjointlyfundedby theBMU, the In thesolar-thermalenergy sector, preparations are underway tobuildasolar- ofSchleswig-Holstein. by thestate part-funded Seaandis intheNorth intheBalticSea.FINO3willbesituated 2 islocated ofMecklenburg West-Pomerania,potential. Jointlyfundedby thestate FINO wind with theFINO2and3research platformstoexploitoffshore h eea oenetwl emkn bu U 500million available over the federalgovernment will bemakingaboutEUR Development, theBMWi andtheBMBFpresented inMay 2006.Intotal, forTransport,developed by BuildingandUrban the FederalMinistry The below collaboration.) inthesectiononinternational reducing radioactive waste are actuallyachieved. (Nuclear fusionisdiscussed nuclear safety, improving resisting proliferation and cost-effectiveness, and tofollow developments abroad regarding how theaimsofenhancing includingthoseinneighbouringcountries, safety ofnuclearpower stations, theGerman government’s capabilitytoassessthe tomaintain conducted Researchprojects by new willbe fostering talent. imminent lossofexpertise timely resolution an fortheissue ofpermanentdisposalandtocounter government upresearch planstostep intosafety a anddisposal,both tofind Though nuclearpower inGermany iscurrently beingphasedout,the National Innovation Programme onHydrogen andFuel Cells was jointly

© OECD/IEA, 2007 INTERNATIONAL COLLABORATION up a detailed working programmeup adetailed during2007. Strategy Counciland therespective willjointlydraw government departments way.environmentally sustainable TheNational Hydrogen andFuel Cell produced quantities inan ofhydrogennecessary canbeefficiently in Germany. issueinthisconnectionistoclarifyhow the Afundamental fuelcellapplications growth andportable inthemarket formobile, stationary promotion oftheemerging hydrogen andfuelcellsectorinordertoaccelerate and Theaimoftheprogramme years. the nextten support istargeted Cadarache, France. Germany’s research efforts underITERfocus onplasma Cadarache, France. Germany’s research efforts large-scale(ITER), aninternational fusionexperimentpendingcompletion at Reactor Thermonuclear Experimental totheInternational Germany isparty production ofhydrogen.environmentally soundandcost-effective commercial usefrom 2020onwards). OneofGIF’s development goalsis activities toinvestigate thepotential ofnextgenerationreactor models(ready for Forum(GIF),whichengagesIV International co-operation ininternational the future. Through EURATOM, Germany isanindirect memberoftheGeneration At level, theinternational R&Dwork isincreasingly for focusedonreactor systems sunbelt. neartheEarth’s thatcanonlybeoperated power stations from SpainandCaliforniainwork onsolar-thermal withpartners maintained forrenewables Closeco-operationisalso andenergyparticularly efficiency. co-operation withnon-OECDcountriesinwork transfer, ontechnology Forum(GIF). Italsoengagesand theGenerationIVInternational inbilateral fortheHydrogen Economy (IPHE) Partnership Forum (CSLF),theInternational operation initiatives. TheseincludetheCarbonSequestration Leadership Germany continuestoplay anactive role inanumberofthematicco- setting and basicresearch andisactive inother groups onR&Dpriority- intheexpert participates and cleantechnologies, toanumberofimplementing agreementsalso party relating tofossilfuels rational energy use,renewable energy sourcesandnuclearfusion.Germany is to25IEAimplementing agreements.party Inparticular, thesefocuson Germany is mainlytakes placeinthework oftheEUandIEA. partners In energyco-operationbetween issues, international Germany anditsresearch shaping thisprocess. and research, theGermangovernment plays anactivewith industry role in Programme 2007-2013 European research anddevelopment policy. The promotion policies.Germanresearch anddevelopment isthuscloselylinked to synergies between national and international becauseitfosters importance closeco-operationwithotherGermany countriestobeofgreat considers further defines theEuropean research defines area. Along further ad hoc Seventh Research Framework and expert groups. and expert 163

© OECD/IEA, 2007 CRITIQUE 164 fusion experiments. components, issuesconcerningplasmawall andthefuelcycle interaction in andITER materials developmentphysics, technological ofsuitable partnership with international programmes. withinternational partnership role,the future, includingin andinthis,Germany canplay animportant isessentialtoensurenuclear energy thatthisoptioniskept systems openfor funding atadequate levels. R&Donadvanced Lookingtothelongerterm, funding fornuclearR&Dandweencourageittocontinue this maintain operation.Therefore, weare pleasedtoseeGermany safe andefficient theircontinued tosupport theknowledge basenecessary need tomaintain Whether ornot thelifetimes ofthenuclearplantsare there extended, isa oncarboncapture andstorage. this area, inparticular fundinggoestoR&Din encourage thegovernment toensure thatsufficient addition, given thelarge share inGermany’s ofcoalandlignite fuelmix,we manner. andsustainable In inacost-effective biofuelstargets longer-term resources advances sothattechnology allow Germany toachieve itsambitious sharefunding, second-generationbiofuelsshouldbegiven ofthe asignificant improvements ascompared torenewables deployment. Within renewables to meet ofefficiency government andthecost-effectiveness targets and energy inlightoftheneedtodramaticallyimprove efficiency, efficiency government shouldstudycarefully how fundsbetween toallocate renewables not onlybetween renewables projects butmore broadly. Forexample, the for renewables shouldalways remain akey R&D,cost-effectiveness criterion, the share ofrenewables large outlays offunding initsfuelmix,necessitating andrenewables. WhileGermany isfocusedondramaticallyraising efficiency Broadly speaking,60%ofthepublic energy R&Dbudget isdevoted toenergy duplication ofefforts. procedures, ensuringahighlevel ofco-ordinationandreducing any We encouragethegovernment tocontinuemonitorR&Dfunding approval boardsandresearchstandardised associations. procedures, advisory projects. We are pleasedtoseeGermany address thischallengethrough aco-ordinationprocess toavoiddefine duplicationofresearch themesand involved and multiplicity ofstakeholders toestablish makes itmandatory As inallIEAcountries,anumberofministriesare involved inenergy R&D.The in many IEAcountries.Theapplaudsthisgrowth. safety, andfusion–hasgrown, incontrasttothetrend energy seen efficiency – includingresearch intorenewables, gas nuclear andcoaltechnologies, inrecent Asaresult,funding years. total government’s R&Dfundingportfolio inthe R&D intoenergyhastaken onrenewed technologies importance

© OECD/IEA, 2007 RECOMMENDATIONS ◗ ◗ ◗ ◗ ◗ The government ofGermany should: option for thefuture. ininternationalprogrammesparticipate designedto keep openthenuclear operation ofnuclearpower ismaintained,andthatGermany can efficient fromcarbon dioxide coal-fired emissions,inparticular power plants. environmentally sustainable second-generation biofuels. and energy efficiency. between energy technologies andsubjectareas, such asbetweenrenewables intheenergy actors different R&Dfield. Ensure thatthenationalresearch forthecontinuedsafe and basenecessary R&Dfundingforenergy technologies aimedatreducingAllocate sufficient Provide R&Dfundingforprojects to develop and cost-effective Ensure criteriaare thatcost-effectiveness usedwhenallocatingR&Dfunding Continue to monitor co-ordination procedures andprocesses amongthe 165

© OECD/IEA, 2007 © OECD/IEA, 2007 REVIEW TEAM ORGANISATION OFTHEREVIEW Australia Tourism andResources ofIndustry, Department National Energy Market Branch Energy Analyst Mr. BenJarvis The Netherlands Energy Market Directorate ofEconomicAffairs Ministry Senior Policy Adviser Mr. Kick Bruin Denmark Danish Energy Authority ofTransport andEnergyMinistry Secretary Deputy State (team leader) Mr. HansJørgenKoch Berlinandthe visited Theteam IEA Secretariat. countries, theEuropean Commission, theNuclear Energy Agencyandthe by ofenergy ateam policyspecialistsdrawn fromundertaken IEAmember The IEA’s 2007 in-depthreview oftheenergy policiesofGermany was The members of the team were: oftheteam The members of EconomicsandTechnology.Federal Ministry preparation ofWolfdieter both BöhlerandChristophScholten, from the review couldnot haveand beenpossiblewithouttheassistance the candourandco-operationshown itmet. Inparticular, by the everyone questionnaire, alongwithother greatly information.The team appreciates response totheIEA’smeetings and thegovernment’s official policy onthebasisofthose governmental organisations. was drafted Thisreport groups andnon- energy industry energy administration officials, Westphalia from 30Octoberto3November 2006fordiscussionswith International EnergyInternational Agency, OECD Division Energy Diversification Natural GasExpert Mr. DanielSimmons Nuclear Energy Agency, OECD Nuclear Development Division Nuclear Energy Analyst Mr. Taylor Martin and Transport European Commission Directorate-General for Energy Adviser –Energy Dr. Derek Taylor Italy New Technologies andtheEnvironment National AgencyforEnergy, Senior Scientist Ms. AliciaMignone Land of North Rhine- of North ANNEX 167 A © OECD/IEA, 2007 ORGANISATIONS VISITED 168 Federal Cartel Office ( Office Federal Cartel E.ON/E.ON Ruhrgas EnBW Energie Baden-Württemberg Electrabel EFET-Deutschland (European FederationofEnergy Traders) EEX ( forTransport, Building and UrbanFederal Ministry Development ( fortheEnvironment, and Nuclear Nature Safety Federal Ministry Conservation BUND ( BKWK ( BNE ( und Technologie ofEconomicsandTechnologyFederal Ministry ( BGW ( Industries) BDI ( helddiscussionswiththefollowingThe team energy andenvironment stakeholders: Consoliprovidedand Viviane editorialassistance. Sadinprepared themaps.MarilynFerris prepared andBertrand thefigures Taylor by Martin was drafted from theNuclear Energy Agency. MonicaPetit IEA’s onnuclearpower, Division,andthechapter Energy Diversification which by DanielSimmons from onnaturalgas,the of thechapter which was drafted Jolanka Fishermanagedthereview withtheexception andwrote thereport, EnergyInternational Agency, OECD and Policy Analysis ofLong-TermOffice Co-operation Director Dr. Noévan Hulst Bundesministerium fürVerkehr, Bauund Stadtentwicklung Bundesministerium fürUmwelt, undReaktorsicherheit Naturschutz Bundesverband derDeutschen Industrie e.V. Bundesverband NeuerEnergieanbieter Bundesverband der deutschen Gas- und Wasserwirtschaft e.V.Bundesverband derdeutschen Gas-undWasserwirtschaft Bundesverband Kraft-Wärme-Kopplung e.V.Bundesverband Kraft-Wärme-Kopplung Bund fürUmwelt Deutschland undNaturschutz e.V. ) Bundeskartellamt ) International EnergyInternational Agency, OECD Studies Division Country forGermany Desk Officer Ms. Jolanka Fisher ) Bundesministerium fürWirtschaft , FederationofGerman ) ) ) ) )

© OECD/IEA, 2007 REVIEW CRITERIA Federal Network Agency ( Wuppertal Institute for Climate, Environment forClimate, Institute andEnergy Wuppertal German Energy Agency( Federal Ministry ofFinance( Federal Ministry conducted by the IEA. The byconducted theIEA. meeting inParis,provide theevaluationfor in-depthreviews criteria The IEA VKU ( for IndustrialEnergy Consumers) VIK ( Verbundnetz GasAG VDEW ( Vattenfall RWE Öko forAppliedEcology Institute Rhine-Westphalia ofEconomics, North Ministry GEW RheinEnergie AG Germanwatch Verband der Industriellen Energie- und Kraftwirtschaft e.V.Verband derIndustriellen Energie- undKraftwirtschaft Verband kommunaler Unternehmen e.V. Verband der Elektrizitätswirtschaft e.V.Verband derElektrizitätswirtschaft Shared Goals , which were adopted by IEA Ministers attheir4June1993, whichwere by adopted IEAMinisters Deutsche Energie-Agentur Bundesnetzagentur Shared Goals Bundesministerium derFinanzen are set outinAnnexC. , GermanElectricityAssociation) ) ) ) ) , Association 169

© OECD/IEA, 2007 © OECD/IEA, 2007 lcrct xot ...... 4.0 3.8 3.8 5.3 4.4 2.6 0.7 Exports Electricity i xot . 022. 7537392.8 3.9 7. 3.7 7.0 27.5 0.9 25.3 0.1 10.2 9.9 Exports Exports Gas Oil OA RDCIN1171621621451349. 86.9 94.9 123.4 134.5 136.2 186.2 171.7 Coal TOTAL PRODUCTION lcrct rd 03––. 01–. –0.1 – –0.6 –0.1 –0.1 – 0.3 forecasts of theGermangovernment. All forecasts are submission. basedonthe 2004 official – Please note: Forecasts are basedonstudiesby ofEnergy theInstitute EconomicsatUniversity ofCologne(EWI) and Prognos 0 isnegligible. –isnil,..not available. – Electricity trade 287.2 – 308.6 337.4 –1.7 344.7 9.5 348.2 –1.1 Electricity trade 6.7 356.2 4.7 337.9 4.3 –1.1 2.7 Coal 2.5 TOTAL SUPPLY (TPES) TOTAL STOCK CHANGES 0.0 – TOTAL NETIMPORTS Solar, wind,etc. ENERGY BALANCESANDKEYSTATISTICAL DATA yr ...... 2.1 9.5 – 2.1 6.7 2.0 8.3 4.3 1.7 33.9 2.7 42.5 1.8 2.5 4.3 43.5 1.5 0.0 1.1 39.8 1.3 – 3.2 0.2 0.1 0.1 2.1 0.0 – 2.1 Solar, wind,etc. Geothermal – Hydro 2.0 8.3 Nuclear 1.7 33.9 42.5 1.8 4.3 43.5 1.5 1.1 39.8 1.3 3.2 0.2 0.1 0.1 0.0 Geothermal – Hydro Nuclear a 875. 878. 268. 88.5 86.3 110.1 82.6 118.5 80.8 127.9 78.7 123.4 125.2 55.0 126.5 28.7 161.9 Combustible renewables &waste Gas Oil i ...... 0.6 11.4 1.8 13.8 3.0 15.3 4.6 14.2 4.4 14.7 4.7 13.5 16.4 6.8 Combustible renewables &waste Gas Oil Coal oa,wn,ec . . . . 3.3 0.7 – 2.2 0.7 1.3 30.8 0.6 2.7 38.4 27.9 19.3 0.8 0.5 10.0 38.4 24.5 22.7 0.7 12.3 37.9 0.5 6.0 23.4 22.3 12.5 35.8 – 5.1 0.4 22.6 23.7 11.2 36.0 0.4 3.9 15.4 24.6 – 0.9 35.5 8.5 36.1 3.5 47.9 41.2 3.1 1.3 0.7 Solar, wind,etc. Geothermal Hydro Nuclear Combustible renewables &waste Gas Oil Coal Shares (%) SUPPLY 1 1 1 mot ...... 3.8 3.7 1.8 77.2 77.2 4.9 72.4 72.4 67.2 4.1 67.2 73.5 65.7 2.7 72.8 65.9 1.7 42.7 41.7 12.4 12.3 Imports Net imports Imports e mot . . 02–. 20–. –0.2 –0.1 4.4 –2.0 3.6 –0.4 3.0 –0.2 13.8 13.8 109.5 116.8 2.5 0.1 116.7 24.8 24.8 124.2 124.9 131.6 2.7 1.0 23.9 23.9 121.0 150.9 0. 25.7 26.4 2.5 119.8 147.8 0.6 27.7 28.3 120.2 132.9 4.1 157.1 171.1 11.5 3.3 Net imports 8.2 15.2 –3.1 18.3 Net imports Bunkers Imports Net imports Imports Exports 4 3 2 2 3. 2. 588. 546. 55.5 69.9 75.4 81.7 85.8 128.5 139.4 6. 6. 1. 1. 1. 1. 200.2 213.8 214.0 212.0 213.1 165.4 167.3 4. 2. 835. 154. 41.8 45.2 51.5 56.5 58.3 121.8 141.4 9319 0320 0022 2030 2020 2010 2004 2003 1990 1973 . . 081. 321. 17.2 15.8 13.2 12.2 10.8 4.8 2.5 17.2 15.8 13.2 12.2 10.8 4.8 2.5 . . 02–. 20–. –0.2 –0.1 –2.0 –0.4 –0.2 0.1 1.0 ––––0.10.41.5 8––– 6––– AG/Baselof. They are not ANNEX nt Mtoe Unit: 171 B © OECD/IEA, 2007 172 oa,wn,ec –00020305091.1 45.3 0.9 45.8 45.3 0.5 44.5 0.3 – 44.1 0.2 39.1 – 0.0 26.9 – – 0.1 0.1 0.0 Electricity Solar, wind,etc. Geothermal – oa,wn,ec –00020305081.0 23.6 24.7 0.8 24.9 0.5 23.2 0.3 – 22.6 0.2 19.3 – 0.0 10.7 – – 0.1 0.1 0.0 Electricity Solar, wind,etc. Geothermal – a 331. 112. 122. 21.3 27.0 21.6 28.0 21.2 27.5 21.4 26.9 21.1 27.4 19.7 27.3 13.3 46.9 Combustible renewables &waste Gas Oil a . 134. 993. 6033.3 21.4 36.0 24.7 37.7 29.2 39.9 24.9 41.3 26.1 21.3 31.6 7.8 54.2 Combustible renewables &waste Gas Oil F 4. 4. 5. 6. 4. 4. 229.8 240.1 248.7 261.0 252.6 247.3 246.6 Coal TFC Coal et . . . 7861616.0 6.1 1.1 26.6 6.1 0.8 37.5 0.2 25.6 24.1 17.8 0.5 24.1 37.3 5.3 0.2 25.6 7.9 0.2 20.2 36.6 5.9 0.4 28.3 4.5 6.9 21.7 34.9 0.2 6.3 21.8 0.8 4.2 19.8 3.9 39.5 – 25.0 20.4 1.2 4.0 21.8 10.6 1.2 32.3 8.3 – 7.7 16.9 4.2 53.6 1.4 6.7 22.5 0. 4.4 61.5 24.9 1.6 3.9 0.1 62.6 2.2 23.9 26.8 9.3 33.9 12.3 1.0 64.1 – 1.7 23.3 26.6 Heat 0.8 34.5 9.3 13.0 Electricity 63.3 1.2 24.0 Solar, wind,etc. 26.1 Geothermal – 33.8 14.6 0.6 64.4 2.7 Combustible renewables &waste 24.1 1.3 25.7 Gas 32.3 8.7 60.0 Oil 0.6 1.5 20.8 Coal 25.3 7.8 32.8 Shares (%) 39.7 8.5 14.5 2.7 – 22.0 Heat 30.5 7.8 23.1 12.6 2.9 0.5 44.3 – 2.4 27.1 19.7 3.1 0.4 1.6 19.1 24.4 4.3 0.9 44.3 TOTAL 10.8 OTHERSECTORS 0.2 18.2 24.3 6.3 4.5 TRANSPORT – 45.6 6.4 17.1 0.1 Heat 23.7 7.1 Electricity 5.0 47.4 4.0 Solar, 3.7 wind,etc. 17.5 23.5 0.1 Geothermal 42.8 7.6 Combustible renewables &waste 3.1 3.3 15.8 24.7 2.2 Gas – Oil 45.8 28.1 Coal 3.3 2.5 10.9 16.6 Shares (%) 47.6 16.0 – Heat 15.1 8.6 2.6 56.0 9.1 21.5 2.2 5.5 1.2 TOTAL INDUSTRY 0.7 Heat Electricity Solar, wind,etc. Geothermal Combustible renewables &waste Gas Oil Coal Shares (%) Heat lcrct 531. 012. 901. 19.9 19.4 19.0 20.0 20.1 18.6 15.3 Electricity Solar, wind,etc. Geothermal Coal a 114. 246. 905. 56.2 58.3 101.9 59.0 109.4 61.3 117.8 62.4 111.8 115.6 41.0 117.7 21.1 138.2 Combustible renewables &waste Gas Oil FINAL CONSUMPTION BY SECTOR DEMAND 1 1 1 5 6 2 2 2 0. 958. 328. 1179.6 81.1 81.4 83.2 83.6 89.5 105.9 0. 781461441319. 88.7 96.4 103.1 114.4 104.6 97.8 101.0 9319 0320 0022 2030 2020 2010 2004 2003 1990 1973 872. . . 191. 9.8 10.5 11.9 7.3 7.1 20.7 28.7 271. . . . . 0.2 0.2 0.4 0.9 1.3 16.6 22.7 313. . . 231. 10.0 10.7 12.3 8.2 8.4 37.3 53.1 . . . . 0.6 0.5 0.5 – – 0.8 0.0 ...... 9.2 8.0 6.1 6.8 5.6 3.0 1.7 ...... 4.0 4.1 4.1 4.8 4.6 2.2 1.7 –––––0.10.1––––––– ––––––– ––––0.00.00.1––––––– 1––– Unit: Mtoe Unit:

© OECD/IEA, 2007 Energy–related CO yr . 0514–. . . 0.0 14.5 0.3 19.1 – 0.8 –0.7 0.4 5.7 3.3 –13.1 –2.3 –0.8 –0.7 0.4 2.8 –4.4 –7.1 –0.7 0.7 –0.9 2.7 24.1 –2.4 1.4 –1.6 0.9 –0.4 –1.4 – 2.6 0.6 –4.8 –0.5 –1.0 1.8 –0.1 10.3 0.6 –2.8 3.2 – –0.2 –2.2 1.6 27.5 –0.6 10.2 –0.3 –0.1 13.3 –0.2 1.5 5.9 2.7 6.2 Geothermal Hydro Nuclear Combustible renewables &waste Gas Oil Coal TPES ouain(ilos 89 93 25 24 24 13 79.30 81.30 82.40 82.46 82.50 79.36 2818.47 2476.96 2113.40 78.96 1961.79 1944.12 1543.20 1038.75 TPES/GDP Population (millions) GDP (billion2000USD) GENERATION ELECTRICITY D ...... 1.3 1.6 1.5 –0.4 –0.6 –0.3 0.9 –0.7 –0.9 3.4 –1.7 –0.1 –1.0 0.7 –2.0 1.7 –2.6 –1.9 4.5 0.1 3.3 –2.4 –1.7 1.0 2.2 –2.4 9.9 0.3 0.2 –1.9 –1.2 2.4 –0.0 2.6 9.9 0.8 –1.9 –2.2 –0.6 –2.5 –1.5 42.7 –1.8 0.9 0.2 1.2 0.2 –2.8 – –2.5 1.4 1.0 –1.3 –1.0 – 3.8 from thesumof the elements. Please note: Rounding may todiffer causetotals Growth intheTFC/GDPratio Growth intheTPES/GDPratio GDP Net oilimports Energy production Electricity consumption TFC Solar, wind,etc. 4.2 16.5 – 4.2 11.4 57.3 3.7 7.1 5.3 68.5 39.4 3.2 88.7 20.9 4.6 48.6 82.5 3.5 26.6 5.4 4.3 47.0 98.6 27.4 3.2 4.9 49.8 0.0 112.0 27.8 50.7 589.5 4.1 50.3 4.2 90.7 – 51.6 0.6 600.0 3.2 100.6 58.7 33.1 2.7 622.5 53.5 112.2 0.7 69.0 613.2 24.7 133.3 52.7 2.6 610.0 Own useandlosses 0.7 16.3 141.5 52.5 547.7 0.9 Electricity andheatgeneration 144.2 11.3 1.7 of which: 47.1 374.4 TOTAL LOSSES 141.2 0.8 10.3 Solar, wind,etc. 1.7 32.2 98.6 Geothermal Hydro 7.4 Nuclear 1.9 Combustible renewables &waste Gas 10.9 Oil 12.0 Coal Output shares (%) gross) (TWh OUTPUT (Mtoe) INPUT (Mtoe) Per capita TFC Per capita TFC/GDP nrypouto/PS05 .203 .903 .10.30 0.31 – 0.37 – 1.3 0.39 1.4 0.39 – 0.52 1.4 1.2 0.51 CO 5.4 –2.9 5.6 –3.0 Oil supply/GDP TPES Per capita 8.0 0.5 Energy production/TPES 7.0 Statistical differences Other transformations GROWTH RATESGROWTH (%peryear) INDICATORS ENERGY TRANSFORMATION ANDLOSSES DEMAND emissions (MtCO 2 emissions from bunkers (MtCO 10 10 11 11 10 2 2 9 ) 12 7 8 2 182. 17. 494. 48.0 41.3 34.9 .. 31.7 22.1 21.8 ) 087964886. 0. 7. 695.8 770.0 808.3 .. 848.6 966.4 1058.7 37 99 00 40 51 02 20–30 10–20 05–10 04–05 90–04 79–90 73–79 9319 0420 0022 2030 2020 2010 2005 2004 1990 1973 2030 2020 2010 2004 2003 1990 1973 .844 .241 .938 3.62 0.10 3.80 0.12 4.09 0.16 4.18 0.18 4.22 13.3 0.18 4.49 42.8 14.7 0.23 4.28 52.5 16.3 0.33 71.0 18.8 58.3 18.7 74.3 20.5 83.4 23.7 60.0 .401 .301 .201 0.08 0.10 0.12 0.13 0.13 0.16 0.24 .600 .600 .600 0.04 0.05 0.06 0.06 0.06 0.08 0.16 .231 .631 .229 2.90 2.95 3.02 3.17 3.06 3.12 3.12 ––––0.00.20.9 Unit: Mtoe Unit: 173

© OECD/IEA, 2007 AND KEYSTATISTICAL DATA FOOTNOTES TOENERGYBALANCES 174 12. “Energy-related CO “Energy-related 12. Toe perperson. 11. Toe at2000pricesandexchange rates. perthousandUSdollars 10. includelarge statistical on“losses”forforecast often years Data 9. Lossesarisingintheproduction ofelectricityandheatatmainactivity 8. Inputs toelectricitygenerationincludeinputs toelectricity, CHPandheat 7. includesresidential, commercial,publicservice, “Othersectors” 6. includes non-energy use. Industry 5. Total supplyofelectricityrepresents net trade.Anegative numberinthe 4. Total includecombustiblerenewables net imports andwaste and trade of 3. “Combustiblerenewables andwaste” comprises solidbiomass,liquid 2. andpeat. Includeslignite 1. plants. Output refers onlytoelectricitygeneration. plants. Outputrefers losses. ontransformationgainsand mostlydonot real reflect and expectations between supplyanddemand covering expected differences differences approximately 33%fornuclearand100% forhydro andphotovoltaics. of generation, theoretical lossesare basedonplantefficiencies producer Fornon-fossil-fuelelectricity utilitiesandautoproducers. sectors. agricultural, andother non-specified fishing are greater thanimports. share thatexports ofTPESindicates heat. andmay not becomparable surveys between countries. based onpartial biomass, biogas, are often industrialwaste andmunicipalwaste. Data IPCC/OECD emission factors andmethodology.IPCC/OECD emissionfactors supplyprojectionsproduct-specific andare usingthe calculated toforecastthis factor energy supply. Future coal emissionsare basedon calculating theratioofemissionstoenergy usefor2005andapplying Projected emissionsforoilandgasnational totals. are derived by from marineandaviation international bunkers are not includedin Sectoral Approach. InaccordancewiththeIPCCmethodology, emissions 2 msin”hv enetmtduigteIC irI emissions” have usingtheIPCCTier beenestimated

© OECD/IEA, 2007 INTERNATIONAL ENERGYAGENCY“SHARED GOALS” supply emergencies. the Agencyinresponding jointly to oil through IEAcountriesco-operate action: this requires collective mechanismsand emergencies. to energy promptly and flexibly ability torespond shouldhave Energy systems 2. as agroup. energy ofIEAcountries supplydiversity make contributiontothe asubstantial nuclearandhydro power,particularly Non-fossil fuels, aspracticable. diverse the sourcesofthosefuelsshouldbeas and fuels usedwithinandacross sectors the energytions forlonger-term security: Spain, Sweden,Switzerland, Turkey, theUnited Kingdom,the United States. Hungary, Ireland, Italy, Japan,Korea, Luxembourg, theNetherlands, New Zealand, Norway, Portugal, Finland,France, Australia, Austria,Belgium,Canada,theCzechRepublic,Denmark, Germany, Greece, * sector within theenergy 1. policy framework withthe following consistent goals: In ordertosecure theirobjectives, membercountriestherefore aimtocreate a encourage dialoguewithallparticipants. energy operationofinternational marketsseek topromote theeffective and ofincreasing globalsignificance inenergy. interdependence They therefore emphasis bygiven governments. particular IEAcountriesrecognise the thoughenergy securityandenvironmental protectionof departure, needtobe offree andopenmarketspolicies, theestablishment point isafundamental well-being oftheirpeopleandtheenvironment. Informulatingenergy economicdevelopment andtothe fullest possiblecontributiontosustainable oftheireconomiescanmakecreate conditionsinwhichtheenergy sectors the EnergyThe 26membercountries*oftheInternational Agency(IEA)seekto Diversity, efficiency andflexibility Diversity, efficiency are basiccondi- In somecases the energy sources energy 4. practicable. the Polluter Pays Principlewhere shouldrespect Government interventions account oftheenergy consequences. environmental decisionsshouldtake impacts ofenergy activities,justas environmental minimise theadverse Decision-makers shouldseekto goals. to theachievement oftheseshared provision anduseofenergy 3. loapirt.AnumberofIEAmember also apriority. ment ofeconomicnon-fossilsourcesis Thedevelop- of fossilfuelsisessential. use Cleanandefficient and developed. More environmentally acceptable environmentally More The environmentally sustainable The environmentally need tobeencouraged ANNEX are central 175 C © OECD/IEA, 2007 176 5. contribution tomake. also have an increasingly important Renewable sourceswill carbon dioxide. because nuclearenergy doesnot emit highest available safety standards, nuclear optionforthefuture, atthe recountries wish to encouraged. with non-membercountries,shouldbe andco-operation participation industry tion ofenergyincluding technologies, tion inthedevelopment anddissemina- co-opera- International energy policies. logy policiesshouldcomplement broader Energy techno- jectives outlinedabove. critical contributiontoachievingtheob- improved technologies energy and market deployment ofnew and Continued 6. needed torealise theseopportunities. governments are andallenergy users by Strong efforts tion toconsumption. oftheenergy cycle fromstages produc- iisfor greater ener nities There opportu- are significant manner. and energy securityinacost-effective promote both environmental protection Improved efficiency energy research, developmentresearch, tain andimprovetain the gy efficiency atall gy efficiency make a can 7. 8. inprices. reflected of energy production anduseshouldbe and practicable,theenvironmental costs To necessary theextent industrial goals. costs ofsupplytopromote socialor below the should not beheldartificially Energy prices markets towork efficiently. in Paris.) attheir4June1993Ministers meeting (The Shared Goalswere by adopted IEA objectives. energy security andenvironmental toachieve global necessary confidence promote theinvestment, tradeand Theseare neededtohelp worldwide. andmarkets energy systems and flexible environmentally acceptable efficient, encourages thedevelopment of and information andunderstanding, market participants 9. investment shouldbeavoided. toenergy tradeand Distortions security. energy markets andenergy efficient framework forinvestment to contribute Undistorted energy prices energy Undistorted Free andopen trade Co-operation amongallenergy Co-operation helps toimprove and asecure enable

© OECD/IEA, 2007 GLOSSARY ANDLISTOFABBREVIATIONSGLOSSARY c billioncubicmetres BfS bcm BMELV BGR BMF BMWi BNetzA BMBF BMVBS BMU kartellamt Bundes- BAFA foreign words are alsoincluded. of someoften-used central reference formany oftheabbreviations used.Inaddition,definitions mentionineachchapter, provides aquick thisglossary outonfirst written and Energythe International Agency. generallyhave Whiletheseterms been abbreviations usedwithin are foranumberofterms substituted In thisreport, of Economics and Export Control) of EconomicsandExport of EducationandResearch) Protection) Consumer Protection) Verbraucherschutz sicherheit (Federal Ministry forTransport, BuildingandUrban(Federal Ministry Affairs) Ministry ofEconomicsandTechnology)Ministry Institute forGeosciencesandNaturalInstitute Resources) Conservation andNuclear Safety) Conservation Bundesministerium für Ernährung, Landwirtschaft und Landwirtschaft Ernährung, für Bundesministerium Forschung und Bildung für Rohstoffe und Bundesministerium Geowissenschaften für Bundesanstalt Strahlenschutz für Bundesamt Ausfuhrkontrolle und Wirtschaft für Bundesamt Bundesministerium für Wirtschaft und Technologie und Wirtschaft für Stadtentwicklung und Bundesministerium Bau Verkehr, für Reaktor- Bundesministerium und Naturschutz Umwelt, für Bundesministerium Federal Cartel Office Federal Cartel Bundesnetzagentur Finanzen der Bundesministerium (Federal Ministry fortheEnvironment, Nature(Federal Ministry (Federal Ministry for Food,Agriculture and (Federal Ministry (Federal Network Agency) (Federal Office forRadiation (Federal Office (Federal Ministry ofFinance) (Federal Ministry (Federal Ministry (Federal Office ANNEX (Federal (Federal 177 D © OECD/IEA, 2007 178 CDM clean development mechanism (a flexibility mechanismunder cleandevelopment mechanism(aflexibility CDU boilingwater reactor CDM BWR Bundestag CO combinedproduction ofheatandpower; sometimes when CHP CEuropean Commission EEG EC EnWG DENA Bundesrat CSU UESEuropean Union EmissionsTrading Scheme EUR Euro EU-ETS European Transmission Operators System ( EU European European Group Regulators’ forElectricityandGas ETSO ERGEG Union gramme g Group forum forthegovernments ofEight, aninternational of direct high-voltage current G8 University ofCologne’s ofEnergy Institute Economics HVDC EWI E European Energy Exchange EnEV EEX 2 the Kyoto Protocol) byelected popularvote elected butare andremovedelected appointed by regional cabinets referring toindustrialCHP, “co-generation”isused theterm Democratic Union) Kingdom andtheUnited States Canada, France, Germany, Italy, Japan,Russia, theUnited one-half of Germany’s bicameral parliament; members areone-half ofGermany’s members bicameralparliament; one-half of Germany’s bicameral parliament; members areone-half ofGermany’s not members bicameralparliament; Christlich Demokratische Union Deutschlands Union Demokratische Christlich Energiewirtschaftsgesetz Energieeinsparverordnung Erneuerbare-Energien-Gesetz Energie-Agentur Deutschlands Deutsche Union Soziale Christlich carbon dioxide ? ); EUR1=USD1.26 (average exchange in2006) rate (Energy Industry Act) (Energy Industry (German Energy Agency) (energy saving directive) (Renewable Energy Sources Act) (Christian SocialUnion) (Christian

© OECD/IEA, 2007 clkilocalorie, or1calorie mechanismundertheKyoto (aflexibility jointimplementation kcal Reactor ThermonuclearExperimental International JI Change IntergovernmentalPanelonClimate ITER Energy International Agency IPCC IEA KWK-G KfW Wgigawatt, or1watt Forum GenerationIVInternational GW GIF gross domesticproduct GHG greenhouse GDP gas MAP kilowatt-hour =1kilowatt kilowatt, or1watt kilovolt kWh kW thousandtonnesofoilequivalent; see“toe” thousandtonnes kV ktoe kt gigawatt-hour =1gigawatt GWh P liquefied petroleum gas m liquefied naturalgas LPG regions ofGermany (there are 16 singularis intotal); LNG Länder m kilometre, or1metre kilojoule kilogramme km kJ kg 2 Protocol) Kreditanstalt für Wiederaufbau für Kreditanstalt Marktanreizprogramm square metre Kraft-Wärme-Kopplungsgesetz litre × × 10 × 10 (Market Incentives Programme) × 10 3 9 10 × 3 3 one hour=1watt × , equivalent to10 (law onCHP) 1 hour (Bank forReconstruction) –7 × 10 toe 3 × Land one hour 179

© OECD/IEA, 2007 180 o tonneofoil equivalent, as10 defined consumption final ofenergy total tonne toe TFC t MtCO millionBritishthermalunits milligramme Mt million MBtu millioncubicmetres mg tonnes mcm Stadtwerke MW StrEG megawatt-hour =1megawatt MWh megawatt, or1watt milliontonnesofoilequivalent; see“toe” MW Mtoe TPA third-party access;insomeregions “openaccess”is the term third-party TPA M smallandmedium-sizedenterprise SPD research anddevelopment, may especiallyinenergy technology; SME pressurised water reactor photovoltaics R&D PWR PV operatorintheUnited (ithas States anindependentsystem petajoule PJM Organisation for EconomicCo-operationandDevelopment PJ net transfercapacity OECD nationalallocationplan(undertheEU-ETS) NTC NAP e 2 used inplace of TPA include thedemonstrationanddisseminationphasesas well the origin ofthename) and Maryland, inadditiontoPennsylvania,expanded tocover New states Jersey Sozialdemokratische Partei Deutschlands Partei Sozialdemokratische Stromeinspeisungsgesetz municipal utility megawatt ofelectriccapacity million tonnesofcarbondioxide × 10 (feed-in law) 6 × one hour 7 kcal (Social DemocraticParty)

© OECD/IEA, 2007 W terawatt-hour =1terawatt operator transmissionsystem TWh energy supply TSO primary total TPES A value-added tax USdollar($);USD1=EUR0.80(average exchange in2006) rate VAT United States USD US United Nations Framework Convention Change onClimate UNFCCC UnionUK United fortheCo-ordination ofTransmission ofElectricity UCTE Kingdom × 1 hour=watt × 10 12 × 1 hour 181

© OECD/IEA, 2007 © OECD/IEA, 2007 www.turpin-distribution.com [email protected] Fax: +1(860)3500039 Toll free: +1(800)4566323 Connecticut 06776, USA 143 West Street, New Milford The Bleachery Turpin Distribution NORTH AMERICA CUSTOMERS IN The OnlineBookshop Fax: +33(0)14057 67 75 Tel: +33(0)14057 66 90 E-mail: [email protected] E BOOKS IEA - with the exception of the statistics publications- - withtheexception ofthestatistics All IEApublicationsmay bebought all IEA books at20%discount. all IEAbooks can bedownloaded inPDF, ofcharge, free You PDFsof may alsoobtain Books published before January 2006 January publishedbefore Books online ontheIEAwebsite: www.oecdbookshop.org You mayalsosend from theIEAwebsite.from OECD salespoint the OECDonline to your nearest your order services: or use www.iea.org/books International EnergyAgency 75739 Cedex15, Paris France delaFédération 9, rue Agency Energy International [email protected] Turpin Ltd Services Distribution www.turpin-distribution.com THE RESTOFWORLD Pegasus Drive, Biggleswade, Bedfordshire SG18 8QB,UK Fax: (0)1767 +44 604640 Tel.: (0)1767 +44 604960 Stratton BusinessPark, CUSTOMERS IN

© OECD/IEA, 2007 IEA PUBLICATIONS, 9,ruedelaFédération,75739 PARIS CEDEX15 (61 2007 16 1P1)ISBN:978-92-64-02223--2 –2007 PRINTED INFRANCE MEDIA BY STEDI

© OECD/IEA, 2007