The New German Energy Policy – What Role for Gas in a De- Carbonization Policy?
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March 2014 The New German Energy Policy: What Role for Gas in a De-carbonization Policy? Ralf Dickel* OIES PAPER: NG 85 *OIES Senior Visiting Research Fellow The contents of this paper are the author’s sole responsibility. They do not necessarily represent the views of the Oxford Institute for Energy Studies or any of its members. Copyright © 2014 Oxford Institute for Energy Studies (Registered Charity, No. 286084) This publication may be reproduced in part for educational or non-profit purposes without special permission from the copyright holder, provided acknowledgment of the source is made. No use of this publication may be made for resale or for any other commercial purpose whatsoever without prior permission in writing from the Oxford Institute for Energy Studies. ISBN 978-1-907555-97-8 i March 2014: The New German Energy Policy – What Role for Gas in a De- carbonization Policy? Acknowledgements Grateful thanks go to Howard Rogers and Jonathan Stern for their encouragement and their always constructive and useful support of the paper both in practical terms and on substance. The paper greatly benefited from frequent discussions with Kirsten Westphal (SWP), Peter Klingenberger (E.ON Storage), Michael Kranhold (50hz), Heiko Lohmann (energate Gasmarkt) and Michael Schulz (BMWi), keeping me updated on the development of the various aspects of the Energiewende and helping me to understand the issues relevant for the topic of this paper. Martin Rengler did a great job handling the layout of figures and tables and the necessary translation of terms of German origin. Big thanks to John Elkins for his precise comments and his careful editing of the manuscript and to Kate Teasdale for her professional formatting. The contents of this paper do not necessarily express the views either of the OIES nor of its sponsors. Despite the contributions of so many people, responsibility for the views expressed and any errors is solely mine. Ralf Dickel, February 2014 ii March 2014: The New German Energy Policy – What Role for Gas in a De- carbonization Policy? Preface In a cursory review of the European energy landscape an observer might reasonably ask how Germany, one of Europe’s most successful economies, had arrived at a power generation aspiration dominated by the rather incongruous mix of solar, wind, coal and lignite? German Energy policy – in its current form the Energiewende - is the product of a complex evolution of overt aspirations of many of the parties in and out of governing coalitions since the turn of the century, and a covert fear of import dependency on Russian gas combined with ‘coal-mindedness’ – an affinity for the use of coal and lignite, despite the country’s net coal import position. In this extensive and comprehensive paper, Ralf Dickel explains the political path by which Germany’s current energy policy was derived and in particular the way in which the Fukushima disaster on March 2011 finally catalysed an embedded desire to exit nuclear energy in many political factions to fulfillment through consensual legislation. Phased nuclear closure and a desire to achieve decarbonisation targets drove the many scenarios underpinning energy policy, but the role of gas was never explicitly addressed within the governing political mainstream. The choice between gas and coal/lignite was comprehensively ‘ducked’ but as the abject failure of the ETS system unfolded it was convenient to ascribe such a choice as being ‘for the market to decide’. At present a CO2 price of €50/tonne CO2 would be required to burn gas in favour of coal in German power plant. Looking ahead however, the paper anticipates potential developments for which the maintenance of the German gas sector and its transmission grid would be much more positive (preserving options) than allowing gas to wither and coal and lignite to maintain dominance. These include the continuation of biogas generation, gas with CCS (having superior investment economics than coal and lignite) and power to gas, via the Sabatier process, by which surplus renewable power generation could be stored as (zero carbon) gas and utilised by the existing transmission and storage system. I thank Ralf for this timely and though provoking paper. On the OIES Natural Gas Research Programme we value leading edge research on developments in key gas markets. And on a wider, philosophical but very germane level, in his conclusion Ralf poses the question: ‘If a country like Germany is not able or willing to phase out coal for de-carbonization, why should China or India do it’? Howard Rogers Oxford, March 2014 iii March 2014: The New German Energy Policy – What Role for Gas in a De- carbonization Policy? Contents Acknowledgements ................................................................................................................. ii Preface ..................................................................................................................................... iii Summary .................................................................................................................................. 1 Introduction .............................................................................................................................. 2 1. The Development of the Energiewende (New German Energy Policy) .......................... 5 1.1 Development of German De-Carbonization and Nuclear Power Policy (Policy Objectives, Political Development and Debate) .................................................................... 5 1.1.1 The Development of German Energy Policy under Governments before 2009: . 6 1.1.2 Preparation of the New Energy Concept by the CDU/CSU/FDP Government (since 2009) .................................................................................................................... 10 1.1.3 The New Energy Concept .................................................................................. 21 1.1.4 Fukushima and Following Debate ..................................................................... 24 1.1.5 The Energiewende ............................................................................................. 29 1.2 Institutions and Instruments ................................................................................... 32 1.2.1 Institutions .......................................................................................................... 33 1.2.2 Instruments for De-carbonization ....................................................................... 37 2. What Has Happened since the Energiewende was Decided? ...................................... 41 2.1 The Situation in Winter 2011–12 and 2012–13 ....................................................... 42 2.2 TYNDP 2013 /2022 and 2014/2023 and Related Scenarios .................................. 43 2.3 Discussion on Capacity Needed and Grid Expansion ............................................ 45 2.4 Monitoring Report .................................................................................................... 49 2.5 Costs and Benefits of Energiewende ...................................................................... 52 2.5.1 Costs of Phasing Out Nuclear ........................................................................... 53 2.5.2 Costs of Fostering Renewables ......................................................................... 54 2.6 Results of the Election of September 22, 2013 ...................................................... 64 3. Role for Gas ....................................................................................................................... 70 3.1 Recent Developments ............................................................................................ 70 3.2 Role of Gas in Recent Scenarios / Policy Discussion ............................................ 84 3.3 Role of Gas and Gas Infrastructure in the Long Run ............................................. 98 3.4 Gas as a Transition Fuel ...................................................................................... 105 3.5 Elements to Improve the Role of Gas for De-Carbonization ................................ 113 4. Conclusions ..................................................................................................................... 119 List of Acronyms ................................................................................................................. 121 Glossary of German Terms ................................................................................................ 124 Bibliography ......................................................................................................................... 126 Tables Table 1: Changes in Sectoral Energy Consumption and Sectoral Energy Productivity in the Reference and Target Scenarios for the Energy Concept of the Federal Government for the Periods between 2008 - 2020 and 2008 - 2050 ...................................................................... 15 Table 2: Status Quo and Quantitative Targets of the Energy Concept (2010) ...................... 22 Table 3: Gas Usage in Scenario I, II, III of the Framework Scenarios for Gas (in TWh/a) ..... 44 Table 4: Heating Structure of Housing Stock .......................................................................... 72 Table 5: Heating Systems in New Housing Units .................................................................... 73 iv March 2014: The New German Energy Policy – What Role for Gas in a De- carbonization Policy? 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