Second Progress Report on the Energy Transition the Energy of the Future

Second Progress Report on the Energy Transition The Energy of the Future

Reporting Year 2017 Imprint

Publisher Federal Ministry for Economic Affairs and Energy Public Relations Division 11019 Berlin www.bmwi.de

Current as at June 2019

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Reporting Year 2017 – Summary – 2

Contents

Central messages from the Second Progress Report ...... 4

1 Introduction ...... 10

2 Objectives of the energy transition and monitoring indicators ...... 16

2.1 Target architecture for the energy transition...... 18

2.2 Indicators and evaluation scheme...... 19

3 The energy transition in the European and international context ...... 23

3.1 Present situation...... 25

3.2 Key measures taken to date...... 30

3.3 Outlook and conclusions...... 40

Part I: Quantitative targets of the energy transition ...... 43

4 Renewable energy ...... 45

4.1 Present situation...... 47

4.2 Key measures taken to date...... 52

4.3 Outlook...... 58

4.4 Conclusions...... 62

5 Energy consumption and energy efficiency ...... 65

5.1 Present situation...... 67

5.2 Key measures taken to date...... 70

5.3 Outlook...... 84

5.4 Conclusions...... 86

6 Buildings ...... 89.

6.1 Present situation...... 91

6.2 Key measures taken to date...... 95

6.3 Outlook...... 101

6.4 Conclusions...... 102

7 Transport ...... 105

7.1 Present situation...... 107

7.2 Key measures taken to date...... 110

7.3 Outlook...... 117

7.4 Conclusions...... 120

8 Greenhouse gas emissions ...... 123

8.1 Present situation...... 125

8.2 Key measures taken to date...... 129

8.3 Outlook...... 131

8.4 Conclusions ...... 132 CONTENTS 3

Part II: Targets and policies of the energy transition ...... 133

9 Power plants and security of supply ...... 135

9.1 Present situation and measures taken up to now...... 136

9.2 Key measures taken to date...... 142

9.3 Outlook...... 143

9.4 Conclusion...... 144

10 Affordable energy and a level playing field ...... 147

10.1 Present situation...... 148

10.2 Key measures taken to date...... 156

10.3 Outlook and conclusions...... 156

11 Environmental compatibility of the energy supply system ...... 159

11.1 Present situation...... 160

11.2 Key measures taken to date...... 166

12 Grid infrastructure ...... 169

12.1 Present situation...... 171

12.2 Key measures taken to date...... 174

12.3 Outlook...... 176

12.4 Conclusions...... 176

13 Integrated development of the energy system ...... 181

13.1 Present situation and key measures taken to date...... 183

13.2 Outlook...... 193

13.3 Conclusions...... 193

14 Energy research and innovation ...... 197

14.1 Present situation and key measures taken to date...... 199

14.2 Outlook...... 204

14.3 Conclusions...... 204

15 Investment, growth and jobs ...... 207

15.1 Present situation ...... 208

15.2 Outlook...... 212

15.3 Conclusions...... 213

16 Overview of measures ...... 214

Bibliography and list of sources ...... 245

List of abbreviations ...... 250 4

Central messages from the Second Progress Report

The German Federal Government has set itself ambitious goals with its energy transition. The energy transition is a vehicle for Germany to plan a sustainable energy supply and to provide the economy and industry new opportunities to create additional value added. The energy transition is not solely a German effort, rather is embedded in Euro- pean energy policy and has meanwhile taken root all over the globe. To be successful, the energy transition must therefore also be seen from a global and holistic perspective. To this end, the German Federal Government is taking the measures described in this report and is utilizing market processes to implement the energy transition to meet the goals it has set, both technology-neutral and cost efficiently.

At the European level, the ‘Clean Energy for All Europeans’ package has in particular successfully set the course for the energy transition in Europe and Germany. This package has set ambitious goals for 2030 and beyond. The whole EU is basically on course to reach its energy and climate goals for 2020. With a view to reducing greenhouse gases, both the sectors falling under the European emissions trading system (EU-ETS), and the non-ETS sectors have already fulfilled their respective targets of 21% and 10% reductions in emissions.

ƒƒThe Federal Government submitted a draft for an integrated National Energy and Climate Plan (NECP) in December 2018. After conducting consultations, it will submit a final Plan at the end of 2019. The Plan will set out how Germany aims to achieve its national energy and climate goals for 2030 and, accordingly, contribute to the goals of the Energy Union.

The Federal Government set up the Commission on Growth, Structural Change and Employment (“Coal Commission”) in the summer of 2018, with actors from various economic and social groups. The Coal Commission presented its final report on 31 January 2019. In this report it makes recommendations for meeting the 2030 targets for the energy sector set out in the 2050 Climate Action Plan, among other things. This also includes the gradual reduction and finally, phasing out, of coal-fired power generation by 2038 at the latest. The reduction in greenhouse gas emissions in the period 2023–2030 should be continuous, if possible. The cut-off date should be reviewed in 2026, 2029 and 2032, and either brought forward or adjusted. At the same time, the Coal Commission made recommendations for assisting coal regions in future-oriented, sustainable structural development. The Federal Government is reviewing these recommendations. At the national level, the Federal Government adopted key parameters on 22 May 2019 for implementing the structural policy recommendations of the Coal Commission.

The following facts and figures on the status of selected German energy and climate goals show the difficulty of this challenge and the measures the Federal Government is taking to tackling it.

A positive piece of news is that the share of renewable energies in gross electricity consumption was 36% in 2017. This increase continued in 2018. At the same time, the 2017 5

Renewable Energy Sources Act introduced a paradigm shift toward competitive funding rates, leading to substantially more cost-efficient development of renewable energies. The cost of producing electricity from renewable energy resources was significantly reduced for many new facilities. An important factor in this was the successful bidding competition with sufficient approved land for wind and photovoltaics.

Targeted, efficient, grid-synchronized and an increasingly market-driven expansion of renewable energy sources is a prerequisite for successful energy transition and climate protection policies. The Federal Government aims to increase the share in renewables in the energy sector – especially in the context of the challenges of better synchronisation of renewable energy sources and grid capacity – in order to reach the goal set by the Coa- lition Agreement of approximately 65% by 2030. The capacity of the power grid to transport energy is key.

ƒƒThe Omnibus Energy Act created special bidding processes for onshore wind energy and photovoltaics for an additional 4 gigawatts up to 2021 and provides for innovation bidding processes.

ƒƒBy the autumn of 2019, based on the grid expansion plan and the results of the coalition working group on issues of acceptance and of the Coal Commission, decisions should be made regarding specific acceptance measures and requirements for funding, and regarding future routes for expansion of renewable energy sources in the electricity sector by 2030, in order to reach the 65% goal set in the Coalition Agreement.

Primary energy consumption in 2017 increased by 0.8% compared with the previous year. This was primarily due to strong economic growth. In contrast, primary energy consumption declined in 2018, according to preliminary estimates. However, annual energy savings of 0.6% on average since 2008 and positive figures for 2018 are not sufficient to reach the target set for 2020 (20% reduction). Overall, there is a great need to take action to achieve the savings target as quickly as possible.

ƒƒThe Federal Government plans to present an energy efficiency strategy in 2019. This strategy aims to introduce a 2030 efficiency target and a specific catalogue of measures for the decade 2021 – 2030 (NAPE 2.0), which should also be instrumental in achieving the German contribution to the EU energy efficiency goal for 2030.

Energy consumption in buildings in 2017 increased by 2.6% compared with the previous year. Since 2008, this figure had declined by an average of 0.8% annually. To reach the savings target as quickly as possible, there must be additional effort in this area, too. The Federal Government will prepare a catalogue of measures for the buildings sector to achieve the 2030 targets set for this sector, and will add these measures to the National Energy and Climate Plan and the 2030 Programme of Measures for implementing the 2050 Climate Action Plan. 6

ƒƒThe Federal Government will draft a new bill for energy conservation law for buildings, and will combine the Energy Conservation Act, the Energy Conservation Ordinance and the Renewable Energy Sources Act into the Buildings Energy Act. As set forth in the Coalition Agreement, the Buildings Energy Act will remove bureaucracy and simplify regulations, will transpose EU legislation and provide continuity in energy requirements for old and new buildings. In addition, the ‘urban quarters’ approach will be introduced.

ƒƒThe tax incentives for energy efficient refurbishment of buildings is a top priority measure that was set out in the Coalition Agreement to contribute to achieving the energy and climate policy goals in the buildings sector. The Federal Government is reviewing various options of implementation that will comply with budgetary requirements of the coalition agreement.

ƒƒIt has implemented an assistance programme titled “Energy Efficiency and Heating with Renewable Energy” to give funding programmes more focus and visibility and make access significantly easier. The German Federal Government prioritizes effective use of funds to make such instruments basically more efficient.

Final energy consumption in the transport sector continued to run counter to the goals of the Energy Concept, increasing by around 2.4% compared with the previous year and around 6.5% compared to 2005. It is expected that the 2020 Goal (10% reduction) will not be reached until after 2030 under the present circumstances. Considerable additional efforts will be required to turn this trend around as soon as possible.

ƒƒThe German Federal Government initiated the National Platform on Electric Mobility. This platform aims to assess future mobility issues and formulate recommendations for action in the areas of climate protection in the transport sector, alternative drives and fuels, digitisation, securing Germany as a centre of mobility and manufacturing, infrastructure and grids, and standardisation. Working Group 1 deals with climate protection in the transport sector, and submitted an interim report in March 2019 to the steering committee of the National Platform on Electric Mobility.

Greenhouse gas emissions went down slightly in 2018 according to preliminary estimates. In 2017 they had declined by 27.5% compared with 1990.

ƒƒThe German Federal Government is assessing what additional action should be taken in order to reach the climate protection goal for 2020 (40% less greenhouse gases compared with 1990) as quickly as possible. The Coal Commission has prepared recommendations for gradual reduction and phase-out of coal-powered power generation, sustainable and future-oriented structural development, as well as recommendations on how the energy sector can contribute as best as possible to bridging the remaining gap to the climate goal for 2020. 7

ƒƒThe Federal Government is working on a 2030 Programme of measures for the 2050 Climate Action Plan that will also be incorporated in the NECP. These measures should ensure that the reduction target for 2030 (at least 55% less compared with 1990) is reached and all sectors contribute to this target. The Coal Commission has developed recommendations for meeting the 2030 targets for the energy sector set out in the 2050 Climate Action Plan. All of the measures are evaluated with regard to their ecological, economic and social impact. As agreed in the Coalition Agreement, the German Federal Government will draft a law that should enforce the compliance with the 2030 climate targets.

ƒƒThe Cabinet resolved in March 2019 to set up a Climate Protection Cabinet Committee to ensure the legally binding implementation of the Climate Action Plan as well as of the climate protection targets for 2030 binding on Germany.

Germany’s electricity supply is secure. There is enough energy to cover demand in Ger- many at all times, guaranteeing a high level of supply security. The European electricity market also contributes to this security. Germany is at the forefront – also by international standards – with supply quality consistently at a very high level. This high level of security will also be maintained in the event of atomic energy and coal phase-out.

Cost efficiency is one of the main criteria for optimal implementation of the energy transition. Electricity in particular must remain affordable and German industry must remain competitive. In light of this, efforts have been made to appreciably slow down the EEG surcharge dynamics of previous years. Electricity prices for private households remained nearly constant in 2017 and 2018. However, for industrial customers not covered by special compensation arrangements, electricity prices increased by 4.9% in 2017. An increase was also recorded in 2018. For a hypothetical electricity consumer who can take advantage of all existing discounts, after adding up all factors, electricity prices increased in 2017 by 0.7% in 2017 and by 8.4% in 2018, according to the Federal Network Agency and the Federal Cartel Office (BNetzA, BKartA 2017 und 2018).

Final consumers spent more overall in 2017 for final energy than in the previous year. The share of end energy expenditures in nominal GDP was unchanged over the previous year, at 6.7%. The share of electricity costs in GDP declined once more in 2017, and reached the lowest level since 2010.

The grid expansion measures that have been agreed must be implemented without delay.

ƒƒThis process has entered the next phase, as federal planning has commenced for the big extra-high voltage, direct current transmission lines SuedLink and SuedOstLink in 2017, and for A-Nord in early 2018. In January 2019, formal federal sectoral planning for the first phase of the large ultra-high voltage grid Ultranet was completed. 8

ƒƒThe Action Plan Electricity Grid of the Federal Ministry for Economic Affairs and Energy contains two strategies: first, existing grids should be optimized and utilized more heavily and grid expansion should be accelerated. Technical improvements, new technologies and operating concepts as well as improved congestion management will optimize existing grids. At the same time, grid expansion should be accelerated with strategic controlling, simplifying the planning process and economic incentives. The German Bundestag passed the Power Grid Expansion Act (NABEG amendment) in April 2019. The Action Plan will be further developed in the coming months and specific measures will be incorporated.

Digitalisation, the heating transition, sector coupling and energy research are additional key factors in making the energy transition successful. Integrated development of the energy system is essential. To achieve this, the framework must be quickly adapted and planning reliability ensured.

ƒƒThe first Barometer of Digitisation of the Energy Transition presented on behalf of the Federal Ministry for Economic Affairs and Energy reported that progress has been made in specific areas. At the same time, there is work to be done yet on implementation of the Act on the Digitisation of the Energy Transition (GDEW). The first certification of a Smart Meter Gateway in December 2018 marks an important milestone.

ƒƒThe German Federal Government will continue to promote the heating transition – indispensable for achieving energy and climate targets. This includes creating new heat networks, but also modernising existing heat networks, stronger emphasis on renewable energy in heating supplies and increasing energy efficiency.

ƒƒA substantial impetus for sector coupling is the “Gas 2030 dialogue process” launched in December 2018 with representatives from the gas sector. Findings are expected in September 2019.

ƒƒThe 7th Energy Research Programme addresses current and expected challenges with a holistic approach to funding policy. Current financial planning has earmarked approximately €6.4 billion for energy research under this program for the period 2018 to 2022. Living Laboratories for the energy transition will facilitate the transfer of practical results and startups will provide important impetus for the energy transition.

The energy transition is a modernisation strategy that will trigger extensive and ongoing future investment in enhancing Germany’s attractiveness for business and investment – particularly in the areas of energy-efficient refurbishment of buildings, the energy supply and transitioning to e-mobility – and thereby contribute to increased growth and employment in Germany. Innovative business models offer big opportunities in this process. The energy transition is beneficial in opening up new opportunities for innovation and new market potential. Digitisation of the energy transition also has an impact. Certain industry sectors and business models are faced with structural change, and need assistance. 9

Many German companies profit from trade in new and innovative energy technologies. For example, in 2017, exports of renewable energy installations and components amounted to over €8 billion. Global demand for well-designed renewable energy installations and efficient technologies is on the rise, which improves business prospects in this area. International energy collaboration efforts are gaining in importance, because they facilitate political discussions and underpin economic activities. 10

1 Introduction

The Energy for the Future monitoring process tracks pro- Outlook: The monitoring process also looks ahead to the gress towards goals of the energy transition with a view to likely development of key indicators. To this end, the pro- establishing a secure, environmentally friendly and eco- gress reports capture and visualise reliable trends. nomic energy supply and checks the implementation of measures to transition the energy system; the German This Second Progress Report focusses on these tasks. It energy transition is embedded in the European energy transition and its ambitious goals (see Chapters 2 and 3). zzis based on data taken over several years to ensure reli The monitoring process provides the basis for making able trend analysis; adjustments, if necessary. The focus is on three tasks: zzcontains a comprehensive comparison of status quo and Overview: The monitoring process provides a fact-based quantitative and qualitative goals of the Energy Concept; overview of the current status of progress with regard to implementation of the energy reforms. It condenses the zzdescribes and evaluates the status of implementation of reams of statistical information on energy that have been important measures; collected into selected indicators. zzpan overview of the expected development of important Evaluation: Based on the status quo, the annual monitoring key indicators and describes: reports analyse to what extent targets set out in the Federal ——updated results from models created for the “Target Government’s Energy Concept are being met and what Architecture Study” (Effects of Measures taken by the effect the measures are having. In areas where the targets Federal Government within the Target Architecture are likely to be missed, consolidated progress reports com- for Restructuring the Energy Supply) conducted by prising several years of data propose measures to remove the Federal Ministry for Economic Affairs and Energy; obstructions and reach the targets. ——results from the reference scenario of the “Energy Sec- tor Projections and Impact Assessment” (see Chapter 2) 1 INTRODUCTION 11

zzexamines causes and explains hurdles Part II looks at additional targets and policies affecting the energy transition: zzrecommends measures or processes for removing hurdles and reaching targets. zzDevelopment of the power plant fleet with regard to security of supply, the nuclear phase-out and compati- The structure of the current report and the topics bility with the energy transition (electricity market 2.0) addressed are based on the energy transition target archi- (Chapter 9) tecture adopted by the Federal Government in December 2014. The Monitoring Report is an integral part of this zzAffordability of energy for private households and busi- Report. nesses (Chapter 10)

Embedded in the European and international context zzEnvironmental compatibility of the energy supply sys- (Chapter 3), Part I summarises current progress towards tem the quantitative goals of the energy transition in the following areas: zzExpansion of the electricity transmission systems and distribution grids (Chapter 12) zzProgress in the expansion of renewable energy (Chapter 4) zzIntegrated development of the energy system with a focus on sector coupling, heating transition and digitisa- zzDevelopment of energy consumption and energy effi- tion (Chapter 13) ciency (Chapter 5) with a specific focus on the three areas of electricity, heating and transport zzEnergy research and innovation (Chapter 14) zzEnergy policy targets and measures in the buildings zzCorrelation of the energy transition with investment, sector (Chapter 6) and in the transport sector growth and employment (Chapter 15) (Chapter 7) The boxes below provide an overview of important hori- zzDevelopment of greenhouse gas emissions (Chapter 8) zontal issues of the Report. A table at the end of the Report provides an overview of the status of implementation of measures (Chapter 16). A list of abbreviations is also included.

From the electricity transition to the Energy Transition – paving the way for 2030

The energy transition pursues ambitious goals. The energy basically been an electricity transition. In particular, energy transition is a vehicle for Germany to plan a sustainable transition has not yet reached the necessary momentum in energy supply and to provide the economy and industry the heating, building and transport sectors. In particular, in new opportunities to create additional value added. The order to also fulfil the European legal obligations set for energy transition is not solely a German effort, rather has 2030 for energy and the climate, the following action areas meanwhile taken root all over the globe and is embedded will be key for setting the course: in European energy policy. Major measures taken up to now started with the nuclear energy phase-out by 2022, and 1. European energy transition most recently included the transition to the Electricity Mar- The energy transition has in the meantime also become a ket Design with non-regulated pricing and introduction of European project. Successful European cooperation will bidding processes for renewables. In the meantime, more enable the German energy transition to be successful. The than one third of all kilowatt hours comes from renewable Federal Government participated extensively in negotia- energies. However, the energy transition has up to now tions on the European legislation package Clean Energy for 12 1 INTRODUCTION

All Europeans, and will incorporate this strengthened foun- energy efficiency have not progressed far enough to date; dation of the European energy transition into the German this was exacerbated in 2017 by low oil and gas prices on energy transition. the global market. Heating makes up more than half of German final energy consumption. In order to reach the Central measure: energy and climate targets, it is therefore absolutely neces- zzIntegrated National Energy and Climate Plan (NECP) In sary to decarbonise the heating supply (heating transition) December 2018, German outlined in its draft NECP for buildings, industry and the crafts, trades and services which measures it will take to reach the European sector. Heating networks play a key role in this process (see energy and climate goals. After consultations, the final Chapters 5, 6 and 13). plan will be submitted to the European Commission at the end of 2019 (see Chapter 3). Central measures include in particular: zzEnergy Efficiency Strategy (see Chapter 5) 2. Better synchronization of renewable energies and grid capacities zzBuildings Energy Act; assessing the options for creating According to the Coalition Agreement between the CDU, tax incentives for energy-efficient refurbishment of CSU and the SPD, targeted, efficient, grid-synchronized and buildings as set forth in the Coalition Agreement (see increasingly market-driven expansion of renewable energy Chapter 6) sources is a prerequisite for successful energy transition and climate protection policies. The Federal Government zzMaking progress regarding the heating transition, in par- aims to increase the share in renewables in the energy sec- ticular by expanding new heat networks and modernis- tor – especially addressing the challenges of better synchro- ing existing networks (see Chapter 13) nisation of renewable energy sources and grid capacity – in order to reach the goal set by the Coalition Agreement of 4. Phase-out of coal and structural change approximately 65% by 2030. The capacity of the power grid Another big challenge is to gradually phase out coal-fired to transport energy is key. Increasing expansion of renew power generation, and to manage the structural change able energy is ultimately necessary for replacing electricity that comes with it in the coal mining areas. The climate produced with coal and to cover the additional demand for goals for the energy sector cannot be reached without electricity, so that climate protection goals in transport, in phasing out coal. The goal is to maintain energy supply buildings and in industry can be achieved. By autumn of security, environmental compatibility and economic viabil- 2019, on the basis of results of the coalition work group on ity, and to avoid structural upheaval. The workforce and acceptance issues (AG Acceptance) and recommendations their regions are entitled to good future prospects in return of the Coal Commission and taking into account the grid for their substantial contribution to the energy transition. expansion plan, concrete acceptance measures and conditions for finance will be decided, as well as the additional Central measure: deployment corridors for renewable energies in the elec- zzEvaluation and implementation of the recommendations tricity sector by 2030, in order to achieve the goal of 65% of the Coal Commission (see box below) renewable energies set out in the Coalition Agreement. 5. Sustainable, affordable and climate-friendly mobility Central measures include in particular: The Federal Government wants to create sustainable, zzThe Omnibus Energy Act and determining the renewable affordable and climate-friendly mobility. Important ways of energy path for reaching the 65% renewables target set enhancing low-emission mobility and reaching climate out in the coalition agreement goals in the transport sector include increasing the number of electrical vehicles, expanding the charging infrastructure zzImplementing the Action Plan Electricity Grid and the and increasing the share of bicycles, pedestrians and local package of measures decided with the Länder at the public transport. In particular, for rapid expansion of elec- Grid Conference, in particular the Grid Expansion Accel- tric mobility it will be key to create sufficient incentives for eration Act amendment sector coupling. In particular, the results of the National Platform on the Future of Mobility should be factored in. zzNetwork Development Plan 2019 to 2030 Creating viable, sustainable mobility is the goal of the (see Chapter 12) research programme Sustainable Urban Mobility. This will require continued high-level investment in the rail infra- 3. Energy efficiency and the heating transition structure, the introduction of innovative technologies in rail Despite numerous instruments and funding programmes, transport and new logistics solutions, as proposed in the reduction in energy consumption and improvement in final findings of the Future Alliance for Rail Transport. Ulti- 1 INTRODUCTION 13

mately, an automated and digitised rail transport system In all of these areas the Federal Government utilizes mar- should be the outcome. Due to the increasing need for ket processes to the greatest extent possible, in order to transportation, it is more important than ever to break the implement the goals of the energy transition both technol- link between traffic volume and energy consumption. There ogy-neutral and cost efficiently. must be stronger efforts made to find ways to avoid transportation demand or to diminish the amount of transport. Implementation of the recommendations of the Coal A reversal of the trend in the transport sector, with signifi- Commission cantly lower energy consumption, is and will remain a long-

term project. European legislation to reduce the CO2 emis- After intensive debate, the 28 members of the Coal Com- sions of road vehicles will be developed further with mission agreed on a phase-out of coal-fired power genera- ambitious targets for the post-2020 period in order to meet tion that will provide citizens and businesses planning energy consumption and climate goals at national and security and prospects for sustainable development in the European level. era after coal. At the end of January 2019, the Coal Com- mission presented its final report to the German Chancel- Central measures: lor. The Commission comprises representatives from vari- zzSetting up a National Platform on the Future of Mobility ous groups: Experts from business, environmental organizations, trade unions, citizens’ initiatives and the zzInterim report of the Working Group 1 of the National regions affected by coal phase-out. Numerous scientists Platform on the Future of Mobility (see Chapter 7) and interest groups provided input.

6. Climate protection The final report of the Coal Commission includes a number The Federal Government is preparing a 2030 Programme of structural and energy policy recommendations that will of Measures for the 2050 Climate Action Plan and the lead to a gradual reduction and finally, the phase-out, of National Energy and Climate Program. These measures coal-fired power generation and combine it with successful should ensure that the reduction target for 2030 (at least structural development. The final report is available on the 55% less compared with 1990) is reached and all sectors BMWi website. contribute to this target. The Coal Commission has developed recommendations for meeting the 2030 targets for The Federal Government adopted key principles on 22 May the energy sector set out in the 2050 Climate Action Plan 2019 for implementing the structural policy recommenda- (see box below). All of the measures are evaluated with tions of the Coal Commission. This policy will provide the regard to their ecological, economic and social impact. As framework for enabling the coal regions to continue to agreed in the Coalition Agreement, the German Federal develop into modern energy and economic regions. The key Government will draft a law that should enforce the com- principles stipulate that the Federal Government will pro- pliance with the 2030 climate targets. vide up to €40 billion by 2038 at the latest for the continued development of previous lignite mining sites in Central measures include in particular: Brandenburg and Lusatia in Saxony, in North Rhine-West- zzProgramme of measures 2030 for the 2050 Climate phalia west of Cologne and in Saxony and Saxony-Anhalt in Action Plan the area near Leipzig and Halle. The coal sites that are particularly hard hit and the former lignite mine in Helmstedt zzLegislation to ensure compliance with the 2030 climate will also receive support. protection targets

zzThe Climate Protection Cabinet Committee, to prepare the legally binding implementation of the 2030 climate protection targets (see Chapter 8)

A commission of independent energy experts oversees the University of Berlin), Prof. Dr. Frithjof Staiß (Centre for monitoring process. Working on a scientific basis, the Com- Solar and Hydrogen Research) and Dr. Hans-Joachim Zies- mission of Experts comments on the Federal Government’s ing (Working Group on Energy Balances). The opinions of monitoring and progress reports. Prof. Dr. Andreas Löschel the commission of experts are published on the website of (University of Münster) is the chair of the Commission. the Federal Ministry for Economic Affairs and Energy, Other members are Prof. Dr. Georg Erdmann (Technical together with the monitoring reports and progress reports. 14 1 INTRODUCTION

By making the energy transition more transparent, the gies for the central action areas of the energy transition can monitoring process helps boost public acceptance. The be developed in this way. Federal Government publishes key data on the energy transition in regular reports. Dialogue with the Commission of In addition, the Federal Government has also been report- Experts on the Energy of the Future monitoring process ing on current greenhouse gas emission trends since 2015 and the high-level energy transition platforms that focus in annual climate reports. The report provides information on the electricity market, energy efficiency, buildings, on the state of implementation of measures defined in the energy grids and research and innovation promote exchange 2020 Climate Action Programme, current trends and the with representatives from the Länder, the business com- effects of emissions reduction. munity, society and academia. Joint solutions and strate-

Transparency, participation and acceptance

Acceptance is an important factor for the energy transition. More recent surveys for the 2018 Social Sustainability Transparency, dialogue and participation can all help to Barometer of the Energy Transition conducted by the Insti- improve acceptance (see boxes in Chapters 3 ff.). Accord- tute for Advanced Sustainability Studies and for the 2018 ingly, communication with the Commission of Experts and Energy Transition Monitor of the BDEW confirm that the high-level energy transition platforms are essential for pro- energy transition is firmly anchored as a goal in the opinion viding extensive information and finding joint solutions. of a broad cross-section of the population, and is seen as positive, or as a very important policy. There is even a grow- The Expert Commission has issued several expert opinions ing share of individuals who see the energy transition as a providing important tips on assessing acceptance. There are joint effort in which they personally want to take part three levels: (Institute for Advanced Sustainability Standards 2019; zzThe general public opinion on the energy transition is BDEW 2018). judged by the Commission to be positive (green light) The public has however become more critical of how the zzPublic satisfaction with implementation of the energy energy transition is being implemented, according to the transition is considered at risk (yellow light) 2018 Sustainability Barometer. For the first time, its findings have been largely negative. Public disapproval of govern- zzAcceptance by individuals affected by implementation of ment energy policy has grown markedly, to 61%. The main the energy transition is considered negative (red light) reasons named were:

Overall, the Commission of Experts perceives acceptance of zzit is taking too long to implement (58%); and the energy transition to be at risk (yellow light) The Com- mission will provide a detailed explanation of this indicator zzthe process is not socially just (52%). in its expert opinion regarding the Second Progress Report on the Energy Transition (EWK 2018). Even though many individuals see the energy transition as being expensive, high costs are not seen by the majority as a The BMU and the UBA have published an environmental main point of criticism. Even according to the BDEW Energy awareness survey since 1996 that gives a representative pic- Monitor, the majority of the population feels that the energy ture of public opinion regarding the condition of the envi- transition is not making enough progress. ronment, current topics of environmental policy and their own conduct regarding the environment. This survey clearly The 2018 Sustainability Barometer recommends developing indicates that the public sees climate protection as one of plausible approaches to dealing with major issues of con- the biggest challenges for society. In the most recent survey tention in the energy transition and introducing them to the conducted in 2016, 58% of participants considered the tran- political discourse. This includes solutions that can sustain sition from fossil fuels to renewable energy sources to be a the high ideals of climate protection and at the same time top priority of the government. Regarding their own atti- pay heed to the social dimensions. According to the 2018 tude, they said they were prepared to switch to environmen- Sustainability Barometer, the touchy issues have revolved tally friendly alternatives, for example in the area of auto- around how the energy transition is implemented. mobility (BMU/UBA 2017). 1 INTRODUCTION 15

Various surveys provide insight on what citizens expect or Commission of Experts, the acceptance rate for individuals perceive to be the impact of the energy transition on them directly affected could decline. and their opinion on related projects that are located close to them. According to the BDEW Energy Transition Monitor, To summarise, it is important to retain acceptance as a cor- a large proportion (46%) of those interviewed do not see any nerstone of the energy transition. The challenge is to impact on their lives. Those that perceived an impact found heighten approval of the energy transition, and not only it to be largely advantageous (38%), and a smaller propor- abstractly, rather also specifically where it affects the popu- tion found the energy transition to be disadvantageous the lation. In particular, expansion of renewable energies that is them (14%). targeted, efficient, grid-synchronized and increasingly market oriented is indicative of how the Federal Government is According to the acceptance survey of the Renewable focussing on acceptance (see Chapters 4 and 12). This Energy Agency, those citizens who already have renewable includes keeping the energy transition and maintaining a energy plants in their vicinity were open to the further dialogue with citizens. Furthermore, it is important to expansion of such plants. Overall, the acceptance of such explain the energy transition better and with more nuance plants in the vicinity is 63%. Compared with this, the accord- and to clarify key target conflicts. Once the major decisions ing to surveys for the 2018 Social Sustainability Barometer, have been taken on the direction of political and strategic the number of individuals that feel affected by wind energy goals, the energy transition still needs to provide a clearly installations goes up in correlation with those who oppose recognizable compass in the workshop phase with its many expansion of such installations. Regarding overland electri- implementation steps. The Energy of the Future monitoring cal lines, the acceptance survey of the Renewable Energies process can assist in this process. Another important ele- Agency is similar to this result: 78% of those survey agree ment is still an affordable energy supply. In particular, elec- that expanding such lines is important, yet these individuals tricity must remain affordable – for both households and do not wish to have them in their vicinity. Only 32% were in industry. Greater transparency is required in this aspect (see favour (Renewable Energies Agency, 2018). This is a strong Chapter 10). In particular, digitalisation makes is possible to indication that, in line with the ‘traffic light system’ of the reduce transaction and system costs (see Chapter 13).

In order to achieve the greatest consistency possible and processes, which must be published every two years start- to optimize synergies, the national monitoring process ing in 2023. In order to facilitate the assessment of long- should also be coordinated with governance of the Euro- term trends using a data base spanning several years, the pean Energy Union and the National Energy and Climate national progress report is scheduled for publication every Plan (NECP, see Chapter 3). It is important to ensure that four years instead of every two years, starting in 2022. In both processes observe the goals relevant to each process any case, the national monitoring process should be on the national and European level, respectively, while tak- retained in addition to the European governance process. ing the interaction between the two levels into count. In This allows for an assessment of the energy transition that addition, the timing of the national progress reports will be adequately and quickly considers issues specific to the aligned more closely with the progress reports of the NECP national situation as well as including national data. 16

2 Objectives of the energy transition and monitoring indicators

The energy transition is gradually shifting Germany’s sions by the Bundestag, and European rules. National goals energy sources from fossil fuels and nuclear energy to are based on the ambitious goals set at the EU level. The renewable energies. The orientation for the energy transi- triple objective of security of supply, affordability and envi- tion – and thus the basis for its monitoring – is provided ronmental compatibility remains the guiding principle for by the Federal Government’s Energy Concept, further deci- Germany’s energy policy.

Europe Creating a reliable European and international framework for more climate protection, renewables and International energy efficiency

Table 2.1: Quantitative targets of the energy transition and status quo (2017)

2017 2020 2030 2040 2050

Greenhouse gas emissions

Greenhouse gas emissions -27.5% at least at least at least largely (compared with 1990) -40% -55% -70% greenhouse- gas-neutral -80% to -95%

Renewable energy

Share of gross 15.9% 18% 30% 45% 60% final energy consumption Share of gross 36% at least at least at least at least electricity consumption 35% 50%*, 65% 80% Renewable Renewable Energy Sour- Energy Sour- ces Act 2017: ces Act 2017: 40–45% 55–60% by 2025 by 2035

Share of heat consumption 13.4% 14%

Efficiency and consumption

Primary energy consumption -5.5% -20% -50% (compared with 2008) 1.0% Final energy productivity per year 2.1% per year (2008 – 2050) (2008–2050) (2008–2017) Gross electricity consumption -3.3% -10% -25% (compared with 2008) Primary energy consumption in buildings -18.8% -80% (compared with 2008) Heat consumption in buildings -6.9% -20% (compared with 2008) Final energy consumption in the transport sector 6.5% -10% -40% (compared with 2005)

Source: In-house data from the Federal Ministry for Economic Affairs and Energy, 3/2019 *, Targeted, efficient, grid-synchronized and an increasingly market-driven expansion of renewable energy sources is a prerequisite for successful energy transition and climate protection policies. The Federal Government aims to increase the share in renewables in the energy sector – especially in the context of the challenges of better synchronisation of renewable energy sources and grid capacity – in order to reach the goal set by the Coalition Agreement of approximately 65% by 2030. The capacity of the power grid to transport energy is key. Increasing expansion of renewable energy is ultimately necessary for covering the additional demand for electricity, so that climate protection goals in transport, in buildings and in industry can be achieved. 2 OBJECTIVES OF THE ENERGY TRANSITION AND MONITORING INDICATORS 17

Conversion factors for uniform valuation of energy sources when calculating primary energy consumption

According to international convention, primary energy of electric energy produced), and for nuclear energy, 33%. sources are calculated in the energy balance using the effi- An efficiency rate of 100% is also implied for the import ciency rate method, which replaced the substitution balance that is recorded in the energy balance at the pri- method in 1995. The efficiency rate method assigns energy mary energy consumption level. The efficiency rate method sources that have no calorific value a physical efficiency is an international standard and is required for comparisons rate for energy conversion of 100% for hydropower, wind with other countries. power and photovoltaics (equivalent to the calorific value

EU goals are described in detail in Chapter 3. The reduction reduced by at least 40%, renewable energies should reach a of greenhouse emissions in Germany is anchored in a share of at least 32% in gross final consumption of energy, European framework. The EU has committed to reducing and European primary energy consumption should be emissions by 20% by 2020, compared with 1990. Important reduced by at least 32.5% compared with a baseline (see instruments include the European Emissions Trading Sys- Chapter 3). tem (EU-ETS) for industry, the energy industry and intra- European aviation and effort sharing in the other sectors. Part I of the Progress Report examines the quantitative Whereas the target for the EU ETS sectors is not allocated targets of the energy transition. As Table 2.1 shows, these to Member States, the reduction target for non-ETS sectors targets extend through to 2050, with some milestones set is divided into national targets for each individual Member for 2020, 2030 and 2040. State, in accordance with the EU Effort Sharing Decision. Accordingly, Germany has committed to reducing its emis- Part II of the Progress Report looks at other targets and sions in these sectors by 14% by 2020, compared with 2005. policies affecting the energy transition. As quantitative tar- By 2030, greenhouse emissions across the EU should be gets have not been agreed for some of these topics, these

Table 2.2: Additional targets and policies affecting the energy transition

Security of supply Efficiently covering Germany’s energy needs at all times

Nuclear energy phase-out Switching off the last nuclear power plants at the end of 2022

Affordability competitiveness Maintaining affordability of energy and ensuring Germany's competitiveness

Environmental aspects Creating an energy supply system that is environmentally compatible and protects natural habitat

Grid expansion Expanding and modernising grids to meet demand

Sector coupling Unlocking the potential of efficient sector coupling, the heating transition and digitisation for a Heating transition successful energy transition Digitisation Research Fostering forward-looking innovations for restructuring the energy supply Innovation Investment Retaining and creating jobs in Germany and laying the foundations for sustainable prosperity and Growth quality of life Jobs

Source: In-house data from the Federal Ministry for Economic Affairs and Energy, 03/2019 18 2 OBJECTIVES OF THE ENERGY TRANSITION AND MONITORING INDICATORS

areas also focus on qualitative targets (Table 2.3). Public and Transition Progress Report (see Figure 2.1). This target scientific community debates revolve around how well the architecture structures and prioritises the individual goals goals of supply security and affordability can be quantified of the Energy Concept, distinguishing between multiple and if it is possible to verify which goals have been reached goal levels: using key indicators (see EWK 2017). Any efforts are wel- come that use a multidimensional approach to help make The policy goals define the framework for the restructuring the status of the energy transformation more visible. How- of our energy supply. They include: ever, there has been no real consensus as of yet regarding quantification of the specific targets. For this and other rea- zzclimate targets, including a 40% reduction in greenhouse sons, Part II uses not just one indicator or a leading indica- gas emissions by 2020 and thereafter, tor, rather several to examine the targets – taken together, they provide a reasonable picture of progress made toward zzthe phase-out of nuclear energy for electricity genera- these goals and demonstrate the complexity of the issues tion by 2022, and involved. The research project titled Definition and Moni- toring of Supply Security in European Energy Markets zzgoals to guarantee competitiveness and security of commissioned by the Federal Ministry for Economic Affairs supply. and Energy defines indicators and threshold values suited to measuring and assessing the security of supply in the The core objectives describe the central strategies of the electricity market. Energy Concept to drive the energy transition forward. The focus here is on expanding renewables and reducing primary energy consumption or increasing energy efficiency. 2.1 Target architecture for the energy Both core objectives are defined in concrete terms by steer- transition ing targets for the three action areas of electricity, heating and transport. The target architecture is focussed on illus- The target architecture structures the individual goals of trating the interaction of the various levels and targets. the energy transition. The Cabinet adopted a target archi- Quantitative targets for 2020 and thereafter can be found tecture for the energy transition with the First Energy in Table 2.1. The steering targets and the corresponding

Figure 2.1: Structure of the goals of the Energy Concept

Climate goals (including -40% GHG emissions by 2020), phase-out of nuclear energy (by 2022), Policy goals competitiveness, security of supply

Increasing share of RES in all Lowering primary energy consumption and Core objectives energy consumption increasing energy efciency at athe strategy level

Steering targets Increasing final energy productivity at the steering level

Reducing Reducing Æ Optimisation Energy Heat RES in Reducing nal heat energy consumption using RES transport energy energy consumption using RES consumption consumption in transport Overarching goals: cost efficiency, system integration

Mix of measures Measures level (laws, ordinances and directives, funding programmes, etc.)

Source: In-house data from the Federal Ministry for Economic Affairs and Energy, 03/2019 2 OBJECTIVES OF THE ENERGY TRANSITION AND MONITORING INDICATORS 19

measures are aligned so that, with an integrated approach, values for 2020, the study estimates to what extent goals the overarching goals can be achieved in the most reliable, can be reached when the additional effects of measures cost-effective manner possible. This optimisation tasks also already under way are factored in until 2020. The breadth includes better synchronization of renewable energies and of the corridor reflects uncertainty regarding the effective- grid capacities (see Chapters 4 and 12). ness of the instruments and the basic socio-economic data. Current findings are based on the status of measure at the end of 2018. The Federal Government does not take owner- 2.2 Indicators and evaluation scheme ship of the current results, however it does include them in its assessments of expected developments of major key Energy transition monitoring is based on publicly accessi- indicators. For details on methodology please refer to the ble and verifiable data. The process is carried out using Sixth Energy Transition Monitoring Report. selected indicators which visualise progress made in the energy transition over time. These indicators are informed, The quantitative chapters also provide an outlook on 2030 wherever possible, by official and publicly accessible data. and 2040. The results of a project on a research project The Energy Statistics Act is the national legal basis for offi- accompanying the Integrated National Energy and Climate cial energy statistics, and was amended in March 2017 to Plan (NECP) are cited. The project was initiated by the Fed- adapt it to the current situation. However, surveys for 2017 eral Ministry for Economic Affairs and Energy and is still were conducted in accordance with the original Act. The ongoing. Preliminary findings on trends in reference values indicators used for the various topics are illustrated in Fig- based on the status quo of measures at the end of 2017 ure 2.2. were incorporated in the NECP drafted by the Federal Gov- ernment and published at the end of 2018. In the mean- A points system is used to assess the progress made in time the analytical work for the project has taken shape. terms of the quantitative targets of the energy transition. The outlook for the trend for 2030 and 2040 compared with Firstly, the development of the indicators since 2008 is the reference situation is based on an updated reference extrapolated on a linear basis. On the basis of percentage scenario. For this reason, individual figures may diverge of deviation of the extrapolated figures from the target fig- from those in the NECP draft. Extensive assessments of the ures in 2020, points are awarded as follows for this report: impact of energy policy instruments based on available 5 points if, according to the extrapolation, the target is met studies have been incorporated into the reference scenario. or the deviation is less than 10%; 4 points if the deviation Overall, the reference scenario provides a complete and is between 10 and 20%; 3 points if the deviation is between consistent picture of the projected development of the 20 and 40%; 2 points if the calculated deviation is between energy system in Germany. 40 and 60%; and 1 point if the deviation from the target exceeds 60%. The evaluation scheme applied here cannot The figures indicated in this Report generally reflect the replace complex, model-based forecasts. But this system data available in March 2019. The data on the Energy of the offers the advantage of a comparatively simple and com- Future monitoring process are publicly accessible on the prehensible depiction of the current status of key energy websites of the Federal Ministry for Economic Affairs and transition indicators at a glance. The future impact of Energy and the Federal Network Agency. The reporting measures which are currently being implemented is not year is the year 2017 with preliminary figures, whereby reflected in this assessment of whether targets are met. some of the data is based on more current developments. They may yet have an impact, and the actual development With this report, the Federal Government fulfils its report- can deviate in response to political and economic influ- ing obligations pursuant to Section 63 (1) of the Energy ences. Therefore such an assessment always carries a cer- Industry Act, Section 98 of the Renewable Energy Sources tain degree of uncertainty. Act and Section 24 of the Core Energy Market Data Register Ordinance and with regard to the National Action Plan on The chapters on quantitative goals of the energy transition Energy Efficiency (NAPE) and the Energy Efficiency Strat- (see Part I of the Report) provide an outlook for 2020. This egy for Buildings (ESG). chapter presents updated results from models created for the “Target Architecture Study” (Effects of Measures taken by the Federal Government within the Target Architecture for Restructuring the Energy Supply) conducted by the Federal Ministry for Economic Affairs and Energy. The target architecture study is set up as a meta analysis and assesses the effects of instruments in the target architecture up to 2020 as compared with a reference situation. By comparing a time corridor for projected effects with the target 20 2 OBJECTIVES OF THE ENERGY TRANSITION AND MONITORING INDICATORS

Table 2.3: Outlook on the likely development of key indicators (2020 and 2030)

2020 2030

Estimate Target Projection Target [min-max-spread] NECP reference Current Target scenario Architecture Study

Renewable energy

Share of gross 18.4% 18% 22.6% 30% final energy consumption (17.9% to 18.8%) Share of gross 43.4% at least 52.9% Renewable Energy electricity consumption (41.3% to 45.1%) 35%*. Sources Act 2017: 40–45% by 2025

by 2030: at least 50%* 15.2% Share of heat consumption 14% 18.8% (14.9% to 16.2%)

Efficiency and consumption

Primary energy consumption -10.8% -20% -21.0% (compared with 2008) (-10.3% to -11.2%) Gross electricity consumption -4.0% -10% -6.5% (compared with 2008) (-2.5% to -5.2%) Heat consumption in buildings -7.7% -20% -17.4% (compared with 2008) (-6.8% to -9.0%) Final energy consumption in the transport sector 5.4% -10% 4.0% (compared with 2005) (5.0% to 5.8%)

Source: In-house data from the Federal Ministry for Economic Affairs and Energy, 3/2019 *. Targeted, efficient, grid-synchronized and an increasingly market-driven expansion of renewable energy sources is a prerequisite for successful energy transition and climate protection policies. The Federal Government aims to increase the share in renewables in the energy sector – especially in the context of the challenges of better synchronisation of renewable energy sources and grid capacity – in order to reach the goal set by the Coalition Agreement of approximately 65% by 2030. The capacity of the power grid to transport energy is key. Increasing expansion of renewable energy is ultimately necessary for covering the additional demand for electricity, so that climate protection goals in transport, in buildings and in industry can be achieved.

Figure 2.2: Indicators

The energy transition in the zz EU targets 2020/2030 European and international zz Physical flows of electricity context zz Emissions trading in the EU-ETS zz Effort sharing in areas outside the emissions trading scheme zz Global investment in renewable energy and energy efficiency zz Global CO2 emissions zz Global installed renewable capacity

Renewable energy zz Share of renewable energy sources (RES) in gross final energy consumption zz Share of RES in gross electricity consumption zz Renewable electricity generation by technology zz Gross electricity generation by energy source zz Share of RES in heating and cooling consumption zz Share of RES in the transport sector zz EEG surcharge by technology zz Sum total of EEG surcharge plus electricity prices on the exchange

Efficiency and consumption zz Primary energy consumption zz Primary and final energy productivity zz Gross electricity consumption

Buildings zz Share of final energy consumption of buildings in total energy consumption zz Final energy consumption of buildings/heating final energy consumption zz Specific final energy consumption for space heating zz Primary energy consumption in buildings 2 OBJECTIVES OF THE ENERGY TRANSITION AND MONITORING INDICATORS 21

Transport zz Final energy consumption in the transport sector zz Specific final energy consumption of the transport sector zz Number of 3-wheel-plus vehicles with an electric drive zz Number of 3-wheel-plus vehicles powered by fuel cells and natural gas zz Shift to rail transport zz Shift to public transport

Greenhouse gas emissions zz Greenhouse gas emissions zz Greenhouse gas emissions by source group zz Energy-related CO2 emissions by sector zz Greenhouse gas emissions avoided through use of renewables zz Specific greenhouse gas emissions in relation to the population and GDP

Power plants and security zz Installed capacity of power generation plants of supply zz Distribution of power plant capacity across the Länder zz Combined heat and power including electricity generation zz Conventional generation capacities: new plant construction and dismantling of plants zz Capacity of pumped storage power stations zz Nuclear phase-out roadmap zz SAIDI power zz Conventional power plants under construction zz Electricity outage duration compared to other countries

Affordable energy and a level zz Final consumer spending on energy and as a share of GDP playing field zz Energy spending of private households zz Electricity prices of private households zz Energy costs for industry zz Oil and gas prices zz Prices of electricity on the exchange zz Electricity prices of non-privileged industrial enterprises zz Macroeconomic energy spending zz Energy prices compared to other countries

Environmental compatibility zz Environmental monitoring of the energy transition using a suitable set of indicators (being developed)

Grid infrastructure zz Projects under the Power Grid Expansion Act and Federal Requirements Planning zz Grid investments zz Grid charges zz Costs for ancillary services

Sector coupling, the heating zz Number and electricity consumption of heat pumps transition and digitisation zz Number and electricity consumption of E-mobility zz Efficient heat networks zz Innovative CHP systems zz Digitisation Barometer, including Smart Meter Gateway certification

Energy research and zz Industry spending on R&D innovation zz Federal research spending in the Energy Research Programme zz Project funding from EU funds zz Patents zz Market uptake of innovative technologies in energy consumption

Investment, growth and jobs zz Investment in renewable energy and energy efficiency zz Investment in grids and electricity supply zz Primary energy sources saved as a result of the use of renewable energy zz Numbers employed in renewable energy sector zz Employment in the energy sector

Source: Source: In-house data from the Federal Ministry for Economic Affairs and Energy, 3/2019 22 23

3 The energy transition in the European and international context

Where do we stand?

The EU is basically on course to reach its energy and climate goals for 2020. With a view to reducing greenhouse gases, both the sectors falling under the European emissions trading system (EU-ETS), and the non-ETS sectors have already fulfilled their respective targets of 21% and 10% reductions in emissions.

Germany must make additional efforts, in particular in reducing greenhouse gas emissions in the non-ETS sectors and primary and final energy consumption, in order to comply with its obligations regarding 2020 goals for individual EU Member States.

The European legal framework in the electricity area as well as diverse collaboration formats strengthen trade and exchange of electricity between Germany and its neighbours, thereby making a strong contribution to supply security.

Efforts to expand the use of renewables and improve energy efficiency are bearing fruit all over the globe, and international interest in joint projects with Germany is still strong. The decisive driver of this global trend is China.

What is new?

The package of measures titled “Clean Energy for All Europeans” will provide a new European legislative framework for clean energy and is also strategically key for national energy and climate policies.

The reworked directives for energy efficiency and renewables embody ambitious goals for the EU for enhancing energy efficiency (at least 32.5% in 2030) and expanding renewable energies (at least 32% in 2030). For the first time there are specific EU targets for expansion of renewable energies in the heating and cooling sector and in the transport sector.

The new design for the European electricity market will improve cross-border electricity sales between Member States and also the role of the consumer. This will make the electricity supply more secure and cheaper.

The new Governance Regulation contains a new planning and monitoring instrument: the integrated National Energy and Climate Plan (NECP). The German Federal government submitted its NECP draft to the EU Commission on time in December 2018 and then published it. The European Commission will provide the Member States with recommendations on their drafts by June 2019. After national and regional consultation, the final Plan will be submitted to the European Commission, at the end of 2019. The Plan will describe the German energy and climate protection policies and illustrate how Germany will contribute in particular to the EU tar- 24 3 THE ENERGY TRANSITION IN THE EUROPEAN AND INTERNATIONAL CONTEXT

gets for renewable energy and energy efficiency, as well as for reducing greenhouse gas emissions by 2030.

The EU ETS reform that entered into force in April 2018 strengthens the price signal with a limited offer of certificates; at the same time it provides for reasonable rules, in order to protect the international competitiveness of the European industry.

What is next?

The energy transition can only be successful as a European effort. The new EU Gov- ernance with comprehensive monitoring of the NECPs is an important prerequisite.

It is clear that, even after 2020, the EU ETS will remain the most important tool for cutting greenhouse gases in the EU. The reform of the ETS will pave the way.

The new EU Electricity Market Design that will enter into force in 2020 will orient the European electricity market to challenges of providing a secure and affordable energy supply with an increasing share of renewable energies.

The requirement that cross-border energy trading must become more and more independent of internal grid shortages require intensive efforts from grid operators. Necessary measures will be worked out in a separate action plan.

In addition, the European Commission has proposed ideas for a long-term climate strategy that is to be prepared in accordance with the Paris Agreement on Climate Change and presented by 2020. In the Communication, the European Commission has proposed various scenarios as to how greenhouse gas emissions can be reduced by between -80% up to zero-net emissions by 2050. Renewable energies and energy savings play a big role; in addition, industry and transport should be more electrified, the closed cycles promoted and stronger incentives for low-emission living should be created. On this basis, the EU Commission proposes that the EU should be a greenhouse gas-neutral system by 2050.

At the international level, the special report of the Intergovernmental Panel on Climate Change (IPCC) takes up the 1.5°C goal of the Paris Agreement of October 2018 and illustrates the possible drastic effects of global warming of more than 1.5°C and looks at emissions-reducing means for limiting warming to 1.5°C. This involves reducing global greenhouse gas emissions by 2030 by around 45% compared with the 2010 level and reaching zero-net emissions by 2050. The emissions level targeted for 2030 in the climate action plans (national determined contributions, NDCs) submitted up to now are now sufficient, according to IPCC, to achieve the binding target set in Paris, to reduce global warming by significantly under 2°C over pre-industrial levels, and to achieve a limitation of 1.5°C, wherever possible.

The energy transition is part of a global and technological trend toward sustainable energy supplies. Only if Germany and the EU make the switch successfully to renewable energies and efficient technologies, can others profit from their expertise.

Europe Creating a reliable European and international framework for more climate pro- International tection, renewables and energy efficiency 3 THE ENERGY TRANSITION IN THE EUROPEAN AND INTERNATIONAL CONTEXT 25

3.1 Present situation large majority of the Member States reached or exceeded their indicative goals under the EU Renewable Energy Direc- 3.1.1 European energy and climate protection policy tive; 11 Member States have already reached their 2020 targets or even succeeded them. This is also true for Germany, Regarding the goals the EU has set itself – reduction of which had an indicative targeted 2017/2018 average under GHG emissions by 20% (over 1990), a share of renewable the EU Renewable Energy Directive of a 13.7% share of energy sources in the energy supply of 20%, and reduction renewables in gross final energy consumption; Germany’s of primary energy consumption by 20% (compared with a actual figure was 15.5% (calculated using EU methods). In baseline) – the EU is either already close or has reached view of preliminary figures, it is expected that the share of these goals ahead of time in some areas (Figure 3.1). How- renewables compared with 2017 has increased significantly ever, there is very little time left to close all of the existing to 16.6%; this is largely attributable to the electricity, heat gaps. For example, with regard to annual energy savings and transport sectors. Germany has made steps toward there is a great need for action. reaching its 2020 target of an 18% share in renewables, yet it is not yet clear whether the target will actually be reached. The situation regarding reduction of greenhouse gases is This is shown by the fact that in 2017 Germany missed its positive. In 2017, emissions were almost 22% down over national goal under the NREAP (National Renewable Energy 1990, according to EEA estimates. This exceeds the 20% tar- Action Plan) and is expected to do the same in 2018 also; this get that the EU agreed on in the Framework Convention on goal is more ambitious than that of the EU Renewable Climate Change of the Kyoto Protocol. However, there was Energy Directive, and requires a target of 15.7% for 2017, and a slight increase in emissions in 2017 of 0.6%. Using current 16.7% for 2018. Despite positive developments in other cur- projections of Member States as a base, the target for 2020 rent goals, the share of renewables particularly in the heating is not yet in danger – especially since emissions went down sector and in the transport sector are lagging behind expec- once again in 2018. However, this does not yet produce a tations. If Germany ultimately misses its renewables target positive trend for emissions development. for 2020, it will be subject to infringement proceedings, with financial sanctions. The EU-wide share of renewables in gross final energy consumption is still a bit below the 20%-mark. In 2017, Not only Germany, but also all other countries in the EU according to preliminary figures this figure was at 17.5% must make additional efforts, especially in the transport throughout the EU, which is a substantial contribution to area: in 2017, the EU-wide use of renewables in the transport decarbonising the energy system in Europe. Accordingly, a sector was at 7.6% – quite far from the sector target of 10%

Figure 3.1: Progress in the EU regarding 20-20-20 targets in Percent 25

-5

-10

-15

-20

-25 2005 2010 2015 2020

Share of RES in nal energy consumption Decline in primary energy consumption since 2005 Drop in emissions over 1990* Target path according to the Renewable Energy Directive target (13% decline over 2005) target of -20%

Source: Eurostat 02/2019 (Renewables and primary energy consumption figures; primary energy consumption without non-energy consumption); EEA 10/2018 (Emissions figures; without LULUCF, but with indirect CO2 and with international aviation); in-house calculations *Data for 2017 are based on EEA estimates. 26 3 THE ENERGY TRANSITION IN THE EUROPEAN AND INTERNATIONAL CONTEXT

for 2020. Renewables were even at a nearly 30.8%-share in transparency and stronger cross-border cooperation and gross electricity consumption in all of the EU, with a rising support of Member States. In the electricity sector, too, a tendency. Wind energy is currently the biggest factor in this. cross-border approach in planning supply security and reciprocal support in case of crisis will create the future basis In the area of energy efficiency, the trend toward lower in Europe. energy consumption in the EU reversed in 2015. In 2017, primary energy consumption – as in the two previous years The European electricity market is reality, and contributes – went up slightly, due to a relatively cool winter and lower substantially to a secure energy supply. It allows for more fuel prices compared to the previous year. The period competition on the electricity markets and as such creates between 2005 and 2017 saw a decline in primary energy con- affordable electricity prices for consumers in EU Member sumption of 9.2% overall, yet the EU-wide figure in 2017 of States. A well-connected electricity market is also necessary 65.35 EJ was more than five percent above the target for 2020 for inexpensive integration of more and more energy from (less than 62.09 EJ); the amount that must be conserved is renewable sources that are not equally accessible. similar to the primary energy consumption of Sweden and Austria together in 2017. Final energy consumption in 2017 The European electricity market Germany trades electricity was also higher, more than 3% over the target of less than with its neighbours at all times – as with other goods. In 45.47 EJ. To reach the target, an amount of at least the final this way, large-scale equalisation effects can be used much energy consumption of Belgium in 2017 would have to be more efficiently: if in Germany the wind is not very strong, saved between 2017 and 2020. Accordingly addition efforts wind turbines often are in operation in neighbouring coun- may be required for the EU to reach its 2020 energy effi- tries, and vice versa. To enable these effects, in June 2018 the ciency targets. intraday energy trading markets of Germany, France, Austria, Belgium, Denmark, Estonia, Finland, Lithuania, Latvia, Nor- With a view to supply security, the EU considers a better- way, the Netherlands, Portugal, Spain and Sweden were coordinated approach in the future as essential. To satisfy interconnected. The project enables continual cross-border energy demand, the EU relies on imports from non-EU intraday trading between the participating countries and countries of over 50%. Dependency on oil and gas is particu- offers market participants the opportunity to access excess larly strong. The share of net imports in total gross domestic capacity in other countries to quickly even out their power consumption in 2017 was at around 89% for crude oil, and balances. This can significantly reduce costs. In the summer 75% for natural gas. A large part of these (net) imports, both of 2019, most of the other European countries plan on join- oil and gas, came from Russia (almost one-third, and nearly ing. The physical electricity exchange balance between Ger- one-half, respectively). A coordinated approach toward gas many and other countries reached a new peak in 2017, at supplies should include a common methodology, more over 55 TWh (Figure 3.2). 3 THE ENERGY TRANSITION IN THE EUROPEAN AND INTERNATIONAL CONTEXT 27

A key factor for an integrated electricity market is having 1.74%. The allowances will be either given to the installa- connecting transmission lines (interconnectors) between tions or aviation operators for free, or they must buy them national electricity markets that function well. To this end, in an auction; they will be freely negotiable on the market. the EU has set an indicative goal for interconnection – the capacity for exchange of cross-border transmission lines – The reduction target for EU ETS areas has already been of 10% by 2020. Interconnection in 2017 was below the fulfilled. Compared with 2005, the overall reduction in 10%-level in 11 Member States. This also applies to Ger- emissions was 26% (target: 21%) in the stationary plants many, due to the rapidly growing capacity for generating (without air transport) – from 2,375 to 1,754 million t CO2 renewable energy. The rate of interconnection drops if the equivalent. Nevertheless, according to analysis of prelimi- expansion of interconnectors cannot keep pace with the nary data for EU ETS sector emissions in 2017, they are rapid expansion in renewables capacity. slightly above the previous year’s level (+ 0.3%) for the first time since 2010. The reason for this is economic growth in many EU countries, following a phase in which emissions 3.1.2 Climate protection in European Emissions had dropped significantly due to the economic crisis. Emis- Trading and European Effort Sharing sions in European air transport recorded an especially sharp rise – around 4.5% – whereas the stationary plant Introduced in 2005, the European Union Greenhouse Gas emissions recorded an increase of less than 0.2%. The Emission Trading Scheme (EU ETS) comprises emissions of decline in the electricity sector was not able to compensate around 11,000 plants and installations of the energy sector for the increase in industry emissions. and energy-intensive industry, as well as emissions from intra-European aviation in the 28 Member States of the According to information provided by the German Emis- EU and Norway, Iceland and Liechtenstein. Together, these sions Trading Authority (DEHSt), in 2017 approximately sectors account for roughly 40% of all GHG emissions in 1,833 installations were included in the EU ETS (without air Europe. The goal of reducing EU-wide greenhouse gas transport), of which about one-half comprised energy and emissions by 20% compared with 1990 by 2020, or by 14% industry sector facilities. Taken together, they emitted 438 compared with 2005, is divided as follows: Around two- million tonnes of CO2 equivalent – 3.4% less than the previ- thirds of reductions are to be met by the sectors within the ous year. In contrast to the EU overall, the drop in energy EU ETS, and one-third by sectors outside of the EU ETS. sector emissions in Germany could overcompensate the This equates to a goal of 21% reduction by 2020 compared rise in industrial emissions. In the entire period between with 2005 for EU ETS sectors. To reach this goal, the total 2005 and 2017 emissions in Germany have gone down by amount of emissions allowances available during the third around 15% and thereby much less than the European trading period 2013 – 2020 must go down each year by average (-26%).

Figure 3.2: Physical flows of electricity in cross-border capacities in TWh

100 85.4 80.7 83.4 80 72.2 74.5 65.9 67.3 61.9 63.4 62.7 59.9 60 54.9 56.0

-20 -27.0 -28.4 -40 -33.6 -38.4 -38.9 -44.3 -40.2 -40.6 -42.2 -44.2 -46.1 -49.7 -60 -53.4

-80 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Export Import

Source: AGEB 12/2018 28 3 THE ENERGY TRANSITION IN THE EUROPEAN AND INTERNATIONAL CONTEXT

However, simply relying on the EU ETS is not enough to half of Chinese emissions and the EU with a global share of achieve the EU emission reduction target – the non-ETS almost one-tenth. These figures illustrate how much China sectors (especially buildings, non-aviation transport, agri- influences global emissions: The small rise in 2015 and 2016 culture, small industrial plants and waste) also must make a was largely attributable to the fact that emissions in China decisive contribution in order to lower emissions. In 2017, hardly increased or even decreased. However, this trend emissions from these sectors was already 11% lower than could not be continued in 2017, especially due to increased 2005, yet the trend in the past few years has indicated a rise, demand for electricity produced by coal. due to low oil prices and weather-related heating needs. The transport sector contributed largely to this increase. If we Energy-related emissions, which comprise the largest share assume that current projections made by the Member States by far in total emissions, increased due to the global eco- are fulfilled, the EU would still reach its goal of a drop in nomic upswing and relatively low prices for fossil energy emissions in the non-ETS sectors of 10% by 2020 (EEA 2018). sources in most of the large economies (OECD/IEA 2018a). The global trend to an increase continued in 2018; specifi- Whereas the target for the EU ETS sectors is not allocated cally, the International Energy Agency (IEA) estimates that to Member States, the reduction target for non-ETS sectors there was 1.7% more CO2 emissions from energy. This was is divided into national targets for each individual Member attributable in particular to China, India, and the USA, State. The targets for 2020 were adopted in the 2013 ESD whereas emissions in the EU went down, contrary to the Effort Sharing Decision. global trend (OECD/IEA 2019).

Germany may miss its goal of reducing emissions in the non-ETS sectors by 14% by 2020. Member States are not legally bound to fulfilling their 2020 targets as of a strict and precise date. However, they must furnish proof that they have enough emissions allowances for each year from 2013 to 2020 from the Effort Sharing Decision to cover their actual emissions. Unused allowances may be transferred without restriction to later years of the allocation period or transferred to other Member States. Because Germany is expected to use up by 2020 the emissions it saved between 2013 and 2015 that were below the annual allowance, it might be forced to purchase emissions allowances from other EU Member States or emissions allowances by means of international market mechanisms.

In June 2018, the International Civil Aviation Organisation (ICAO) accepted binding guidelines and recommendations for compensating the growth in CO2 emissions in international air transport starting in 2020 (CORSIA: Carbon Off- setting and Reduction Scheme for International Aviation).

Its requirements for monitoring CO2 emissions take effect in 2019, and the CO2 compensation requirements in starting 2021. The EU Commission will evaluate the effective- In December 2017 China initiated its own market for carbon ness of the CORSIA regulations on the environment, and allowances, which is now larger than the European ETS. As will use this as a basis for recommendations as to how the a pilot project, it currently only includes the energy sector – scope of application of the EU ETS should be applied to air the 1,700 power plants currently involved produce about transport. one-third of all Chinese emissions, according to the China Carbon Forum.

3.1.3 International energy policy Overall, the global energy transition is making progress toward a low-emissions energy supply, even if the tempo

Whereas overall global CO2 emissions did not increase in has slowed somewhat. According to the IEA, in 2017 more 2015 and 2016, or hardly at all, there was a noticeable energy investment was made in fossil energy sources than increase in 2017 of 1.2% (see Figure 3.3). CO2 emissions in renewables, for the first time in four years. With respect reached the highest level ever, at over 37 billion tonnes. The to total investments in renewable energies (without the biggest polluter is China, with over more than one-third of large area of hydropower), China had the biggest share total global emissions. Then comes the USA, with around globally, at around 45%. Whereas expenditures in China 3 THE ENERGY TRANSITION IN THE EUROPEAN AND INTERNATIONAL CONTEXT 29

had gone up by 30% over 2016, they were quite a bit lower electricity are continually pursued. Even now, about one- in some other regions; this is especially true for Europe, fifth of the global increase in electricity demand is due to where investment impetus has been waning for several electrical motors in China. Lower costs for renewable years already. Given this, China – not Europe – has been the energy technologies also make this easier, and in particular region with the largest investment volume since 2013 for developing and emerging economies to cover growing renewable energies, and its lead is growing rapidly (OECD/ energy demand ecologically – yet big opportunities are also IEA 2018c). fraught with additional challenges for reliable operation of electricity systems (OECD/IEA 2018d). Especially in the electricity sector, renewable energies are highly dynamic: In 2017, two-thirds of total global invest- In 2016, renewables provided almost one-seventh of global ment in power generation went to renewables. At the end primary energy consumption, and almost one-fifth of final of 2017, 2,200 GW of energy generation capacity from energy consumption. Overall energy consumption from renewables was available – another increase of 8% over the renewable sources in 2017 grew more strongly than from previous year. Overall, renewable generation capacity has other energy sources – the main drivers of this trend were about doubled in the decade 2007 – 2017. In this age of China and the USA. In the meantime, rapidly growing lower costs and technological advances, photovoltaic modern renewables in the area of wind and solar energy capacity again expanded strongly; in 2017 it grew more have a bigger impact than traditional biomass, which is strongly than fossil fuel and nuclear power generation only slowly gaining in acceptance globally and in some capacities together. countries is even declining. All renewables together provided around one-fourth of electricity generation (REN21 With regard to installed power, Germany was the European 2018). leader in 2017, with more than 113 gigawatts, which was about one-fourth of EU-wide installed power. About half of Despite progress in electrification, around one billion peo- this is attributable to wind energy. Worldwide only China, ple all over the globe still have no access to electricity. the USA and Brazil had more capacity for power generation Between 2000 and 2017 the percentage of world population from renewable energy sources (see Figure 3.4). The situa- with access to electricity rose from 78% to 87%, whereby tion was similar in 2018. the absolute number of people without electricity dropped from 1.7 billion to slightly less than one billion. In sub- In the meantime, the IEA even expects that in some regions Saharan Africa alone around 600 million people – that (e.g. China, India, South-east Asia and the Middle East) equates to about 57% of the population – have no access to electricity generating capacities will exceed demand. How- electricity. In Asia, despite progress, 350 million people, ever, electricity demand in the next few decades will proba- around 9% of the population is without electricity (OECD/ bly grow tremendously, if electric mobility and access to IEA 2018d).

Figure 3.3: CO2 emissions in selected global regions in % 40,000

35,000

30,000

25,000

20,000

15,000

10,000

5,000

0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

World China USA EU-28 Russia Germany

Source: EDGAR 03/2019 30 3 THE ENERGY TRANSITION IN THE EUROPEAN AND INTERNATIONAL CONTEXT

Energy efficiency has continued to improve at the interna- The following targets must be reached at the European tional level, even if progress has slowed compared with level by 2030: previous years. In 2017, the energy intensity dropped by 1.7% over the previous year. In the years before that, there zzgreenhouse gas emission should be lowered by at least were even larger drops: between 2014 and 2016, the average 40% (against 1990 levels; this has already been decided in rate was 2.3% annually. Investments in energy efficiency October 2014 by the European Council). amounted to USD 236 billion globally, an increase of 3% compared with the previous year, though the increase in zza share of 32% of renewables in gross final energy con- 2016 was well over 9%. China is a driving force in invest- sumption; the amended Renewable Energy Directive ment, even if the largest proportion of energy efficiency provides for measures for increasing the share of renew- investments is still spent in Europe. able energy in the respective sectors. The EU Member States are required to reach an increase in the share of renewables in the heating and cooling sector by 1.1 per- 3.2 Key measures taken to date centage points per year, starting in 2021, or 1.3 percentage points including waste heat and cooling (however, In November 2016 the European Commission introduced a only up to a share of 40% can be added to the calcula- draft for an extensive legislative package titled “Clean tion). In transport, a requirement was introduced for fuel Energy for All Europeans”. This package is the foundation distribution companies that mandated an increase of for the European Energy Transition and creates the basis renewables to at least 14% by 2030. Production of biofu- for a new European energy framework up to 2030. Central els on the basis of edible plants is to be held at the pro- elements include the new rules for a governance system for duction level of 2020, and a share of at least 3.5% of non- the Energy Union (EU regulation for the Governance Sys- edible plants by 2030 will be required. tem of the Energy Union and Climate Protection: the Gov- ernance Regulation), for a new EU electricity market design zzReduction in primary energy consumption by at least (Electricity Market Directive, Electricity Market Regulation, 32.5% (compared with the energy consumption forecast ACER regulation and risk provisioning regulation) and for in 2007 for the year 2030). reworking the directives for renewables, energy efficiency and buildings. Negotiations on individual components of An additional goal is to create by 2030 a 15%-level of coop- the package have been concluded; the Governance Regula- eration – that means that every Member State should pro- tion and the directives for renewables, energy efficiency vide sufficient cross-border transmission lines such that at and buildings entered into force at the end of 2018, and the least 15% of the maximum electricity output of domestic rules on the electricity market design will follow in early power plants (installed generating capacity) can also be summer of 2019. exported through these lines. However, this goal is defined

Figure 3.4: Global installed renewable capacity, 2017 in GW Global share in %

2,500 120 100.0 2,179 100 2,000

80 1,500

1,000 28.4 40 619 20.4 500 445 10.6 20 230 5.9 5.2 4.8 3.8 2.4 128 113 105 83 52 0 0 Global EU-28 China USA Brazil GermanyIndia Japan Russian Federation

hydro (including marine energy) wind energy photovoltaics biomass geothermal solar thermal power plants Global share in %

Source: IRENA 02/2019 3 THE ENERGY TRANSITION IN THE EUROPEAN AND INTERNATIONAL CONTEXT 31

Table 3.1: Overview of major EU 2020 and 2030 targets

2017 2020 targets 2030 targets Comments (according to informal trilogue agreements) GHG reduction (compared with 1990) 22% at least 20% at least 40% binding GHG reduction in the EU ETS area 26% 21% 43% binding (from 2005)1 GHG reduction in the non-ETS area (from 2005)1 zz for all of the EU 10.8%2 10% 30% binding zz for Germany 2.7%2 14% 38% binding Renewables percentage zz of gross final energy consumption 17.5% 20% at least 32% binding at the EU level in Germany 15.5%3 18% no country-specific binding targets, rather national target amounts that must be added to the binding EU target

zz in the heating/cooling sector 19.5% (EU) Increase of 1.1 percent- indicative 13.4% (Germany) age points annually (waste heat and waste cooling included: 1.3 percentage points annually)

zz in the transport sector 7.6% (EU) 10% (incl. duplicate At least 14% (incl. quad- no sector targets, rather 7.0% (Germany) figures for biofuels ruplicate figures for commitment to intro- (incl. duplicate from waste, residues electricity in road trans- duce a certain percent- figures for biofuels and lignocellulose) port, 1.5 factor for rail age to the market from waste, residues transport, nationally and lignocellulose) determined duplicate figures for biofuels from residues and other rules) with a maximum of 7% 1st generation biofuels Reduction of energy consumption zz at the EU level 9.2% reduction in by 20% 4 (= 13% drop by at least 32.5%3 Indicative for 2020, primary energy con- in primary energy not defined for 2030 sumption from 2005 consumption from 2005)

zz in the individual EU Member States indicative national no country-specific tar- indikative contributions to gets, rather national tar- reaching targets get amounts that must be added to the binding EU target

additional cumulative additional real cumula- binding final energy savings of tive final energy savings 1.5% annually of 0.8% annually Interconnection in EU Member States in Germany: 9% 10% 15%5 indikative

Electricity trading/exchange Make overall system more efficient and increase security of supply

Source: BMWi 3/2019 1 See Chapter 3 2 Preliminary targets; Status in all of the EU: 02/2019; Status in Germany: 03/2019 whereby the 2005 baseline year emissions according to the EEA are calculated as follows: 2005 baseline year emissions = absolute 2020 target/(1 + % of the 2020 target) 3 According to the requirements of EU Directive 2009/28/EC 4 Compared with the trend in the reference figures for 2020 or 2030 (according to the PRIMES 2007 Model for the European Commission) 5 Additional thresholds make this figure more specific 32 3 THE ENERGY TRANSITION IN THE EUROPEAN AND INTERNATIONAL CONTEXT

more specifically with additional thresholds that address For the second half of 2020, the European Commission has the problem that with increasing proportions of renewable planned a Communication in which it will evaluate the final energy, the installed generating capacity is high even if actu- NECP – as to whether there are sufficient contributions, ally very little power is generated, due to lack of wind or sun. especially to the EU 2030 targets for renewable energies and energy efficiency, as well as consistency of the mea The integrated National Energy and Climate Plans (NECP) sures taken with the five dimensions of the Energy Union. form the core of the Governance Regulation. Each Member As of 2023, the Commission will start evaluating progress State was required to submit to the European Commission made by Member States in reaching the targets and imple- by the end of 2018 a draft National Energy and Climate Plan; menting measures with a regular monitoring process tak- the final plan for 2021 to 2030 is due by the end of 2019. In ing place at two-year intervals. The EU Member States will their NECPs, EU Member States present their goals and have the opportunity to update their plans after five years, measures for carrying out their energy and climate policy and this update will apply for the following ten years. Fur- for the period to 2030. The plans should be comparable and thermore, the Member States will submit their first contain in particular the national contributions of the Mem- national progress reports in 2023. If there is a gap, particu- ber States to the EU 2030 targets for renewable energies larly in the area of renewable energy, the so-called ‘gap- and energy efficiency. In the NECPs all five dimensions of filler’ mechanisms will apply, so that adjustments can be the Energy Union are included (decarbonisation with the made. Those Member States that have not contributed suf- two subcategories reduction of GHG and renewables, energy ficiently should make extra efforts. efficiency, the European internal energy market, supply security and research, innovation and competitiveness). The Governance System and the agreed 2030 targets for The plans must be coordinated at the national level with renewable energies will also be applied to countries out- stakeholders, and regionally with neighbouring countries. side of the EU. The Council of Ministers submitted to the The EU Commission will publish recommendations on the ‘Energy Community’, comprised of EU Member States and draft plans that the Member States should take into account various neighbouring countries, a draft for policy guide- when preparing their final NECPs. lines which should serve as a blueprint for targets that are as far-reaching as the 2030 targets for the EU. The German Federal government submitted its NECP draft to the EU Commission on time in December 2018 and then The new EU Electricity Market Design that was agreed on published it. This draft is based in particular on national at the end of 2018 will orient the European electricity mar- goals of the Energy Concept and the 2050 Climate Protec- ket to challenges of providing a secure and affordable tion Plan. The Federal Government will prepare this draft energy supply with an increasing share of renewable ener- in 2019 in consultation with the public and EU neighbours, gies. It emphasizes greater competitiveness and corre- and will receive recommendations from the EU Commis- sponds with the German decision to create the Electricity sion that it will then address. Market 2.0. A boost to competition will be provided in par- 3 THE ENERGY TRANSITION IN THE EUROPEAN AND INTERNATIONAL CONTEXT 33

ticular by free price signals, a stronger consumer role and ity made available for electricity trading between Germany unrestricted, short-notice exchange of electricity across and Denmark. borders. The minimum requirements for capacity markets should apply, so that they do not distort competition; in In addition, since October 2018, a congestion management particular, time limits are planned. Subsidies for CO2-inten- of energy transports has been taking place on the German- sive power plants will be gradually rolled back. In many Austrian border. This means that previous common price cases the Member States are given flexibility in how they zone was split into an Austrian and a German/Luxembourg approach certain challenges. For example, they can decide price zone. The actual network capacities are now included themselves how they will remove congestion in their own in German-Austrian electricity trade. This has a positive countries that hamper cross-border trade. A clear target is effect on the electricity network in Germany, because the to increase step-by-step to 70% the amount of transmission need for transport is lower. This system also strengthens capacity in Member States they must make available for the European internal electricity market. The joint Ger- cross-border trade by 2025. Only if a Member State does man-Austrian price zone in effect had led to costly network not conform to this target can the EU Commission decide problems due to what is called ‘loop flows’ not only in Ger- on redrawing the trade area boundaries as a last conse- many, but also in several neighbouring countries. Traded quence. electricity that could not be transported directly to Austria led to network congestion in the networks of neighbouring The European aspect of electricity supply security should countries. be strengthened. To this end a European supply security report should be prepared; the national reports that are still An important factor for a functioning internal electricity possible must contain a European perspective and take into market is good regional cooperation. In this respect, Ger- account cross-border electricity exchange. To manage elec- many’s participation in various cooperation platforms has tricity supply risks, the Risk Preparedness Regulation pro- proven effective. The goal of the Pentalateral Energy Forum vides for both national and cross-border coordinated mea is to strengthen the coupling of participating electricity sures. markets, testing and implementing new means of cooperation and thereby gain experience in cross-border partner- To conform to the 70% transmission capacity requirement, ships. Germany is participating in creating the regional German will submit an action plan sometime this year. This supply security report. Besides this, Germany’s electricity action plan is part of the new Electricity Market Regulation neighbours have been working together since 2014 primar- and contains all necessary measures to ensure the gradual ily to make the electricity markets more flexible. There are adherence to 70% of transmission capacity made available also extensive bilateral cooperation efforts with other for trade by 2025. The plan will also build on the measures Member States. Germany and France, for example, founded of the Action Plan Electricity Grid. a joint high-level working group for energy policy in Janu- ary 2019 on the anniversary of the Treaty of Aachen. Germany has already taken a first step by tackling the challenges of cross-border electricity exchange with its elec- In order to strengthen integration of European electricity tricity neighbours Denmark and Austria. Germany and Den- and gas markets and improve supply security, the EU sup- mark agreed in June 2017 to gradually allow for more trade ports infrastructure projects of common interest. The EU in electricity between the two countries, with the long- Commission has identified a need for investment in the term goal of efficient use of cross-border transmission lines European electricity and gas infrastructure in the amount for energy trading as soon as there are no more domestic of more than €200 billion. Various funding programs help network congestion problems. During a test phase that cover this need for investment, for example, the Connect- began in July 2017 and will extend to January 2020, mini- ing Europe Facility (CEF) or the European energy pro- mum trade capacities are to be raised progressively using gramme for recovery (EEPR). Financial support of the EU in what is called counter trading. In case of shortages in Ger- the scope of the CEF is an important factor in implement- many, the costs for these measures will paid for by the Ger- ing significant energy infrastructure projects of common man side, and if shortages occur in Denmark, the Danes interest (‘Projects of Common Interest’: PCI) in the areas of will bear the costs. Approximately 593 GWh were traded electricity and gas. These projects are also aimed at helping from July 2017 to August 2018 using counter trading, at a Member States reach their interconnection goals. At this total cost of €20.72 million. point in time, interconnectors to and from Germany have a capacity of around 25 GW and will be further expanded. It Electricity trading at the German-Danish border was the is expected that Germany will achieve its interconnection subject of anti-trust proceedings at the European Commis- goal for 2030, if the interconnectors contained in the Power sion until December 2018. The proceedings were dropped Grid Expansion Act, the Federal Requirements Plan Act and after the German transmission system operator TenneT the NDP 2019 – 2030 are in operation by then. agreed to increase considerably to 75% of technical capac- 34 3 THE ENERGY TRANSITION IN THE EUROPEAN AND INTERNATIONAL CONTEXT

An important contribution to supply security is also the the middle of the decade, the price for emissions allow- diversification of the energy supply. It is for this reason an ances in EU ETS had shown a strong downward trend (see important concern both at the European level and on the Figure 3.5). The reason for this decline was that large national level. An important building block in diversifica- amounts of excess certificates had mounted up at the end tion of the energy supply is the direct import of liquefied of 2017, the total excess was around 1.65 billion certificates. natural gas (LNG) from other countries and from various When the EU ETS reform for the fourth trading period sources, using both the European and German LNG infra- entered into force in April 2018, the German Federal Gov- structure. In March 2019, the Federal Government adopted ernment joined with other Member States in strengthening the Ordinance on Improving the Framework for Creating emissions trading in the long term, and in particular, its LNG Infrastructure in Germany (see Chapter 9). The price signals. Measures that have been initiated to planned Nord Stream 2 Pipeline will also help to improve strengthen emissions trading will help to rapidly and per- diversification because it connects new deposits in Russia manently reduce the current certificate surplus. to the European grid. For instance, the ‘Market Stability Reserve’ has been active since 2019. This reserve adjusts the supply of certificates in the emissions trading market. Of the total amount of certificates counted on the market each year, one part is put into the reserve and is no longer put up for auction if the total volume exceeds the upper limit of 833 million certificates. If the surplus falls below a minimum amount of 400 million certificates, allowances will be moved out of the reserve and back to the market. The market stability reserve should also bolster the so-called backloading effect, which resulted in retention of 900 million allowances between 2014 and 2016 that should have been auctioned in the period 2019 – 2020. These allowances will now be deposited directly to the market stability reserve. The ETS reform provided for an increase in the percentage of allowances taken out of the market stability reserve, from 12% to 24% of the amount in circulation, which would result in a reduction of the ETS allowances market by about 2021. In addition, as of 2023, the amount of allowances held in the market stability Germany and its neighbours are pursuing a whole number reserve will be limited to the amount auctioned in the pre- of cross-border projects that serve to integrate the Euro- vious year; the remaining allowances will be deleted from pean electricity market. Two examples: In the framework the reserves. of the German-French Energy Platform, the German energy agency dena and the French agency ADEME are working The reform is already showing results. Since mid-2017, the on a showcase project on system integration in the form of price for emission allowances has almost quintupled to a cross-border Smart Grid. The goal of the Smart Border around EUR 26 per tonne of CO2 (as of May 2019). This Initiative is in particular to optimise the distribution grids leads to a large increase in incentives for investing in low- in the Saarland-Lothringen region using a virtual manage- carbon technologies. Another impetus is that recently not ment tool and a new physical connection at the distribu- only allowance prices but also global prices for important tion grid level. The planned Smart Grid will also contain fossil fuels such as coal and oil have increased markedly. interfaces and additional modules in the areas of electric mobility and heat and energy efficiency. The projects has In general, the EU ETS reform stipulates that the ETS sec- earned the status of a Project of Common Interest (PCI). In tors must reduce their emissions by 43% by the year 2030 addition, construction has begun on the first German-Bel- compared with 2005. This means that the overall number of gian electricity bridge, a connection between both national allowances will decline more quickly starting in 2021, by electricity grids. The goal is to stabilise network operations 2.2% annually instead of the 1.74% in the current trading in the region and to satisfy Belgian demand for electricity period. This is equivalent to a reduction of about 484 million with energy from Germany. tonnes of CO2 equivalent between 2021 and 2030 – which is more than half of the total annual greenhouse gas emissions An important instrument for attaining a sustainable and in Germany. The option of certified emission reduction in climate-friendly economy is an efficient emissions trading non-EU countries using the Clean Development Mechanism system with price signals that provide an impetus for (CDM) or Joint Implementation (JI) will no longer be availa- investing in low-carbon technologies. In the past years in ble after 2020. 3 THE ENERGY TRANSITION IN THE EUROPEAN AND INTERNATIONAL CONTEXT 35

Transparency, participation and acceptance

The Federal Government will confer on the national and tations are conducted with questionnaires for a period of European level regarding the NECP. 12 weeks. The findings are usually published in a condensed The plan is that the Federal Government will consult with form and factored into the following project phases. A national stakeholders this year regarding its NECP draft sub- recent example is consultations on long-term climate strat- mitted in December to the European Commission, and to egy of the European Commission, which ended at the begin- include the results of these consultations in its final NECP. ning of October 2018. According to Article 10 of the Governance Regulation, all Member States are required to conduct such national con- Then there is also the possibility of responding to draft leg- sultations. islation as soon as the Commission has completed it and submitted it to the European Parliament and the European In addition, Article 11 requires regional cooperation with Council. The time limit for responding is eight weeks. Any neighbouring and interested Member States when drafting responses will be submitted to the Parliament and the Euro- the NECP. The Federal Government uses various established pean Council. energy policy cooperation forums, such as the European Cli- mate Protection Initiative, the Pentalateral Energy Forum, If these generous opportunities for participation are used the Baltic Energy Market Interconnection Plan (BEMIP) or widely, it will help EU initiatives to reflect more strongly the the regional groups of the Transeuropean Energy Networks citizens’ point of view and to enable to citizens to identify (TEN-E). The results of this partnership were already fac- more strongly with the initiatives. tored into the draft German NECP, and will also be incorporated into the final NECP. More supra-regional transparency is the goal of the coordinated effort to ensure energy supply security. Furthermore, the monitoring process for the NECPs pro- In times of electricity supply crises, the Risk Preparedness scribed by the Governance Regulation provides for continual Regulation obligates Member States to work together and communication between the EU Commission and Member demonstrate solidarity. For example, warnings are to be States, by requiring them to submit progress reports on issued to affected Member States, agreements reached their NECPs every two years, and the Commission is also regarding cross-border measures and Member States should requested to review progress every two years and make rec- cooperate to master crisis situations. The Gas Supply Secu- ommendations. rity Regulation also mandates that Member States jointly coordinate regional measures to ensure a secure gas supply. These various processes ensure that the NECPs are extensively coordinated and based on broad expert input and as European and international energy policy forums provide such are suitable for implementing the European energy platforms for information exchange and transparency. transition. Because there are no more country-specific bind- The various multi- and bilateral forums for energy policy ing targets for share of renewable energies and energy effi- contribute considerably to transparency of energy policy ciency for 2030, rather only joint EU targets, the compara- strategies in various countries around the globe. At the bility of the NECPs between Member States and their European level, examples of this are the Pentalateral supra-regional acceptance are very important factors. Energy Forum and cooperation between Germany’s electricity neighbours. At the international level, the World The European Commission consults with the public prior Climate Conference (COP) is an annual conference of the to carrying out important projects. Member States to the UN Framework Convention on Cli- In the context of its agenda for better legislation the Euro- mate Change, and as such, an important forum for creating pean Commission aims to involve the public and stakehold- transparency of measures to achieve the Paris climate tar- ers more effectively. The Commission explains new ideas for get. policy measures and legislation in the initial phase by means of road maps and impact assessments; feedback may be At the 24th World Climate Conference (COP 24) in Katowice given within four weeks. An important instrument for in Poland, the countries agreed on a comprehensive set of enhancing transparency of EU projects is public consulta- rules for implementing the Paris Agreement. The rules tions on new EU initiatives that the Commission announces adopted in Katowice will provide information on how emis- on its website. Citizens can express their opinions on the sions of all signatories of the Paris agreement are managed, scope of application, priorities and benefits of new EU initi- details on their climate goals, and which measures will be atives or evaluate existing policies and legislation. Consul- implemented. The costs of climate protection financing will 36 3 THE ENERGY TRANSITION IN THE EUROPEAN AND INTERNATIONAL CONTEXT

be more predictable and more details will be provided. In zzLIFE Programme for the Environment and Climate Action addition to international transparency among the countries, zzRevised EU energy label there will be an improved base for planning national climate zzDirective on laying down ecodesign requirements for protection and adjustment measures. Every five years the refrigerating appliances countries will assess the global status quo using a compre- zzAmendment of the Gas Supply Security Regulation hensible process and on the basis of reliable data. The crite- zzcross-border grid expansion ria for this assessment are the goals of the Paris agreement zzCommission Communication on Protecting Europe’s Crit- on reduction, adaptation and financing. ical Energy and Transport Infrastructure zzCommission Communication on an interconnectivity tar- Key current measures taken to date in European energy get for 2030 policy zzregional partnerships zzRegulation on Governance of the Energy Union zzRevised Cross-Border Renewable Energy Ordinance zzDraft for a National Energy and Climate Plan (NECP) (GEEV) zzAmendment of the EU Renewable Energy Directive zzEnergy congestion management on the Austria-German zzAmendment of the Energy Efficiency Directive border zzAmendment of the Building Efficiency Directive zzProgramme for financing electricity and gas infrastruc- zzAmendment of the Regulation on the internal electricity ture market in the EU zzRegulation on determining a guideline for system equili- zzAmendment of the Directive on the internal electricity bration in the electricity system market in the EU zzAmendment of the Directive on the single market for zzAmendment of the ACER Regulation Natural Gas zzRisk provisioning regulation zzTallinn e-Energy Declaration zzInitiative on “Speeding-up the Conversion of Buildings to zzEnergy Diplomacy Action Plan Clean Energy”

Additionally, the reform ensures that industry – energy- with other such systems in the world is a goal of the Fed- intensive and exposed to international competition – will eral Government, which it is pursuing with various initia- continue to be cushioned from unfair competition from tives and in various forums, such as in the scope of the G20. companies in countries with lower environmental standards. Accordingly, the next trading period will also contain In July 2018, the new EU Climate Action Regulation entered provisions to curb carbon leakage (Chapter 10), which into force for sectors outside the EU ETS. It stipulates that refers to the practice of transferring CO2-emitting produc- by 2030, greenhouse emissions across the EU should be tion to countries with less stringent climate change policy. reduced by at least 30% compared with 2005. Binding To avoid this, the next trading period will continue to national targets for this period range between 0% and 40% observe regulations on allocating a reasonable number of cuts in greenhouse gas emissions – Germany is in the upper free allowances to polluters that are at risk of transferring range at 38%. Here there is a concrete path that defines the their emissions. However, compared with the current trad- emissions reductions to be reached for the entire period up ing period, the regulations focus more specifically on the to 2030. The level of ambition is equivalent to the corre- actual carbon leakage risk. The list of 63 sectors that should sponding national sector goals for 2030 in the 2050 Climate benefit from free allowances is quite a bit shorter than the Action Plan, and this level has risen even further regarding list of 175 sectors that is in effect until 2020. Furthermore, the 2020 goal: Between 2020 and 2030, the annual reduc- an innovation fund will be set up to sponsor technologies tions must take on greater a magnitude than up to now. To that should contribute in the long term to transforming a certain extent, Member States may spread their allotted the economy to make it more climate friendly. Innovate annual allowances over a time period or transfer them industry technologies in Germany will also be eligible for amongst themselves. funding. In order to limit emissions in the transport sector, the Other areas in the world have also created emissions trad- European Commission submitted a second mobility pack- ing schemes, or are about to do so. This includes China, age in November 2017. It included nine new legislative ini- California, New Zealand and Switzerland. The EU has signed tiatives, one being the law already passed on continuation a convention with Switzerland that aims to integrate both of the CO2 emissions targets for passenger cars and light systems. Coupling the European emissions trading system commercial vehicles after 2020. For details, see Chapter 7. 3 THE ENERGY TRANSITION IN THE EUROPEAN AND INTERNATIONAL CONTEXT 37

One example of an international initiative for reducing zzMaking finance flows consistent with a pathway towards damaging emissions that is not part of the emissions trad- low greenhouse gas emissions and climate-resilient ing system comes from maritime transport: 173 member development. states of the International Maritime Organisation have agreed to voluntarily reduce carbon emissions of their The convention has been signed by 185 of the 197 con- ocean-going merchant fleet by more than one-half of 2008 tracting countries, including the EU and Germany. The con- levels by 2050. Maritime traffic is certainly a significant vention has obligated all contracting states to prepare and contributor to pollution, responsible for 2% to 3% of global submit climate protection contributions (NDCs: Nationally

CO2 emissions. It emits more carbon dioxide each year than Determined Contributions). The Federal Government has all of Germany. This is a response to an expansion of the several programs to ensure rapid presentation and imple- EU ETS that the European Parliament had planned to insti- mentation of the NDCs worldwide. In June 2017, US presi- gate if negotiations in this sector were unsuccessful. In dent Donald Trump announced that the USA would with- addition, shipping companies active in the cruise industry draw from the Convention; however, this would become have submitted a voluntary commitment to reduce by 2030 effective in November 2020 at the earliest. The long-term the annual CO2 emissions of holiday vessels by 40% com- effects of this are difficult to forecast – many US states and pared with 2008. The Maritime Research Programme sup- cities still pursue strong climate protection policies. As it ports this approach by increasingly funding projects that turns out, no other countries have yet followed the US provide a significant contribution to the maritime energy example. transition (see Chapter 16). Publication in early October 2018 of the special report of The Paris Agreement on Climate Change that entered into the Intergovernmental Panel on Climate Change (IPCC) on force in November 2016 provides the overall framework for possible impacts of global warming of 1.5°C brought fresh the global energy transition. The Convention has three dynamics into the discussion on climate protection. The main goals: paths envisaged by the IPCC for reducing the warming trend to 1.5° involve reducing global greenhouse gas emis- zzHolding the increase in global warming to well below sions by 2030 by around 45% compared with the 2010 level 2°C above pre-industrial levels in order to limit the tem- and reaching zero-net emissions by 2050. To reach a reduc- perature increase to 1.5°; tion of less than 2°C, 25% reduction would be necessary by 2030, and zero-net emissions by around 2070. If current zzIncreasing the ability to adapt to the adverse impacts of emissions trends were maintained, an increase in tempera- climate change and foster climate resilience and low ture of 1.5°C would probably be reached in 2040s (between greenhouse gas emissions development; 2030 and 2052). According to the IPCC, the emissions level targeted for 2030 in the NDCs submitted up to now glob-

Figure 3.5: Carbon allowance prices in the EU emissions trading system in €/t CO2 30

0 Jan 08Jul 08 Jan 09Jul 09 Jan 10Jul 10 Jan 11Jul 11 Jan 12Jul 12 Jan 13Jul 13 Jan 14 Jul 14 Jan 15 Jul 15 Jan 16 Jul 16 Jan 17 Jul 17 Jan 18Jul 18 Jan 19

Source: EEX 05/2019 38 3 THE ENERGY TRANSITION IN THE EUROPEAN AND INTERNATIONAL CONTEXT

CO2 price reform and other financing aspects

At the national level, one of the institutions requesting a to part of the CO2-emitting sectors (the energy sector and carbon price reform is the independent expert commission industry) and covers about 45% of EU emissions. The in that monitors the Energy of the Future – this should be a centive aspect was strengthened with a recent reform of key element for creating an economically reasonable, stable this program. Additionally, this reform ensures that indus- and long-term framework for transforming the energy sys- try – energy-intensive and exposed to internationally tem. It sees this as an energy price system that charges all competition – will continue to be cushioned from unfair greenhouse gas emitting sources, if possible, a largely uni- competition from companies in countries with lower envi-

form price per emitted tonne of CO2. In return, other taxes, ronmental standards. levies and charges for electricity should be lowered or replaced, in order to avoid market distortions and social Regarding sectors not included in the EU ETS, a national burdens. Such a system would also improve market chances CO2 price could also help to steer investments to climate for sector coupling technologies. For details see the state- protection options with the lowest marginal avoidance ments of the Expert Commission on the Sixth Monitoring costs. The European Council also emphasizes in its final Report (EWK 2018). conclusions on climate diplomacy of February 2019 that a price on carbon emissions would be an important step, in Also the Commission on Growth, Structural Change and addition to a reform of subsidies for fossil fuels, toward Employment suggests in its final report looking into intro- aligning global financing with climate-friendly develop-

ducing a CO2 pricing instrument as an incentive effect in ment. the non-EU-ETS sectors (WSB 2019 p. 126). In addition to price signal for CO2, there are a number of The reason for this is that large investments are necessary other factors influencing investment decisions in favour to lower energy consumption and to convert the energy of low-emission technologies. The investment boom in system to low-carbon technologies. Investors make such renewable electricity generation in recent years has been investments if it pays off. Such decisions are also affected driven largely by government support and declines in price,

by a price for emitting CO2. The investors can thereby save especially in the area of photovoltaic installations (see

money by avoiding CO2. Chapter 4).

In this context and to implement the 2050 Climate Action In addition, when important investors withdrew their Plan, the Federal Government will evaluate the effective- funding from coal plants (for example, insurance compa- ness of existing components of energy prices mandated by nies, the European Bank for Reconstruction and Develop- the government in form of charges, fees and taxes. In prin- ment), this sent an important signal to power plant opera- ciple, a carbon price can provide an economic incentive for tors to complete their conversion to more climate-friendly cheap and effective reduction of greenhouse gases in the energy sources more quickly. According to a study of the areas of heating and transport. With a view to determining Institute for Energy Economics & Financial Analysis a carbon price, first the consequences for industry, the cli- (IEEFA), since 2013 over 100 large financial institutions mate and energy policy as well as the distributional aspect have restricted their coal financing or insurance. The speed must be assessed. It is important to reward climate-friendly at which capital is leaving coal is increasing all the time behaviour and at the same time, avoid unreasonable social (Buckley, 2019). At the same time, according to a current burdens. It is important to consider the benefits of reor- survey conducted by the Gesellschaft für Konsum- ganising the components of the carbon price (e.g. climate forschung (GfK, a society for consumer research), more protection through incentives for investing in renewable than one-fourth of all private capital investors can envision energies and energy efficiency, electricity price reductions, investing in renewable-energy-related investments. To market-driven sector coupling) together with the distribu- strengthen this willingness would also be in the interest of tion impacts. In addition, it must be ensured that German the EU Action Plan: Financing Sustainable Growth, whose industry and in particular energy-intensive sectors can goal is to mobilise private capital for climate protection. remain competitive internationally even after the reform.

One important existing price instrument is the European Emissions Trading (EU ETS), which provides for investment

incentives with a price signal for CO2. The EU ETS applies 3 THE ENERGY TRANSITION IN THE EUROPEAN AND INTERNATIONAL CONTEXT 39

ally is not sufficient to limit global warming by signifi- compared with a target in 2014 of €2 billion, to €4 billion cantly less than 2°C above the pre-industrial level. In order (federal funds and gift equivalents for development loans). to reach the 1.5°C target, the emissions level based on the scenario calculations must be lowered by 40% to 50%. Even if the path is difficult, the global and technological trend to a sustainable energy supply is unstoppable. Good At the 24th World Climate Conference (COP 24) in Decem- examples and good practices are important for organising ber 2018 in Katowice, uniform rules were adopted for the international energy transition. Germany is an impor- implementing the Paris Climate Agreement. The successful tant partner for many countries and in addition, is the negotiations were proof that it is possible to reach an global technological leader in many areas, for example agreement on binding rules at the international level. The wind energy, system integration and efficiency technolo- German Federal Government worked together with other gies. There is strong interest all over the globe in German countries to reach this agreement. The international com- expertise and technology, for example in adapting the legal munity has now basically agreed on common rules on how framework or integrating renewables into a secure supply to fulfil the requirements of the Paris Agreement, three system. Export figures for energy technology prove this, as years after it was adopted. The goal of limiting global well as the positive trend in employment in this sector. warming to significantly less than 2°C, if possible, to 1.5°C However, it must be ensured that the switch to renewable compared to pre-industrial levels, has thus been given a energies and efficient technologies is successful in Ger- foundation of specific measures and reporting require- many. Only if we can be both successful in remaining an ments The rules adopted in Katowice will provide informa- attractive industrial hub, and at the same time offer secure tion on how the countries’ emissions are managed, details and future-oriented employment opportunities, will we be on their climate goals , and which measures will be imple- an example for other countries. mented. This increases international transparency and improves the basis for planning national climate protection The fact that there is successful exchange of ideas, for measures. A global update on progress will be conducted example the annual Berlin Energy Transition Dialogue, with every five years. The negotiations on market mechanisms more than 2,000 participants, illustrates how swiftly energy that play a key role in globally efficient climate policy are systems are being transformed in many regions of the still ongoing. world. This is good news, because the energy transition opens up opportunities to reduce costs and use synergies Already before the conference, Germany and other indus- on a global scale. International energy cooperation should trialised countries had announced that they would support be expanded by utilizing existing organisations such as the poor countries in combating the consequences of climate G20 or G7 or international energy institutions (IEA, IRENA) change. Twice as much funding as previously – as of 2019, and developing other bilateral energy partnerships. The €1.5 billion – are to be paid into the Green Climate Fund. goal is also to create a worldwide network for the German The Green Climate Fund assists developing and emerging economy, create new market potential and promote the economies to reduce their greenhouse-gas emissions and global energy transition. to adapt to the impact already felt from climate change. All in all, the Federal Government strives to double its interna- At the G20 summit held in July 2017 in Hamburg under tional climate funding from the Federal budget by 2020, German presidency the heads of state and government –

Key measures taken to date in the area of climate change mitigation in European emissions trading and outside of this area

zzMarket stability reserve in the EU emissions trading zzSecond mobility package for regulating CO2 emissions of system passenger cars and light commercial vehicles after 2020 zzreform of the emissions trading system for the period (see Chapter 7)

2021 – 2030 zzInitial introduction of CO2 emissions targets for new zzmoving allowances that were held back into the market heavy commercial vehicles (see Chapter 7) stability reserve zzDeclaration of EU Member States on the future of clean zzlinking the EU emissions trading system with the Swiss energy and mobility (see Chapter 7) emissions trading system zzAction Plan: Financing Sustainable Growth zzClimate Protection Regulation zz‘Europe on the Move’ mobility package (see Chapter 7) 40 3 THE ENERGY TRANSITION IN THE EUROPEAN AND INTERNATIONAL CONTEXT

without the USA – resolved a G20 Action Plan on Climate reform of the ETS will pave the way. The European Union and Energy for Growth. In this plan the countries express has agreed to reduced greenhouse gases by at least -40% by their commitment to unrestricted implementation of the 2030 (over 1990). To reach this goal, emissions trading must Paris Climate Agreement and the goals of the Agenda 2030 produce a savings of -43% (compared with 2005). Accord- on sustainable development, as well as efficient transfor- ingly, the linear factor by which total emissions are reduced mation of energy systems. This is an important signal, annually will be increased from currently -1.74% to -2.2% because the G20 countries are responsible for about 80% of for the period 2021 to 2030. global primary energy consumption, and even more than

80% of all CO2 emissions. Furthermore, the finance minis- In November, the European Commission presented a Com- ters of 22 countries – including Germany – agreed at the munication with suggestions for a long-term EU climate spring meetings of the IMF and the World Bank in April strategy. In the Communication, the European Commis- 2019 to create a Coalition of Finance Ministers for Climate sion has proposed various scenarios as to how greenhouse Action. The goals are to exchange information on climate- gas emissions can be reduced by between -80% up to zero- related fiscal policies and to promote common standards net emissions by 2050. All scenarios conform to the tem- and principles (the ‘Helsinki Principles’). The Helsinki Prin- perature targets of the Paris Climate Agreement. The sce- ciples emphasize taking action that leads to an effective narios contain a broad and varied portfolio with various

CO2 pricing system, mobilising private climate protection options for reducing emissions. This includes first of all the financing and including climate change concerns in gov- comprehensive use of renewable energy sources and an ernment financial policies. increase in energy efficiency. Furthermore, the benefits of life-cycle management should be exploited, changes in consumer behaviour, shifting to alternative fuels, natural 3.3 Outlook and conclusions means of reducing carbon and achieving negative emissions, for example using CCS. The European Commission’s Monitoring of EU energy and climate goals is conducted Communication supports the goal of reaching greenhouse under the guidance of the Governance of the Energy Union gas-neutrality in the EU by 2050. To reach zero-net emis- and its core element, the NECPs of the Member States. sions, the European Commission feels it is necessary to Using the final NECPs as submitted, the European Com- make maximum use of all options, to expand efforts to mission will start assessing the progress of Member States reduce emissions and to rethink mobility. every two years as of 2023, in order to ensure that the energy and climate goals of the EU for 2030 are reached, or On the whole, decarbonisation of the European economy if necessary, that corrective action is taken. The Progress will require additional investment of €175 to €190 billion Report does not attempt to predetermine the assessment of annually, according to the European Commission. This the degree of fulfilling or missing the EU 2030 goals. At the means that the share in GDP that goes to the energy sector same time, due to previous experience, this Report does would need to be increased from currently 2% to 2.8%. As include initial conclusions for major areas of EU energy a counter-measure, however, the long-term EU strategy and climate policy in which decisions are already being would also lead to cost savings and other advantages, such made for future trends: as lowering the number of diseases related to pollution, lowering the dependency on energy imports and lower In the next few years, parts of the new EU Electricity Mar- costs for adaptation to climate change. Overall, the Euro- ket Design must be transposed into national law. Whereas pean Commission expects ultimately positive impetus for the Electricity Market Regulation, the Risk Provisioning the economy. On the basis of these considerations, by 2020 Regulation and the ACER Regulation apply directly, and to a long-term EU climate strategy should be developed that a great extent as of the beginning of 2020, the Electricity is aligned with the targets on the Paris Climate Agreement. Market Directive must be transposed into national law by mid-2021. Furthermore, the Electricity Market Regulation There has been no agreement on the future post-Brexit contains various requirements such as preparation of an relationship between the UK and the EU regarding energy Action Plan in order to gradually make 70% of transmis- and climate policy and the EU ETS. If there were a “deal”, sion capacity available for the cross-border electricity mar- the UK would set up an effective carbon-pricing system ket. The Risk Provisioning Regulation requires the Member similar to the EU ETS. In 2019, adjustments were agreed on States to develop national crisis scenarios and determine regarding the absolute EU efficiency goals in line with the national and regionally coordinated measures to deal with Governance Regulation or the Amendment of the Energy such crises. Efficiency Directive that result from the required reduction of energy consumption by at least 32.5%. This involves a Even after 2020, the EU ETS will remain the most impor- purely technical recalculation for the EU 27 Member States, tant tool for cutting greenhouse gases in the EU. The without any change in the target itself of the model basis. 3 THE ENERGY TRANSITION IN THE EUROPEAN AND INTERNATIONAL CONTEXT 41

Key current measures taken to date in international energy policy

zz24th World Climate Conference (COP 24) zzGlobal Commission on the Geopolitics of Energy Trans- zzIEA/IRENA Study: Perspectives for the Energy Transition formation organised by IRENA – Investment Needs for a Low-Carbon Energy System zzEnergy Export Initiative carried out under the auspices of the German G20 presi- zzG20 Action Plan on Climate and Energy for Growth dency zzTravelling exhibition: “Energiewende – Germany’s Energy zzdeepening existing bilateral energy partnerships and cre- Transition” ating new ones (recently with Chile and Jordan) zzCooperation on creating funding for the global energy zzBerlin Energy Transition Dialogue transition

The EU renewable targets for 2020 and 2030 should be Furthermore, a study conducted by IEA and IRENA during somewhat easier to reach after Brexit, because the UK cur- the German G20 presidency on the prospects for the energy rently had a renewables level below the EU average and EU transition shows that achieving greenhouse gas neutrality total energy consumption would be lower after Brexit. in the worldwide energy system by 2050 is ambitious, yet However, this would have no effect on the binding national technically possible and economically feasible (OECD/IEA, goals for 2020 as set out in the EU Renewable Energy Direc- IRENA 2017). The additional investment required for this tive. If there is a hard Brexit, the UK would be treated at in the period up to 2050 would be equivalent to about 0.3% first like a third country regarding the electricity and gas of global GDP. Investments in energy efficiency of all sec- market; many rules, for example on assigning transborder tors would have to increase by a factor of 10 compared capacities, would no longer apply. It remains to be seen to with the current level. Investments in energy generation what extent cooperation and mechanisms can be negoti- would not increase significantly, but much of the funding ated that ensure supply security and efficient trading using would have to be diverted, especially to renewables. interconnectors between the UK and the EU. Other than that, there are no significant effects expected after Brexit on the electricity and gas market of the remaining EU Member States – with the exception of Ireland.

25 EU Member States and a large number of companies signed a declaration on green hydrogen during the informal meeting in Linz, Austria. Ambitious climate targets could be met over the long term with CO2-free green gases playing a larger role in reducing greenhouse gases in sectors that otherwise would be difficult to decarbonise. The declaration describes potential uses and future perspectives for green hydrogen. Green hydrogen could for example be instrumental in sector coupling, especially in ship and air transport. The signed declaration is not binding, however.

In the global context, a current analysis conducted by IRENA found that renewable energies will be able to cover up to 86% of global energy demand by 2050. At the same time, the study points out that in 2050 around one billion electrical vehicles could be on the road, and that electricity could be used increasingly for heating needs or for producing hydrogen. Hydrogen in turn could replace kerosene or oil in air or shipping travel. This could contribute significantly to fulfilling the Paris climate protection goals and provide additional impetus for economic growth and employment (IRENA 2019). 42 3 THE ENERGY TRANSITION IN THE EUROPEAN AND INTERNATIONAL CONTEXT 43

Part I: Quantitative targets of the energy transition

The quantitative targets of the energy transition refer to five thematic areas

Renewable energy

Energy consumption and energy efficiency

Buildings

Transport

Greenhouse gas emissions

4 Renewable energy

Where do we stand?

The share of renewable energies in gross electricity consumption was 36% in 2017. Almost one-third of kilowatt hours of electricity produced comes from renewable energies.

This increase continued in 2018, to 37.8%.

The share of renewable energies in final energy consumption for heating and cooling was 13.4% in 2017 and 13.9% in 2018.

In the transport sector, the share of renewable energies in final energy consumption in 2017 was 5.2% and rose to 5.6% in 2018.

Furthermore, the further expansion of renewable energies has been considerably cheaper than previous expansion, because competitive bidding has greatly reduced the cost of energy generation with new wind and photovoltaic installations.

What is new?

The EEG 2014 and 2017 introduced competitive auctions for solar, wind energy and biomass power plants. The tenders bring about cost efficiency in funding for ground-mounted solar PV systems as well as for wind power plants both on land and offshore.

The Landlord-to-Tenant Electricity Act should enable tenants to profit directly from the energy transition and create new incentives for expanding solar energy generation in Germany.

Targeted, efficient, grid-synchronized and an increasingly market-driven expansion of renewable energy sources is a prerequisite for successful energy transition and climate protection policies. The Federal Government aims to increase the share in renewables in the energy sector – especially in the context of the challenges of better synchronisation of renewable energy sources and grid capacity – in order to reach the goal set by the Coalition Agreement of approximately 65% by 2030. The capacity of the power grid to transport energy is key.

Increasing expansion of renewable energy is ultimately necessary for covering the additional demand for electricity, so that climate protection goals in transport, in buildings and in industry can be achieved.

The Omnibus Energy Act created special bidding processes for onshore wind energy and photovoltaics for an additional 4 gigawatts up to 2021 and provides for innovation bidding processes. 46 4 RENEWABLE ENERGY

What is next?

The updated Target Architecture Study expects that the target of increasing the share of renewable energies in gross electricity consumption to 35% by 2020 and in heating consumption to 14% will be fulfilled. The goal of increasing the share of renewable energies in gross energy consumption to 18% by 2020 is expected to be just barely reached.

If no additional measures are taken, the renewables share in final energy consumption would go up according to the NECP reference scenario to 22.6% by 2030, and the share in gross electricity consumption to 52.9%.

For this reason, further efforts are needed. This applies in particular to the increase in renewables in the energy sector targeted by the Federal Government that is necessary to achieve the goal set out in the Coalition Agreement of approximately 65% by 2030.

In order to transition the energy system to mostly renewable energy sources by 2050, innovative technological solutions and new business models will be necessary to contribute substantially to efficiently implementing the energy transition.

2017 2020 2030 2040 2050

Renewable energy

Share 15.9% 18% 30% 45% 60% in gross final energy consumption

Share 36% at least at least at least at least in gross electricity consumption 35% 50%* 65% 80%

Renewable Renewable Energy Energy Sources Act Sources Act 2017: 2017: 40 – 45% 55 – 60% by 2025 by 2035

Share of heat consumption 13.2% 14%

* Targeted, efficient, grid-synchronized and an increasingly market-driven expansion of renewable energy sources is a prerequisite for successful energy transition and climate protection policies. The Federal Government aims to increase the share in renewables in the energy sector – especially in the context of the challenges of better synchronisation of renewable energy sources and grid capacity – in order to reach the goal set by the Coalition Agreement of approximately 65% by 2030. The capacity of the power grid to transport energy is key. Increasing expansion of renewable energy is ultimately necessary for covering the additional demand for electricity, so that climate protection goals in transport, in buildings and in industry can be achieved. 4 RENEWABLE ENERGY 47

4.1 Present situation Preliminary estimates for 2018 arrive at a share of 16.7% of renewables in total gross energy consumption, an increase 4.1.1 Share of renewables in gross final consumption of around 5% or 0.8 percentage points compared with the of energy previous year (15.9%). This is another (large) step toward the goal of 18% for 2020. Since 2008, the share of renewables in gross final consumption of energy went up overall by more than one-half Despite this positive trend, the strong growth in the share (5.8 percentage points) and was at 15.9% in 2017. This of renewables in 2017 and 2018 do not necessarily mean means that to reach the target of 18% set in the Energy that the 18% target for 2020 will be reached. Whether the Concept of the Federal Government by 2020, another 2.1 targets are reached depends not only on the rate of expan- percentage points must be achieved. sion of wind energy and photovoltaics, on wind conditions in the years 2019 and 2020 as well as the amount of sun- In 2017, the gross final energy provided by renewable shine, but also largely on the heating demand and energy sources amounted to 430.5 TWh, thereby covering 15.9% prices in those years, which will affect gross energy con- of total gross final energy consumption. This represents an sumption. increase over the previous year of around one percentage point (See Figure 4.1). This positive trend was due mainly to The entire gross final energy consumption comprises the the increase in energy generated by renewable energies, final energy delivered to final consumers before deduction with a share of 36% in total gross electricity consumption of losses incurred in conversion and transmission in the in 2017. In the heating sector, the share of renewable ener- three sectors of electricity, heating and transport (fuels) (see gies in total final energy consumption for heating and Chapter 5.1.2). Electricity covers around one quarter of our cooling during the same period increased to 13.4%, and the total demand for energy, while process heating and space share of renewables in total final energy consumption in heating cover around one half, and fuels cover roughly one the transport sector remained constant, at 5.2%. quarter.

Figure 4.1: Renewable energy and gross final energy consumption 2020 target Renewables will cover 18% of gross final energy consumption Status in 2017 15.9%

Share of gross nal energy consumption in % 20

18 15.9 Target 18% by 2020 16 15.1 14.3 14.8 13.8 14 13.6 12.4 12 11.4 10.7 10.1 10

0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Source: AGEE-Stat 02/2019

Trend Measures Renewable Energy Sources Act, Market Incentives Programme, Renewable Energies Heat Act, greenhouse gas emissions rate, etc. 48 4 RENEWABLE ENERGY

4.1.2 Renewable energy in the electricity sector In 2017, expansion of onshore wind at 5,493 gross MW of new capacity installed was central to the success of the At 216.3 TWh, electricity generated from renewable sources energy transition. With decommissioned plant capacity in 2017 was significantly above the previous year (2016: factored in, total net onshore capacity added amounted to 189.7 TWh). This corresponds to an increase of about 14% 5,009 MW. The annual gross planned installation stipulated over the previous year. The share of renewable energies in by the Renewable Energy Sources Act 2017 for the period gross electricity consumption showed a significant jump 2017 to 2019 was 2,800 MW, which was clearly exceeded. from 31.6% in 2016 to 36.0% in 2017. According to prelimi- The large amount of capacity added in 2017 is in particular nary figures, the share of renewables in gross energy con- attributable to projects that were carried out ahead of plan sumption in 2018 was 37.8%. This means that the 35% target due to transitional provisions in the Renewable Energy for 2020 has already been reached. Total gross electricity Sources Act of 2017. consumption was 601.3 TWh in 2017. It corresponds to the sum of all domestic energy generation (wind, hydro, solar, Since 2018, auctions for onshore wind energy installations coal, oil, natural gas, etc.), plus electricity imports from other have been underbid. In comparison to the large increase in countries and less electricity exports. The net electricity 2017, net capacity of newly installed wind energy installa- consumption is equivalent to the gross electricity consump- tions dropped by about 55% to only 2,273 MW in 2018. This tion less network or transmission loss. is the lowest increase since 2013 and is short of statutory deployment corridor. Reasons for this include the effects of The driver of growth in renewable energies in recent years introducing the bidding system and additional issues has been in particular expansion of wind energy and photo- regarding acceptance of wind energy projects. The coalition voltaic installations. Generation of electricity with onshore work group on acceptance issues (AG Acceptance) is dis- wind installations went up significantly over 2016 (about 68 cussing possible action to improve acceptance of wind TWh) to around 88 TWh. In addition to increased capacity, energy installations. better wind conditions compared with the previous year contributed significantly to this increase. In general, elec- Approvals for new onshore wind energy installations have tricity generated by wind installations contributed 41% to dropped drastically since then beginning of 2017. Whereas electricity generated by renewables. in 2016, approvals were granted for new wind energy installations of about 9,400 MW, in 2017 about 1,380 MW

Figure 4.2: Meeting the target for renewable energy and gross energy consumption 2020 target Renewable energy to provide at least 35% of gross electricity consumption Status in 2017 36.0%

Percentage of gross electricity consumption 40 36.0 35.0 35 31.5 31.6 Target: at least 35% by 2020 30 27.4 25.1 25 23.5 20.4 20 16.4 17.0 15.2 15

0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Source: AGEE-Stat 02/2019

Trend Measures Renewable Energy Sources Act 4 RENEWABLE ENERGY 49

ity of 5,427 MW, 17.7 TWh of electricity were fed into the grid. The 2017 Renewable Energy Sources Act provides for an increase in installed capacity of offshore wind powered installations to 6,500 MW in 2020, and to 15,000 MW in 2030. In 2018, 990 MW less wind energy capacity was taken into operation than in 2017, and overall installed capacity rose by 18% over the previous year, by 6,417 MW.

At 39.4 TWh, photovoltaic contributed 18.2% to electricity generation with renewables (2016: 38.1 TWh). At the same time, however, the increase in photovoltaic installations – standing at 1,660 MW of installed capacity in 2017 – was almost 1,000 MW short of the deployment corridor of 2,500 MW defined in the Renewable Energy Sources Act of 2017. In 2018, photovoltaic energy generation rose by over 17% to 46.2 TWh and contributed 20.5% to electricity generated with renewables.

All of biomass contributed a share of 23.5% in electricity generation with renewables, at 50.9 TWh. The slowdown in biomass (solid, liquid and biogas) continued, and at around 28 MW 2017 (gross, without increased capacity with the were approved, and in 2018, 1,450 MW. This corresponds in goal of flexibility), biomass did not fulfil the requirements each of these two years to only one half of the annual under the EEG 2017 stipulating a deployment corridor of expansion targets set forth in the 2017 Renewable Energy 150 MW gross capacity increase annually in the period Sources Act. 2017 – 2019.

New offshore wind installations with a capacity of 1,275 Energy generation from geothermal and hydropower was MW (net) were added in 2017. With overall installed capac- slightly down in 2017. Due to only little change in installed

Figure 4.3: Gross electricity generation from renewable energy in TWh 250

216

200 189 190

163 152 150 143

124

105 100 94 96

0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

hydro onshore wind energy offshore wind energy photovoltaics biogenic solid waste fuels biogenic liquid waste fuels

biogas biomethan gas from puri cation plants land ll gas biogeneic share of waste geothermal total

Source: AGEE-Stat 02/2019 50 4 RENEWABLE ENERGY

capacity due to weather, generation of electricity from hydro power was down significantly, at only 16.5 TWh. Electricity power was down slightly to 20.2 TWh (2016: 20.5 TWh). In generation from geothermal dropped to 0.163 TWh (2016: 2018, due to drought, electricity generation with hydro- 0.175 TWh), and no further capacity was added in 2017.

Table 4.1: Deployment corridor according to the Renewable Energy Act of 2017 and special bidding processes under the Omnibus Energy Act for the period 2017 – 2021 and actual newly installed capacity in the period 2017 – 2018

Technology Target to increase the installed Actual new installations in 2016: capacity under Section 4 of the Renewable Energy Sources Act of in 2017 IN 2018 2017 and the Omnibus Energy Act

Onshore wind 2,800 MW per year (gross) 5,493 MW (gross) 2,457 MW (gross) From 2020 on: 2,900 MW 5,009 MW (net) 2,273 MW (net) Special bidding processes 2019 – 2021: total 4,000 MW 2019: +1,000 MW 2020: +1,400 MW 2021: +1,600 MW

Offshore wind 6,500 MW by 2020 1,275 MW 990 MW (5,427 MW cumulative) (6,417 MW cumulative)

Photovoltaic 2,500 MW per year (gross) 1,660 MW (gross) 2,938 MW (gross) Special bidding processes 2019 – 2021: total 4,000 MW 2019: +1,000 MW 2020: +1,400 MW 2021: +1,600 MW

Biomass up to 150 MW per year (gross 28 MW (gross)* 41 MW (gross)

Source: Working Group on Renewable Energy Statistics, 02/2019, Federal Environment Agency, Federal Network Agency. Photovoltaic: gross=net * The total increase in the installed capacity of biomass plants, primarily due to a non-generation-related change in capacity for flexibilisation purposes, amounted to 301 MW (net) in 2017. (2018: 418 MW net)

Figure 4.4: Meeting the target for the share of RES in heating and cooling consumption 2020 target Renewables to provide 14% of heating and cooling energy consumed Status in 2017 13.4% Share in heating consumption in % 16

14.2 14.1 14.2 14.0 14 13.5 13.4 12.9 12.4 Target: 14% by 2020 12 11.6 10.8 10

0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Source: AGEE-Stat 02/2019

Trend Measures Renewable Energies Heat Act, Market Incentives Programme 4 RENEWABLE ENERGY 51

As Figure 4.3 illustrates, electricity generation from renew- in the heating sector overall, as can be seen in Figure 4.6 on ables has doubled in since 2008, more than doubling from the time scale. 94.3 to 216.3 TWh. In 2018, this figure was already at 225.7 TWh. Since 2013, however, there has been a marked slow- Geothermal, ambient heat and solar thermal did not gain down in the expansion of electricity generated with renew- much ground over the previous year for final heating able energies. As the amount of installations grows, how- energy consumption from renewable sources. Geothermal ever, the effects of weather on electricity generation gain and ambient heat provided about 8% and solar thermal more significance and downplay the effects of slower 4.6% of total heating from renewables. (For details on heat expansion of renewables. pumps, see Chapter 13).

Also considering the fact that all buildings in Germany 4.1.3 Renewable energy in the heating sector are to be nearly climate neutral by 2050, the share of renewables in heating and cooling must be increased. As Final energy consumption of heating and cooling from the Energy Efficiency Strategy for Buildings has demon- renewable energies went up slightly in 2017 compared strated, this will only be possible if serious progress is made with the year before. Overall final heating and cooling by combining efficiency and the use of renewables for energy consumption rose by 3% in 2017, due primarily to heating and cooling (see also Chapter 5). the faster-paced economy. The share of renewables, at 170.9 TWh, dropped slightly from 13.5% in 2016 to 13.4%. According to preliminary estimates, the share of renewable 4.1.4 Renewable energy in the transport sector energies in total final energy consumption for heating and cooling in 2018 increased to 13.9%. The share of renewables in the total energy mix for the transport sector stagnated compared to the previous year, Biomass remains the leading renewable source of heat. at 34.3 TWh or 5.2% in 2017 (2016: 33.7 TWh, a share of In particular, wood consumption of private households 5.2%). Biofuels therefore account for about 88% of renew (including wood pellets) rose in 2017 compared with the able energy in the transport sector. previous year, by almost 3%. One reason was the continued rise in sales of modern wood pellet stoves. With a share of One cause for the stable trend in the share of renewables 87.4%, biomass (solid, liquid, biogas and biogenic waste) in the transport sector, despite the slight rise in the abso- remained the most important source of renewable energy lute figure, was the increase in the total final energy con-

Figure 4.5: Trend in consumption of heating from renewable energy sources in TWh 200

Target: 14% by 2020 180

160

140

120

100

0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

solid biomass uid biomass gas biomass solar thermal geothermal, ambient heat

Source: AGEE-Stat 02/2019 52 4 ERNEUERBARE ENERGIEN

sumption in this sector. Accordingly, the total final energy required to compete in auctions, where only the cheapest consumption rose from 647.9 TWh in 2016 to 655 TWh in offers are awarded contracts. This is the end of a phase of 2017 (without international air traffic), in particular due to technology support with fixed funding rates – but hydro- the increase in passenger and freight traffic (see Chapter 7). power, geothermal energy and small PV roof systems still In 2018, the share of renewables in final energy consump- have fixed feed-in tariffs. tion in the transport sector was at 5.6%, according to preliminary estimates. Since obligatory direct marketing was introduced with funding through the market premium and other direct marketing, renewables have become increasingly integrated in 4.2 Key measures taken to date the market. The accompanying technical connectivity of the installations simultaneously leads to better system inte- The Renewable Energy Sources Act is the central instru- gration. In addition, overall responsibility for the power ment for steering the expansion of renewable energy. The balance of these installations comes into play. Act has undergone continuous development since its introduction in 2000 – with amendments to the Act in 2004, The European Court of Justice (ECJ) issued a judgement on 2009 and 2012, various photovoltaic revisions and the 28 March 2019 that declared null and void a decision of the Renewable Energy Sources Act 2014 – as well as the most European Commission on the Renewable Energy Sources recent revision, the Renewable Energy Sources Act of 2017 Act of 2012, according to which the benefits provided for and the Omnibus Energy Act of 2018. by the act were government subsidies. Accordingly, the funds collected as a result of the EEG surcharge were mis- The paradigm shift created by the Renewable Energy takenly considered government funding. It is now being Sources Act of 2017 from funding of renewables with gov- assessed what the effects of the judgement will be on deter- ernment-administered fixed amounts to subsidies determining whether the later amendments of the Renewable mined by competition is an important step toward driving Energy Sources Act and other provisions are to be consid- the market integration of renewables. It has led to cost effi- ered state aid. The later amendments of the Renewable cient development of renewable energies. An important Energy Sources Act were notified to the European Com- factor in this was the successful bidding for wind and pho- mission as a precaution, and have been approved. tovoltaics projects. In the onshore wind energy area, auctions have been underbid since 2018. The most important Compared with total generation capacities, the share of renewable energy sources – onshore and offshore wind generation capacities registered with grid operators for the energy, large photovoltaic systems and biomass – are now market premium increased from about 43% in 2013 to

Figure 4.6: Final energy consumption in the transport sector from renewables in TWh 40 37.2 37.2 36.0 35.5 35.5 35 34.4 34.3 33.0 33.4 33.7

0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

biodiesel vegetable oil bioethanol biomethane RES electricity consumption

AGEE-Stat 02/2019 53

around 62% in 2017 (2018: 65% on average). At the end of high level of competition and were often oversubscribed. 2017, generation capacities in the system of direct market- The average funding rate for electricity from large PV ing totalled around 68 GW (2018: 74 GW). With around 52 installations continued to go down and saw a reduction GW, wind energy continues to dominate the portfolio of of about 50% in all auction rounds (including the pilot RES electricity sold directly. The registered capacity for PV phase). The lowest average award price was reached in stood at around 9.8 GW at the end of 2017, while that for the February 2018 auction (4.33 cents per kWh) This biomass was roughly 5.5 GW. The electricity generated by price went up again in the following auction rounds. 92% of the installed capacity of onshore and 100% of off- More information can be found in Table 4.2. The final shore wind installations is sold through the market pre- realisation rates for all six pilot auctions in 2015 and mium system. The corresponding share for biomass is 2016 show that on average, 96% of the projects that were around 73% and around 22% for PV. awarded government funding were initiated and went into operation within the two-year implementation The overall amount of electricity sold through subsidised period. Compensation for new solar installations in the direct marketing and other direct marketing has been going 40 to 750 kW segment were also lowered in the Omnibus up consistently since 2012. This may be due on the one Energy Act for reasons of rules on government subsidies. hand to the gradual reduction in thresholds for obligatory There is no change for installations up to 40 kW. direct marketing, and on the other hand to the shift of existing installations to this type of sales. The amounts zzOnshore wind: in May of 2017, the first auctions for have gone up by category and over the period 2012 to 2017 onshore wind energy installations in accordance with to well over 142,000 GWh. This corresponds to a share of the new rules of EEG 2017 were initiated. The first three 75% of all renewable electricity marketed in 2017 (about auctions for onshore wind energy in 2017 were marked 188,000 GWh). Total funding through the market premium by a high competition level and declining funding rates. system amounted to roughly €14.7 billion in 2017 (2016: This is attributable to the special rules on citizens energy €12.7 billion). projects. The average amount-weighted awarded price in the first round sank from 5.71 ct per kWh to 3.82 ct per Initial results from the competitive auctions for expanding kWh in the third auction round in 2017. The resulting wind energy and PV under the EEG revisions in 2014 and level of funding ranges between 3.40 ct per kWh (at a 2017 confirm that these reforms are important steps on the 120% site), and 4.93 ct. (at a 70% site). After the special path to a successful energy transition. The auctions have rules for citizens’ energy projects were removed, the led to significantly lower support costs. number of offers submitted and the energy amounts were down in auction rounds that took place in 2018. In zzSolar installations: Bids for PV were conducted in the the auction rounds held since May 2018, the amounts period 2015 – 2016 as part of a pilot project for ground- put out for bid were not completely granted. As a result, mounted solar systems and then as part of the Renewa- the average volume-weighted price awarded climbed to ble Energy Sources Act of 2017. The auctions evidenced a 6.26 ct/kWh in the fourth round in 2018 (maximum 54 4 RENEWABLE ENERGY

legal price: 6.30 ct/kWh). Accordingly, the price was sig- The average volume-weighted price awarded in the sec- nificantly above the level of the May 2017 auction. More ond round was 4.66 ct/kWh. The highest offer receiving information can be found in Table 4.3. an award was 9.83 ct/kWh. Two awards were granted for 0 ct/kWh. The median volume-weighted price awarded zzOffshore wind: In the auction round conducted in early in both rounds was 2.3 ct/kWh. More information can 2017, four offshore wind farms with 1,490 MW were be found in Table 4.4. awarded. The average mean value of the awards was 0.44 ct/kWh. Three awards were given for 0 ct/kWh, and one zzBiomass remains the exception: the first two auctions wind farm was awarded 6 ct/kWh. In the second auction for biomass installations differed from the auctions for round (1 April 2018), six awards were granted with a vol- solar and wind energy with regard to the participants ume of 1,610 MW. The level of competition was some- and the results. Existing power plants subject to the pre- what lower than in the first round, because only existing vious funding limit of eight years were admitted to the projects could take part for which there was still net- auction and were granted a ten-year follow-on funding. work capacity available, and that had not been awarded Both auctions for biomass show relatively low compe- a contract in the first round. Furthermore, a new restric- tition activity, with prices granted close to the highest tion came into effect stipulating that at least 500 MW be prices achieved. More information can be found in awarded for projects in the Baltic Sea (“Ostseequote”). Table 4.5.

Table 4.2: Results of the first auction for solar installations under the EEG 2017

Auctions 2017 2018 Auction date 1 Feb 17 1 Jun 17 1 Oct 17 1 Feb 18 1 Jun 18 1 Oct 18 Number of offers received 97 133 110 79 59 76 volume offered 488 MW 646 MW 754 MW 546 MW 360 MW 551 MW Excluded offers 9 17 6 16 1 3 Lowest offer 6.00 ct/kWh 5.34 ct/kWh 4.29 ct/kWh 3.86 ct/kWh 3.89 ct/kWh 3.86 ct/kWh Highest offer 8.86 ct/kWh 6.54ct/kWh 7.20 ct/kWh 5.74 ct/kWh 6.26 ct/kWh 8.73 ct/kWh Number of offers receiving funding 38 32 20 24 28 37 amounts receiving funding 200 MW 201 MW 222 MW 201 MW 183 MW 192 MW Lowest price awarded 6.00 ct/kWh 5.34 ct/kWh 4.29 ct/kWh 3.86 ct/kWh 3.89 ct/kWh 3.86 ct/kWh Highest price awarded 6.75 ct/kWh 5.90 ct/kWh 5.06 ct/kWh 4.59 ct/kWh 4.96 ct/kWh 5.15 ct/kWh Average price awarded 6.58 ct/kWh 5.66 ct/kWh 4.91 ct/kWh 4.33 ct/kWh 4.59 ct/kWh 4.69 ct/kWh

Source: Federal Network Agency

Table 4.3: Results of the first auction for onshore wind powered installations under the EEG

Auctions 2017 2018 Auction date 1 May 17 1 Aug 17 1 Nov 17 1 Feb 18 1 May 18 1 Aug 18 1 Oct 18 Number of offers received 256 281 210 132 111 91 62 Volume offered 2.137 MW 2.927 MW 2.591 MW 989 MW 604 MW 709 MW 396 MW Excluded offers 12 14 15 2 0 5 5 Lowest offer 4.20 ct/kWh 3.50 ct/kWh 2.2 ct/kWh 3.8 ct/kWh 4.30 ct/kWh 4.00 ct/kWh 5.00 ct/kWh Highest offer 7.00 ct/kWh 6.45 ct/kWh 6.66 ct/kWh 6.28 ct/kWh 6.28 ct/kWh 6.30 ct/kWh 6.30 ct/kWh Number of offers receiving funding 70 67 61 83 111 86 57 Amounts receiving funding 807 MW 1.013 MW 1.000 MW 709 MW 604 MW 666 MW 363 MW Lowest price awarded 4.20 ct/kWh 3.50 ct/kWh 2.20 ct/kWh 3.80 ct/kWh 4.65 ct/kWh 4.00 ct/kWh 5.00 ct/kWh Highest price awarded 5.78 ct/kWh 4.29 ct/kWh 3.82 ct/kWh 5.28 ct/kWh 6.28 ct/kWh 6.30 ct/kWh 6.30 ct/kWh Average volume-weighted price 5.71 ct/kWh 4.28 ct/kWh 3.82 ct/kWh 4.73 ct/kWh 5.73 ct/kWh 6.16 ct/kWh 6.26 ct/kWh awarded

Source: Federal Network Agency 4 RENEWABLE ENERGY 55

Lawmakers adjusted the special rules for citizens’ energy the bidding amounts for onshore wind and photovoltaic companies. During the first three bidding rounds for 2017, are to increase from 1 GW each in 2019 to 1.4 GW in 2020 the major share of grants for onshore wind energy installa- and then 1.6 GW in 2021. The EEG also contains an adapta- tions went to citizens’ energy companies, which did not yet tion of the statutory ordinance on innovation bids. In the have the required permits under the Federal Immission scope of innovation bids, 250 MW are to be put up for bid Control Act. Furthermore, the citizens’ energy companies in 2019, 400 MW in 2020 and in 2021, 500 MW. The amount had a longer implementation deadline than other bidders. of the innovation bidding is deducted from regular bidding To remove the distortion of competition inherent in this amounts for onshore wind energy and solar installations and to avoid other erroneous trends, lawmakers adapted and serve as a testing field for more competition and more the special rules applicable to citizens’ energy companies. grid and system accessibility. For example, since 2018 only those citizens’ energy companies that have approved projects may participate in bid- Lawmakers will determine the renewable energy path for ding. In addition, the implementation deadlines were sim- 2030. After passing the Omnibus Energy Act, the coalition plified. The Federal government wants to ensure that there parties commenced discussions on measures for increasing are many actors taking part and thereby make it easier for acceptance of expanding onshore wind energy. This citizens to take part in bidding projects without a commen- includes for example strengthening the decision-making surate increase in expansion of renewable energy sources. authority of cities and municipalities and regional manage- To increase acceptance of expansion of renewable energies, ment of expansion. The results of consultations are there are also efforts to determine how uniform federal intended to serve as a basis for decisions in the autumn of rules can help communities with such installations to 2019 on expansion paths of the individual technologies up receive more value-added from renewables installations. to 2030, in order to reach the 65% renewables target set out in the Coalition Agreement. In order to provide an additional contribution to reaching climate targets, the Renewable Energy Act also provides for Financing for existing renewable energy plants continued special bidding processes for onshore wind and photovol- to increase in 2017 and 2018. The financing need is equiva- taics as of 2019. In total, an additional 4GW each of lent to the difference between remuneration or premium onshore wind and photovoltaics are planned for bidding payments to the operators of RES plants under the Renew- between 2019 and 2021. In order to increase competition, able Energy Sources Act and revenues from the sale of elec-

Table 4.4: Results of the first auctions for offshore wind powered installations under the Offshore Wind Energy Act

Auctions 2017 2018

Auction date 1 Apr 17 1 Apr 18

Number of offers receiving funding 4 6

Amounts receiving funding 1,490 MW 1,610 MW

Lowest price awarded 0.00 ct/kWh 0.00 ct/kWh

Highest price awarded 6.00 ct/kWh 9.83 ct/kWh

Average price awarded (volume-weighted) 0.44 ct/kWh 4.66 ct/kWh

Source: Federal Network Agency

Table 4.5: Results of the first auction for biomass under the EEG

Auctions Biomass Auction date 01 Sep 2017 01 Sep 2018 Number of offers receiving funding 24 79 Amounts receiving funding 27.55 MW 76.5 MW (of that, 77% existing installations >150kW and 22% new installations) Lowest price awarded 9.86 ct/kWh 10.00 ct/kWh Highest price awarded 16.9 ct/kWh 16.73 ct/kWh Average price awarded (volume-weighted) 14.30 ct/kWh 14.73 ct/kWh

Source: Federal Network Agency 56 4 RENEWABLE ENERGY

tricity from renewables on the electricity exchange. The related strong increase in electricity generation with wind prices and revenues on the electricity exchange fell in 2017, power. Renewables have themselves also contributed to the yet the electricity generated by renewables went up by drop in prices on the electricity exchange on account of about 16% compared with 2015 and 2016, and accordingly, their low marginal costs (known as the merit-order effect). so did payments for feed-ins and market premiums. The After rising only slightly in previous years (from €21.9 bil- reasons were the large increase in capacity by the end of lion in 2015 to €22.2 billion in 2016), overall financing the year (around 8 GW), but also in primarily the weather- demand went up sharply again in 2017 to about €23.4 bil-

Transparency, participation and acceptance of renewable energies

Acceptance of onshore wind energy is being improved. however, landlord-to-tenant electricity was not usually The German population is in favour of switching from fos- attractive, partly because in landlord-to-tenant electricity sil-based energy to renewable energy. Some feel that the models there are substantial expenses for distribution, transition is not happening fast enough. Even residents liv- metering and invoicing. The landlord-to-tenant electricity ing close to renewable energy installations are open to premium will make landlord-to-tenant electricity more expansion of renewable energies. However, there are indi- economically attractive. It will be easier for housing coop- cations that the acceptance rate could drop for individuals eratives and associations to provide their renters with land- located directly next to such installations (see box on Trans- lord-to-tenant electricity starting 2019. The draft bill parency, participation and acceptance in Chapter 1). The agreed on by the German parliament in November 2018 Omnibus Energy Act deals with one important area in this containing tax incentives for new construction of apart- regard: as one of the first measures to increase acceptance ments also provides for a change in Section 5 (1) no. 10 of of onshore wind, a demand-driven illumination system is the German Corporation Tax Act. The change allows hous- being introduced. Wind installations no longer blink red all ing cooperatives and associations to remain tax exempt on the time at night, rather only when an aircraft that should rental income if they have landlord-to-tenant electricity be warned is actually in the vicinity. A working group was installations using solar power. This reflects a measure formed with members from the coalition parties for confer- decided at the Wohngipfel (summit on residential living) ring on additional measures for acceptance. held by the Federal Government on September 21, 2018. The Bundesrat (German Federal Council) however has yet Make landlord-to-tenant electricity more economically to pass this law – it has not been scheduled as yet for con- attractive clusive discussion in the assembly. The goal of landlord-to-tenant electricity funding is to help tenants participate directly in the energy transition and to The Regionalnachweisregister, a registry of regional origin provide additional incentives for installing solar power on for electricity generated with renewable energy, has been residential buildings. Landlord-to-tenant electricity is launched. power that is generated in solar PV installations on the roof As of January 2019, any household can contribute to the of a residential building and that is delivered to end users, energy transition in their own location. The new register is in particular tenants of the building or of residential build- a means for issuing proof of regional generation of electric- ings and other buildings in the immediate vicinity without ity from renewables. End customers can see that their elec- being transmitted through the power grid. The power not tricity was produced in their region, for example with the used by tenants is fed into the municipal power grid and wind energy installation next door. The register makes the compensation is paid for this power. In contrast to electric- energy transition tangible for power customers at the ity consumption from the grid, several cost components are regional level. Electricity suppliers can give their products a waived for landlord-to-tenant electricity (e.g. grid charges regional face. Electricity generated locally improves local and electricity tax). In addition, in the future each kilowatt acceptance of the energy transition. By using Guarantees of hour of landlord-to-tenant electricity will be subsidized – Regional Origin, electricity providers can now advertise in with a landlord-to-tenant electricity premium – financed their fuel mix disclosure that renewables electricity that with the renewable energy surcharge. The direct and indi- they deliver – that is, renewable electricity financed with rect financial incentives should make it economical for the renewable energy surcharge – comes from installations landlords, and tenants can source their electricity from from the area. The regional origin guarantee system is a their “own” roof. This should help to promote expansion of means for the Federal Environment Agency to ensure that renewable energy in the cities. There is quite a bit of poten- the regional aspect of a kilowatt hour of electricity pro- tial: up to 3.8 million private accommodations could be duced with renewables is marketed only once. supplied with landlord-to-tenant electricity. Up to now, 4 RENEWABLE ENERGY 57

lion. In 2018, this figure was €25.6 billion (preliminary figure). Remuneration for existing RES plants is based on guaranteed feed-in tariffs for periods of up to 20 years. In view of the results of the auction, it is evident that new installations offer cost-saving potential in the competitive process as a result of advancements in technology and thereby drive down the rates of remuneration under the Renewable Energy Sources Act.

The need to finance renewables is counteracted by the positive impact of renewables, such as avoided emissions of greenhouse gases and atmospheric pollutants and the resulting reduction of harmful effects on health and the environment. By using renewables, 184 million tonnes of

CO2 equivalent were avoided in 2018. In addition, the expansion of renewables produces macroeconomic benefits: for example, less use of fossil fuels causes energy imports to fall (see Chapter 3, 8 and 11). In addition, the promotion of renewables in Germany through the Renewa- ble Energy Sources Act and other means has also contributed at an international level to a reduction in technology costs in the field of renewable energy (see Chapter 15). large cost burden from the past, specifically payment for The EEG surcharge in 2019 is 6.405 ct/kWh. This means existing installations with high feed-in tariffs which cannot that it has gone down for two straight years, and by around be altered due to the principle of the protection of legiti- 6% compared with 2018. The surcharge has ranged between mate expectations and the protection of vested interests. 6.2 and 6.9ct/kWh since 2014. Previous to that, it climbed New installations require much lower feed-in tariffs, which drastically (from 3.59 ct/kWh in 2012 to 6.24 ct/kWh in will substantially reduce the load on the EEG surcharge in 2014)(see figure 4.7). The EEG surcharge has inherited a the long run.

Figure 4.7: EEG surcharge by technology in ct/kWh

8 6.79 6.88 7 6.35 6.24 6.17 6 5.28 5

4 3.53 3.59

2.05 2

-1 2010 2011 2012 2013 2014 2015 2016 2017 2018

hydropower, gas, geothermal biomass onshore wind energy offshore wind energy

photovoltaics liquidity reserve, account balancing and other costs

Source: Federal Ministry for Economic Affairs and Energy on the basis of the forecast prepared by the transmission system operators in accordance with the Equalisation Scheme Ordinance 15 October 2018 58 4 RENEWABLE ENERGY

Owing to the EEG reforms in 2014 and 2017, it was possi- Furthermore, the further expansion of renewable energies ble to limit the increase in the EEG surcharge and at the has been considerably cheaper than previous expansion, same time, to promote renewable energy expansion. It has because the costs of new wind and photovoltaic installa- therefore been possible to slow down the cost dynamics of tions have generally gone down. A balanced mix of onshore previous years appreciably. At the same time, energy gener- and offshore wind as well as photovoltaics reduced grid ation from renewable energies rose by round 50%. and system integration costs and thereby, ultimately also overall costs (see Chapters 8 and 15).

Key measures taken to date for renewable energy in the electricity, heating and transport sectors

zzRenewable Energy Sources Act 2017 (EEG) (see Chapters 5 and 6) zzAct to Revise the EEG 2017 zzHarmonised regulatory system for the heating market zzLandlord-to-Tenant Electricity Act (see Chapter 5) zzOmnibus Energy Act (e.g. special bidding process for zzlow temperature heat networks with seasonal thermal onshore wind energy and photovoltaics) energy storage zz2015 Revision of the Market Incentive Programme, zzMeasures regarding electric mobility/biofuels/rail trans- including heat pump funding and expansion since 2016 port (see Chapter 7) with the Energy Efficiency Incentive Programme (APEE)

4.3 Outlook

4.3.1 Outlook for 2020

The current Target Architecture Study (see Chapter 2.2) arrived at the following scenarios: The goal of increasing the share of renewable energies in gross final energy consumption to 18% by 2020 is expected to be just barely reached. The study assumes that this percentage will be at about 18.4% by 2020 (within a range of 17.9% to 18.8%, see Figure 4.8). This takes the effects of measures taken under the Study into account.

The goal of increasing the share of renewable energies in gross electricity consumption to at least 35% is expected to be exceeded, according to the current Target Architecture Study. In 2017, the share was already at 36%, and the study assumes that this percentage will be at 43.4% by the year 2020 (within a range of 41.3% to 45.1%, see Figure 4.9). This takes the effects of measures taken under the Study into account.

The goal of increasing the share of renewable energies in heating and cooling consumption to 14% by 2020 is expected to be met, according to the current Target Archi- tecture Study. In 2017, the share was already at 13.4%, and the study assumes that this percentage will be at around 15.2% by the year 2020 (within a range of 14.9% to 16.2%, see Figure 4.10). 4 RENEWABLE ENERGY 59

Figure 4.8: Increase in the share of renewables in gross final energy consumption according to the Target Architecture Study in % 20

18.7 18.4 18 17.9

9.0 8 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

2020 forecast 2020 forecast actual trend trend compared to 2020 goal (18%) extrapolation of trend (min-max range of (study estimates on to 2017 reference value (incl. effect of measures) effect of measures) Measures up to 2008)

Source: Prognos, Fraunhofer ISI, (2019)

Figure 4.9: Increase in the share of renewables in gross electricity consumption according to the Target Architecture Study in % 50

45 45.1 43.4 41.3 40

15 15.0

0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Source: Prognos, Fraunhofer ISI, (2019)

4.3.2 Outlook for 2030 is comprised of the strong growth in amounts produced by electricity generation, rising volumes of final energy con- If no additional measures are taken, the renewables share sumption, and to a small extent the somewhat slower in final energy consumption would go up according to the growth in the amount of district heating generated with NECP reference scenario to 22.6% by 2030. The rising trend renewables. The scenario assumes that the overall gross 60 4 RENEWABLE ENERGY

Figure 4.10: Increase in the share of renewables in heating and cooling consumption according to the Target Architecture Study in % 18

16 16.2 15.2 14.9 14

12.7 12

6 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Source: Prognos, Fraunhofer ISI

final energy consumption will drop slightly in the same Accordingly the goal of the Energy Concept (at least 50% by period. In 2040, the share of renewables in gross final con- 2030) would be reached. However, the increase in renew sumption of energy in the NECP reference scenario will be ables in the energy sector would not be reached that was 26.1% (see Figure 4.11). targeted by the Federal Government and is necessary to achieve the goal set out in the Coalition Agreement of If no additional measures are taken, the renewables share approximately 65% by 2030. This target is also important in gross electricity consumption would go up according to for mastering the challenges of better synchronisation of the NECP reference scenario to about 52.9% by 2030. renewable energies and grid capacities. The capacity of the

Figure 4.11: Trend of the renewables share in final energy consumption by 2040 according to the NECP reference scenario in % 30

26.1 25 22.2 22.6 21.0 21.6 20.0 20.6 20 19.1 19.5 18.4 18.8

0 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2040

Source: Prognos, Fraunhofer ISI, GWS, iinas (2019) 4 RENEWABLE ENERGY 61

power grid to transport energy is key. Starting in 2028, barely reached according to the Target Architecture Study renewables will be responsible for more than half of elec- – additional efforts will be necessary. This applies in par- tricity generation in Germany, according to the NECP ref- ticular to the increase in renewables in the energy sector erence scenario. The share will increase more slowly than targeted by the Federal Government that is necessary to in the strong growth years between 2008 and 2015, and will achieve the goal set out in the Coalition Agreement of grow even slower, yet steadily, up to 2040. Overall gross approximately 65% by 2030 – which was basically the tar- energy consumption will drop slightly between 2021 and get originally set for 2040. 2030 in the reference trend. In 2040, the share of renew ables in gross electricity consumption in the NECP refer- Additional efforts will therefore still be required to con- ence scenario will be 56% (see Figure 4.12). tinue developing renewables in the electricity sector. For ensuring that the goal set out in the coalition agreement If no additional measures are taken, the renewables share of increasing the share of renewables to 65% by 2030, a in heating and cooling consumption would go up accord- focused, efficient, grid-synchronised and increasingly mar- ing to the NECP reference scenario to about 18.8% by ket-oriented expansion of renewable energies is necessary. 2030. The reference scenario is based on the assumption In addition, an efficient bidding competition must be in of nearly constant growth between 2021 and 2030. The place and planning security and sufficient approved surfaces amount of district heating energy generated with renew for wind and photovoltaics must be available. For planning ables will remain nearly constant over the same time and legal certainty, it is essential to determine the expan- period. Overall heating consumption will go down slightly sion paths for individual technologies required for reaching between 2021 and 2030, by about 0.9% annually. In 2040, the 65% target. To increase acceptance of increased use of the share of renewables in heating and cooling consump- renewable energies, additional measures could help, such tion in the NECP reference scenario will be 22.3% (see Fig- as stronger participation of affected municipalities in creat- ure 4.13). ing valued added and improving the options for citizen participation in projects without an increase in cost of using renewables. 4.3.3 Inferences Approvals for new onshore wind energy installations have Regarding the 2020 goals for the share of renewable ener- dropped drastically since then beginning of 2017. Whereas gies in gross electricity and heating consumption, the in 2016, approvals were granted for new wind energy energy transition is on track, even though the expansion of installations of about 9,400 MW, in 2017 about 1,380 MW renewables was markedly slower in the electricity sector in were approved, and in 2018, 1,450 MW. This corresponds in past years (2013 – 2017). The 2020 goal for share of renew each of these two years to only one half of the annual ables in gross final consumption of energy will be just expansion targets set forth in the 2017 Renewable Energy

Figure 4.12: Trend of the renewables share in gross electricity consumption by 2040 according to the NECP reference scenario in % 60 55.7 51.8 52.9 50.3 50 47.7 48.8 46.3 44.1 45.1 42.5 43.4 40

0 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2040

Quelle: Prognos, Fh ISI, GWS, iinas (2019) 62 4 RENEWABLE ENERGY

Sources Act.. This trend affected the underbid auction in 4.4 Conclusions 2018 such that of the entire volume of bids of 2,710 MW, only 2,343 MW could be granted (see also Chapter 4.2). Targeted, efficient, grid-synchronized and an increasingly market-driven expansion of renewable energy sources is a In order to reach the 65% target by 2030, it is necessary to prerequisite for successful energy transition and climate dedicate additional land to wind-powered installations. A protection policies. The Federal Government aims to key prerequisite for expanding onshore wind energy is increase the share in renewables in the energy sector – approving space with land-use planning procedures. Cur- especially in the context of the challenges of better syn- rently around 1% of land in Germany is dedicated to wind chronisation of renewable energy sources and grid capacity energy. Wind power has already been installed on more – in order to reach the goal set by the Coalition Agreement than half of this area. As part of the repowering process, of approximately 65% by 2030. The capacity of the power these spaces are reassessed as to whether they can continue grid to transport energy is key. Increasing expansion of to be used for wind energy. Those spaces not suitable for renewable energy is ultimately necessary for replacing elec- installing wind power are often lack acceptance or run into tricity produced with coal and to cover the additional approval hurdles (requirements under conservation law, demand for electricity, so that climate protection goals in aviation or military concerns). Accordingly, the barriers to transport, in buildings and in industry can be achieved. further expansion of possible areas for installation are being analysed and efforts will be made to reduce them. The Federal Government is continuing to prioritize the expansion of renewable energy sources. A working group There is sufficient potential for expansion of photovoltaics was formed with members from the coalition parties for on roofs and ground-mounted installations. According to conferring on measures for increasing the acceptance of the 2018 Expert Report on the Renewable Energy Sources onshore wind energy (see above). Based on the findings of Act Progress Report, the current capacity of solar rooftop this group and on those of the Coal Commission, as well panels of about 30GW corresponds to 10% of the potential (see Chapter 1) as the further trend in grid expansion, a for solar energy. “This makes it clear that even considering decision will be reached by autumn of 2019 on concrete the amount of area required for existing and future solar acceptance measures and on funding requirements, as well thermal installations and estimates for uncertainties. there as future paths of expansion of renewable energies in the is a large potential of available surface for further expan- electricity sector by 2030, in order to achieve the goal of a sion of solar roof-top installations” (see page 10 of the 65% share in renewable set out in the Coalition Agreement. Expert Report). During a three-year pilot phase (2019 – 2021) the Federal Government will also gain experience with cross-technology bidding invitations.

Figure 4.13: Trend of the renewables share in heating and cooling consumption by 2040 according to the NECP reference scenario in % 25 22.3

20 18.4 18.8 17.7 18.1 16.9 17.4 16.3 16.6 15.6 15.9 15

0 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2040

Source: Prognos, Fraunhofer ISI, GWS, iinas (2019) 4 RENEWABLE ENERGY 63

Additional steps in implementing the energy transition In order to transition the energy system almost completely build increasingly on the integrated development of the to renewable energy sources by 2050, innovative techno- electricity, heating and transport sectors. The importance logical solutions and new business models will be neces- of renewables can be expected to increase in all three sec- sary to contribute substantially to efficiently implementing tors over the coming years also. In addition to increased the energy transition. In addition, it is important to energy efficiency and the expansion of renewables, there increase efforts to mobilize private capital. Market pro- will also be greater interaction between the energy, trans- cesses best utilize the decentralized knowledge of actors port and buildings sectors (sector coupling) in the future. and ensure that new knowledge is discovered. This is a The German Federal Government will continue to promote means of identifying the most efficient trans-technology the heating transition – indispensable for achieving energy and trans-sector solutions. and climate targets (see Chapter 13).

5 Energy consumption and energy efficiency

Where do we stand?

Primary energy consumption rose in 2017 by 0.8% compared with the year before, due in turn to positive economic growth.

According to estimates, primary energy consumption dropped by 4.6% in 2018. This was attributable especially to sharp increases in energy prices, the unusually mild weather and a strong rise in energy productivity.

The measures proposed by the National Action Plan on Energy Efficiency (NAPE) and the energy policy resolutions of 1 July 2015 are contributing to climate protection with specific energy and greenhouse gas savings.

What is new?

The Energy Savings Meter pilot programme was revised and extended to 2022 and the funding increased to a total of €160 million. The funding requirements for this funding entered into force in August 2019. An assistance programme titled “Energy Efficiency and Heating with Renewable Energy”, funding programmes were combined and adapted in focus to address relevant participants. In January 2019, this new program was launched in industry. In April 2019, the Federal Ministry for Eco- nomic Affairs and Energy launched the Energy Efficiency competition.

What is next?

The updated Target Architecture Study expects that the goals of lowering primary energy consumption by 20% compared and gross electricity consumption by 10% by 2020 will be either missed by a wide margin or simply not reached.

If no additional measures are taken, primary energy consumption would go up according to the NECP in 2030 by 11,364 PJ and gross electricity consumption to 575 TWh.

Accordingly, it is imperative to take action, in order to reduce primary energy consumption by 2030.

The funding strategy and the ‘Efficiency Funding 2020 Finish Line Photo’ are still being implemented. The application processes have been made more customer- friendly in order to further increase efficiency and effectiveness of funding. 66 5 ENERGY CONSUMPTION AND ENERGY EFFICIENCY

The Federal Government plans to adopt an inter-sectoral energy efficiency strategy. It should contain specific measures for fulfilling the requirements set out in the Energy Concept and for achieving the German contribution to the EU energy efficiency goal for 2030. To this end, the strategy will create a specific package of measures for the 2021 – 2030 decade (NAPE 2.0).

2017 2020 2030 2040 2050

Efficiency and consumption

Primary energy consumption -5.5% -20% -50% (compared with 2008)

1.0% Final energy productivity per year 2.1% per year (2008 – 2050) (2008 – 2050) (2008 – 2017)

Gross electricity consumption -3.3% -10% -25% (compared with 2008) 5 ENERGY CONSUMPTION AND ENERGY EFFICIENCY 67

5.1 Present situation Compared with the reference year (2008), primary energy consumption in Germany had dropped by 5.5% in total in 5.1.1 Primary energy consumption and primary 2017. In order to reach the reduction target for primary energy productivity energy consumption by 2020, this consumption would have to be further reduced by 14.5 percentage points com- Primary energy consumption rose slightly in 2017 compared with the level of 2017. In absolute numbers, this is pared with the year before. In 2017, primary energy con- the equivalent of around 2090 PJ, that is, the entire German sumption stood at 13,594 PJ, up 0.8% on the previous year annual electricity consumption. Such a decline by 2020 is (Figure 5.1). Contributing to the increase are both strong unlikely. economic growth of 2.2% as well as an increase in the population of about 308,000 persons. Following adjustments According to preliminary figures, in 2018 primary energy for the effects of temperature and inventories, primary consumption dropped significantly compared to the previ- energy consumption energy consumption in 2017 was 1.1% ous year, by 4.6%. This follows from the annual report of higher than the previous year. The rise in consumption due the Working Group on Energy Balances (AGEB 2019b). to the economy and population growth were only partially According to the report, energy consumption in Germany counteracted by increases in energy efficiency. declined for the first time since 2014, and was at the lowest level since 1972. The drop in energy consumption is attrib- The demand for renewable energy and natural gas increased utable especially to sharp increases in energy prices, the again significantly in 2017. Petroleum was also in higher unusually mild weather and a strong rise in energy produc- demand. In contrast, the consumption of coal, lignite and tivity. nuclear once again declined. In addition to increases in capacity, the push in renewable energies was helped by In addition to absolute energy consumption, how effi- favourable wind conditions. The main cause for expansion ciently a national economy uses energy is also of central of natural gas consumption was its continued growing sig- importance. Energy productivity is one indicator of this. To nificance for generating electricity and heating. determine energy efficiency, it is necessary to calculate the ratio of a country’s economic output (e.g. gross domestic product or gross value added) to energy consumption.

Figure 5.1: Reducing primary energy consumption 2020 target 20% reduction in primary energy consumption (compared with 2008) Status in 2017 -5.5% petajoules

15,000 14,380 14,217 13,822 14,000 13,531 13,599 13,594 13,447 13,180 13,262 13,491 13,000 12,000 11,504 11,000 Target -20% by 2020 10,000 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 2020201920182017201620152014201320122011201020092008

Source: AGEB 08/2018

Trend ● ● ● ● ● Measures National Action Plan on Energy Efficiency and other existing energy efficiency programmes 68 5 ENERGY CONSUMPTION AND ENERGY EFFICIENCY

Factors influencing energy consumption

The changes in primary energy consumption are attributa- 2005 and 2015 was in particular due to a rise in economic ble to a number of factors. Apart from weather conditions, activity. The European Commission results also indicate that the most important determinants are the development of an increase in consumption was counteracted by an the population (demographic component), the change in improvement in energy intensity in the industry and CTS GDP (growth component) and macroeconomic energy sectors and a slight shift to less energy intensive processes intensity (energy intensity component). By analysing the (structural effect) in the same period. components using the decomposition model proposed by Sun (1998), for example, it is possible to draw conclusions about the contribution of the individual factors influencing Figure 5.2: Components influencing the change in the development of primary energy consumption. The indi- adjusted primary energy consumption in Germany in vidual contributions quantify the change in total energy the period 2008 – 2017 consumption that would occur, in theory, if just one of the in PJ components were to change while all the other factors 1,500 remained constant. 1,224

The result, after adjusting for temperature differences, is 1,000 that the overall decrease of 684 PJ in primary energy con- 500 sumption between 2008 and 2017 is largely attributable to 326 improvements in energy intensity. In contrast, the positive 0 economic developments during this period had the effect of increasing energy consumption. Taken in isolation, the total -500 population increase of around 1.9 million people in the -684 period between 2008 and 2017 also drove up energy con- -1,000 sumption slightly. Component decomposition illustrates that efficiency efforts made during the 2008 – 2017 period -1,500 overcompensated for effects that drove up consumption, such as increasing per capita income and population growth. -2,000 -2,234 Calculations made by the European Commission for individual consumption sectors between 2005 and 2015 confirm -2,500 this (COM-1). These results show, for example, that in the total growth population ef ciency industry sector and in the crafts, trade and services (CTS) Source: Federal Ministry for Economic Affairs and Energy, in-house representation based on data sector, the increase in final energy consumption between from the Working Group on Energy Balances, 01/2019. 5 ENERGY CONSUMPTION AND ENERGY EFFICIENCY 69

Energy productivity therefore indicates the value of If we look at the individual energy sources, growth was goods and services that can be produced with one unit strongest in heating oil consumption, at 7.8%. Consump- of energy. tion of gas grew by 5.4%, and lignite grew by 4.0%. In contrast, consumption of electricity and district heating hardly Primary energy productivity increased on the previous changed. Fuels increased by 2.6%. year. In 2017, it was possible to produce 1.4% more products and services with the same amount of energy com- Final energy productivity dropped slightly in 2017 compared with the previous year (see bottom curve in Figure pared with the previous year. The Federal Government’s 5.3). Adjusted for the effects of the weather as well as Energy Concept also refers the efficiency goal to final changes in inventories, the increase was 1.1%. energy productivity, i.e. to the real gross domestic product per unit of final energy consumption. Final energy productivity stood at €314.4/GJ in 2017 compared with €316.4/GJ 5.1.2 Final energy consumption the previous year (see top curve in Figure 5.3).

Final energy consumption increased compared with the Between 2008 and 2017, final energy productivity improved preceding year. Final energy is the share of primary energy by 1.0% on average each year, which clearly falls short of that is available to consumers after deductions for energy the target of an annual increase of 2.1%. Final energy pro- lost during transmission and conversion and for non- ductivity would have to increase by an average of 5.4% energy related consumption. Final energy consumption annually in the three years between the reporting year 2017 reached 9,329 PJ in 2017, an increase of 2.8% over the previ- and 2020 to achieve the pre-determined target set by the ous year. Following adjustments for the effects of tempera- Energy Concept. This acceleration is very unlikely. How- ture and inventories, final energy consumption in 2017 ever, the goal is still to produce real GDP with as little final rose 3.3% on the previous year. Broken down by sector, the energy consumption as possible and to avoid unnecessary unadjusted increase in consumption highest in industry, at energy consumption. For this reason, companies, house- 3.5%, followed by the trade, commerce and services sector holds and the public sector must continue to focus on effi- at 3.4% and transport at 2.4%. Households consumed 2.2% cient handling of energy resources. more final energy than in the previous year.

Transparency, participation and acceptance of energy efficiency

Particularly in the area of energy efficiency there are many transparent ongoing way of bringing all interested individu- options for citizens, companies and municipalities to als and participants into the political processes on energy actively shape the energy transition and to benefit from it. efficiency policy. The Federal Government provides ample funding for companies, municipalities and households. The Federal Ministry Consumers can contribute to the energy transition, for for Economic Affairs and Energy has access to €17 billion example, by buying choosing new appliances that are espe- for existing and new energy efficiency measures during the cially energy efficient. The EU Energy Label is a successful period 2016 – 2020. Of this, €2.5 billion are earmarked for tool for transforming complex technical aspects of energy NAPE activities for this same period. Even smaller meas- efficiency of consumer goods into meaningful and easily ures, for example in buildings, are eligible for investment comprehensible information. By making products compara- grants or loans, which makes the energy savings they gen- ble using the familiar efficiency scale ranging from green erate financially attractive. for highly efficient to red for least efficient, the label creates transparency for purchasing decisions. At the same The “Germany Makes it Efficient” awareness-raising and time, this leads to competition among manufacturers to mobilisation campaign informs all the stakeholders about create the most efficient products. To make the EU energy the energy transition – a collaborative effort – and in par- label even more informative, the European Commission ticular, helps convince them of the need for yet more effi- decided to return to the A to G scale by January 2019 in cient use of energy. The campaign is geared to private consensus with the Member States for the first six product households, business enterprises and public institutions groups (cooling appliances, lighting, TVs and screens, dish- alike, and involves all the stakeholders in a stakeholder dia- washers and washing machines and refrigerators with a logue. Furthermore, the Energy Efficiency Platform is a sales function). 70 5 ENERGY CONSUMPTION AND ENERGY EFFICIENCY

5.1.3 Electricity consumption and electrical energy heat, cold or propulsion energy, and thereby replace the efficiency largest possible amount of fuel with a small amount of renewable electricity (see Chapter 13). Gross electricity consumption in 2017 increased slightly by 0.3% compared with the previous year. Gross electricity Macroeconomic electricity productivity continued to consumption refers to the volume of electricity consumed improve in 2017. Macroeconomic electricity productivity in Germany. In 2017, this figure was around 598 TWh (Fig- expresses the ratio of real GDP to total gross electricity ure 5.4). Efficiency gains could not completely compensate consumption and is therefore an indicator of how effi- for the factors that drove up consumption, being strong ciently an economy uses electricity. In 2017, it registered an economic growth and population growth. increase of 1.7% on the previous year. There has been a trend towards greater decoupling of economic growth Between 2008 and 2017, gross electricity consumption from the development of electricity consumption ever declined by around 3.3%. The goal is to reduce gross elec- since the 1990s. In 2017, aggregate electricity productivity tricity consumption by 10% by 2020 (compared with 2008). was 38% higher than the 1990 level, and increased by In order to reach this goal, consumption would have to go around 1.2% on average each year during this period. down by another 6.9 percentage points – about 24 TWh – in the years between the reporting year 2017 and the target year 2020. This is more than the annual electricity output 5.2 Key measures taken to date of four nuclear power plants. It must also be noted that If we are to make further progress with decarbonisation in The National Action Plan on Energy Efficiency (NAPE) was the heating and transport sectors, increasing amounts of already launched in 2014 by the Federal Government as a green electricity should be used efficiently in these sectors comprehensive strategy to deliver on the energy consump- within the context of sector coupling. This creates new tion goal. NAPE defines immediate actions and farther- energy consumers. To keep the additional need for renewa- reaching work processes in order to meet the national effi- ble electricity to a minimum, sector coupling should always ciency and climate goals. It also makes a significant use the technologies that efficiently convert electricity to contribution to the 2020 Climate Action Programme.

Figure 5.3: Meeting the target for energy productivity 2020 target Increase final energy productivity by 2.1% per year Status in 2017 1.0% annually since 2008 in Euro/GJ

400 368.0 Target: 2.1% increase per year 350 317.2 315.5 316.4 314.4 301.1 301.4 294.3 300 286.8 286.1 277.1

250

200 209.4 211.7 212.8 215.7 196.7 199.9 195.4 182.7 183.2 181.5 150

100

0 2020201920182017201620152014201320122011201020092008

primary energy productivity nal energy productivity target

Quelle: AGEB 01/2019

Trend ● ● ● ● ● Measures National Action Plan on Energy Efficiency 5 ENERGY CONSUMPTION AND ENERGY EFFICIENCY 71

Figure 5.4: Meeting the target for electricity consumption 2020 target Reduce gross electricity consumption by 10% by 2020 (compared with 2008) Status in 2017 -3.3% in TWh

700

619.0 615.9 606.6 606.6 605.1 596.3 597.0 598.7 600 582.2 592.2 557 Target: -10% by 2020 500

400

300

200

100

0 2020201920182017201620152014201320122011201020092008

Source: AGEB 08/2018

Trend ● ● ● ● ● Measures National Action Plan on Energy Efficiency

The most important action areas of energy efficiency policy general federal budget. The 2019 Federal budget saw all are to: energy efficiency measures managed by the Federal Minis- try for Economic Affairs and Energy transferred to the ECF zzStep up energy efficiency in the buildings sector and restructured. The ECF is financed with proceeds from auctions of emissions allowances and a federal subsidy. In zzEstablish energy efficiency as a business model and a addition, the ECF has access to reserves. In 2018, the ECF model for generating returns on investment had a total volume of about €6 billion. Between 2016 and 2020, around €17 billion will be available for sponsoring zzIncrease personal responsibility for energy efficiency energy efficiency and heating with renewables.

To do this, NAPE defines cross-sector measures designed to In 2017 all of the programmes under NAPE for which there reduce energy consumption. The goal was to utilise NAPE is reliable data have achieved a savings of about 15 million measures to boost energy efficiency to save 390 – 460 PJ of tonnes of CO2, which is about 196 PJ of primary energy. energy in total primary energy by 2020. These comprise both new savings from efficiency measures carried out in 2017, as well as savings in 2017 resulting Programmes based the resolutions of the party leaders of from earlier energy-efficiency work (this is called the NAPE the coalition of CDU, CSU and SPD passed on 1 July 2015 logic). New savings, that is, those achieved in 2017, amounted flesh out NAPE. These measures aim to cut an additional to 49 PJ of primary energy savings. A direct comparison

5.5 million tonnes of CO2 through energy efficiency meas- with projected effects of NAPE is not possible because in ures in buildings, the municipalities, in industry and at some cases they reflect the increased funding of only some German rail provider Deutsche Bahn AG. of the programmes. Differing amounts of savings in 2016 and previous years were noted for some measures due to Energy efficiency has been funded largely through the evaluations now available (see above) or based on new data Energy and Climate Fund (ECF) since January 2019. Energy results. efficiency measures have up to now been mostly funded with these special assets and the rest has come from the 72 5 ENERGY CONSUMPTION AND ENERGY EFFICIENCY

The direct and indirect savings resulting from energy effi- grams will gradually be reorganised, grouped together by ciency instruments are sometimes not easy to quantify. In focus and set up to more adequately address interested particular, it is hard to assess how awareness raising really entities. Funding includes the modules consultation, initial affects the actions of stakeholders. In addition, awareness funding, systemic funding and complex innovation pro- raising and advisory efforts often initially have an indirect jects. To make saving energy more economically attractive, effect when combined with other measures or actually the funding parameters are set up according to the motto trigger specific energy efficiency investments. Significant the more ambitious, the more attractive the funding offer. methodology challenges and various methodology Furthermore, the customer focus should be continually approaches arise also when quantifying dead weight, mul- improved and access to funding made easier. The aim is to tiplier and overlap effects. Overlap effects, that is counting create a one-stop shop that combines all relevant informa- savings twice, should be avoided. This happens any time a tion and assists citizens and industry alike step by step, conserved unit of energy is counted both under the indi- beginning with introductory information to energy sav- rect effects of an awareness and activation measure and ings, and finally carrying out a funded project. under the direct effects of a funding programme (e.g. building insulation). In 2018, the Federal Ministry for Economic Affairs and Energy combined all industry funding programs as part of We can assume that the effects of the new instruments will the funding strategy. This approach is technology-neutral continue to strengthen in the course of their respective and includes many sectors. In addition, funding can be programme periods. As such, the total values listed in Table chosen either as a direct subsidy or a loan repayment sub- 5.1 for those measures with quantifiable results to date are sidy. Furthermore, funding may be received by means of not representative of the overall effectiveness of NAPE by participation in the BMWi Energy Efficiency Competition. 2020. More precise conclusions on NAPE effects are only This takes into account the various needs of companies for possible over the coming years on the basis of current pro- different types of funding. The reorganisation of industry gramme evaluations. A comprehensive evaluation of the funding programs is aimed in particular at more effectively energy efficiency fund comprising a total of almost 20 funding investment in more complex measures focused on measures (some of these belong to NAPE), and many from systemic energy-related optimization of production pro- industry, was completed in 2018. The evaluation period cesses. In addition, funding of individual measures in the covered 2011 to 2017. In this period, 16 million tonnes of area of highly efficient horizontal technologies, renewables greenhouse gases were saved. Energy savings resulting only technologies for provided process heating as well as mea from the measures completed in 2017 led to greenhouse surement and control technology and energy management gas reductions of about 1.2 million tonnes of CO2. The eval- software. The new funding package is available in 2019. uation confirms that energy efficiency is worth the effort: Funding in the buildings sector will also be restructured in the measures being funded lead to energy savings of about 2019. €235 million in the evaluation period; over the entire life of the funding, cost savings amount to over €3 billion. This In addition to national measures, various EU measures also funding spurred private investment of over €2 billion by contribute to improving energy efficiency. This includes the the end of 2017. This is convincing evidence of the macro EU eco-design and the EU energy labelling system. The EU economic effect of energy efficiency funding. eco-design is a major factor in ensuring that dealers offer only energy-efficient technologies and appliances and that Monitoring of all efficiency measures is being continually they therefore are successful on the market. Between Sep- improved. For example, building on the experience gained tember 2018 and January 2019, ambitious eco-design stand- in evaluating the Energy Efficiency Fund, a uniform ards were agreed upon for the product group comprising method on evaluating all efficiency measures is currently household cooling appliances, lighting, televisions and being developed. electronic displays, household dishwashers, household washing machines, motors, transformers, external power In order to increase the effectiveness and efficiency of supplies, welding equipment and professional refrigerators. funding programs, the Federal Ministry for Economic The regulations define requirements for ecological design Affairs and Energy has launched the funding strategy of energy consuming products, so that design improve- Energy Efficiency and Heating with Renewable Energies ments can be made that improve the products’ environ- and fundamentally reformed the funding of consulting mental impact. The new regulations are planned to enter and investment. Between 2017 and 2020, funding pro- into force in the summer of 2019. 5 ENERGY CONSUMPTION AND ENERGY EFFICIENCY 73

Table 5.1: Quantifiable effects of efficiency measures since 2016

NAPE measure and programmes on the basis of the resolutions of the party Primary energy savings* CO2 savings* leaders of the coalition of CDU, CSU and SPD passed on 1 July 2015. (in PJ) (in millions of tonnes of

CO2 equivalent) 2016 2017 2016 2017

NAPE measures (only those with quantifiable primary energy savings in the reporting years)

CO2-Building Modernisation Programme: Residential buildings 96.5 115.4 8.04 ** 8.4

CO2-Building Modernisation Programme: Non-residential buildings 4.8 6.3 0.2 0.3

Energy Efficiency Incentive Programme (APEE) 1.6 4.1 0.1 0.3

National Efficiency Label for old heating systems 0.01 2.4 0.0 0.1 Market Incentive Programme on Promoting Measures for Use of Renewable 2.1 3.0 1.2 1.1 Energy in the Heating Market( MAP) KfW Energy efficiency improvement Programme for Production Facilities and 9.6 10.1 0.5 0.6 Processes Energy Efficient Networks Initiative 13.3 19.1 1.1 1.6

Mandatory energy audits for non-SMEs 4.1 8.3 0.3 0.5

SME Energy Transition and Climate Action Initiative 0.6 0.9 0.0 0.1

Energy-efficient and Climate-smart Production Processes 3.0 3.9 0.2 0.7

National Top Runner Initiative (NTRI) 0.0 0.1 0.0 0.005

STEP up! „STromEffizienzPotenziale nutzen“ (Utilize energy efficiency potential) 0.1 0.6 0.0 0.0

Energy Savings Meters 0.0 0.01 0.0 0.001

Energy management systems 0.5 0.7 0.03 0.04

Energy consulting 7.4 12.8 0.5 0.7

Programmes on the basis of decisions made 1 July 2015 Promotion of heating optimisation using high-efficiency pumps and hydraulic 0.1 0.9 0.0 0.1 balancing Horizontal technologies 2.5 4.6 0.2 0.2

Waste heat directive 0.8 2.9 0.1 0.2

Total effect 147 196 12 15

Source: BMWi 04/2019 * Cumulative effect following the NAPE logic, starting with the commencement of the individual measure, up to and including 2016 or 2017 ** Refers to the entire programme 74

Monitoring of important measures for funding energy savings

KfW Energy efficiency Improvement Programme for Production Facilities and Processes

Short description The KfW Energy Efficiency Programme provides low-interest loans to industrial companies for energy efficiency measures in the area of production facilities and processes. Funding is provided for any investments that achieve energy savings of at least 10% (entry standard) or at least 0% (premium standard). Both upgrades and new investments in machines, plants, and process technology compressed air, vacuum and suction technology; electrical motors and pumps; process heat and cooling; heat recovery and waste heat recovery; measurement and control technology; information and communication technology, and combined heat and power plants. The maximum loan amount is usually €25 million per project. Loan maturities of 5, 10 or 20 years are possible.

Status in 2017 The KfW Energy efficiency improvement Programme for Production Facilities and Processes has found wide acceptance on the market due to the transparent and generous funding.

Type of instrument Funding programme

Target group Companies

Energy sources All

Duration of the 2015, then open-ended instrument

Completion KfW

Last evaluation In 2017: Funding years 2015 – 2016

Next evaluation In 2019: Funding years 2017 and 2018

Target indicator of the instrument Monitoring indicators 2016 (NAPE logic) 2017 (NAPE logic) for 2020 Primary energy savings 9.6 10.1 30 (in PJ)

Final energy savings (in PJ) 4.0 6.6 not specified

CO2 savings (in millions of 0.5 0.6 2

tonnes of CO2 equivalent per year)

Energy Efficient Networks Initiative

Summary The goal of the Energy Efficiency Networks Initiative that is sponsored by the Federal Government together with currently 22 associations and business organisations is to initiate around 500 new Energy Efficiency Net- works (EEN) in Germany by the end of 2020. Important industry sectors, the energy industry, the skilled craft sector and trade are involved in the initiative. The main thrust is to motivate companies to carry out significantly more efficiency measures by exchanging information through the network than they would on their own. Companies set savings targets at the beginning of their involvement in this network, both for themselves and for the joint initiative. Experienced energy advisors structure and assist in the network efforts. Current status in 2017 Together with currently 22 business associations, the Federal Government launched and runs the Energy Effi- ciency Networks Initiative (IEEN) with the goal of encouraging companies to set their own targets for becoming more energy efficient. The goal is to initiate a total of 500 new energy efficiency networks by the end of 2020. The IEEN provides a framework for at five or more companies to create their own network for a fixed period of time, to set themselves a joint energy savings goal and to share their experiences in implementing suitable efficiency measures. The shared motivation and structured exchange of information between the companies helps their networking efforts to be successful. Companies can acquire the technical and organisational knowledge in these networks necessary for achieving substantial progress in efficiency. In 2017, 45 new networks were registered at the administrative office of the Initiative. Added to this are the previous 102 networks from 2016 and 2015, amounting to a total of 147 networks in 2017.

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Energy Efficient Networks Initiative

Type of instrument Voluntary commitment from business and industry

Target group Industrial companies, trade and commercial companies

Energy sources All

Duration of the 3 Dec. 2014 to 31 Dec. 2020 instrument Completion Contact with companies through associations and business organisations In some cases these entities also function as network initiators. The Federal Government provides funding specifically with public relations and financing an administrative office.

Last evaluation 30/03/2018

Next evaluation Q1/2019

Target indicator of the instrument Monitoring indicators 2016 (NAPE logic) 2017 (NAPE logic) for 2020 Primary energy savings 13.3 19.1 75 (in PJ)

Final energy savings (in PJ) 9.7 13.9 not specified

CO2 savings (in millions of 1.1 1.6 5 tonnes of CO2 equivalent per year)

Mandatory energy audits for non-SMEs

Short description To increase energy efficiency of business, companies that are not small or medium-sized enterprises (non- SMEs) have been obligated since 22 April 2015 under the Energy Services Act to conduct an energy audit by 5 December 2012 and from then on to conduct further audits at least every four years. The Federal Govern- ment complied with Art. 8 paragraphs 4-7 of the Energy Efficiency Directive by introducing the audit requirement as part of NAPE. Current status in 2017 Ongoing assistance with the mandatory energy audits in cooperation with the BAFA; evaluation of the first energy audit round of 2015

Type of instrument Regulatory law

Target group Non-SMEs/associated companies

Energy sources All

Duration of the 1 May 2015, the first date by which an audit was required, or alternatively, an energy management system to instrument ISO 50001 or EMAS by 31 December 2016 with unlimited duration

Completion BAFA

Last evaluation 2017

Next evaluation Not known

Target indicator of the instrument Monitoring indicators 2016 (NAPE logic) 2017 (NAPE logic) for 2020 Primary energy savings 4.1 8.3 51 (in PJ)

Final energy savings (in PJ) 3.0 6.0 not specified

CO2 savings (in millions of 0.3 0.5 3.4 tonnes of CO2 equivalent per year) 76

Horizontal technologies

Summary The goal of funding investments in highly efficient horizontal technologies is to quickly tap the existing potential for efficiency improvements in industry and trade in generally applicable technologies. The funding programme thereby creates specific incentives for companies to invest in these technologies. Individual measures provide funding for electrical motors and powertrains, pumps, ventilators, compressed air systems and standard technologies for use of waste heat. Systemic measures provide support for updating at least one technical system in the technologies listed under individual measure. A prerequisite for systemic measures is participation in an energy advice programme. The funding rates range between 20% and 30%, according to company size. The funding rate for systemic measures is also dependent upon the verifiable amount of energy saved (at least 25%).

Current status in 2017 After a drop in applications in 2016, caused by the introduction of changes in the funding guidelines, the number of applications almost doubled in 2017. The funding focus in 2017 was on air compressor systems, ventilators and motors. The program was basically used by small and medium-size companies. Only about 10% of the approved applications went to large companies.

Type of instrument Funding programme

Target group Companies (especially SMEs)

Energy sources All

Duration of the 2012 to at least 2019 instrument

Completion BAFA

Last evaluation Summer 2018 for 2017

Next evaluation Spring 2019 for 2018

Target indicator of the instrument Monitoring indicators 2016 (NAPE logic) 2017 (NAPE logic) for 2020 Primary energy savings 2.5 4.6 not specified (in PJ)

Final energy savings (in PJ) 2.0 2.4 not specified

CO2 savings (in millions of 0.2 0.2 0.9

tonnes of CO2 equivalent per year)

Waste heat directive

Summary The goal of the funding programme for avoiding waste heat and recovering waste heat in industrial companies

(waste heat programme) is to save 1 million tonnes of CO2 annually by 2020. The programme serves to implement the Waste Heat Prevention Campaign, part of NAPE Funding is provided for investments in replacement, modernisation, expansion or new construction of facilities that prevent waste heat or efficiently utilize previously unused waste heat, both inside and outside the plant. Assistance is provided either as a subsidy or as subsidies for redemption of principal of a KfW loan. To receive funding, companies must present a plan for recovery of waste heat prepared by a certified energy advisor. Loans with redemption subsidies (subsidy: 30%-40% of the investments qualifying for funding; 10% bonus for SMEs).

Current status in 2017 Measure is in effect The Federal Ministry for Economic Affairs and Energy reports a strong increase in acceptance and market recognition. In addition to the redemption subsidies (in connection with KFW loans), the subsidy was introduced as an additional funding option in September 2017.

Type of instrument Funding programme

Target group Companies

Energy sources Electricity, fuels

Duration of the 2016 - 2019 instrument

→ 77

Waste heat directive

Completion KfW

Last evaluation Summer 2018 for 2017

Next evaluation Not known

Target indicator of the instrument Monitoring indicators 2016 (NAPE logic) 2017 (NAPE logic) for 2020 Primary energy savings (in 0.8 2.9 not specified PJ)

Final energy savings (in PJ) 0.8 2.4 not specified

CO2 savings (in millions of 0.1 0.2 1 tonnes of CO2 equivalent per year)

Contracting bank guarantee

Summary The goal of the Contracting bank guarantee programme is to remove financing hurdles for SMEs such as handicraft businesses or service companies, and thereby promote contracting measures in trade and industry (especially with indemnity bonds issued by the guaranty banks for projects in energy-savings contracting).

Current status in 2017 Applications were continually submitted and approved as well as final evaluation and payment of funding.

Type of instrument Funding programme

Target group SMEs

Energy sources All energy sources

Duration of the 2015 – 2017 instrument

Completion BAFA

Last evaluation 2018

Next evaluation Not known

Target indicator of the instrument Monitoring indicators 2016 (NAPE logic) 2017 (NAPE logic) for 2020 Primary energy savings 0.0 0.1 not specified (in PJ)

Final energy savings (in PJ) 0.0 0.1 not specified

CO2 savings (in millions of 0.0 0.005 not specified tonnes of CO2 equivalent per year) 78

SME Energy Transition and Climate Action Initiative

Summary The SME Energy Transition and Climate Action Initiative has provided funding since 1 January 2013 to companies implementing the energy transition and offers SMEs in the craft trades and industry specific assistance with qualifications building and network projects for energy efficiency and climate protection. Companies receive specific assistance through optimization of information and advice as well as by stepping up further training, qualifications building and exchange of information. The initiative is a joint project sponsored by the Federal Ministry for Economic Affairs and Energy, the Federal Ministry for the Environment (BMU), the Association of German Chambers of Industry and Commerce (DIHK) and the German Confederation of Skilled Crafts and Small Busi- nesses (ZDH). The Federal Ministry for Economic Affairs and Energy and the Federal Ministry for the Environ- ment each provided 50% of funding for the project, drawing from the Energy and Climate Fund, and 20% came from the project partners. To avoid mix funding, the German Association of Chambers of Industry and Commerce projects are funded by the BMU, and the ZDH projects by the Federal Ministry for Economic Affairs and Energy. Current status in 2017 As part of the measure, between 2013 and 2018, approximately 20,000 companies were approached regarding energy efficiency and 1,000 companies were assisted on site with conversations on efficiency . Furthermore, trades received specific guidebooks on energy efficiency in handicraft trades, an energy book was created and a tool kit created during on-site visits with tools for efficiency discussions (e.g. metres, efficiency tips). These instruments are rolled out using a network of currently three trades chambers of commerce, 12 associations and other players.

Type of instrument Funding programme

Target group Company (SMEs, skilled crafts businesses)

Energy sources Electricity, fuels

Duration of the 2013 – 2021 instrument

Completion BAFA

Last evaluation Summer 2018 for 2017

Next evaluation Not known

Target indicator of the instrument Monitoring indicators 2016 (NAPE logic) 2017 (NAPE logic) for 2020 Primary energy savings 0.6 0.9 75 (in PJ)

Final energy savings (in PJ) 0.4 0.5 not specified

CO2 savings (in millions of 0.04 0.1 5

tonnes of CO2 equivalent per year) 79

Energy-efficient and Climate-smart Production Processes

Summary Support is given to measures to improve energy efficiency in commercial and industrial production processes. This includes in particular the switch to production processes as well as measures on efficient use of energy from production processes or production facilities. Funding is provided for up to 20% of the expenses that qualify. The requirement for funding is an investment of at least €50,000, specific energy conservation of at least 5% com-

pared with the average consumption of the past 3 years, and annual savings of at least 100 kg of CO2 for each €100 of investment cost. Current status in 2017 Four bidding rounds were carried out. The final funding round was closed on December 12, 2017, that means the funding decision was taken in 2018. These projects are not included in the accounting for the 2017 funding year. The programme ended on 31 December 2017.

Type of instrument Funding programme

Target group Companies, contractors

Energy sources Electricity, fuels

Duration of the 2013 – 2017 instrument

Completion Project provider: Karlsruhe-Produktionstechnologie

Last evaluation 2018

Next evaluation Not known

Target indicator of the instrument Monitoring indicators 2016 (NAPE logic) 2017 (NAPE logic) for 2020 Primary energy savings 3.0 3.9 5 (in PJ)

Final energy savings (in PJ) 2.6 3.1 not specified

CO2 savings (in millions of 0.2 0.7 0.35 tonnes of CO2 equivalent per year)

Support for market monitoring

Summary To ensure the reliability, effectiveness and efficiency of existing and new testing methods and standards, and ultimately, to strengthen the effectiveness and plausibility of product-related energy efficiency instruments used by the EU, the German Federal Institute for Materials Research and Testing (BAM) was assigned the task of testing this project. In addition, round robin tests were introduced to validate the testing methodologies or to detect any deficiencies. These tests verify whether norms used in market observations are suitable, that is reproducible, effective and efficient, and also provide a realistic picture of actual energy consumption. In addition, the methods are also reviewed regarding the possibility of simplification and optimisation with additional spot checks conducted by independent institutes that could reveal any deficiencies in the products being assessed. Current status in 2017 The NAPE project Support for Market Monitoring aims to further develop the test methodology for efficiency monitoring of EU product groups that will increase compliance with the law among manufacturers and thereby improve the effectiveness of the label itself.

The BAM is to request product testing for more than 500 appliances in various product groups that had also not been previously inspected by market monitoring agencies (e.g. Exhaust fans, clothes dryers, heat pumps and air conditioning units), and to further develop existing testing methods. In 2017, 305 (61%) appliances were addressed.

Type of instrument Market monitoring

Target group Equipment manufacturers, market monitoring authorities, households

→ 80

Support for market monitoring

Energy sources All

Duration of the From 1 April 2016, unlimited thereafter instrument

Completion German Federal Institute for Materials Research and Testing (BAM)

Last evaluation 11/06/2018

Next evaluation 30/04/2019

Target indicator of the instrument Monitoring indicators 2016 (NAPE logic) 2017 (NAPE logic) for 2020 Primary energy savings 0.0 0.0 0.2 (in PJ)

Final energy savings (in PJ) 0.0 0.0 not specified

CO2 savings (in millions of 0.0 0.0 0.014

tonnes of CO2 equivalent per year)

National Top Runner Initiative (NTRI)

Summary The National Top-Runner Initiative (NTRI) is an effort spearheaded by the Federal Government to consolidate measures to accelerate the market penetration of energy-efficient products (top-runners) to increase product- related and multi-sector electricity efficiency. To achieve this goal, motivation and competence in electricity efficiency, product-related energy efficiency and rational use of energy along the value-added chain should be enhanced – from equipment manufacturers to trade and ending with consumers. The NTRI relates to all products regulated by EU directives on eco-design and the EU label. It was started in January 2016 and is active especially in the following areas: (a) consumer information (energy-efficient products, user behaviour), (b) trade as an efficiency multiplier, (c) impetus for developing future products, prototypes of the EU product database, and (d) stakeholder events. Current status in 2017 The measure is running as planned. Extensive material has been developed for the five product groups of the NTRI (heating, white goods, multimedia). The product finder (online tool for top efficiency appliances) was completed and provided on the website of the main campaign.

Type of instrument Public Relations

Target group Equipment manufacturers, trade, end consumers

Energy sources All

Duration of the 2016 – 2019 instrument

Completion BAFA/BfEE

Last evaluation 22/07/2017

Next evaluation Spring 2019

Target indicator of the instrument Monitoring indicators 2016 (NAPE logic) 2017 (NAPE logic) for 2020 Primary energy savings 0.0 0.1 1.02 (in PJ)

Final energy savings (in PJ) 0.0 0.03 0.425

CO2 savings (in millions of 0.0 0.005 0.0595

tonnes of CO2 equivalent per year) 81

EU Energy Label Directive

Summary In EU deliberations on the Energy Label Directive, Germany successfully campaigned for a clear and informative energy label. The Directive provides for a transition from A+++ ratings to a range of A to G, and describes the procedure and deadlines for the transition. The creation of an EU product database by 1 January 2019 should make it easier for consumers to compare efficiency of various products and for market surveillance authorities to monitor label requirements. For the first five product groups (e.g. refrigerators, TVs and screens, washing machines and dishwashers) the new energy label will be visible for consumers as of March 2021.

Current status in 2017 The EU Energy Label entered into force on 1 August 2017.

Type of instrument Information, regulatory law

Target group Equipment manufacturers, dealers, households

Energy sources All

Duration of the From 1 August 2017 to unlimited validity instrument

Completion BMWi

Last evaluation No evaluation planned

Next evaluation No evaluation planned

Target indicator of the instrument Monitoring indicators 2016 (NAPE logic) 2017 (NAPE logic) for 2020 Primary energy savings 0.0 0.0 not specified (in PJ)

Final energy savings (in PJ) 0.0 0.0 not specified

CO2 savings (in millions of 0.0 0.0 not specified tonnes of CO2 equivalent per year)

STEP up! “STromEffizienzPotenziale nutzen” (Utilize energy efficiency potential)

Summary The pilot phase of the funding programme STEP up! (Utilize energy efficiency potential) planned for completion by the end of 2018 was initiated in 2016. This programme is the first competitive bidding process for funding energy efficiency measures. It aims to activate the search function of the market for a cost-optimal means of saving energy. The programme was designed to be open to all technologies, participants and sectors. On the basis of the cost-benefit ratio (ratio of subsidized euros to saved kWh), all measures submitted in a financing round are compared and rated. Those measures that can provide the most economic cost-benefit ratios receive funding. The public invitations to tender are augmented with “closed invitations to tender” on rotating topics. The pilot phase should test the feasibility of competitive calls for bids for energy efficiency measures, as well as enhance and improve the programme (learning programme). Current status in 2017 The pilot programme STEP up! (Utilize energy efficiency potential) is a test of competitive funding allocation. In 2017 two bidding rounds took place (1 March 2017 to 31 May 2017 and 1 September 2017 to 30 November 2017). The first bidding focussed in implementing electricity efficiency projects in data centres. The second invitation to tender in 2017 introduced electricity and heating combination projects for the first time. These focus on implementing energy efficiency measures in drying and cleaning processes.

Type of instrument Funding programme

Target group Companies (and by way of joint projects, also private consumers)

Energy sources Electricity; savings of other energy sources are allowed as of the 4th round during the closed invitations to tender; including heating is to be assessed by the end of 2018.

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STEP up! “STromEffizienzPotenziale nutzen” (Utilize energy efficiency potential)

Duration of the 1 June 2016 to 2018 instrument

Completion Project sponsors VDI/VDE-IT GmbH

Last evaluation 1 October 2018

Next evaluation Not known

Target indicator of the instrument Monitoring indicators 2016 (NAPE logic) 2017 (NAPE logic) for 2020 Primary energy savings 0.10 0.62 not specified (in PJ)

Final energy savings (in PJ) 0.04 0.26 not specified

CO2 savings (in millions of 0.01 0.03 not specified

tonnes of CO2 equivalent per year)

Energy Savings Meters

Summary The Energy Savings Meters pilot programme provides funding for digital platforms for the energy transition. Any company may participate that tests innovative digital systems and accompanying business models that save energy and can be developed as a scalable business model for end customers. A prerequisite is installation of digital systems such as Smart Home, Smart Meter, Smart Building, and measurement and control technology that help customers to conserve energy. Half of project funding is contingent on proof of energy savings at the end customer using an energy savings meter. Pilot projects for saving electricity, gas, heat and cooling may be funded with up to €1 million of project funds. The main idea is to individualize actual energy savings potential on the basis of continual measurement of individual energy consumption (“assistants”) and use this information to create value-added services for energy efficiency on digital platforms. In addition, this funding program is the first effort at creating the methodology requirements for quantifying actual energy savings that are always verifiable and can be used in comparisons. This should help quantify the extent of rebound effects, design countermeasures and implement value-added services such as demand-side management for sector coupling. Eligible for funding is the development of digital platforms and energy services that encourage customers to conserve energy, not however the implementation of the savings measure itself; this should be supplied by the market. Current status in 2017 Increase in applications from 14 in 2016 to 27. The BAFA has set up the evaluation process, the number of applications processed went up from 3 in 2016 to 25. Continual development of the funding program. Two information events were held for potential applicants (3 April and 30 August) as well as several workshops for applicants for exchanging information. Topics included: Data protection, IT security, benchmarking, providing data-protected value-added services and IT security. Presenting the interim results at the ECEEE in France.

Type of instrument Funding programme

Start-ups, energy industry, contractors, businesses that conduct energy-saving projects at the end customer’s Target group site

Energy sources Line- and pipe-sourced energy (electricity, gas, heating, cooling)

Duration of the 1 May 2016 to 31 December 2022 instrument

Completion BAFA

Last evaluation 12/10/2018

Next evaluation 31/05/2019

→ 83

Energy Savings Meters

Target indicator of the instrument Monitoring indicators 2016 (NAPE logic) 2017 (NAPE logic) for 2022 Primary energy savings 0.0 0.011 not specified (in PJ)

Final energy savings (in PJ) 0.0 0.009 not specified

CO2 savings (in millions of 0.0 0.001 0.37

tonnes of CO2 equivalent per year)

Energy management systems

Summary The goal of the funding guidelines for energy management systems is to encourage the implementation of energy management systems to ISO 50001 in industry. The main idea is that only by identifying energy utili zation is it possible to identify effective energy saving measures and implement them. The ISO 50001 norm follows the plan-do-act-check cycle and provides for continual improvement of energy performance of the company. It has been shown that companies operating an energy management system to ISO 50001 implement measures that quickly pay for themselves. It is assumed that companies with a reporting system can save up to 10% of their primary energy consumption, depending on the sector.

Current status in 2017 In 2017, the funding programme for energy management systems was continued through the year, and ended at the end of the year 2017. Part of the funding will be reintroduced in the Energy Efficiency and Process Heat- ing from Renewable Energies in Industry funding programme, as part of restructuring of industry funding programmes.

Type of instrument Funding programme

Target group Companies

Energy sources Fuels, electricity

Duration of the 1 July 2013 to 2017 instrument

Completion BAFA

Last evaluation Summer 2018 for 2017

Next evaluation Not known

Target indicator of the instrument Monitoring indicators 2016 (NAPE logic) 2017 (NAPE logic) for 2020 Primary energy savings 0.5 0.7 not specified (in PJ)

Final energy savings (in PJ) 0.3 0.4 not specified

CO2 savings (in millions of 0.03 0.04 0.083

tonnes of CO2 equivalent per year)

Monitoring of central measures for funding energy savings measures is outlined in Chapter 6.4. 84 5 ENERGY CONSUMPTION AND ENERGY EFFICIENCY

5.3 Outlook federal, Länder or municipal level, often information or contacts are not available for efficiency solutions, or there 5.3.1 Outlook for 2020 are shortages in energy-saving businesses or lack of financing for end customers, which are hurdles to sustainably The current Target Architecture Study (see Chapter 2.2) lowering their energy consumption with efficiency meas- arrived at the following scenario: The goal of reducing pri- ures. mary energy consumption by 20% by 2020 compared with 2008 will be widely missed. The study assumes that this Often there are no economic incentives for efficiency reduction will be at about only 10.8% by 2020 (within a investments. For example, low energy prices can keep con- range of -10.3% to -11.2%, see Figure 5.5). This takes the sumers from investing in efficiency technologies or install- effects of measures taken under the Study into account. ing heating insulation, because the financial benefit of energy cost savings would only be recovered after many Primary energy consumption has gone down overall years. However, whenever energy prices go up, the financial between 2008 and 2018. The Federal Government and benefits are more obvious, making efficiency investments other actors have initiated efficiency measures, change of more attractive. consumer behaviour and technological advances, which have contributed to this drop. However, the 2020 goal will Changes in consumer behaviour can also increase energy probably not be reached. consumption. Efficiency measures and related energy expenditures savings can lead to rebound effects in particu- Reasons for this include economic growth between 2008 lar caused by changed consumer behaviour (e.g. an auto- and 2017, which increased energy consumption (see box mobile with lower fuel consumption is driven more fre- above). The Federal Government projects economic growth quently) and indirect rebound effects caused by a change until 2020, which will also affect energy consumption. The in demand (e.g. purchase of additional goods). Rebound total population increase of around 1.9 million people in effects are hard to quantify, are considered however by the period between 2008 and 2017 also drove up energy research to be a factor that reduces the savings from energy consumption slightly. In this context it is also expected that efficiency measures. Income effects can trigger another the economy will continue to grow until 2020, increasing increase in consumption. For example, if the amount of energy consumption. available income of private households goes up, this can lead to changes in consumer behaviour and higher demand Attaining the goal is also made difficult by introduction of for comfort, for example, higher heating needs, increased energy saving measures. Despite a comprehensive offer of travel or more traffic in general. information and funding for efficiency measures at the

Figure 5.5: Reduction in primary energy consumption according to the Target Architecture Study in PJ 16,000

15,132 15,000

14,000

13,000 12,905 12,829 12,762

12,000

11,000 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Source: Prognos, Fraunhofer ISI, (2019) 5 ENERGY CONSUMPTION AND ENERGY EFFICIENCY 85

The goal of lowering gross electricity consumption by 10% energy consumption in the NECP reference scenario will be by 2020 compared with 2008 will not be reached, according 10,171 PJ (see Figure 5.7). to the current Target Architecture Study. The study assumes that this reduction will be at about -4.0% by 2020 (within a If no additional measures are taken, gross electricity con- range of -2.5% to -5.2%, see Figure 5.6). This takes the effects sumption would go up to 575 TWh by 2030 according to of measures taken under the Study into account. the NECP reference scenario. Between 2021 and 2030, the average reduction would accordingly be 0.3% annually. In Overall, gross electricity consumption has remained rela- comparison to gross electricity consumption of 619 Twh in tively constant between 2008 and 2018. The reasons for 2008, consumption would drop by 2030 by 7.2%. In 2040, not achieving the target are on the one hand those reasons primary energy consumption in the NECP reference sce- mentioned above that contribute to increased energy con- nario will be 571 TWh (see Figure 5.8). sumption, and on the other hand, also an increase in electric mobility as well as an increase in use of sector cou- If no additional measures are taken, final energy productiv- pling technologies, such as heat pumps (see Chapters 7 ity would be €408.4/GJ in 2030, according to the NECP ref- and 13). erence scenario. According to the reference scenario, final energy productivity will go up between 2021 and 2030 by Not achieving the 2020 targets regarding primary energy 1.8% annually on average. GDP is expected to increase by consumption and gross electricity consumption is therefore an average of 1.2% annually in the same time period. End attributable to various factors that must be addressed with energy consumption will go down slightly by 0.6% annu- targeted efficiency measures and setting up appropriate ally, according to the scenario. In 2040, final energy pro- conditions. Conclusions drawn from this are outlined in ductivity in the NECP reference scenario will be €481.2/GJ Chapter 5.4. (see Figure 5.9).

5.3.2 Outlook for 2030 5.3.3 Inferences

If no additional measures are taken, primary energy con- Overall, there is a great need take action to achieve the sumption would go up 11,364 PJ in 2030 according to the 2020 targets for energy efficiency as quickly as possible. NECP reference scenario. Between 2021 and 2030, the aver- The progress made thus far is not enough. Regarding the age reduction would accordingly be 1.2% annually. In com- 2030 targets, the NECP reference scenario indicates that parison to primary energy consumption of 14,380 PJ in additional measures must be taken to reach these goals. 2008, this is a reduction of 21.0% in 2030. In 2040, primary

Figure 5.6: Reduction in gross electricity consumption according to the updated Target Architecture Study in TWh 660

646 640

620

604 600 594 587 580

560

540 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Source: Prognos, Fraunhofer ISI, (2019) 86 5 ENERGY CONSUMPTION AND ENERGY EFFICIENCY

5.4 Conclusions

The Federal Government plans to present an energy effi- European level, especially in the non-ETS area (see Chap- ciency strategy in 2019. Energy efficiency is part of the ter 3). foundation of the energy transition. The national energy and climate policy goals for 2020, 2030 and 2050 cannot be The efficiency strategy is slated to be adopted by the Fed- reached without additional efforts to enhance energy effi- eral Government in 2019. The essence of the strategy is to ciency. This also applies to Germany’s obligations at the set an interim goal for primary energy for 2030. The guid-

Figure 5.7: Trend of primary energy consumption up to 2040 according to the NECP reference scenario PJ 13,000 12,746 12,483 12,500 12,234 12,180 12,079 12,000 11,909 11,761 11,643 11,478 11,500 11,364

11,000

10,500 10,171

10,000 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2040

Source: Prognos, Fraunhofer ISI, GWS, iinas (2019)

Figure 5.8: Trend of gross electricity consumption up to 2040 according to the NECP reference scenario TWh 595

591 590 589 587 587 586 585 583 581 580 579 577 575 575 571 570

565

560 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2040

Source: Prognos, Fraunhofer ISI, GWS, iinas (2019) 5 ENERGY CONSUMPTION AND ENERGY EFFICIENCY 87

Figure 5.9: Trend in final energy productivity by 2040 according to the NECP reference scenario € real GDP/GJ 600

500 481.2

408.4 394.6 401.5 400 381.0 387.7 367.6 374.4 348.4 354.7 361.0

300

200

100

0 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2040

Source: Prognos, Fraunhofer ISI, GWS, iinas (2019)

ing principle is to halve primary energy consumption by expansion could not make it possible to completely satisfy 2050 (compared with 2008). Emphasis will also be placed on the demand for heating with renewable energies, the energy the heating transition. The National Action Plan on Energy transition trio should be pursued in the heating sector: First Efficiency (NAPE) adopted in 2014 by the Federal Govern- of all, energy consumption for heating purposes must be ment should also be further developed based on the results drastically reduced, then direct thermal use of renewable of the Energy Efficiency Green Paper and implemented as energies must be better exploited and finally, the remaining soon as possible. It is planned that this National Action Plan demand satisfied with energy-efficient sector coupling. At on Energy Efficiency 2.0 will contain a specific package of the same time, the limits of how much biomass will be reli- measures for the decade 2021 – 2030 with measures for the ably available over a long period of time must be taken into sectors and trans-sector instruments. This package of meas- account. Heating networks that allow for decarbonised heat ures will then create the basis for the chapter on Energy supply are one of the key technologies, and will be the focus Efficiency of the German National Energy and Climate Plan of work in this area (see Chapter 13). Biogas plants con- and for implementation of the 2050 Climate Protection nected to local heating networks could make a contribution, Plan. The Energy Efficiency Platform and the Buildings especially in rural areas that are hard to reach. Platform will ensure that all relevant actors are involved. The “Energy Efficiency and Heating with Renewable In order to reach the national and European energy and cli- Energy” assistance program run by the Federal Ministry for mate goals, Germany must press ahead with decarbonisa- Economic Affairs and Energy is still actively implemented. tion of the heating supply for buildings and for the industry As in the industry sector, funding for the buildings sector sector and the crafts, trades and services sectors. Accord- will be restructured. Improved coordination of the pro- ingly, the heating transition will receive more attention grammes and designed them to appeal to the recipients are from policy makers. Because even greatly accelerated means of enhancing productivity.

6 Buildings

Where do we stand?

Primary energy consumption in buildings (see Chapter 6.1.2 for a definition) increased in 2017, by 1.9%. However, benchmarked against the baseline year, 2008, primary energy consumption was down 18.8%.

End energy consumption in buildings increased by 2.6% compared with the previous year. Compared with 2008, consumption was down by 6.9%.

The share of renewable energies in heating consumption was 13.4% in 2017. This means that the 2020 target of 14% has almost already been reached.

What is new?

Numerous programs for the buildings sector were further developed in 2017 under the Energy Efficiency Strategy for Buildings (ESG) with the purpose of increasing energy efficiency in the buildings sector. For example, eligibility for applications to funding of efficient fuel cell heating was expanded to companies and municipalities and social welfare institutions.

What is next?

The extrapolated prognosis in the Target Architecture Study of the Federal Ministry for Economic Affairs and Energy assumes that the 2020 savings target regarding heating needs for buildings will be missed by a wide margin.

If no additional measures are taken, building-related final energy consumption would be at 2,877 PJ in 2030 according to the NECP reference scenario.

There is a great need take action to achieve the 2020 savings target as quickly as possible.

Implementation of the programme Funding Strategy for Energy Efficiency and Heat- ing with Renewable Energy should give funding programmes up to 2020 more focus and make access significantly easier.

The energy conservation act for buildings is an amendment of energy conservation law for buildings.

The tax incentives for energy efficient refurbishment of buildings is a top priority measure that was set out in the Coalition Agreement to contribute to achieving the energy and climate policy goals in the buildings sector. They are intended to be a 90 6 BUILDINGS

meaningful addition to existing funding programmes in the buildings sector. The Federal Government is reviewing various options of implementation that will comply with budgetary requirements of the coalition agreement.

The Federal Government will prepare a catalogue of measures for the buildings sector to achieve the 2030 targets, and will add these measures to the National Energy and Climate Plan.

The Federal Government will also work out a long-term renovation strategy on the basis of the requirements of the Energy Performance of Buildings Directive.

2017 2020 2030 2040 2050

Efficiency and consumption

Primary energy consumption in buildings (compared with 2008) -18.8% -80%

Heat consumption in buildings (compared with 2008) -6.9% -20%

Renewable energy

Share of heat consumption 13.4% 14% 6 BUILDINGS 91

6.1 Present situation demand would have to go down by another 13.1 percentage points from the 2017 level. Such a decline by 2020 is 6.1.1 Energy consumption in buildings unlikely.

The buildings sector plays a central role in the energy tran- Energy efficiency in buildings declined in 2017 compared sition. The share of building-related final energy consump- to the previous year. Final energy consumption of private tion for 2017 was about 34.5% in total. Private households households increased more strongly than the amount of accounted for the majority of this energy consumption, residential space. The way these two statistics have devel- followed by the trade, commerce and services (TCS) sector, oped differently reflects the status of energy efficiency in and industry (see Figure 6.1). the buildings sector. This specific final energy consumption for space heating in private households went up by 1% over Final energy consumption in buildings, hereinafter also the previous year. Adjusted for weather factors, the gain is referred to as heating energy demand, rose in 2017. Build- 1.6%. ing-specific final energy consumption for heat (heating energy demand) comprises consumption data for space Compared with 2008, residential buildings use energy much heating, space cooling and warm water supply. In addition, more efficiently today. In 2017, a median value of 14.0% the power consumption of (permanent) lighting systems in less energy was used for heating per square metre than in non-residential buildings is also included. Heating energy 2008 (see Figure 6.3). This means that, on average, energy in demand reached 3,214 PJ in 2017, an increase of 2.6% over the residential buildings sector has been used more and the previous year. This increase was largely due to the rela- more efficiently, resulting in an overall decline in heating tively cold temperatures in January and September com- energy demand up to 2014, despite increasing residential pared to the previous year, leading to increased heating space. After adjusting for temperature, specific final energy demand. consumption for space heating among private households in 2017 was 13.5% lower than in 2008. Even though heating demand increased in each of the previous four years, it has decreased by 6.9% overall since 2008. This means that heating energy demand fell annually by around 0.8% on average during this period. To achieve a reduction of 20% by 2020 as compared with 2008, heating

Figure 6.1: Share of final energy consumption in buildings in total final energy consumption in 2017

1.6% space heating 0.2% warm water Other consumption across industry, buildings-related : 2.4% all sectors: 65.5% 0.2% cooling 0.4% lighting

7.4% space heating 0.7% warm water TCS, buildings-related: 10.1% 0.2% cooling 1.8% lighting

17.9% space heating private households: 22.0% 4.0% warm water 0.05% lighting

Total energy consumption in buildings: 34.5%

Source: AGEB 11/2018 92 6 BUILDINGS

Figure 6.2: Meeting the target for final energy consumption for heating 2020 target 20% reduction in final energy consumption for heating (compared with 2008) Status in 2017 -6.9% petajoules

4,000 3,619 3,451 3,418 3,500 3,319 3,230 3,214 3,144 3,102 3,133 3,000 2,937 2,761 Target: -20% by 2020 2,500

2,000

1,500

1,000

500

0 2020201920182017201620152014201320122011201020092008

Source: AGEB 11/2018

Trend ● ● ● ● ● Measures National Action Plan on Energy Efficiency, Efficiency Strategy for Buildings and Climate Action Programme

Figure 6.3: Development of specific final energy consumption for the generation of space heating in private households in kWh/m2

180

156 160 151 141 141 140 133 133 146 129 130 128 131 139 135 135 120 129 125 127 122 121 113 100

0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

not adjusted for temperature adjusted for temperature

Source: Working Group on Energy Balances, StBA 11/2018 6 BUILDINGS 93

6.1.2 Primary energy consumption towards the goal. According to the prognosis of the reference scenario of the Efficiency Strategy for Buildings (ESG), Primary energy consumption of buildings rose by 1.9% in the primary energy consumption as based on existing 2017 over the previous year. In addition to the provision of instruments (status in 2013) will not drop by 2050 by more heating, cooling, warm water, and also lighting in the case than about 60% compared with 2008, so that the goal of of non-residential buildings, the primary energy consump- climate-neutral buildings will not be achieved. tion indicator also factors in the non-renewable effort for the production, conversion and transportation/distribution of the individual energy sources. Primary energy consump- 6.1.3 Modernisation and investment in the buildings tion does not encompass renewable energy sources, how- sector ever. It can therefore be reduced both by energy efficiency improvements and by increasing the share of renewables to In 2017 building permits were issued for renovating or new cover heating energy demand. In 2017, primary energy construction for a total of 340,000 residential units and consumption stood at 3,555 PJ compared with 3,488 PJ in around 279,000 units were completed. This corresponds to the previous year. a drop of almost 7% (approvals) or an increase (completion) of around 3% compared to the previous year. New con- Primary energy consumption has already decreased by struction accounted for about 300,000 units, e.g. about 88% 18.8% since 2008. This is equivalent to an average annual of the 340,000 residential units. At the same time, in 2017 reduction of 2.3%. This is a clear indication that Germany is around 117,000 residential units received financial support on the right track to reducing primary energy consumption through the KfW programme Energy Efficient Construc-

(Figure 6.4). However, these figures have remained almost tion as part of the CO2 building refurbishing programme. flat since 2014. As the primary energy consumption goal is That is, at least 40% of the new residential units receiving set far into the future (80% reduction by 2050 compared permits in 2017 were funded by the Federal Government, with 2008 levels), it does not make sense to extrapolate the and accordingly, built to a higher energy efficiency stand- value on a linear basis to estimate the level of progress ard than the Energy Saving Ordinance requires. With the

Figure 6.4: Meeting the target for primary energy consumption 2050 target 80% reduction in primary energy consumption (compared with 2008) Status in 2017 -18.8% in PJ

5,000 4,489 4,500 4,380 4,221 4,380 3,988 4,000 3,906 3,696 3,538 3,488 3,555 3,500

3,000

2,500

2,000

1,500

1,000 876 Target: -80% by 2050 500

0 2015 2016 20172014201320122011201020092008 2026 2032 2038 2044 2050

industry crafts, trades and services (CTS) households not assignable

Source: BMWi on the basis of the Working Group on Energy Balances 11/2018

Trend No trend information available given the long goal horizon to 2050 Measures National Action Plan on Energy Efficiency, Efficiency Strategy for Buildings and Climate Action Programme 94 6 BUILDINGS

Figure 6.5: Heating systems in new residential spaces from 2000 to 2017, share of energy source in %

2017 39.40 26.9 25.3 0.7 0.6 5.5 1.6 2016 44.40 23.4 23.8 0.9 0.7 5.3 1.5 2015 49.90 20.7 20.6 1.3 0.7 5.3 1.5 2014 49.90 20.1 21.1 0.6 0.7 6.2 1.4 2013 48.30 22.5 19.8 0.7 0.8 6.4 1.5 2012 48.50 23.8 18.6 0.6 0.9 6.3 1.4 2011 50.10 22.6 16.3 0.9 1.5 5.6 2.5 2010 50.20 23.5 14.6 1.01.8 5.0 4.1 2009 50.90 23.9 13.1 0.81.9 5.0 4.4 2008 58.40 19.8 12.0 1.0 2.3 4.0 2.5 2007 65.60 14.3 10.2 1.3 3.2 3.0 2.4 2006 66.90 11.2 9.0 1.0 4.3 6.0 1.6 2005 74.00 5.4 8.6 1.2 6.4 3.0 1.4 2004 74.90 3.1 7.3 1.2 10.7 1.2 1.6 2003 74.30 2.8 7.0 1.2 12.0 2.7 2002 75.80 2.1 7.2 1.7 11.0 2.2 2001 75.90 2.0 7.5 1.7 11.3 1.6 2000 76.70 0.8 7.0 1.3 13.4 0.8

0 10 20 30 40 50 60 70 80 90 100

gas *) electric heat pumps district heating electric heating heating oil wood, wood pellets other **)

*including bio natural gas **including wood up to 2003

Source: BDEW, based on information from the statistics agencies of the Länder in 2018

Transparency, participation and acceptance in the buildings sector

Lower energy costs, more comfortable living, increased ronmentally-conscious construction in the framework of property value and a valuable contribution to climate pro- the former Effizienzhaus Plus research programme. With tection–energy efficiency and the use of renewable ener- this platform the Federal Government is providing any gies in private residential buildings is worth it. The Federal interested persons or entities a form for a dialog on this Ministry for Economic Affairs and Energy provides attrac- topic. Additional information can be found at tive financial assistance for such efforts. Since 200, about 5 www.bauen-der-zukunft.de. million property owners have conducted an energy-efficient building refurbishment and have thereby benefitted The Energy Transition Platform for Buildings offers the from subsidies. property sector, trade, industry and consumers and the public sector the possibility for dialogue on the many In addition, the Federal Ministry for Economic Affairs and opportunities in the building sector and existing challenges. Energy offers a number of consulting programs on energy The 7th meeting of the platform took place in late 2017. efficiency and use of renewables in buildings to empower energy consumers to make good decisions and avoid bad investments. Professional energy consultation can unleash potential for efficiency and savings, as well as clarify the costs of implementation and how to finance such measures or apply for funding. The platform www.deutschland- machts-effizient.de provided by the Federal Ministry for Economic Affairs and Energy gives an overview of all of the federal efficiency funding programs for buildings.

The government Information and Competency Centre for Future-oriented Construction has been providing information to the public since 2017 on specific solutions for envi- 6 BUILDINGS 95

help of the “Energy-efficient Refurbishing” programme, the well utilized. The MAP is becoming increasingly popular, energy efficiency of around 276,000 residential units in especially in the area of innovation funding for highly effi- total was increased in 2017. Energy-efficient construction cient heat pumps and biomass installations. The APEE – set opens up the potential for profitable solutions. This also up as an alternative to tax incentives for energy efficient enhances the competitiveness of the construction sector. refurbishment of buildings – has been in high demand since its inception in 2016. Among other things, the APEE With regard to renewables (RES) for heat generation, the promotes replacement of inefficient heating systems installation of roughly 61,400 renewable energy heating (“heating package”), installation of ventilation systems in systems - primarily in residential buildings - was promoted connection with other energy-efficient measures (“ventila- in 2017 under the Market Incentive Programme for Renew- tion package”) and innovative fuel cell heating systems for able Energy in the Heating Market (MAP). The technologies new construction and existing buildings. deployed were based on solar thermal, biomass and ambient heat. The grants paid out in 2017 amounted to €196.7 Energy consulting programmes are important components million in total. This corresponds to an increase of almost ofBringen the Federal energy efficiency Sie and climate Ihr policies. As the 8% over the previous year. The investment volume of these number of certified energy advisers for the programmes measures amounted to around €894 million. Energy Advising for Residential Buildings and Energy AdvisingHaus for SMEs is inexpanded Bestform to include qualified energy New construction is increasingly equipped with climate- advisors such as tradesmen and chimney sweepers, con- friendly heating systems. For example, installation in resi- sumersWegweiser benefit für from ein theenergieeffizientes great supply of qualified Zuhause advisors. dential buildings of oil heating has gone down since 2000 Energy consultation continues to be balanced and high from 13.4% to under 1% in 2017. Installation of gas heating quality. Professional information on energy new consult- also dropped during the same period from 76.7% to 39.4%. ants must be published in the federal Energy Efficiency List And, heat pumps are on the rise in new construction, from of Experts for Federal Funding. 0.8% in 2000 to 26.9% in 2017. At the same time, the share of biomass heating systems went up from less than 1% to 5.5% (see Figure 6.5 and Chapter 13).

6.2 Key measures taken to date

The Efficiency Strategy for Buildings (ESG) is a comprehensive strategy for the energy transition in the buildings sector. This strategy shows how the goal of a virtually climate- neutral building stock can be achieved by 2050 by combining greater energy efficiency with the increased use of renewable energy. Economic feasibility and social acceptability must be taken into account. The strategy builds on the National Action Plan on Energy Efficiency (NAPE).

Measures of the ESG and NAPE are being continually implemented. For example, in 2017 the consultation tool Individual Refurbishment Plan (iSFP) for Residential Build- ings was introduced to pass on previous experience and The Federal Ministry for Economic Affairs and Energy 1 provide input from energy advisors and users alike. This introduced the Funding Strategy for Energy Efficiency and leads to continued improvement in user-friendliness. Dur- Heating with Renewable Energy as a means for better coor- ing 2019 the advising plan should also be continually dinating the funding programmes for the period up to 2020 refined and adapted for non-residential buildings. and making them more service oriented. In addition to funding programmes that are easy to understand, informa-

The CO2 Building Modernisation Programme, the Market tional materials are being prepared that speak more Incentive Programme for Renewable Energies (MAP) and directly to interest parties and provide a simplified applica- the Energy Efficiency Incentive Programme (APEE) were tion process. In the area of buildings, the Funding Strategy very successful in 2017. The KfW programmes for energy- also combined the two large programmes CO2-Building efficient construction and retrofitting – part of the CO2 Modernisation Programme and the Market Incentive Pro- Building Modernisation Programme – are still in high gramme (MAP), in order to provide incentives both for demand. The funding programmes under NAPE were also energy efficiency and renewables. 96

Monitoring of important measures for funding energy savings in the buildings sector

Energy Efficiency Incentive Programme (APEE)

Summary This programme promotes replacement of heating units for optimizing the total heating system (fossil and renewable), installation of ventilation systems in combination with an additional improvement to the outside building

surface (e.g. windows) and introducing fuel cell heating systems. The program was integrated into the CO2 Build- ing Modernisation Programme and the Market Incentive Programme. Current status in 2017 The KfW Energy Efficiency Programme for Energy Efficient Construction and Refurbishing – Subsidy for Fuel Cells (Programme No. 433) that was developed for introducing stationary fuel cell-based heating systems to the market has been available since July 2017 not only to private residential property owners but also companies, contractors, municipalities, municipal enterprises and associations as well as charitable organisations and churches. This helps fund the installation of highly efficient fuel cell systems both in residential buildings and non-residential buildings. The funding conditions are the same for the expanded group of applicants: Funding is provided for installation of stationary fuel cell heating systems for the categories 0.25 to 5.0 KW power output in new and existing buildings, finalized agreed costs for full maintenance in the first ten years and costs for the services of an energy efficiency expert. Funding varies according to the power output of the installation.

Type of instrument Funding programme

Target group Residential building and condominium owners, energy service providers (contractors)

Energy sources Natural gas, heating oil, coal, liquefied gas, biomass, electricity and district heating

Duration of the 2016 and unlimited thereafter instrument

Completion KfW and BAFA

Last evaluation 09/10/2018

Next evaluation Planned for 2019

Target indicator of the instrument Monitoring indicators 2016 (NAPE logic) 2017 (NAPE logic) for 2020 Primary energy savings 1.6 4.1 not specified (in PJ)

Final energy savings (in PJ) 1.2 3.1 not specified

CO2 savings (in millions of 0.1 0.3 not specified

tonnes of CO2 equivalent per year)

CO2-Building Modernisation Programme: non-buildings Summary This programme sponsors energy-saving refurbishing projects for non-residential buildings with low-interest loans, sometimes combined with redemption subsidies or subsidies. Funding is provided both for individual measures (e.g. heating, ventilation, insulation) and combinations (heating and ventilation package), as well as complete packages for achieving KfW Efficiency House standards (refurbishing and new construction). Standards for primary energy consumption of the building and overall insulation of the building exterior must be complied with. Greenhouse gas savings 2015 – 2017 are updated on the basis of ongoing evaluations of the funding pro- Current status in 2017 grammes.

Type of instrument Funding programme

Target group Owners, first owners, builders of non-residential buildings

Energy sources Natural gas, heating oil, coal, liquefied gas, biomass, electricity and district heating

Duration of the 2007 and unlimited thereafter instrument

Completion KfW

→ 97

CO2-Building Modernisation Programme: non-buildings

Last evaluation 01/12/2015

Next evaluation Currently ongoing

Target indicator of the instrument Monitoring indicators 2016 (NAPE logic) 2017 (NAPE logic) for 2020 Primary energy savings 4.79 6.26 not specified (in PJ)

Final energy savings (in PJ) 3.55 4.62 not specified

CO2 savings (in millions of 0.24 0.33 not specified tonnes of CO2 equivalent per year)

CO2-Building Modernisation Programme: Residential buildings Summary This programme sponsors energy-saving refurbishing projects for residential buildings with low-interest loans, sometimes combined with redemption subsidies or subsidies. Funding is provided both for individual measures (e.g. heating, ventilation, insulation) and combinations (heating and ventilation package), as well as complete packages for achieving KfW Efficiency House standards (refurbishing and new construction). Standards for primary energy consumption of the building and overall insulation of the building exterior must be complied with.

Current status in 2017 No significant changes in the programme in the reporting year 2017

Type of instrument Funding programme

Target group Owners, first buyers, and builders of residential buildings and condominiums

Energy sources Natural gas, heating oil, coal, liquefied gas, biomass, electricity and district heating

Duration of the 2006 and unlimited thereafter instrument

Completion KfW

Last evaluation 09/10/2018

Next evaluation 2019

Target indicator of the instrument Monitoring indicators 2016 (NAPE logic) 2017 (NAPE logic) for 2020 Primary energy savings 96.5 115.4 not specified (in PJ)

Final energy savings (in PJ) 76.9 81.3 not specified

CO2 savings (in millions of 8.0 8.4 not specified tonnes of CO2 equivalent per year) 98

National Efficiency Label for old heating systems

Summary The National Efficiency Label for old heating systems is intended to inform consumers of the efficiency level of their old heating systems and motivate them to replace inefficient heaters. The Label is issued by a district chimney sweeper, a heating specialist or energy advisor who personally inspects the heating system, explains the Label and provides the consumer with a brochure with information on consulting and promotions. It is expected that the German heating label will increase the rate of replacement by about 20%, to 3.7% annually. Current status in 2017 In 2017, district chimney sweepers affixed almost 700,000 efficiency labels to old heating systems and were reimbursed by BAFA. The owners of the systems gained information from the label and from flyers regarding the energy efficiency of their boiler as well as possible modernisation and improvement measures and funding.

Type of instrument Information

Target group Households, small trade, commerce and service businesses

Energy sources Gas, oil

Duration of the 2016 – 2021 instrument

Completion BAFA

Last evaluation 12 July 2018

Next evaluation Mid-2019

Target indicator of the instrument Monitoring indicators 2016 (NAPE logic) 2017 (NAPE logic) for 2020 Primary energy savings 0.01 2.41 4.6 – 13.9 (in PJ)

Final energy savings (in PJ) 0.01 2.09 0.3 – 2

CO2 savings (in millions of 0.001 0.12 0.0003 – 0.001

tonnes of CO2 equivalent per year)

Promotion of heating optimisation using high-efficiency pumps and hydraulic balancing

Short description The goal of the heating optimisation programme is to replace up to two million inefficient heating and warm water circulation pumps annually with highly efficient pumps, and to optimize operation of up to 200,000 existing heating systems with what is known as hydraulic balancing. In order to exploit this potential, the heating optimisation programme provides an incentive of up to 30% subsidy of net investment costs for optimising existing heating systems. Current status in 2017 The funding programme for Heating Optimisation has begun and received an average of 5,900 applications per month in 2017.

Type of instrument Funding programme

Target group Private individuals, companies, municipalities, cooperatives and not-for-profit organizations

Energy sources Gas, oil, electricity

Duration of the 1 August 2016 to 31 December 2020 instrument

Completion BAFA

Last evaluation 02/10/2018

Next evaluation April 2019

Target indicator of the instrument Monitoring indicators 2016 (NAPE logic) 2017 (NAPE logic) for 2020 Primary energy savings 0.1 0.8 not specified (in PJ)

→ 99

Promotion of heating optimisation using high-efficiency pumps and hydraulic balancing

Final energy savings (in PJ) 0.1 0.5 not specified

CO2 savings (in millions of 0.01 0.05 1.8 tonnes of CO2 equivalent per year)

Market Incentive Programme on Promoting Measures for Use of Renewable Energy in the Heating Market (MAP)

Short description MAP sponsors investments in the use of renewable energy, mostly in existing buildings. MAP comprises two parts: 1) investment grants from BAFA for small solar thermal power plants and biomass plants as well as efficient heat pumps and 2) loan repayment subsidies in combination with KfW loans from the KfW Renewable Energy – Premium or Deep Geothermal Energy programmes for large solar plants, biomass heating plants, specific efficient heat pumps, biogas pipelines, deep geothermal plants, municipal heating networks for heat from renewable energy (supplement to subsidies under the Combined Heat and Power Act), large heat accumulators for heat from renewable energy.

Current status in 2017 No significant changes in the programme in the reporting year 2017.

Type of instrument Funding programme

Target group Private households, companies, municipalities

Energy sources All

Duration of the 2000 and unlimited thereafter instrument

Completion BAFA and KfW

Last evaluation 2017

Next evaluation 2018

Target indicator of the instrument Monitoring indicators 2016 (NAPE logic) 2017 (NAPE logic) for 2020 Primary energy savings 2.1 3.0 5 (in PJ)

Final energy savings (in PJ) 2.3 3.5 5

CO2 savings (in millions of 1.2 1.1 2.373 tonnes of CO2 equivalent per year)

Energy-efficient Buildings 2050 - Innovative Projects for a Virtually Climate-Neutral Building Stock in 2050

Short description The goal of the Energy-efficient Buildings 2050 funding initiative is to showcase ambitious plans for almost completely climate-neutral buildings and urban quarters construction, and thereby encourage widespread acceptance. The main thrust is that the projects should address the challenges involved in achieving a largely climate neutral building stock, to pick up current research findings and innovation and to provide models for broad acceptance.

Current status in 2017 In 2017, 25 projects were approved (of that, 22 were innovation projects and 3 were competition).

Type of instrument Funding programme

Target group Consortiums comprised of companies and research institutions

Energy sources All

Duration of the 2016 to 31 December 2018 (last submission date for project recommendations), term of the projects up to 5 instrument years after approval → 100

Energy-efficient Buildings 2050 - Innovative Projects for a Virtually Climate-Neutral Building Stock in 2050

Completion Various project sponsors

Last evaluation Evaluation of degree of success expected to be complete in June 2019

Next evaluation The Energy-efficient Buildings 2050 funding initiative was integrated on 1 January 2019 into the 7th Energy Research Programme run by the Federal Government For this reason, it will be part of the evaluation of the 7th Energy Research Programme (or the funding announcement Applied Non-nuclear Research Funding under the 7th Energy Research Programme: Innovation for the Energy Transition in connection with the 7th Energy Research Programme). Target indicator of the instrument Monitoring indicators 2016 (NAPE logic) 2017 (NAPE logic) for 2020 Primary energy savings 0.0 0.0 not specified (in PJ)

Final energy savings (in PJ) 0.0 0.0 not specified

CO2 savings (in millions of 0.0 0.0 not specified

tonnes of CO2 equivalent per year)

Energy consulting

Short description Energy consultation for consumer centres, non-residential municipal and non-profit organisation buildings, energy consultation for small and medium-sized businesses and for residential buildings (on-site consultation, personalized renovation planning) Current status in 2017 On 1 December 2017 two guideline changes entered into force that widened the pool of certified energy advisors. The Energy Consulting for SMES funding programme and Energy Consulting for Residential Buildings were affected. This allowed for a larger number of qualified energy advisors to take part in the funding programmes. Up to this point, the principle of independence prevailed, which meant that individuals conducting energy advising may not have a personal stake in implementation of energy efficiency investments. The consequence of this was that certain sectors, such as tradesmen, chimney sweepers or energy providers were excluded from the programmes. By changing the conflict of interest criteria while retaining high quality standards, these sectors were allowed to also participate in funding programmes. Energy advising must still be conducted neutrally and independently. The quality of advising is still monitored by various measures.

Type of instrument Funding programme

Target group Private individuals, tenants and owners, companies, municipalities and not-for-profit organisations

Energy sources Electricity, heating

Duration of the Continued, open-ended instrument

Completion BAFA

2018 (energy consultation for SMEs/non-residential municipal and non-profit organisation buildings), 2016 Last evaluation (energy consultation for consumer centres)

Next evaluation 2019 (energy advising for residential buildings)

Target indicator of the instrument Monitoring indicators 2016 (NAPE logic) 2017 (NAPE logic) for 2020 Primary energy savings 7.4 12.8 6 (in PJ)

Final energy savings (in PJ) 6.7 8.6 4

CO2 savings (in millions of 0.5 0.7 0.25

tonnes of CO0 equivalent per year) 6 BUILDINGS 101

6.3 Outlook during this period than in the years before that. In comparison to heating energy demand of 3,451 PJ in 2008, con- 6.3.1 Outlook for 2020 sumption would drop by 16.6% by 2030. In 2040, buildings- related final energy consumption in the NECP reference The current Target Architecture Study (see Chapter 2.2) scenario will be 2,655 PJ (see Figure 6.7). arrived at the following scenario: The goal of reducing building-related final energy consumption by 20% by 2020 If no additional measures are taken, building-related pri- compared with 2008 will be widely missed. The study mary energy consumption would be at 2,962 PJ in 2030 expects that the reduction will be about -7.7% by 2020 according to the NECP reference scenario. The primary (within a range of -6.8% to -9.0%, see Figure 6.6). This takes energy demand for buildings will drop by 1.9% annually on the effects of measures taken under the Study into account. average in the reference trend between 2021 and 2030. In comparison to primary energy consumption of 4,380 Twh The reason for the negative trend in energy consumption in in 2008, consumption would drop by 32.4% by 2030. About the buildings area with a view to 2020 is the fact that there one-half of savings will be attributable to reductions in has been insufficient refurbishing of the building stock and final energy consumption for room heating and warm the continued expansion of that living and accompanying water, and the other half would come from stronger sub- space continue to grow. And not least, the significant rise stitution of fossil energy sources. In 2040, primary energy in construction costs due to the booming construction consumption in the NECP reference scenario will be 2,552 business and the resulting lack of available construction PJ (see Figure 6.8). personnel has restricted construction of energy-efficient building refurbishing. 6.3.3 Inferences

6.3.2 Outlook for 2030 Overall, there is a great need take action to achieve the targets for the buildings sector as quickly as possible. The If no additional measures are taken, building-related final progress made thus far is not enough. Even so, it should be energy consumption would be at 2,877 PJ in 2030 accord- noted that even new measures would require a certain ing to the NECP reference scenario. Heating demand for period of time to take effect. Potential for efficiency must buildings will drop between 2021 and 2030 by an annual be tapped more intently. average of 1.0%, according to the reference trend. Heating demand will drop somewhat more strongly on average

Figure 6.6: Reduction in building-related final energy consumption according to the updated Target Architecture Study in PJ 4,000

3,800 3,782

3,600

3,400

3,216 3,200 3,184 3,140 3,000

2,800

2,600

2,400 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

2020 forecast 2020 forecast actual trend trend compared 2020 goal (18%) extrapolation of trend (min-max range of (study estimates on to 2017 to reference value (incl. effect of measures) effect of measures) Measures up to 2008)

Source: Prognos, Fraunhofer ISI, (2019) 102 6 BUILDINGS

6.4 Conclusions energy efficiency in heat supply for buildings, for using renewable energies and for sector coupling and digitisation. Implementation of the energy transition in the buildings sector will continue to play a key role in the future regard- The Efficiency Strategy for Buildings (ESG) will remain the ing the success of the energy transition. Even regarding basis for the energy transition in the buildings sector. This German goals for the energy transition and the interna- strategy demonstrates that the goal of a virtually climate- tional climate protection goals in 2030 and 2050, the build- neutral building stock by 2050 – comprised of buildings ings sector will continue to be of utmost importance. One that on average correspond to today’s Efficiency Houses 55 of the consequences of this is that efforts in the building (KfW Effizienzhaus 55)– can be reached by combining sector must be continually intensified. Studies also show increases in energy efficiency with ramping up the use of that there is still a great deal of potential for increasing renewable energies. Economic feasibility and social accept-

Figure 6.7: Trend of building-related final energy consumption up to 2040 according to the NECP reference scenario PJ 3,200 3,155 3,123 3,100 3,092 3,061 3,030 2,998 3,000 2,966 2,935 2,906 2,900 2,877

2,800

2,700 2,655

2,600

2,500

2,400 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2040

Source: Prognos, Fraunhofer ISI, GWS, iinas (2019)

Figure 6.8: Trend of primary energy consumption up to 2040 according to the NECP reference scenario PJ 4,000 3,524 3,438 3,500 3,359 3,305 3,248 3,186 3,126 3,071 3,014 2,962 3,000 2,552 2,500

2,000

1,500

1,000

500

0 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2040

Source: Prognos, Fraunhofer ISI, GWS, iinas (2019) 6 BUILDINGS 103

programmes in the buildings sector. When implementing these incentives, the Federal Government evaluates several ways of setting them up, also under the aspect of budget requirements of the coalition agreement. To ensure that the tax incentives are effective, it is important to make refurbishment of existing building stock financially attractive. In addition, such incentives must be incorporated into existing frameworks. In doing so, tax consultants could be used as multipliers in order to spread the word regarding incentives for energy-efficient refurbishment.

Without any significant increase in refurbishment efforts for the existing building stock, it will not be possible to achieve the necessary reduction in energy consumption in the buildings sector by 2030. The analyses in Chapter 6.3.2 illustrate this. To encourage more refurbishment, new instruments are to be created in addition to expanding existing funding programmes. The “Climate Protection” cabinet committee created by the coalition on 19 March 2019 is tasked with preparing decisions on legally binding implementation of the Climate Protection Plan and on ability must be taken into account. For achieving the sav- achieving the 2030 climate protection goals binding on ings goal, this strategy determines a solution corridor com- Germany. The first programme of measures in the plan- prising energy efficiency increases and the share of ning – that will also be incorporated into the National renewables in energy consumption – from today’s perspec- Energy and Climate Plan – aims to ensure that the reduc- tive, implementation should take place within this corridor tion goals for 2030 (at least 55% lower than 1990) are between 2030 and 2050. Depending on the scenario chosen, reached and that all sectors contribute. the ESG strategy projects a reduction in final energy consumption of about one-half, as well as share of renewable In addition to reducing energy consumption, decarbonisa- energies in the remaining final energy consumption of tion of heating supply is absolutely necessary for reaching about 60% to 70% for 2050. To provide assistance for the the energy and climate goals. For this reason, the focus will ESG goals, the 2050 Climate Action Plan has set milestones be increasingly on the heating transition and action will be as part of the Climate-friendly Building and Housing Strat- taken to make more progress. In addition to creating incen- egy and determined strategic measures to be taken into tives with various funding programmes for heating infra- consideration and to be implemented soon. structures that operate on renewables, additional measures and instruments are currently being evaluated or created in The Federal Government plans to adopt an inter-sectoral order to implement the heating transition in the buildings energy efficiency strategy. It should contain specific meas- sector and other consumption sectors as well. ures for fulfilling the requirements set out in the Energy Concept and for achieving the German contribution to the The integrated National Energy and Climate Plan (NECP) EU energy efficiency goal for 2030. To this end, the strategy contains clear goals based on the Energy Efficiency Strat- will focus on specific measures for the 2021 – 2030 decade egy for Buildings for this sector for the years 2030, 2040 (NAPE 2.0) (see Chapter 5.4). and 2050. The NECP will be developed to include specific measures and will be submitted to the European Commis- As set forth in the coalition agreement, the Buildings sion. It should also include a long-term refurbishment Energy Act will remove bureaucracy and simplify regula- strategy. A large group of actors should be involved in tions, will implement EU legislation and provide continuity working out the refurbishment strategy (see Chapter 3). In in energy requirements for old and new buildings. light of the necessary coordination of energy efficiency and renewables, it is advisable to also define goals for 2030 and The tax incentives for energy efficient refurbishment of 2040 for primary energy demand, in addition to the 2050 buildings is a top priority measure that was set out in the goal. Only primary energy demand combines technology- Coalition Agreement to contribute to achieving the energy neutral approach with efficiency criteria and renewables, and climate policy goals in the buildings sector. They are which would make it compatible with the system under- intended to be a meaningful addition to existing funding pinning the Energy Efficiency Strategy for Buildings (ESG).

105

7 Transport

Where do we stand?

Having risen 6.5% from 2005 levels, the development of final energy consumption in the transport sector continued to run counter to the goals of the Energy Concept. It is expected that the 2020 Goal (reduction by 10%) will not be reached until after 2030 under the present circumstances.

Germany has far to go in electrification of vehicle drives, with the exception of rail traffic. Nonetheless, the number of vehicles with alternative drives is steadily increasing. The number of 3-wheel plus electric vehicles went up in 2017 compared to the previous year. Here, the focus is on the faster expansion of the necessary infrastructure.

Another option for reducing final energy consumption is to switch transport from road to rail, which is more environmentally friendly.

What is new?

The German Federal Government initiated the National Platform on Electric Mobility (NPM) in September 2018. In six working groups future mobility issues will be assessed and recommendations formulated for action in the areas of climate protection in the transport sector, alternative drives and fuels, digitisation, securing Germany as a centre of mobility and manufacturing, infrastructure and grids, and norms and standardisation.

Working Group 1 deals with climate protection in the transport sector, and submitted an interim report in March 2019 to the steering committee of the National Platform on Electric Mobility. This contains a batch of measures that could be used to close part of the gaps before the climate target for transport in 2030 can be reached. A new report is projected for the end of June. On the basis of this report, the Federal Government will agree on measures to be taken in the Climate Protection Cabinet Committee.

The Future Alliance for Rail Transport initiated in October 2018 and comprising members from the government, industry and associations will boost digitisation, automation and innovation, and help strengthen competitiveness, reduce noise emissions, create more capacity and introduce the Deutschlandtakt (nationwide integrated regular interval timetable).

The measures of the Rail Freight Master Plan are aimed at promoting rail freight traffic for the long term. One important measure is partial financing of approved track access charges with additional federal funds.

With the eco-bonus, the amendments to the Charging Station Ordinance and other measures to support the creation of a nationwide charging infrastructure, the Federal Government is continuing its work to bring electric mobility to the mass market.

The Federal Government supports the responsible Länder and municipalities in their efforts to

reduce nitrogen oxide emissions (NO2). The Clean Air 2017 – 2020 immediate action programme and other measures are federal vehicles for providing nearly €2 billion to cities and municipalities that exceed the annual average limit for nitrogen oxide. The government would like to avoid widespread driving bans and hindrances to citizens wherever possible. Here, too, it is important to improve the attractiveness of city and regional rail traffic. In particular, commuter traffic could be made more environmentally friendly. 106 7 TRANSPORT

Research initiatives also address the energy transition in the transport sector by using energy generated from renewable sources and by means of sector coupling (as with the Efficiency House Plus initiative). Other initiatives deal with LNG and electric drivetrain technology for ships and heavy goods vehicle traffic.

What is next?

The current Target Architecture Study assumes that final energy consumption in the traffic sector will go up by 6.0% by 2020 compared with 2005, and that the reduction target will be missed by a wide margin.

If no additional measures are taken, final energy consumption in the transport sector would be at 2,688 PJ in 2030 according to the NECP, still far above the base year 2005.

In light of this, considerable additional efforts will be required to turn this trend around as quickly as possible, to reach the 2020 target as soon as possible and to reduce greenhouse gases in transport as planned in the 2050 Climate Action Plan for the period up to 2030.

Important for strengthening low-emission mobility and reaching consumption and climate goals in the transport sector include increasing the number of electrical vehicles, expanding the charging infrastructure and increasing the share in transportation of bicycles and pedestrians. In particular, for rapid expansion of electric mobility it will be key to create sufficient incentives for sector coupling. In particular, the results of the National Platform on the Future of Mobility should be factored in. Creating viable, sustainable mobility is the goal of the research programme Sustainable Urban Mobility.

This will require continued high-level investment in the rail infrastructure, the introduction of innovative technologies in rail transport and new logistics solutions, as proposed in the final findings of the Future Alliance for Rail Transport. Ultimately, an automated and digitised rail transport system should be the outcome.

Due to the increasing need for transportation, it is more important than ever to break the link between traffic volume and energy consumption. More use must also be made of opportunities to reduce transportation demand and traffic volumes. A reversal of the trend in the transport sector, with significantly lower energy consumption, is and will remain a long-term project.

European legislation to reduce the CO2 emissions of road vehicles will be developed further with ambitious targets for the post-2020 period in order to meet energy consumption and climate goals at national and European level.

2017 2020 2030 2040 2050

Efficiency and consumption

Final energy consumption in the transport sector 6.5% -10% -40% (compared with 2005) 7 TRANSPORT 107

7.1 Present situation As Table 7.1 shows, energy consumption for road and air transport (international and domestic) has increased – 7.1.1 Energy consumption in the transport sector both on the previous year and on the baseline year, 2005. In rail traffic consumption remained nearly constant Final energy consumption in the transport sector increased compared with the previous year and in inland water- in 2017. Taking all modes of transport together, final ways transport consumption went up compared with energy consumption in the transport sector stood at 2755 2016 by almost 2%. On account of a revision of rail sector PJ in 2017, up 2.4% on the previous year (see Figure 7.1). data, it is not possible to compare energy consumption The transport sector therefore accounted for roughly 30% directly with 2005 values. However, it can be assumed of total final energy consumption in Germany. that energy consumption has decreased.

Figure 7.1: Meeting the target for final energy consumption in the transport sector 2020 target 10% reduction in final energy consumption (compared with 2005) Status in 2017 6.5% petajoules

3,000 2,690 2,756 2,614 2,601 2,612 2,616 2,621 2,586 2,571 2,541 2,559 2,568 2,559 2,500 2,328 Target: -10% by 2020 2,000

1,500

1,000

500

0 2020201920182017201620152014201320122011201020092008200720062005

Source: AGEB 08/2018

Trend ● ● ● ● ● Measures Consumption/Efficiency/Climate change mitigation, Electric mobility/Alternative fuels/Refilling and charging infrastructure, Shift to environmentally-friendly modes of transport

Table 7.1: Energy consumption by mode of transport and increase compared with the baseline year and the preceding year

2017 in PJ 2017 share in % change on change on 2016 in % 2005 in % Road 2262.3 82.1 1.32 +5.23 Air transportation* 425.5 15.4 9.27 +23.52 Rail 56.4 2.0 -0.004 -27.94 Inland waterways 11.3 0.4 1.91 -16.39 Total 2696 100 2.45 6.55

Source: AGEB 08/2018 *including international air transport 108 7 TRANSPORT

Final energy consumption in the transport sector has Efficiency gains are unevenly distributed across the various increased by a total of 6.5% compared against the baseline modes of transport. A comparison of specific consumption year, 2005. Final energy consumption in the transport sec- between fuels (roads) and electricity (rails) show that the tor has therefore increased annually by around 0.5% on largest gains in efficiency are for rails. These exceed by far average since 2005, and by as much as 1.1% annually since the efficiency gains on roads: according to the Working 2010. A linear extrapolation of the trend since 2005 would Group on Energy Balances (2018), in the period 2005 – 2017 indicate that the 2020 goal would be exceeded by 22.2%. In efficiency increases of 7.5% for road transport were order to drive down the final energy consumption in the exceeded by those in rail transport, at 37.5%. transport sector by 10% by 2020, this figure would have to drop by a total of 15.5% compared to 2017, and annually by The average fuel consumption of newly registered passen- an average of 5.5%. This is improbable. ger cars and light commercial vehicles has dropped since 2005, however has stagnated for the past three years. In Passenger kilometres travelled and volume of freight moved particular, this was due to a 2% increase in consumption of in 2017 recorded a slight 0.8% drop in passenger transport new diesel vehicles. In the period 2005 – 2017, the average and an increase of 2% in freight transport. The number of consumption for vehicles with petrol engines dropped by passengers or goods transported is multiplied by the total 25.7%, and by 24.7% for diesel engines, as indicated by offi- transport distance in a given period to calculate the passen- cial figures from the Federal Motor Transport Authority. ger kilometres travelled or the freight moved, respectively. These numbers, however, reflect only the trends in infor- The passenger kilometres travelled and the volume of mation provided by the manufacturers that was collected freight moved have increased by 9.9% and 20% respectively during the type approval process, and do not take into since 2005. account the discrepancy that has grown through the years between consumption figures and actual operation. For this Specific energy consumption of existing vehicles has dropped reason the Federal Government is working hard to ensure slightly for passenger cars, and stagnated for heavy goods that the new WLTP type approval for passenger cars and vehicles. The average energy consumption for passenger light commercial vehicles, which encompasses an enhanced cars and light commercial vehicles was 7.4 litres/100 km in test procedure and better test parameters, is implemented

2017. A study conducted by the ICCT found that, given the quickly in order to increase the plausibility of the CO2 type vehicle efficiency of the current vehicle fleet, no appreciable approval values and ensure better reproducibility. In the increase in efficiency has been achieved among HGVs in end, vehicle customers should be given a more accurate Europe since 1997, based on average consumption per 100 picture of consumption when comparing manufacturer kilometres, and irrespective of the duty cycle (Lastauto- claims with their own experience. Omnibus 2015, a German trucking magazine, in ICCT 2015).

Figure 7.2: Number of 3-wheel plus electric vehicles Number 120,000 111,147

100,000

80,000

62,500 60,000

41,460 40,000 28,264

20,000 17,094 10,467 6,547 2,834 3,011 3,954 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

e-vehicles plug-in hybrids

Source: Federal Motor Transport Authority 02/2019 From 2012, also includes plug-in hybrid vehicles and range extender vehicles

Elektrofahrzeuge Plug-In Hybride 7 TRANSPORT 109

Overall, final energy consumption in transport runs con- The share of biofuels is currently 4.6% of energy consump- trary to the goals of the Energy Concept. So far, efficiency tion in the transport sector. This means a savings of improvements have been unable to offset growing energy approximately 7.5 million tonnes of CO2 in the transport consumption in the transport sector resulting from the sig- sector. Biofuels produced with residue and waste material nificant increase in the volume of traffic. With the Mobility can also make a significantly higher contribution to and Fuels Strategy and the 2020 Climate Action Pro- reduced CO2 emissions in mobility in the years to come. gramme, the Federal Government therefore established a mix of support, advice, funding and an enhanced regula- Furthermore, hydrogen generated from renewable sources tory framework as early as 2014, which is designed to as a result of sector coupling can be made available to the reduce final energy consumption in the transport sector transport sector. Hydrogen can be used for producing low- (see Chapter 7.2). In addition, the focus is already on the use carbon, synthetic fuels (e.g. methane, DME, OME, etc.) or of technical innovations resulting from R&D funding and can be used for operating fuel cells. Competing uses associated programmes to take the innovations to market between the various sectors must be taken into considera- (see Chapter 14), as well as the potential of digital solutions tion. Use of electricity-based fuels is especially imperative (see Chapter 13.2). in air and sea transport.

7.1.2 Alternative fuels and innovative drive 7.1.3 Shift to environmentally-friendly modes of technologies transport

Electric mobility already enables no-carbon or low-carbon While the volume of freight moved by rail has increased mobility as well as energy-efficient mobility. Overall, how- overall in recent years, its share in total freight moved has ever, their share in the volume of traffic has been relatively stagnated. Owing to the sharp increase in the volume of small so far. The number of electric drive vehicles is increas- freight traffic in recent years and the dominant role of road ing rapidly, but the market share is still small. As shown in freight transport, CO2 emissions and final energy consump- Figure 7.2, over 111,000 battery-powered 3-wheel-plus vehi- tion of freight traffic in Germany have risen in recent years. cles were registered in 2017, 44,465 of which were externally For a prognosis of the trend in consumption, see the out- chargeable hybrid electric vehicles. However, their market look in Chapter 7.3. Increasing the modal split for rail share still remained at less than 2% of new 3-wheel-plus transport will help reach the target. This requires invest- vehicle registrations. In addition to 3-wheel-plus electric ment in appropriate infrastructure, rolling stock and logis- drive vehicles, increasing numbers of two-wheel electric tics concepts, as many trains are already electric, and there- vehicles, such as pedelecs and e-bikes, can be seen on Ger- fore offer considerable energy efficiency. The share of man roads. renewables in the rail electricity mix is also growing stead-

Figure 7.3: Share of freight moved by rail in total freight moved

100 800 90 700 80

600 70

500 60

50 400 40 300

30 % Share of rail traf c in

200 20

Transport volume in billions of tonne-kilometres Transport 100 10

0 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

roads rail inland waterways pipeline air % rail

Source: Transport in numbers, 2018/2019. 110 7 TRANSPORT

ily. Rail freight transport volumes increased, however, by and trams (+20.4%). The share of local public passenger 1.2% to 129.9 billion tonne kilometres, and was 36.1% higher transport in total passenger transport has been consistently than the 2005 level. In recent years, however, the share of below 10% for a number of years. freight moved by rail in total freight moved has slowly dropped since 2011; in 2017 it was at 18.7%. A study carried out for the Federal Environmental Agency (INFRAS and 7.2 Key measures taken to date Fraunhofer-ISI 2016) showed that an increase of another 5% to 23% by 2030, and to 30% by 2050 is possible if ambi- National Platform on Electric Mobility (NPM) involves the tious measures are taken, including expanding and raising government, industry and society to develop ideas and con- the HGV toll, raising and differentiating the track assess cepts to ensure affordable, sustainable and climate-friendly charges to strengthen the user pays principle for rails, or mobility. The Platform began its task in September 2018. In raising the total capacity in rail freight traffic by 60% to six working groups future mobility issues will be assessed 70%. and recommendations formulated for action in the areas of climate protection in the transport sector, alternative drives Even though the number of kilometres travelled by local and fuels, digitisation, securing Germany as a centre of public passenger transport is increasing overall, the share mobility and manufacturing, infrastructure and grids, and of local public passenger transport in total passenger norms and standardisation. Working Group 1 deals with transport remains largely unchanged. In Germany, cars are climate protection in the transport sector, and submitted used to travel short distances, which account for the major- an interim report in March 2019. This contains a batch of ity of consumption and emissions in passenger transport. measures that could be used to close part of the gaps before According to the Federal Statistical Office, passengers used the climate target for transport in 2030 can be reached. A scheduled local and long-distance buses and trains nearly new report is projected for the end of June. It includes 11.2 billion times in 2016, and in 2017, more than 11.5 bil- numerous measures with which the 2030 climate target can lion times. This corresponds to a growth rate of more than be reached. On the basis of this report, the Federal Govern- 1.1 over last year. On average, in 2016 30.7 million passen- ment will agree on measures to be taken in the Climate gers were transported with scheduled services and in 2017, Protection Cabinet Committee. 31.1 million. The number of passengers in local and regional regular services has continually increased since 2004, the Automated and connected driving will redefine mobility in first year in which comparable data was collected. In 2017, motorised private transport, freight transport and public the number of passengers was almost 1.4 billion higher passenger transport. Automated and connected driving is (+14%) than 12 years previously. There was particularly an innovative technology at the interface of mobility and strong growth during this period in rail transport (+36.6%) digital advances which on the one hand can contribute to 7 TRANSPORT 111

increased traffic safety and efficiency as well as reducing mobility-related emissions, and on the other hand, can give rise to new business opportunities in the service and mobility sectors. The Federal Government launched the Auto- mated and Connected Driving Strategy to implement measures regarding infrastructure, legal framework, innovation, connectivity, IT security and data protection, as well as public dialogue. This includes the Eighth Act amending the Road Traffic Act, which provides for more legal certainty for innovation in the areas of highly-automated and completely-automated driving – both for the consumer and industry as well. On the basis of recommendations presented by the Ethics Commission for Automated and Con- nected Driving, the Federal Government also agreed on an action plan for creating ethics rules for self-driving computers (see Chapter 16).

The energy transition in transport can only succeed with a substantial increase in the portion of alternative drivetrains and fuels. The energy concept is in particular based on rapid expansion of use of electric vehicles (battery-powered from providing raw material for batteries to battery recy- vehicles and fuel-cell-powered vehicles) on German roads. cling (see Chapter 16). This must be accompanied by more Another focus of the Energy Concept is on alternative fuels battery cell research (see Chapter 14). The possibility of produced with renewables in connection with innovative combining various funding programmes should provide drive technologies. consumers an incentive to purchase electric vehicles (eco- bonus). To this end, in March 2018 the prohibition on Electric mobility is the motor of the future, and the key for cumulation in the guideline on sponsoring sales of these success of the energy transition in transport, and will sub- automobiles was revoked. It is planned to extend the guide- stantially determine the future of mobility. Electric drive- line until the end of 2020. In addition, electric mobility will trains allow for recovery of kinetic energy. Energy efficiency, also be promoted by reducing by half the assessment basis and in particular cost efficiency, as well as consumer in the Income Tax Act applicable to private use of electric requirements for specific mobility means will be decisive and externally chargeable hybrid vehicles for calculating for use of electric mobility. company car taxation. The Elektro-Mobil funding initiative aims to significantly expand the charging infrastructure Future mobility will be sustainable, interconnected and and integrate it into existing distribution networks. An increasingly energy efficient – particularly rail transport – expert opinion commissioned by the Federal Government but also passenger car traffic. Alternatively-fuelled vehicles provided insight into the pricing models at charging sta- are the key to sustainable and climate-neutral mobility in tions as well as the reliability of various market-based tariff the long term. E-mobility is a major focus of activities. The models for charging electricity. The ICT for Electric Mobil- priority now is to speed up the development of a market ity – Smart Applications for Mobility, Logistics and Energy for such technologies. The number of electric cars (without technology programme sponsors logistics, fleet and traffic hybrids) has increased 30 times overall since 2010. They are applications for business that are zero-emission, automated either battery-powered or use fuel cells that convert hydro- and based on artificial intelligence, as well as economical gen into electric power in the vehicle. The goal is to make operational concepts that improve the overall cost balance Germany a leading market and provider for electric mobil- of electric mobility. ity and thereby entice the entire value-added chain to set up business here. More renewable energy will make mobility climate- and environmentally friendly. The share of renewables in the The Federal Government supports the intention of industry transport sector still stood at 5.2% in 2017, including elec- to create a domestic battery cell production site. As part of tricity consumption from renewables, and is to increase a new European industrial strategy, Germany and France (see Chapter 4.1.4). The share of biofuels was at around aim to create together with other European countries 87.5%, and use of them should continue to rise in accord- European manufacturing facilities for battery cells for elec- ance with the target in the EU Directive 2009/28/EC. As tric automobiles. The goal of promoting such a project is to electric mobility increases, so will also the importance of create an alliance for manufacturing battery cells of the renewable electricity for transport and climate protection. next generation as well as the necessary value networks, This requires that renewables are increasingly used to gen- 112 7 TRANSPORT

erate electricity (see Chapter 4.1.2). This will reduce the spe- tery drivetrains, fuel cells and more recently, sector cou- cific carbon dioxide emissions of the electricity used in pling by using electricity-based fuels (see Chapter 16). The electric cars, and thereby greenhouse gases and air pollu- Federal Government will step up its research efforts (par- tion produced by transport. According to current calcula- ticularly in the area of electrolyser material and surface tions of the Federal Environmental Agency, these traffic- research) to leverage potential for boosting efficiency as related emissions caused a great amount of pollution and soon as possible. It is also expected that market ramp-up of resulted in environmental costs (UBA 2018b). Mobility fuels produced with renewables will lead to economies of based on renewable electricity can substantially reduce scale and efficiency gains in the transport sector. The use of these costs. these alternative fuels does not alter the issue of energy consumption, which remains on a par with that of present- In addition to electric drivetrains, the efficiency gains of day fossil fuels. these vehicles also play an important role. A relatively energy-efficient option is to directly use electricity from Electric buses also play an important role in the reducing renewable energy sources for decarbonisation of the trans- CO2 and pollutant emissions in transport. In recent years, port sector, wherever possible (see Chapter 13.1). As a study the Federal Government has promoted a wide range of pro- commissioned by the Federal Ministry of Transport and jects to support the electrification of the road-bound public Digital Infrastructure illustrates, electrification through transport network, aiming to establish zero-emission and sector coupling and energy efficiency in the transport sec- low-emission vehicles faster in the market. An increasing tor go hand in hand (DLR et al. 2016a). However, there must supply of battery-powered buses, in particular, has been be an assessment of what is required to meet the poten- observed on the market, attracting rapidly growing interest tially sharp increase in the demand for electricity, such as from transport service companies, with concrete plans for adequate domestic and international generation capacity procurement in some cases. The findings of a study com- from renewables and an efficient power grid infrastructure, missioned by the Federal Ministry of Transport and Digital and – where it is economically feasible – such infrastruc- Infrastructure revealed that hybrid trolley buses also offer ture must be provided. At the same time, electric mobility particular potential on busy routes (DLR et al. 2016b). The is not yet concurrently in many parts of the market, so that Federal Government is already promoting the use of hybrid expansion of electric mobility still lags behind earlier trolley buses in cities. Heavy load vehicles can be equipped expectations. This makes it all the more necessary to con- with electrical drivetrains, leading to additional reductions sider all existing vehicle technologies (including hybrids in emissions. The Federal Ministry for the Environment is and lightweight construction) and fuels that are cleaner currently conducting field trials for a hybrid trolley truck and produce less CO. However, the sometimes long invest- under real conditions. To promote plug-in hybrid and elec- ment cycles in the transport sector must be considered, and tric buses in urban public transport, the Electricity Tax Act it is essential to avoid getting locked into non-sustainable was amended on 1 January 2018 to lower the tax rate to technologies. Existing infrastructure and conventional €11.42 (see Chapter 16). powertrain technology can already utilize power-to-x products based on green hydrogen, which increases techni- Gas-based mobility is to become a fixed component of the cal flexibility. These products are especially attractive in transport sector energy transition. Liquefied natural gas areas for which electric mobility will not be technologically and compressed natural gas offer potential for effectively feasible for the immediate future (e.g. air and sea transport) reducing pollutants and CO2 emitted by regional distribu- or does not fulfil the user requirements. However, due to tion traffic, passenger vehicles and regional and municipal the high amount of energy used to produce power-to-x mass transit. By using a blend of biomethane or synthetic products as well as the as yet expensive and technically methane, natural-gas-powered vehicles could become sig- complicated manufacturing methods (e.g. industrial carbon nificantly more climate-friendly than electric vehicles production), this technology will also not be available for (depending on the electricity mix). Furthermore, methane the immediate future. gas is a fuel of the future, particularly in the shipping sector. Its main advantage is the significantly lower level of Renewable fuels will be used increasingly for transport. In pollutants it emits and less noise in comparison to engines the long term, the use of renewable fuels is the only way to operated with marine diesel fuel or heavy fuel oil. There- wean shipping and air travel off their dependency on fossil fore methane gas-based mobility in the form of liquid fuels. As the potential of biomass is limited, the vast major- methane (LNG, bio-LNG, SNG) is a possible alternative to ity of these fuels might be produced on the basis of electri- marine diesel and heavy fuel oil, particularly in the mari- cal energy from renewable sources. Both fuel options still time and inland waterways transport sector, i.e. precisely in offer sufficient potential for volumes as well as for effi- an area which has been associated with high emissions of ciency gains and cost cutting in production. This applies, in pollutants up to now. If the sector were to switch to fossil- particular, to the electrolysers required for the production based LNG, using all available technical possibilities, about of hydrogen. Federal funding covers plug-in hybrids to bat- 20% of greenhouse gas emissions could be avoided. How- 113

ever, to achieve climate protection targets in shipping traf- Numerous transportation projects have been successfully fic it will also be necessary to switch to fuels based on instigated for the roads, rails, air and ship traffic. This fund- regenerative energy sources. ing will be continued in the period 2016 – 2025. About 40% of the funds are to be made available for research, develop- The number of methane gas passenger cars was around ment, demonstrations and market readiness, and about 80,000 on 1 January 2019. The number of annual new vehi- 60% for the respective fixed-term marketing support activi- cle registrations varies greatly and recently increased. In ties. Representatives of the German hydrogen and fuel-cell talks with representatives from the automotive in Decem- industries and academic communities announced in 2015 ber 2015 it was agreed for natural gas to have a 4% share in their intent to invest more than €2 billion over the next 10 the fuel market in the road transport sector by 2020. years in research and development and in the market Accordingly, the Federal Ministry for Economic Affairs and ramp-up of related products. In addition, the Federal Gov- Energy set up the Round Table on Gas-based Mobility. In ernment aims to create a stable funding scheme of up to addition, the amended Energy Tax Act entered into force in €1.4 billion during this period. Funds will be provided by January 2018. These amendments provide for continuation the individual budget estimates of the government depart- of tax breaks for methane gas up to and including 2026, ments responsible for these programmes. with a digressive gradual reduction starting in 2024. Tax breaks for LP and LNG will be gradually decreased starting The infrastructure for alternative drive systems calls for in 2019, and by 2023 the regular tax rates should apply. faster infrastructure expansion and uniform standards. These tax breaks serve as an incentive to use NOx-free and In order to create the charging infrastructure required for

CO2-reduced public and private transportation in the inner battery electric vehicle and the hydrogen refuelling points cities. And finally, methane vehicles are exempted from for fuel cell powered vehicle, the following progress has tolls until the end of 2020. recently been made:

The number of fuel cell vehicles already available on the zzMost charging is done at home or work. These private market is growing, but successful market breakthrough still normal power recharging points can take care of a large needs some time. The mobile application of fuel cells in portion of daily distances travelled. For trips requiring conjunction with hydrogen technology in a vehicle additional charging there must be a public high power involves supplying electricity to the electric drive via a fuel charging infrastructure, for which there is currently no cell that is powered by hydrogen as the secondary fuel. connected and comprehensive network. Over 17,400 There are currently some 600 hydrogen and fuel cell vehi- public and partially public charging points for electric cles in Germany. The Federal Government has been pro- passenger vehicles are currently listed in the charging moting hydrogen and fuel cell technology for ten years, station register of the BDEW. Of these, 12% are fast investing a total of €1.4 billion in the period 2006 – 2016. charging. The rate of expansion of the electrical vehicle 114 7 TRANSPORT

infrastructure is accelerating: in mid-2018 there were vehicles can be supported through the National Innova- already 13,500 charging points, and in mid-2017 the tion Programme for Hydrogen and Fuel Cell Technology number was only 10,700. Over three-quarters of the (NIP), which has been extended for the period 2016 – 2025 charging stations are run by the energy sector. Currently (see Chapter 14). the fast charging stations are primarily located on routes connecting large cities. According to the Federal Minis- zzAccording to surveys conducted by the Initiative for try for Transport and Digital Infrastructure, around 300 Natural Gas-based Mobility, the filling station network of the approximately 400 motorway sites were equipped for compressed natural gas (CNG) comprised over 900 with high power recharging points and sufficient park- stations at the start of 2016, the majority of which were ing spaces. The upgrade of remaining sites to high power integrated into existing filling stations. The first LNG recharging points is still underway. The goal is still to filling station for HDVs was opened in Ulm in 2016. The equip all sites with high power recharging points, if pos- second LNG refuelling point was opened in April 2017 in sible. Grünheide near Berlin as part of a pilot project of the Federal Ministry for Transport and Digital Infrastruc- zzIn May 2019, 45 hydrogen filling stations were available ture. There are currently more than 20 additional LNG for fuel cell vehicles. In Germany, industry is responsible refuelling points planned with funding from the Con- for the expansion of the hydrogen infrastructure. Partic- necting Europe Facility. Bunkering facilities for LNG are ipating companies joined forces to set up the organisa- already available in a number of ports. tional basis to put in place a nationwide network of hydrogen refilling stations and thereby ensure the sup- Current measures to sponsor construction of a comprehen- ply of hydrogen throughout the country. The develop- sive charging infrastructure: The amendment of the Charg- ment of a hydrogen supply infrastructure for fuel cell ing Station Ordinance allows motorists to use a common web-based payment system to charge and pay for electricity at all public charging points. In order to increase the attractiveness of electric mobility and encourage consumers to buy e-vehicles, a sufficient charging infrastructure is needed, not only in the metropolitan regions but also in rural areas and tourist regions. The Federal Ministry of Transport and Digital Infrastructure instigated the programme Electric Vehicle Charging Infrastructure in Ger- many for the period 2017 to 2020 to fund a comprehensive and demand-oriented charging infrastructure for battery electric vehicles with at least 15,000 charging stations all over Germany (see Chapter 16).

Funding for LNG ships: The Ministry of Transport provides funding with the Guidelines on the Provision of Grants for Equipping and Converting Sea-Going Ships to Use LNG as a Marine Fuel adopted on 17 August 2017. This funding for new-builds of LNG ships or adaptation of existing ships to LNG/Dual Fuel drives, including auxiliary equipment is supported with a subsidy of 40%-60% of the costs of upgrading to LNG.

Several calls for applications for funding are planned for the funding period up to 31 December 2020. The goal is – in addition to climate and environmental protection as well as occupational safety and health – to increase demand for LNG as a marine fuel in Germany in order to provide incentives to companies in the gas sector to create the required LNG supply infrastructure in harbours. An indirect impetus for expanding the LNG infrastructure can also be provided by demand from pilot funding measures of the Transport Ministry for inland waterway and maritime navigation (upgrading a container feeder to LNG, construction of a new ferry for Lake Constance) and by subsidizing federal 7 TRANSPORT 115

ships for LNG upgrades. The Transport Ministry also pro- ways should in turn invest in better service and reliability vides funding for heavy goods transport as part of a pilot as well as more innovation. project with haulage firms to purchase LNG-powered HGVs and methane gas-powered HGVs using 100% biomethane. Shifting traffic to rail could make a significant contribution These projects are scientifically monitored to determine to meeting the goal of a 40 – 42% reduction in transport- emissions and consumption of the drives when in opera- related greenhouse gas emissions in the 1990 – 2030 period, tion. as agreed in the Federal Government’s 2050 Climate Action Plan. With regard to final energy consumption, shifting to The Federal Government supports the responsible Länder rail could also contribute to a 20% reduction in final energy and municipalities in their efforts to reduce nitrogen oxide consumption in the 2005 – 2030 period. This, in turn, would emissions (NO2). The Clean Air Immediate Action Pro- be an important contribution to the 40% reduction in final gramme and other measures are federal programmes for energy consumption in the period 2005 to 2050, as required providing nearly €2 billion to cities and municipalities that by the Energy Concept of the Federal Government. exceed the annual average limit for nitrogen oxide. The government would like to avoid widespread driving bans An automated and digitised rail freight transport system is and hindrances to citizens wherever possible. Funding is needed to improve the competitive position of rail freight provided for measures in the areas of electrification of transport compared with road freight transport. The plan is transport and providing charging infrastructure, digitisa- to boost digitisation of the rails. Research is to be conducted tion of municipal transport systems, upgrading diesel buses on automation of freight traffic and autonomous driving in municipal and regional mass transit and upgrading on the rails. Further to this, the Federal Government is sup- heavy vehicles in municipal fleets as well as light and heavy porting the construction and expansion of intermodal ter- trade and delivery vehicles. These measures should have minals for intermodal transport and private sidings by pro- effects by 2020. The amendment to the Federal Immission viding financial contributions towards the construction of Control Act that entered into force in April 2019 ensures the infrastructure (see chapter 16). that no restrictions on transport are implemented in areas in which the NO2 pollution does not exceed 50 micrograms To make more of the opportunities offered by public trans- per cubic metre of air. In addition, the amendment to the port, the public transport system needs to be consistently Road Traffic Act that entered into force in April 2019 pro- strengthened nationwide. According to studies commis- vides municipalities with an effective instrument for moni- sioned by the Federal Ministry of Transport and Digital toring mandatory emissions-related traffic restrictions and Infrastructure and the Federal Ministry for the Environ- prohibitions (see Chapter 16). ment, there are many ways to capitalise more on the potential of the local public passenger transport system (DLR et For the energy transition in the transport sector to succeed, al. 2016e; Institute for Applied Ecology et al. 2016). Findings large segments of traffic must shift to rail and public trans- of the Oeko-Institute study reveal that a smarter parking port services. According to the Energy Concept, the aim is policy, in particular, can improve the competitiveness of to put the necessary framework in place to move traffic to the local public transport system. In this context, the more environmentally-friendly forms of mobility as an authors recall the moderation and coordination role of the alternative to motorised private transport. A rail pact Federal Government and call, inter alia, for the “Develop- agreed by government and industry contains provisions ment of a National Local Public Passenger Transport Strat- that aim to attract twice as many rail passengers by 2030, egy”. Responsibility for planning, designing, organising and and thereby also shift more freight traffic to the rails. The financing local public passenger transport, including local measures of the Rail Freight Master plan are to be imple- passenger rail services, lies with the Länder and municipal- mented permanently (see below and Chapter 16). The rail- ities, however. Among other measures, the Federal Govern-

Table 7.2: Reduction in final energy consumption by exploiting potential to shift traffic to rail

Forms of transport Reduction in final energy consumption in Reduction in CO2 emissions in 2030 in mil- 2030 in PJ compared with 2010 according to lion tonnes compared with 2010 according studies by the German Aerospace Centre to studies by the (DLR) Freight transport 98 8.5 Long-distance passenger transport 15 1.2 Short-distance passenger transport 102 8.6 Transport total 215 18.3

Source: DLR et al. 2016c, d 116 7 TRANSPORT

ment aims to continue to lend significant support to the As the central infrastructure instrument, the Federal Trans- Länder and municipalities to finance the local public pas- port Infrastructure Plan has the potential to drive forward senger transport system. Regionalisation funds were raised the transfer of traffic to efficient, low-emission modes of to €8.2 billion in 2016, increasing to €8.5 billion in 2018. transport. The 2030 Federal Transport Infrastructure Plan This amount will be augmented annually by 1.8% to reach adopted in August 2016 is the basis for maintaining and €10.7 billion by 2031. In addition, under the provisions of expanding the German transport infrastructure. This plan legislation on unbundling (Entflechtungsgesetz), the Länder contains legislation that funds expansion and new con- receive annual compensation payments of around €1.336 struction for the three main transport methods – road, rails billion to improve transport conditions in the municipali- and waterways. It mainly serves to create a demand-ori- ties, as well as federal financial assistance totalling €332.6 ented transport network and focuses in particular on the million on the basis of the federal programme under the specific goals of transport policy that the development of Local Authority Transport Infrastructure Financing Act. the transport infrastructure can specifically influence. A strong infrastructure is essential for seamless mobility in In future, the expansion of the public transport system passenger transport and an efficient freight transport sys- should increase its contribution to reaching the goals of the tem. The 2030 Federal Transport Infrastructure Plan, and energy transition. For this reason, the Federal Government the infrastructure expansion legislation derived from this set out to make public transport more climate-friendly in plan, also influence to a certain extent energy consumption the 2020 Climate Action Programme. Not least, the Federal in the transport sector and therefore progress towards the Government promotes mobility management for compa- energy transition goals in this sector to 2030 and beyond. nies and innovations in the local public transport system, The prioritized new and expansion projects of the Infra- such as better passenger information systems and elec- structure Plan for the rail and waterway network cause tronic tickets. The Initiative for Digital Connectivity in traffic flows to shift, resulting in a reduction in the energy

Public Passenger Transport supports such activities. To sub- input and therefore CO2 emissions of the transport sector. stantially increase regular-interval long-distance rail ser- Altogether, the 2030 Federal Transport Infrastructure Plan vices and benefit more passengers with direct connections will result in reductions of up to 0.4 million tonnes of CO2 in long-distance traffic, efforts should be stepped up to per year. This is equivalent to around 0.2% of current emis- accelerate the nationwide integrated regular interval time- sions in the transport sector, and is the result of measures table (Deutschlandtakt). In addition, the aim is to also boost to strengthen climate-friendly transport modes. For the expansion of the tram, light rail and metro networks and first time ever, the Federal Transport Infrastructure Plan the electrification of urban bus transport. also mentions the cycling infrastructure, particularly the 7 TRANSPORT 117

greater participation of the Federal Government in con- Implementation of the Rail Freight Master Plan The Guide- struction of fast bike lanes. line on Funding of Rail Freight Transport that provides for partial financing of track access charges aims to use addi- The Future Alliance for Rail Transport initiated in October tional federal budget funds to create an incentive for 2018 by the Federal Ministry for Transport and Digital reducing prices in rail transport and to shift freight trans- Infrastructure and comprising members from the govern- port from the roads to the more environmentally-friendly ment, industry and associations will boost digitisation, rails. It entered into force in December 2018 and imple- automation and innovation, and help strengthen competi- ments the Rail Freight Master Plan. The competitiveness of tiveness, reduce noise emissions, create more capacity and rails should be thereby enhanced (see Chapter 16). introduce the Deutschlandtakt (nationwide integrated regular interval timetable). The Deutschland Takt is a nationwide integrated regular timetable for all of Germany – from 7.3 Outlook regional routes to main traffic axes. It integrates local and long-distance transport and is implemented together with The current Target Architecture Study (see Chapter 2.2) the Länder responsible for the local transport systems. The arrived at the following scenario: The goal of reducing final infrastructure measures required to implement this will be energy consumption in the transport sector by 10% by 2020 carried out in 2020. By 2030, the Deutschlandtakt should be compared with 2005 will be widely missed. The goal is in operation. At the initial meeting, the draft expert opin- however, among other things, to use the recommendations ion for a final timetable for the Deutschlandtakt was pre- of the National Platform on the Future of Mobility to consented (BMVI 2018b). fer on and submit by the end of 2019 a package of meas-

Transparency, participation and acceptance in the transport sector

mFUND research initiative reach to the expert community and citizens when drafting The Federal Ministry for Transport and Digital Infrastruc- the 2030 Federal Transport Infrastructure Plan. This ture has provided €150 million in funding for the mFUND includes all of the preparatory phases of the Transport research initiative to assist digital data-based innovations Infrastructure Plan, which overlap time-wise: for Mobility 4.0. zzA transparent process has been used since 2011 in the zzThe goal is to make mobility more efficient, safer and planning and forecast phase to involve experts and the more climate-friendly for all modes of transport and to public in determining the appraisal methodology and the open up new business possibilities by making govern- guidelines of the Plan. In addition, an updated traffic ment data available to the public. forecast was prepared for 2030. zzIn the mFUND Fund 2 (funding for projects up to €3 mil- zzThe appraisal phase started in 2012, with review and lion), four invitations to submit have been published, and assessment of the projects submitted by associations one line of funding in Fund 1 (funding up to €100,000) and citizens, among others. can be applied for at any time and without a deadline. zzWhen drafting the 2030 Plan, the Transport Ministry zzSince the programme was started in June 2016, a total of consulted the Länder, federal government departments, 515 project drafts have been submitted by more than associations and citizens in the participation, consulta- 1,480 participants. tion and decision phases. zzImplementation of the mFUND is accompanied by PR events (especially mFUND conferences, start-up pitches The goal of participation is to achieve a high degree of and hackathons) and internet communication. transparency and create multiple opportunities for involve- zzmFUND brings together creative individuals from start- ment. In this way the various perspectives can be meaning- ups, associations and higher education institutions, creat- fully brought into the drafting process and properly evalu- ing a network of players in government, business and ated in order to achieve a suitable solution. Creating broad research. acceptance of the Plan is also an important goal, but should zzThis makes mFUND an important motor for dialogue in not be the only basis for federal decisions. Due to the com- the transport sector. plexity and multifaceted interests involved, when conflicts of interest arise it is not always possible to reach a consen- Public participation in the 2030 Federal Transport sus with all participants. The 2030 Federal Transport Infra- Infrastructure Plan structure Plan is and will remain a professional assessment In comparison to earlier transport infrastructure plans, the of the investment required for transport infrastructure. Federal Transport Ministry significantly expanded its out- 118 7 TRANSPORT

Key measures taken to date in the transport sector

General measures Electric mobility – alternative fuels – refilling and charging zzContinued development of the 2013 Mobility and Fuels infrastructure Strategy zzElectric Mobility Market Incentive Package zzNew World Harmonised Light Vehicle Test Procedure zzLocal Electric Mobility funding programme (WLTP) zzRegulations on Minimum Technical Requirements for zzStrategy for Automated and Connected Driving the Safe and Interoperable Deployment and Operation zzEighth Act amending the Road Traffic Act of Publicly Accessible Electric Vehicle Recharging Points zzAction plan to create ethic rules for self-driving com (Charging Station Ordinances I and II) puters zzCharging Infrastructure Funding Guidelines

zzReform of the EU Regulations on Reducing CO2 Emis- zzRenewable and Mobile funding programme sions of new Passenger Vehicles and light commercial zzSecond Act amending the Energy Tax Act and the vehicles Electricity Tax Act

zzEU Regulation to reduce CO2 emissions of heavy-duty zzRound Table on Gas-based Mobility vehicles (HDV) zzMaritime Technologies of the Next Generation R&D zz‘Europe on the Move’ mobility package programme zzDeclaration of EU Member States on the future of clean zzTaskforce on LNG in Heavy-duty Vehicles

energy and mobility zzH2 Mobility project zzProgrammes to promote energy-efficient commercial zzClean Air Immediate Action Programme vehicles zzExemption of electrical and LNG heavy goods vehicles zzEU Regulation on national GHG reduction contributions from the toll charge for sectors outside the scope of the ETS in the 2021 – 2030 period (see Chapter 3) Shift to environmentally-friendly modes of transport zzLegislation to ensure compliance with the 2030 climate zzPromotion of investment in the rail infrastructure protection targets (see Chapter 8) zzStrengthening of rail freight transport zzFurther development of the HGV toll/ adaptation of the zz2020 National Cycling Plan European Infrastructure Costs Directive zz2030 Federal Transport Infrastructure Plan zzSetting up a National Platform on the Future of Mobility zzClean Air 2017 – 2020 immediate action programme zzResearch programme Sustainable Urban Mobility zzFederal programme: Hydrogen and Fuel Cells Technol- zzFunding Guideline Mobilitäts WerkStadt 2025 (mobility ogy 2016 – 2026 – from market preparation to competi- workbench for the city) tive manufacturing processes zzFunding Guideline for the Mobility Lab for the Future zzFunding for intermodal transport 2050 zzShifting city/metropolitan traffic to rails – Improving air quality in cities zzCreation of Future Alliance for Rail Transport comprising members of government, industry and associations zzImplementation of the Rail Freight Master Plan

ures that can be used by the transport sector to meet the ertheless still significantly above the level of the base year energy and climate protection targets of the Federal Gov- 2005. In other words is expected that the 2020 Goal (10% ernment by 2030. reduction) will not be reached until after 2030 under the present circumstances. The goal of reducing transport- Germany looks set to fall short of targets post-2020 also, as related greenhouse gas emissions by 40 – 42% by 2030 com- there is no sign of major progress in further decoupling of pared with 1990, as required by the 2050 Climate Action transport services and energy consumption, at least in the Plan, is not expected to be reached. The 2019 Projection short term, even with increased use of alternative drives in Report of the BMU assumes that, given relatively steady road freight transport and moving freight from road to rail economic growth, HGW mileage will continue to increase (see Chapter 7.2 and 7.3). If no further measures are taken, in particular (by 2020 by 1.2% annually, as of 2020 by 0.5% consumption in the transport sector in accordance with annually) as will the mileage of street-based goods trans- the NECP reference scenario will continue to go up until port (by 1.3% annually) in Germany up to 2030 (BMU, 2019). around 2023, and will then start to drop. In 2030, consump- Even if all of the recently agreed measures are imple- tion will accordingly have increased by a total of 10%, nev- mented, the target does not seem to be attainable. 7 TRANSPORT 119

If no additional measures are taken, final energy consumption in the transport sector would reach 2,688 PJ by 2030, according to the NECP reference scenario. The final energy consumption in the transport sector will continue to increase according to the reference trend, up until 2025, and will then decrease. Between 2021 and 2030, consumption will decline by around 1.4%. In comparison to end energy consumption of 2,586 PJ in 2005, consumption would increase until 2025 by 6.3%. In 2030, this figure will still be 4.0% above the level of 2005. The largest portion of consumption is road transport, but this share will continually decline, by about 81% in 2021 to 77% by 2030. Con- sumption for rail transport and inland waterways is projected to go up slightly, but will remain at nearly constant shares in consumption of 2.2% and 0.5% respectively, whereas air transport will increase its share in end energy consumption from 16% to over 20%. In 2040, final energy consumption in the transport sector in the NECP reference scenario will be 2,448 PJ (see Figure 7.5).

Reasons for this trend include the update to the population forecast, the increase in international goods transport as well as the trend to larger engines in passenger vehicles and HGV. These processes partly counteract the increase in vehicle efficiency.

In view of this prognosis, the previous efforts in the transport sector are insufficient for reaching the targets. To the contrary, considerable additional efforts will be required to turn this trend around as quickly as possible, to reach the final energy consumption target by the year 2020 as soon

Figure 7.4: Reduction in final energy consumption in the transport sector according to the updated Target Architecture Study in PJ 3,000

2,936 2,900

2,800 2,736 2,726 2,700 2,716

2,600

2,500

2,400

2,300 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

2020 forecast 2020 forecast actual trend trend compared to 2020 goal extrapolation of trend (min-max range of (study estimates on to 2017 reference value (incl. (2,328 PJ/-10%) effect of measures)) effect of measures) Measures up to 2008)

Source: Prognos, Fraunhofer ISI, (2019) 120 7 TRANSPORT

as possible and to reduce greenhouse gases in transport as zzStricter CO2 requirements are also planned for HGV and planned in the 2050 Climate Action Plan for the period up buses: In February 2019, the European Commission, to 2030. Council and Parliament agreed on mandatory emissions reductions of new heavy commercial vehicles of at least

European legislation to reduce the CO2 emissions of road 15% by 2025 and at least 30% by 2030 (each based on vehicles will be developed further with ambitious targets emissions results of 2019). for the post-2020 period in order to meet energy consumption and climate goals at national and European level. The In October 2018, the EU conservation and transport minis-

EU legislation to regulate the CO2 emissions of road vehi- ters also adopted a declaration on clean energy and the cles is an effective instrument to cut energy consumption, future of mobility. The necessary measures were catego- and thereby significantly reduce greenhouse gases in the rised as follows: rapid introduction of zero-emission vehi- transport sector. This will reign in the CO2 emissions per cles and options for renewable fuels; mobility manage- kilometre in newly registered vehicles. It is therefore a ment; funding for active mobility (bicycles, walking); the major driver for the accelerated market acceptance of car- independence of mobility from social status; and the link- bon-reduced vehicles and creates planning security for ing of various transport systems. industry and consumers alike. zzIn a trialogue, the European Commission, Council and 7.4 Conclusions Parliament agreed in December 2018 on the following targets for 2030: The Federal Government wants to create sustainable,

——Lowering CO2 emissions of new passenger vehicles by affordable and climate-friendly mobility to the greatest 37.5% extent possible. Important ways of enhancing low-emis-

——Lowering CO2 emissions of light commercial vehicles sion mobility and reaching consumption and climate goals by 31% in the transport sector include increasing the number of electrical vehicles, expanding the charging infrastructure zzcompared with the allowed average emissions for 2020/21. and increasing the share in transportation of bicycles and For 2025, there is an interim target of 15% for both vehi- pedestrians. In particular, for rapid expansion of electric cle categories. Any violation of these regulations will be mobility it will be key to create sufficient incentives for punished with a fine. In March 2019, the European Par- sector coupling. In addition, it will be necessary to also liament agreed to these figures; when the EU Council of develop and enhance renewable, alternative fuels in con- Ministers agrees to them in April 2019, the Regulation junction with innovate drive technologies, especially in air will be adopted (Regulation (EU) 2019/613). and sea transport. Both fuel options still offer sufficient

Figure 7.5: Trend of final energy consumption in the transport sector up to 2040 according to the NECP reference scenario PJ 2,800 2,741 2,743 2,746 2,748 2,750 2,734 2,738 2,727 2,715 2,702 2,700 2,688

2,650

2,600

2,550

2,500 2,448 2,450

2,400

2,350

2,300

2,250 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2040

Source: Prognos, Fraunhofer ISI, GWS, iinas (2019) 7 TRANSPORT 121

potential for volumes as well as for efficiency gains and Due to the increasing need for transportation, it is more cost cutting in production. As the potential of biomass is important than ever to break the link between traffic volume limited, after 2030 a large part of these fuels might be pro- and energy consumption. There must be stronger efforts duced on the basis of electrical energy from renewable made to find ways to avoid transportation demand or to sources. The results of the National Platform on the Future diminish the amount of transport. This can be achieved by of Mobility should be factored in. Creating viable, sustaina- increasing system efficiency in the transport sector, such as ble mobility is the goal of the research programme Sustain- through integrated land-use and traffic management plan- able Urban Mobility. This programme focusses on systemic ning or through compact interlinked journeys. The contin- approaches that assess the opportunities for new technolo- ued development of the Mobility and Fuels Strategy will gies in the mobility sector with respect to local mobility place more attention on these areas in the future. These needs (see Chapter 16). This will require continued high- approaches will be incorporated in the decision-making level investment in the rail infrastructure, the introduction process in the Climate Committee. The goal is, among of innovative technologies in rail transport and new logis- other things, to use the recommendations of the National tics solutions, as proposed in the final findings of the Platform on the Future of Mobility to confer on and submit Future Alliance for Rail Transport. Ultimately, an auto- by the end of 2019 a package of measures that can be used mated and digitised rail transport system should be the by the transport sector to meet the energy and climate pro- outcome. tection targets of the Federal Government by 2030.

123

8 Greenhouse gas emissions

Where do we stand?

In 2017 27.5% less greenhouse gases were emitted compared to 1990, according to the Federal Environment Agency. As a result, emissions went down in 2017 compared with 2016. This was in particular attributable to a drop in GHG emissions in the energy industry, caused by good electricity production from wind energy installations and the transfer of coal power plants to the grid reserve.

Initial assessments see this trend continuing in 2018. This means that emissions

went down in 2018 compared with 1990 by 30.8% to 866 million tonnes of CO2 equivalent. These greatly reduced emissions are however most likely due in part to special circumstances. For example, in addition to weather-related lower heating demand, there was also the reduction of private heating oil reserves.

Despite the 2020 Climate Action Programme adopted in 2014 by the Federal Gov- ernment, with its more than 100 individual measures contributing to an additional

reduction beyond original projections of 43 – 56 million tonnes of CO2 equivalent by 2020 (according to the current 2018 Climate Protection Report), it is already apparent that the target of reducing emissions by 40% by 2020 as compared with 1990 will not be achieved. According to a study of the Institute for Applied Ecology (Öko- Institut, 2017), the programs implemented up to now can be expected to reduce greenhouse gas emissions by around 32% by 2020, compared with year 1990. This means the target will be missed by about 8 percentage points. This has also been largely confirmed by the current 2019 Projection Report published by the Federal Government.

In light of the outcome of the Paris Convention on Climate Change (see Chapter 3), the Federal Government adopted the national 2050 Climate Action Plan in Novem- ber 2016. It is the national long-term strategy of the Federal Government, provide important guidance for the period after 2020 and sets concrete targets for the individual emissions sectors for the period up to 2030. These sector goals are also in line with the corresponding EU targets.

What is new?

The Federal Government will continue to implement the 2020 Climate Action Pro- gramme, assess its effects on lowering emissions, which it outlined in February 2019 in the 2018 Climate Protection Report.

The Federal Government also set up a climate protection committee (Climate Cabi- net). One goal of the Cabinet is to create a legally binding framework for implementing the 2050 Climate Action Plan. 124 8 GREENHOUSE GAS EMISSIONS

What is next?

Furthermore, the Federal Government is preparing a 2030 Programme of Measures for the 2050 Climate Action Plan. These measures should ensure that the reduction target for 2030 is reached and all sectors contribute to this target. All of the measures are scientifically evaluated with regard to their ecological, economic and social impact.

The Federal Government set up the Growth, Structural Change and Jobs Commis- sion to not only develop recommendations for a gradual phase-out of producing electricity with coal and for a sustainable and future-oriented structural development, but also to provide recommendations on how to attain the 2030 sector goal for the energy industry that was agreed on in the 2050 Climate Protection Plan (see Chapter 1). As agreed in the Coalition Agreement, the German Federal Government will draft a law that should enforce compliance with the 2030 climate targets.

2017 2020 2030 2040 2050

Greenhouse gas emissions

Greenhouse gas emissions -27.5% at least at least at least largely GHG (compared with 1990) -40% -55% -70% neutral -80% bis -95%

Source: UBA 12/2018 8 GREENHOUSE GAS EMISSIONS 125

8.1 Present situation there were no major shifts compared to 2017 in share of emissions of the various sectors, according to current esti- 8.1.1 Total greenhouse gas emissions mates.

Total greenhouse gas emissions have gone down by 27.5% The transport sector emitted substantially more emissions between 1990 and the beginning of 2017, according to the than in the previous year. Overall, this sector emitted 167 Federal Environment Agency (UBA). In 2017, approximately million tonnes of greenhouse gases in 2017, that is 2 mil-

907 million tonnes of greenhouse gas (CO2 equivalent) were lion tonnes more than in 2016; however, emissions dropped emitted (see Figure 8.1). The decrease over 2016 was around again slightly in 2018 according to preliminary estimates, to 4.4 million tonnes, or 0.5%. Greenhouse gas emissions in 162 million tonnes. The continued high emissions in the Germany are about one-fifth of the annual greenhouse gas transport sector are particularly due to road transport and emissions of the European Union. the increasing numbers of passenger vehicles and HGVs as the number of kilometres driven has increased overall. According to the most recent projection of the UBA (2019) for 2018, annual greenhouse gas emissions have gone down Emissions in the energy industry in 2017 were around by around 30.8% since 1990. This reduction in emissions is 19 million tonnes, a significant drop compared with 2016. due to unusual weather, but probably also to the marked This was attributable especially to the high wind power growth in renewable energies and the significant drop in generation and the sharp drop in energy generated by coal- emissions from black coal. fired plants. This trend continued in 2018. According to current projections of the Federal Environment Agency, Of total emissions in 2017, the largest portion was attribut- emissions went down by another 14 million tonnes to 311 able to the energy sector, at almost 36%. The second largest million tonnes. source of emissions was industry, at around 22%, followed by the transport sector with over 18% and the buildings Of the individual greenhouse gases, CO2 is the most domi- sector at around 14%. Agriculture contributed around 8% nant gas emitted, primarily as a result of combustion. to total emissions. The remaining more than 1% were pro- Owing to the above-average decrease in other greenhouse duced by waste and waste water (see Figure 8.2). In 2018, gases, the share of CO2 emissions has increased by 4% to

Figure 8.1: Meeting the target for greenhouse gas emissions in Germany 2020 target Reduction in greenhouse gas emissions of at least 40% (compared with 1990) Status in 2017 -27.5% (preliminary figure for 2018: -30.8%)

Mt CO2 equivalent 1,400 1,251 1,200 1,126 1,081 Target: at least -40% by 2020 1,039 1,001 1,000 943 903 866 800 751

600

400

200

0 2018*2014201020062002199819941990 2020

* estimate

Source: UBA 04/2019

Trend ● ● ● ● ● Measures 2020 Climate Protection Action Programme 126 8 GREENHOUSE GAS EMISSIONS

roughly 88% since 1990. The share of methane emissions 8.1.2 Energy-related greenhouse gas emissions (CH4) was approximately 6% in 2017, and the emissions from nitrous oxide (N2O) was 4.2%. Fluorinated greenhouse According to calculations of the Federal Environment gases accounted for around 1.7%. This greenhouse gas Agency, energy-related greenhouse gas emissions in Ger- make-up is typical of a highly industrialised country. many went down slightly in 2017 compared to the previ-

ous year, by around 5.4 million tonnes of CO2 equivalent

(around 0.7%), to almost 766 million tonnes of CO2 equiva-

Figure 8.2: GHG emissions by sector (according to the 2050 Climate Protection Plan, 2018 estimate) emissions in million tonnes of CO2 equivalent 1,400 1,251 1,200 1,123 1,045 993 1,000 943 942 920 925 903 907 911 907 866 800 751

600 562

400

200

0 1990 1995 2000 2005 2010 2011 2012 2013 2014 2015 2016 2017 2018* 2019 2020 2030

energy sector industry buildings transport agriculture waste management sector and other minimum targets

* estimate for 2018 Source: UBA 04/2019

Figure 8.3: Energy-related CO2 emissions from the electricity, heating and transport sectors as well as diffuse emissions in million tonnes of CO2 1,000

900 802 800 784 766 784 745 761 745 749 753 748 710 700

600

500

400

300

200

100

0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018*

generation of electricity generation of heating transport diffuse emissions

* Preliminary gures for 2018

Source: UBA 04/2019 8 GREENHOUSE GAS EMISSIONS 127

lent. In line with the general trend, in 2018 energy-related assessed through actual emission, may however provide an emissions also dropped significantly to currently 728 mil- indication of the actual efficiency of measures for reducing lion tonnes. Around 85% of total greenhouse gas emissions emissions. are energy-related. This means they are caused by combustion processes like those in the energy industry, diffuse According to a preliminary estimate of the UBA (2019) for emissions and additional emissions from business, heating 2018, energy-related greenhouse gas emissions have gone systems and vehicles. Because around 98% of these were down by around 5% compared with the previous year. The due to carbon dioxide, the following analyses and assess- largest part of the reduction was provided by the energy ments focus on CO2 emissions. industry, followed by small combustion installations in households and in the crafts, trade and services sector. The Overall energy-related emissions have gone down mark- manufacturing sector and transport also show negative edly since 1990. Most of these energy-related CO2 emis- trends between 2017 and 2018. sions were produced from the burning of fossil fuels to generate electricity and heat, and in the transport sector (see Figure 8.3). Over the long term, they indicate a negative 8.1.3 Greenhouse gas emissions avoided through the trend. The reasons for this are especially the decommis- use of renewable energy sioning of emissions-intensive lignite power plants in the 1990s and the gradual substitution with more efficient The replacement of fossil fuels with renewables (see Chap- power plants with a higher efficiency rate. Another reason ter 4) makes a key contribution to reaching the climate for the decline is the expansion of renewable energies and goals. CO2 equivalent emissions were reduced in 2017 by the switch to lower emissions fuels such as natural gas. On around 178 million tonnes (UBA 2018a). The electricity sup- the other hand, emissions were higher in the transport sec- ply sector accounted for emissions of 135 million tonnes of tor, in households and small consumers. Other energy- CO2 equivalent. The use of renewable energy sources in the related emissions comprised of diffuse emissions or by line heating sector reduced emissions by 35 million tonnes of loss remained relatively constant compared with the previ- CO2 equivalent, and the use of biogenic fuels, by 7 million ous year, (see Figure 8.3). tonnes. According to preliminary figures, in 2018 approxi-

mately 184 million tonnes of CO2 equivalent were pre- It must be noted that the emissions, adjusted for varying vented by using renewable energies. weather conditions (for example changes in heating demand) diverge from the actual emissions shown here. Calculations of the volume of emissions avoided through However, the figures adjusted for weather conditions have the use of renewable alternatives are based on a net analy- no relevance for reaching the target, because they are sis. Here, the emissions produced by the provision of final

Figure 8.4: Greenhouse gas emissions avoided through the use of renewable energy in Mio. t CO2-Äquivalente 200 184 180 178 159 160 158 140 140 138 129 133 120 114 100 102 100

0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

electricity supply generated with renewables heating supply generated with renewables fuel supply generated with renewables

Source: BMWi on the basis of the UBA 02/2019 128 8 GREENHOUSE GAS EMISSIONS

energy from renewable sources are offset against the gross mass the second largest source of renewable energy. The emissions avoided by substituting fossil fuels and/or nuclear Federal Government states in the 2050 Climate Protection fuels, where applicable, with renewables (UBA 2018a). In Plan that because energy supply must be virtually com- contrast to the GHG emissions of GHG inventories that are pletely decarbonised by 2050, and due to the amounts of calculated according to internationally binding rules, this land required for agriculture, the role of bioenergy from calculation also factors in all the upstream process chains plants in helping achieve climate protection will reach its involved in the production and provision of the fuels and limits. On the other hand, the use of bioenergy from resi- for the construction and operation of the plants (exclud- due and waste material can make an important contribu- ing plant dismantling). The methodology applied to calcu- tion to cross-sector energy supply, such that here sustain late the emissions avoided by renewables is based on the able and available potential can be tapped. What is more, it specifications of the EU Renewable Energy Directive is important to remember that in considering the figures (2009/28/EC). on avoidance, the emissions incurred by some biomass sources in the LULUCF sector are not factored in. Other The largest portion of emissions reduction by renewable renewable energies (wind, photovoltaic, ambient heat, etc.) energies is provided by wind energy. About 70 million must therefore gain in importance for the heating market. tonnes of CO2 equivalent were avoided in 2017 by use of wind energy (2018: around 75 million tonnes), 24 million tonnes of CO2 equivalent were avoided using photovoltaics Figure 8.5: Effect of renewables on avoidance of emissions

(2018: 28 million tonnes) and 15 million tonnes of CO2 in 2018 disaggregated by energy source and sector equivalent with hydropower (2018: 12 million tonnes). in million tonnes of CO2 equivalent Around 64 million tonnes of CO2 equivalent were saved in 160 2017 in all three sectors by using biomass in solid, liquid or 140.8 gas form (2018: about 64 million tonnes). This makes bio- 140

120

100

40 35.2

20 7.7 0 electricity heating transport

biomass hydro wind photovoltaics

solar thermal geothermal

Source: BMWi on the basis of the UBA 02/2019

8.1.4 Greenhouse gas emissions and economic output

Specific greenhouse gas emissions per capita dropped by approximately 30% between 1990 and 2017, going from

15.76 tonnes to 10.97 tonnes of CO2 equivalent (see Figure 8.6). In the EU-28, specific greenhouse gas emissions per capita fell by approximately 29% between 1990 and 2016,

from 11.83 to 8.40 tonnes of CO2 equivalent. While greenhouse gases amounting to around 0.65 million tonnes of

CO2 equivalent were emitted per billion euro of GDP in in

1990, this figure had dropped to just 0.31 million of CO2 equivalent in 2017. 8 GREENHOUSE GAS EMISSIONS 129

Figure 8.6: Greenhouse gas emissions per capita and GDP 18 0,7

16 0,6 14

0,5

12 equivalent per billion euro 2 equivalent per billion euro 2

0,4 10

8 0,3 6 0,2 4

0,1 2

0 GHG emissions per GDP in millions of tonnes CO 0,0 GHG emissions per capita in millions of tonnes CO 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018

GHG emissions per GDP (millions of tonnes of CO2 equivalent/billion euro) GHG emissions per capita (millions of tonnes of CO2 equivalent/capita)

Source: UBA 04/2019, StBA 01/2019

8.2 Key measures taken to date 2013 Projection Report. The Action Programme should

contribute between 62 and 78 million tonnes of CO2 equiv- The key instrument for achieving the 40% target for 2020 is alent toward reaching the climate protection target by the 2020 Climate Protection Action Programme, a bundle 2020. This aggregate contribution is based on contributions of over 110 individual measures adopted by the Federal from individual measures. The Federal Government Government in December 2014. The impetus for the 2020 reported in the 2018 Climate Protection Report that the Climate Action Programme was a shortfall of 5 – 8 percent- Action Programme will achieve a reduction of only 43 to age points to achieving the target, a gap pointed out in the 56 million tonnes of CO2 equivalent by 2020.

Table 8.1: Contribution of key policy measures to reaching the 40% target

Contribution to GHG emissions reduction in 2020 in million tonnes of

CO2 equivalent Central policy measures Contribution according to original Contribution according to a current estimates, as at December 2014 expert assessment (rounded figures) National Action Plan on Energy Efficiency (NAPE) approx. 25 to 30 18.8 – 24.9 excluding measures in the transport sector (including Efficiency Strategy for (including Efficiency Strategy for Buildings) Buildings) Climate-friendly Building and Housing strategy approx. 5.7 – 10 in total 3.9 to 4.2 in total and federal, state and municipal energy-related renovation road maps (1.5 – 4.7 of which in addition to NAPE) (1.4 of which in addition to NAPE) Measures in the transport sector approx. 7 to 10 1 – 1.8 Reduction in non-energy-related emissions in the sectors: Industry, trade, commerce and services 2.5 – 5.2 1.3 – 1.8 Waste management 0.5 – 2.5 0.17 Agriculture* 3.6 0.7 – 2.3 Reform of the emissions trading system – 3.5 Additional measures, particularly in the electricity sector 22 16.3 – 17.7 Advice, information and independent initiatives for 0.25 – 2 more climate action Total 62 – 78 40 – 58 Source: 2018 Climate Protection Report * The contributions to GHG emissions reduction estimated in December 2014 are based on the emission factors for nitrous oxide valid at that time for international reporting. These have since been adjusted and form the basis for estimates in the 2016 Climate Action Report 130 8 GREENHOUSE GAS EMISSIONS

2019 Projection Report

The 2019 Projection Report published by the Federal Gov- gas emissions from combustion (energy sector, industry, ernment in May 2019 shows a probable reduction in emis- trades, commerce, services, households and transport sions of up to 33.2% in 2020 and up to 41.7% in 2030, each including international air and sea transport) will drop

as compared with 1990. In the MMS model calculation between 2005 and 2020 by 111 million tonnes of CO2 (with measures scenario), all measures are factored in that equivalent, by 194 million tonnes by 2030 and by 227 mil- were adopted up to 31 August 2018. It also includes meas- lion tonnes by 2035. The total contribution of the energy ures from the 2020 Climate Protection Action Programme, industry (excluding industry power plants) to reducing GHG as well from as the National Action Plan on Energy Effi- emissions from combustion will be about 56% for the time ciency (NAPE) that had been implemented up to this point period described. This reduction in the energy industry is in time. The scenario calculation included a detailed analy- largely due to the decrease in coal-fired power generation. sis of the climate and energy-policy measures adopted as of the respective reporting date, regarding their impact on the trend in GHG emissions in Germany. To help interpret the results, the sensitivity of the measures to demographic and macroeconomic development were analysed (low economic growth, low population growth). This calculation shows that the economic variables (economic growth and energy intensity) are the dominant drivers. In addition, the overall effect on the electricity sector of a scenario assum-

ing medium term low prices for energy sources and CO2 emissions allowances was calculated. Here, too, the overall effect is minor: the assumptions do not lead to any noticeable change in emissions from generation of electricity. Here it is important that the merit order of electricity generation is not substantially changed.

Aggregate greenhouse gas emissions will be reduced by 158

million tonnes of CO2 equivalent – 16% – between 2005 and 2020 (excluding land use, land use changes, forestry, international air and sea transport). By 2030, the reduction

over 2005 will be around 263 million tonnes of CO2 equiva-

lent (26%), and by 2035 about 296 million tonnes of CO2 equivalent (30%). Compared with 1990, this equates to a reduction of about 33% by 2020, 42% by 2030, and over 44% by 2035. If we also look at the sensitivities analysed in the Report, the emissions reduction would be up to 34.3% in 2020, and 43,6% in 2030 compared with 1990 (based on an assumption of slower economic growth). Greenhouse

The 2050 Climate Action Plan created in November 2016 by goal for 2030 with sector goals, also taking impact and cost the Federal Government addresses the results of the 21st analyses into account. Conference of the Parties to the United Nations Frame- work Convention on Climate Change and as a modernisa- For the period after 2020, the 2050 Climate Action Plan is a tion strategy is implemented on three levels: The Climate national long-term strategy that provides important orien- Action Plan develops specific key concepts for the individ- tation and sets specific goals for the individual emissions ual areas requiring action for 2050, leaving room for inno- sectors for the period up to 2030. Both the 2020 Action vation and focussing as much as possible on sustainability. Programme and the 2050 Climate Action Plan follow the For all action areas it maps out robust, transformative guiding principle of climate protection as a social and eco- paths, highlights critical path dependencies and pinpoints nomic modernisation strategy that has a sound scientific interdependencies. In particular, it defines concrete mile- basis, is technology neutral and efficient. stones and strategic measures for the GHG intermediate 8 GREENHOUSE GAS EMISSIONS 131

Transparency and participation in climate protection

Climate protection will only be successful if the entire pop- associations involve themselves in climate protection and ulation is involved. To achieve this, climate policy must be what demands they have for the Federal Government. Pres- made highly transparent, as well as providing the opportu- entations from the Energy Industry bench and the Unions, nity to citizens to get involved policy decisions. Accordingly, Social and Charity Associations bench are planned for the the Federal Government involves citizens in the develop- 9th session at the end of 2019. ment and assessment of its climate protection measures. In 2015 the Climate Action Alliance was created, a platform The adoption of the German long-term strategy – the 2050 for semi-annual meetings in Berlin of up to 200 representa- Climate Action Plan – was preceded by an extensive partici- tives of associations. The members are seated in benches by patory process with associations, municipalities, the Länder topic, and also hold discussions between plenary session to and citizens. Updates of the long-term strategy are also identify dissent and consensus and to present these to the planned as participatory processes. The Länder are brought Alliance. In the past, there have been presentations from into the process via the Environment Ministers Conference, the topics transport, buildings, agriculture, industry, SMEs, the Federal-Länder Working Committee on Climate Protec- trades, municipalities, financial sector, banks, and the envi- tion and Sustainability (BLAG KliNA) and the Climate Pro- ronment in the form of position papers on how the various tection Committee.

Acceptance of climate protection policy

According to the representative 2016 Environmental refurbishment, and prohibitions on products that are par- Awareness Survey (BMU/UBA 2017), 55% of those sur- ticularly harmful to the environment. Funding electric vehi- veyed find climate change to be a great danger. 52% of the cles is perceived by 29% of those surveyed to be very population find the greenhouse gas-neutral target very important, and by 39% to be important. Despite this posi- important, 36% find it important. Similar acceptance is tive backdrop for climate protection policy, it is still impor- shown for removing climate-harmful subsidies, expanding tant to take citizens’ interests and concerns seriously.

renewable energies, funding for CO2-neutral building

Key measures taken to date for climate protection

zzMeasures for reaching the 40% target (see Table 8.1) zz2050 Climate Action Plan and the planned 2030 Programme of Measures (see Chapter 8.2)

8.3 Outlook

The 2050 Climate Action Plan embodies the government’s reduction target for 2030 (at least 55% less than in 1990). goal of a basically greenhouse gas-neutral system by 2050 Expanding the use of renewable energies and focussing (80%-95% reduction). Now that it is clear that the national efforts on energy efficiency in the demand sectors are cru- goal of 40% reduction in emissions between 1990 and 2020 cial steps in reaching this goal. Experience with the goal for cannot be reached, it is important to achieve a more com- 2020 has shown that these goals must be strictly adhered prehensive reduction in emissions in Germany. For exam- to. In particular, the German Federal Government could be ple, sticking to the play book for phasing out coal-fired faced with the cost of purchasing emissions allowances in power generation (see Chapter 1) would make it feasible to the event that it does not meet its national obligations significantly reduce emissions in the energy sector. under the EU Climate Action Regulation (Effort Sharing Regulation). At the European level, the Federal Government has set itself a goal of reducing emissions by 2030 by the national 132 8 GREENHOUSE GAS EMISSIONS

If no additional national measures are taken, according to These measures focus on ensuring that the reduction goal the Projection Report, a total of around 41% less green- for 2030 (at least 55% less compared with 1990) is reached house gas emissions will be produced by 2030 compared with contributions from all sectors. The Coal Commission with 1990. Nevertheless, the reduction target for 2030 has developed recommendations for meeting the 2030 tar- (-55% compared with 1990) will not be reached. This is also gets for the energy sector as set out in the 2050 Climate confirmed by the research conducted by experts for the Action Plan (see Chapter 1). As agreed in the Climate Action Federal Ministry for Economic Affairs and Energy for pre- plan, all of the measures are evaluated with regard to their paring the National Energy and Climate Plan. The Federal ecological, economic and social impact. As agreed in the Government will take measures necessary for reaching the Coalition Agreement, the German Federal Government will sector targets set by the 2050 Climate Action Plan, and for draft a law that should enforce the compliance with the avoiding purchase of emissions allowances. 2030 climate targets.

The Cabinet resolved on 20 March 2019 to set up a Climate 8.4 Conclusions Protection Cabinet Committee to ensure the legally binding implementation of the Climate Action Plan as well as of Climate protection is and will remain a major building block the climate protection targets for 2030 binding on Ger- for maintaining the basis for human subsistence on the many. The Chancellor is Chairperson and the Federal Min- earth. Limiting the climate change caused by humans and ister of Finance in his function as Vice-chancellor is the adapting to changes that can no longer be reversed are deputy Chairman of the committee. The Federal Minister social tasks of the highest priority. Taking no action at all for the Environment has been named Acting Chairman. would cause much suffering, immense damage and irre- The other permanent members include the Federal Minis- trievable loss of habitat. ter of the Interior, Building and Community, the Federal Minister for Economic Affairs and Energy, the Federal Min- At the same time, climate protection measures can provide istry of Food and Agriculture, the Federal Minister of Trans- important impetus for enhancing Germany’s economic port and Digital Infrastructure, the Head of the Federal innovativeness. Ambitious climate protection programmes Chancellery and the Head of the Press and Information not only provide an important contribution to genera- Office of the Federal Government. One goal of the Cabinet tional justice, but also contribute to ensuring the future of is to create a legally binding framework for implementing our economy. the 2050 Climate Action Plan.

The Federal Government is working on a 2030 Programme of Measures for the 2050 Climate Action Plan that will also be incorporated in the National Energy and Climate Plan. 133

Part II: Targets and policies of the energy transition

This part of the Monitoring Report looks at other targets and the energy policy framework for the implementation of the energy transition. Specifically, this part addresses the following topics:

Power plants and security of supply

Affordable energy and a level playing field

Environmental compatibility of the energy supply system

Grid infrastructure

Integrated development of the energy system

Energy research and innovation

Investment, growth and jobs

135

9 Power plants and security of supply

Where do we stand?

Germany’s electricity supply is secure. There is enough energy to cover demand in Germany at all times, guaranteeing a high level of supply security.

There has been another increase in installed renewable capacity. Renewable energies now provide more than half of power plant capacity. There has also been another increase in the amount of electricity generated by renewable energies.

The Electricity Market 2.0 has proven useful.

What is new?

Block B of the Gundremmingen nuclear power plant was shut down in late 2017 – an additional step toward the exit from nuclear power.

The lignite-fired power station blocks Niederaußem E+F and Jänschwalde F switched

to security standby operation in October 2018. This lowers CO2 emissions in the electricity sector.

SMARD, an information platform, went online in 2017, and provides updated and easily understandable electricity market data, thereby enhancing transparency in the electricity market. In addition, the Core Energy Market Data Register started operation in January 2019. It provides information on all power plants in Germany.

What is next?

The final report of the Commission on Growth, Structural Change and Employment (Coal Commission) contains a number of recommendations for the energy plant sector. The Federal Government is evaluating these recommendations. It is also reviewing the fiscal, economic and legal feasibility of the recommendations and will prepare a conclusive general plan. The Federal Cabinet adopted key principles on 22 May 2019 for implementing the structural policy recommendations of the Coal Com- mission (see the box in Chapter 1).

Any necessary changes in the Combined Heat and Power Act are discussed in the Future of Combined Heat and Power Act discussion process. The CHP plants should become more flexible and produce less emissions. It is important to consider the time frame, in order to avoid long-term bad investments in inflexible power plants.

Security of supply Efficiently covering Germany’s energy needs at all times

Nuclear Phase-out Switching off the last nuclear power plants at the end of 2022 136 9 POWER PLANTS AND SECURITY OF SUPPLY

9.1 Present situation and measures taken Westphalia leads the way for conventional power plants. up to now The highest share of renewable energy, measured against total installed capacity, can be found in the of Mecklen- 9.1.1 Power plants burg-Western Pomerania (86%), Saxony-Anhalt (77%), Schleswig-Holstein (76%) and Rhineland-Palatinate (74%). Installed renewable capacity showed strong growth again The share of conventional power stations in installed in 2017. Overall, the net nominal capacity of the electricity capacity is highest in the city states of Berlin (92%), Ham- generation plants connected to the German power grid burg (91%) and Bremen (83%). grew by about 73 GW between 2008 and 2017 (see Figure 9.1). In 2017, the nominal capacity of electricity generation Combined heat and power (CHP) is an important compo- plants based on renewable energy amounted to 113 GW, nent of the energy transition, and plays a special role in up 8% on the previous year. The largest growth came from conventional electricity generation and local heating sup- wind power, but solar energy and biomass also showed ply. By means of simultaneous generation of electrical growth. The share of nominal capacity from renewables energy and heat (e.g. for district heating), CHP plants use rose in 2017 to over 52% of total power plant capacity (see fuel more efficiently than production in separate plants. also Chapter 4). As the supply of energy depends on natural The current data of the Federal Statistics Office show that, conditions - particularly in the case of wind and solar – and for example, during the period January-June 2018, around the full installed capacity can therefore not always be 36 PJ (equivalent to 10 TWh) of natural gas was saved by accessed, significantly more capacity is needed to produce a using highly efficient CHP processes (StBA 2018b). The goal certain amount of electricity when using wind energy and of the current Combined Heat and Power Act (CHPA) is to photovoltaic installations than with the conventional power expand CHP. The Combined Heat and Power Act envisions station fleet. Installed capacity alone is therefore not an expanding power generation to 110 TWh in 2020 and 120 indicator of security of supply. The latter is discussed in TWh in 2025. Cogeneration of heat and electricity was greater detail in Chapter 9.4. already at 117 TWh in 2017, a share of 19% of German electricity generation, according to statistics from the Federal Currently, renewable energies dominate in nine Länder Statistics Office, AGEE-Stat and the Institute for Applied (see Figure 9.2). Nuclear power plants currently still con- Ecology. Heat generation went up to 225 TWh, which cor- tribute to electricity generation in four Länder. In addition, responds to 17% of the heating applications of Germany’s foreign electricity generation facilities with a net nominal final energy consumption, meaning that the 2020 goal was capacity of around 4.6 GW are also connected to the Ger- achieved three years early, and was even exceeded. This man grid. Bavaria and Lower Saxony are the main hubs of expanding the use of CHP has been successful. installed capacity based on renewables, while North Rhine

Figure 9.1: Installed capacity of the electricity generation plants connected to the German power grid in GW

250

218 212 205 196 200 189 180 169 161 153 97.7 104.2 112.5 150 144 90.2 76.3 83.5 53.9 66.5 39.6 46.5

100

85.7 86.7 84.1 90.5 91.5 93.1 94.1 96.3 96.8 94.3 50

20.5 20.5 20.5 12.1 12.1 12.1 12.1 10.8 10.8 10.8 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

nuclear energy fossil energy sources (incl. pumped storage) renewable energy sources

Source: Federal Network Agency, November 2018 Numbers refer to nominal capacity. 9 POWER PLANTS AND SECURITY OF SUPPLY 137

Figure 9.2: Distribution of total power plant capacity among the Länder

1.4 8.7 1.3 5.2 0.9 0.2 2.0

0.3 1.5

0.2 1.9 2.7 15.8 8.0 7.9 2.4 10.7 5.7

11.6 30.2

3.5 6.1 3.2 2.0 4.2 3.0

5.9 2.1

1.0 2.1

nuclear energy

fossil energy sources (incl. pumped storage) 4.0 18.2 renewable energy sources 7.1

Total installed capacity in GW 2.7 8.6 9.2

Source: Federal Network Agency, November 2018

Pumped-storage power stations are a well-established, also use the much greater storage power capacities in Scan- large-scale form of storage. In 2017, pumped-storage dinavia and the Alpine region. power stations with a net nominal capacity of 9.5 GW were connected to the German grid, including pumped-storage The Combined Heat and Power Act (CHPA) provides incen- power stations in Luxembourg and Austria with a com- tive for investment in highly efficient, flexible and carbon- bined capacity of around 3.1 GW. New facilities with a reduced power plants. By replacing coal with natural gas capacity of 360 MW, which are fed into the German grid and with the moderate construction of new CHP plants, an from Austria, went into operation in 2018. Furthermore, additional 4 million tonnes of CO2 are expected to be saved because the electricity markets are coupled, Germany can in the electricity sector by 2020, as set out in the 2020 Cli- 138 9 POWER PLANTS AND SECURITY OF SUPPLY

Storage – a contribution to a more flexible electricity system

A continually growing percentage of our electricity will be important storage technologies. In the case of power-to-x produced from renewable energy resources in the future. products, renewable energy electricity is used to produce Wind power and photovoltaics will be the mainstay of the heat, hydrogen or methane which can then either be used electricity supply (see Chapter 4). As the feed-in from both directly or can be converted back to electricity. Power-to- forms of energy varies greatly depending on the weather heat used in combination with CHP systems can lead to and time of day, future electricity systems must take this types of flexibility. Power-to-gas has the advantage of the into account and become more flexible. Storage systems capability to store energy over a long period of time and in with a high percentage of renewables in the generation of large amounts. In addition, existing infrastructure – the gas electricity – along with other flexibility options, such as the network and underground gas storage can be used. Even in European single market, sector coupling, and flexible con- consideration of these two options, we must keep in mind sumers and providers – can contribute to supply security that any transformation of energy causes loss. For this rea- (see also the Electricity Market Green Paper published by son, the focus should always be on efficient storage. the Federal Ministry for Economic Affairs and Energy). Elec- tricity storage systems can help separate generation from Under the Energy Industry Act and the Renewable Energy consumption. In addition, they can also provide balancing Sources Act, inter alia, electricity storage systems are cate- capacity and thereby help keep the grid frequency stable. gorised as a final consumer with regard to offtake, and are therefore basically subject to corresponding payment obli- In the short- and medium-term, the energy transition will gations. In reality, however, many storage systems are not depend on the expansion of electricity storage systems. exempted from these obligations if they feed electricity Flexible consumers and peak load power plans, in combina- back into the public grid. In general, in the Electricity Mar- tion with innovative business models and digitisation (see ket 2.0, the market should favour use of individual flexibility Chapter 12.2) can even out fluctuations between electricity options. Efficiency and economic viability are decisive. supply and demand, even with high percentages of renew ables in the mix. In addition, storage systems are still some- In recent years the primary balancing power market has times more expensive than other flexibility options. How- received increased attention in the area of large battery ever, in order to satisfy the projected mid- to long-term storage systems. According to information from the sector, demand for storage, the Federal Government has already by late 2017 almost 180 MW of overall capacity had been started funding development of technologies for finding installed in Germany. Battery storage accordingly accounted cost-cutting potential with the Energy Storage Research for about 25% of the share in the market for primary con- Initiative (see Chapter 3). trol power.

Battery storage units, pumped storage reservoirs, compressed air energy storage and power-to-x products are

mate Protection Action Programme. Funding for new and 9.1.2 Supply security modernised CHP plants with electricity generation of more than 1 MW and up to 50 MW was opened up for bidding in The energy transition and the simultaneous exit from 2017. The Public Tender Ordinance for this funding entered nuclear energy and coal-fired power generation pose a into force in August 2017. In addition to CHP plants, bid- large challenge to Germany. The switch to renewable ener- ding was opened up in June 2018 for a new funding cate- gies means for one thing that wind energy from the north gory for innovative CHP systems. These systems combine must be transported to the main centres of consumption in in particular fossil CHP plants with renewable heat and the south. This requires optimisation and higher utilisation electricity-based flexible heat generators, such as solar of the existing electricity grids, and especially the rapid thermal power plants or heat pumps. New, modernised or expansion of these grids. In addition, supply security must refitted CHP plants with electrical generating capacity of be ensured whenever wind and solar energy systems are up to 1 MW or more than 50 MW are still eligible for the not supplying power due to weather conditions. This can approved funding. be provided in part by the integration of the European electricity market by energy storage, more flexibility on the part of consumers or by gas power plants that can react flexibly to volatile conditions in electricity generations. 9 POWER PLANTS AND SECURITY OF SUPPLY 139

Germany is among the countries worldwide with the low- Germany is completely integrated into the European power est down-times for electricity supply, despite a growing supply. All power grids in Europe are connected. Cross-bor- share of renewable energies. A reliable electricity supply is der trade in electricity leads to a more efficient and cost important both for Germany as a location for industry and effective use of the European power plant fleet, and enables for each citizen. In managing the energy transition, the the use of interregional smoothing effects when wind and Federal Ministry for Economic Affairs and Energy puts sun power generation fluctuate. Just as it is much too great emphasis on ensuring that the energy supply will expensive and complicated for each household to supply its remain at the highest level possible. own electricity every hour, this is true for Germany as a whole. For this reason, Germany exchanges electricity with The Electricity Market Act of 2016 provides a federal its neighbours, so that in the end all power customers can framework for future investments. This Act determines satisfy their demand more cost-efficiently and reliably. that prices in the electricity market are set freely and without government intervention. At the same time, the With combined generation of wind and heat, CHP technol- requirements for electricity suppliers to have sufficient ogy contributes to a highly efficient energy supply. Because electricity reserves have become stricter. If they do not do the phase-out of nuclear power and coal require new so, they may be subject to high penalties. To cover their energy generation capacity, the expansion of a renewable future needs, they contract with power plant operators for CHP technology, that is, a flexible and increasingly low-car- long-term electricity supply. In this way the prices in the bon gas CHP technology is the correct answer. electricity market indicate how much electricity is being generated and how much demand there is. Rising prices The Federal Government does not rely solely on market and long-term electricity supply contracts provide inves- forces, European Energy Trading and support for CHP tech- tors an incentive to build new power plants. nology, rather has also created a three-prong approach. Firstly, electricity traders are obligated, as described in the Currently, there are considerable overcapacities in the foregoing, to always be prepared to be able to fulfil their German and European electricity system. Overcapacity supply contracts. If they do not do so, and are forced to throughout Europe is around 80 to 90 gigawatts. For this purchase backup energy from transmission system opera- reason, it was hardly advisable in the past few years to tors, they must pay a large penalty. Secondly, supply secu- invest in a new power plant. In the meantime, however, rity is constantly assessed with ongoing monitoring. Thirdly, prices are changing in the electricity market. Gas-fired reserves have been created for unforeseeable events. power plants that had not been in operation are again producing electricity and placing it on the market. It is notice- The Electricity Market Act of 2016 provides for continual able how market participants react quickly to shortages in monitoring of the security of the energy supply. The mar- power generation capacities. ket-based design of the electricity market can ensure the 140 9 POWER PLANTS AND SECURITY OF SUPPLY

most cost-efficient security of supply. Nevertheless, the of around 6 GW, and specific grid-related operating means energy transition is a very dynamic and fundamental trans- of 1.2 GW. This is especially important because market par- formation process for the entire energy sector. Accordingly, ticipants do not prepare adequately for completely unfore- this development could take an unexpected turn. Ongoing seeable events. If however monitoring detects future bot- monitoring will detect any problems early on and if neces- tlenecks, the reserves may be increased in due time. sary, provide counteracting measures. The German Federal Government evaluates all aspects of The electricity supply in Germany is very secure. The Fed- supply security ongoing and prospectively, in order to be in eral Ministry for Economic Affairs and Energy commis- a position to identify necessary measures early on and to sioned an expert report on the status of supply security. implement them. If measures are shown to be necessary, This report provides an extensive review of how the elec- for example to assist in the phase-out of nuclear energy tricity market and the number of available power plants and coal, they are implemented without delay. will develop in coming years. The energy supply is also secure for the electricity grid. The Monitoring factors in all unforeseen events and develop- secure availability of sufficient transmission and distribu- ments in the electricity market that market participants tion network capacity is a precondition for supplying con- could not have expected. For example, varying weather sumers. To ensure grid stability at the transmission level conditions are considered, including what is called the cold despite the lags in grid expansion, grid operators must Dunkelflaute (dark doldrums), during which there is very increasingly apply measures to ensure system stability (see little wind and solar power. The recommendation of the Chapter 11.4). Coal Commission for reducing coal-fired power generation was also examined. In all of the scenarios looked at, power The duration of power interruption at the distribution grid demand in Germany can be satisfied at all times. Analyses level has remained at a consistently low level, even under show that there are currently no blatant risks that require international standards. Each year, the Federal Network action. Agency publishes the “System Average Interruption Dura- tion Index“ (SAIDI), which reports on the average outage There are ample reserves that provide additional supply duration per connected final consumer at the distribution security in the electricity market. As a suitable acknowl- grid level. The SAIDI value includes all unscheduled inter- edgement of the necessity of supply security, a safety grid ruptions lasting longer than three minutes. The Index was comprising various reserves for unexpected events and 15.14 minutes in 2017, exceeding the previous year, yet was trends already exists. This includes capacity reserves of at the mean of the past 10 years. The SAIDI has dropped 2 GW, a security standby facility of 2.7 GW, the grid reserve since 2006 by around 30%. The increase in the SAIDI in

Figure 9.3: SAIDI trend in minutes

20 18.67 18 16.50 16 14.32 14 13.35 12.68 12.85 12.92 12.10 12 12.00 10.45 10.70 10 10.09 8

4 2.86 2.75 2.57 2.63 2.80 2.63 2.57 2.47 2.19 2.25 2.10 2.22 2

0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

low-voltage interruption medium-voltage interruption

Source: Federal Network Agency, October 2018 9 POWER PLANTS AND SECURITY OF SUPPLY 141

2017 was due mainly to downtimes related to extreme 9.1.3 Nuclear energy phase-out weather conditions. An international comparison shows Germany is still among the leading countries regarding Block B of the Gundremmingen nuclear power plant was supply security. shut down in late 2017 – an additional step toward the exit from nuclear power. The remaining seven nuclear power

Supply of natural gas

With annual consumption of around 95 billion cubic system and adapted it to the new energy sector circum- metres, Germany is the biggest market for natural gas in stances that had changed in recent years. the European Union and also a key gas transit country. In particular, natural gas can play an important role as a The Act amending the Gas Supply Security Regulation (EU) bridge from fossil fuels to renewables. Natural gas also 2017/1938 expands the options for ensuring an uninter- shows advantages in the area of mobility compared with rupted supply of gas for customers in all of the European standard liquid fuels. Overall, natural gas can be more cli- Union. The key principles set forth in the Regulation form mate-friendly than other fossil energy sources, because the basis for cooperation on crisis prevention and mutual combustion of natural gas leads to lower carbon emissions. support and solidarity among the Member States in the Depending on the method of extraction of natural gas, event of gas supply crises. Member States are to add a however, emissions from the upstream processes of gener- regional chapter to their risk analyses and prevention and ation and transport can be very high – for example for emergency plans, and work on bilateral agreements on sup- imports from Algeria. However, Germany imports over 90% portive gas deliveries in case of supply shortfalls that a spe- of its annual consumption mainly from Russia, Norway and cific Member State cannot remedy with market-based the Netherlands, so that these emissions are not high. measures. Compared with electricity, natural gas can be stored in large quantities. With an effective natural gas storage vol- An important building block in diversification of the energy ume of over 24 billion cubic meters, Germany has the supply is the direct import of liquefied natural gas (LNG) largest storage capacities in the EU. Optimisation, rein- from other countries and from various sources, using both forcement and expansion of the German natural gas infra- the European and German LNG infrastructure. In March structure in line with market needs, as provided for in Sec- 2019, the Federal Government adopted the Ordinance on tion 15a of the Energy Industry Act, is guaranteed by the Improving the Framework for Creating LNG Infrastructure Gas Network Development Plan (NEP Gas) of the gas trans- in Germany. The ordinance must still be ratified by the Bun- mission system operators. It is a key component towards desrat. One hurdle could be connecting the LNG facilities maintaining security of supply. The currently binding to the national pipeline network. According to current leg- 2018 – 2028 Gas Network Development Plan makes provi- islation, the plant operators must install and pay for this sions for 1365 km of new pipeline construction and addi- connection themselves. In the future, pipeline network tional compressor capacity of 499 MW by 2028. Investment operators will be required to set up the pipelines between planned for these projects is around €7.0 billion. the German LNG terminals and the pipeline network. To ensure that pipelines are only constructed in connection In short, the extensive natural gas network, liquid trading with actual LNG plant construction, the pipeline network markets, the large storage volume and the diversified port- operators and LNG plant operators will be required to folio of supplier countries and import infrastructures offers closely coordinate their plans and construction progress. In Germany’s gas consumers a very high level of supply secu- addition, LNG plant operators are to contribute 10% to the rity. Added to this is the good technical status of the natu- cost. Pipeline network operators can immediately refinance ral gas infrastructure, which is reflected in the SAIDI-gas and pass on to end users the remaining 90% in the gas grid (System Average Interruption Duration Index). The Index charges. was at 0.99 in 2017, below the long-term mean of 1.7 minutes. More information about the supply of natural gas in The Dialogue Process Gas 2030 initiated by the Federal Germany is provided in the Annual Report on Natural Gas Ministry for Economic Affairs and Energy in cooperation Supply Security published by the Federal Ministry for Eco- with sector representatives aims to identify essential policy nomic Affairs and Energy (BNetzA, BKartA 2018). issues and discuss feedback from practical experience up to September 2019. The amended Gas Network Access Ordinance that entered into force in August 2017 optimised the gas network access 142 9 POWER PLANTS AND SECURITY OF SUPPLY

plants with a net generation capacity of 9.5 GW will go The recommendations of the Commission for the Perma- off-line gradually by the end of 2022 at the latest (see nent Disposal of High-level Radioactive Waste provide Table 9.1). strategies for the search for a final repository. The main focus of these recommendations is a multi-stage, transpar- Funds are available for financing the long-term costs of ent, open-ended and science-based process for finding a nuclear waste removal – thus solving one of the major final repository. This is defined in the Repository Site Selec- challenges posed by the nuclear phase-out. On 3 July 2017 tion Act and was made more specific with the amendment German nuclear power plant operators contributed a total of 2017. The most important recommendations of the Com- of €24.1 billion to the fund for financing nuclear waste dis- mission are: all three potential host rocks in Germany will posal by paying deposits to the accounts at German Federal be considered and the Gorleben site will be included in the Bank. This ends their responsibility for nuclear waste dis- comparative selection procedure. The final disposal of the posal in the area of interim and final storage. The responsi- waste should be in deep geological formations with the bility for management and financing of interim and final option of reversibility and the retrieval and recovery of the storage was transferred to the Federal Government as soon waste. The selection criteria are to be applied in a three- as all payments were received. However, the companies still stage selection process to identify the site that offers the have complete responsibility for decommissioning and dis- best possible safety for a period of one million years. The mantling of nuclear power plants, as well as for properly public should be involved in all stages. packaging radioactive waste and for the financing of these activities. Combining operational obligations with financial responsibility for the operators is regulated by the Draft Act 9.2 Key measures taken to date on the Redistribution of Responsibility for Nuclear Waste Management that entered into force in June 2017. The fund The Electricity Market 2.0 assists in further expansion of invests the money it receives in long-term investments to renewable energies. The triple objective of security of sup- finance the costs of interim and final disposal in the long ply, affordability and environmental compatibility remains term. the guiding principle. The Electricity Market Act of 2016 set the course for competition between flexible generation, flexible demand and storage. It also takes electricity traders to task: anyone selling electricity to customers must purchase an identical volume that suppliers feed into the grid simultaneously. This ensures that supply remains secure. Free price formation on the electricity wholesale market ensures that investment is made in the necessary capacities.

The amendment to the Electricity Network Access Ordi- nance (StromNZV) that entered into force in 2017 ensures that also in coming years the German energy bidding zone cannot be divided up by the transmission system operators. Germany has a uniform energy bidding zone. This makes sure that the conditions for grid access, electricity generation and electricity consumption are the same all over Ger- many. In this uniform bidding zone, energy is traded without taking grid restrictions into account.

Table 9.1 Schedule for the phase-out of nuclear energy for the production of electricity

Name Shutdown by Net nominal capacity (MW) Philippsburg 2 2019 1,402 Grohnde 2021 1,360 Gundremmingen C 1,288 Brokdorf 1,410 Isar 2 2022 1,410 Emsland 1,336 Neckarwestheim 2 1,310

Source: Federal Network Agency, February 2018 9 POWER PLANTS AND SECURITY OF SUPPLY 143

Transparency, participation and acceptance of power plants and security of supply

SMARD is a new energy information platform that went to information and contributes to a more informed debate online in July 2017 to increase transparency in the electric- on energy transition and the electricity market. ity market. At https://www.smard.de/en/5790, key data for the German electricity market and some for other European The Core Energy Market Data Register also contributes to markets can be accessed in real time, presented in graphics more transparency for the electricity market. The Register and downloaded. It is possible to look up data on genera- began operation in January 2019, merging the master data tion, consumption, wholesale prices, imports and exports, of all the plants in grid-bound energy supply in Germany’s as well as data on balancing energy, for differing time peri- electricity and gas market, and the master data of market ods and in graphic form. SMARD speaks to citizens inter- stakeholders, to create a single online database. Reporting ested in the energy transition and the electricity market, as obligations will be simplified and reduced. Register data will well as experts from the energy sector, in companies and also be used for SMARD. the research community. This platform provides easy access

The Combined Heat and Power Act (CHPA) provides incen- tion in carbon emissions by 2020. The range of savings tives for investment in highly efficient, flexible and carbon- overall is between 11.8 million tonnes and up to 15.0 mil- reduced power plants. By replacing coal with natural gas lion tonnes of CO2. The results of the evaluation will be and with the moderate construction of new CHP plants, an taken in consideration in the upcoming negotiations with additional 4 million tonnes of CO2 are expected to be saved lignite power plant operators on implementation of the in the electricity sector by 2020. Funding for new and mod- recommendations of the Coal Commission. ernised CHP plants with electricity generation of more than 1 MW and up to 50 MW was opened up for bidding in As of October 2020, the capacity reserve will provide addi- 2017. In addition to CHP plants, bidding was opened up in tional electricity supply security. This is stipulated by the June 2018 for a new funding category for innovative CHP Omnibus Energy Act that entered into force in December systems. These systems combine especially flexible CHP 2018 and the Capacity Reserve Ordinance of February 2019. plants with renewable heat, for example sourced from solar This reserve is comprised of 2 GW generated by power thermal power plants or heat pumps. New, modernised or plants, storage units or manageable loads that transmission refitted CHP plants with electrical generating capacity of system operators provide for emergencies. The capacity up to 1 MW or more than 50 MW are still eligible for the reserve is accordingly sourced separately from the electric- approved funding The Combined Heat and Power Act was ity market and only dispatched if, despite free price forma- extended in November 2018 by three years to 2025 as pro- tion on the electricity market, supply does not cover vided by in the Omnibus Energy Act. This should improve demand. Power plants that are part of the capacity reserve the conditions for investments in new CHP plants. The cannot participate in the electricity market and so cannot approval under state aid regulations is still pending from distort competition or pricing. Contracts for capacity the European Commission. reserves should have two-year terms. It is planned that transmission system operators enter into contracts on the By October 2019, 13% of lignite capacity will be put on basis of an open bid invitation, starting on 1 October 2019. security standby. Under the Electricity Market Act, lignite- The capacity reserve is currently approved under state aid fired power plant units with a capacity of 2.7 GW will grad- rules for the period up to 2025. ually go off-line. Before being shut down permanently, the plants will first be transferred to a security standby reserve for a period of four years; this reserve can be called upon as 9.3 Outlook a very last resort to help secure the electricity supply in the case of emergencies. By October 2018, three of the eight In the period 2018 – 2021 the existing overcapacity in con- power plant units envisaged for security standby had been ventional power plant capacity will probably drop. The provisionally shut down. Pursuant to Section 13g (8) of the total capacity of conventional power generation plants Energy Industry Act, the Federal Ministry for Economic hardly changed over the previous year, but a slight decrease Affairs and Energy, with the consent of the BMU, submit- in black coal energy was balanced out with an increase in ted its report on evaluation of the lignite security standby gas. According to the Federal Network Agency, new con- capability. The evaluation shows that this instrument of ventional power plant capacity starting at 10 MW added supply security is expected to provide a substantial reduc- during this time will amount to around 2.1 GW of net 144 9 POWER PLANTS AND SECURITY OF SUPPLY

Central measures in the area of power plants and security of supply

zzElectricity Market Act zzCommission for the storage of high-level radioactive zzAmendment to the Electricity Network Access Ordinance waste (Final Repository Commission) (StromNZV) zzAct Modernising the Repository Site Selection Act and zzSecurity standby other Legislation zzOmnibus Energy Act zzAct amending the Gas Supply Security Regulation (EU) zzCombined Heat and Power Act 2017/1938SMARD zzSpare capacity zzCore energy market data register zzAct on the Redistribution of Responsibility for Nuclear Waste Management

nominal capacity nationwide. On the other hand, 7.7 GW Energy Industry Act). Monitoring looks at varying weather of conventional power plant capacity will be shut down, conditions, including what is called the cold Dunkelflaute primarily in the area of nuclear energy (see Chapter 9.3). (dark doldrums), during which there is very little wind and Black coal capacities will also be reduced by 505 MW. On solar power. The recommendation of the Coal Commission the other hand, a slight increase of 346 MW in capacity of for reducing coal-fired power generation was also exam- natural gas is expected. More than one-third of dismantled ined. In all of the scenarios looked at, power demand in capacity took place in Southern Germany, whereby only Germany can be satisfied at all times. somewhat more than 10% of the added capacity took place there (see Figure 9.4). The electricity supply is backed up in several ways. In addition to reserves of approximately 6 GW for covering the risk of insufficient transport capacity of transmission sys- 9.4 Conclusion tems (grid reserve) and reserves of 1.2 GW for grid security (special grid technological operating means), an additional The final report of the Commission on Growth, Structural capacity reserve will be provided as of October 2020 for Change and Employment (Coal Commission) recommends a covering electricity demand for short-term extreme situa- transformation of the energy plant sector. The recommen- tions. This reserve comprising 2 GW will also be provided dations are summarised in Chapter 1. The Federal Govern- only outside of the market, and only if the market cannot ment is currently reviewing the measures it recommended cover demand even after intraday trade and using balanc- and will present a cohesive global approach. This will cre- ing capacity (including corresponding high penalty pay- ate the framework for the transformation of the power ments for those market participants that were not able to plant sector. The Federal Cabinet adopted key principles provide enough energy). on 22 May 2019 for implementing the structural policy recommendations of the Coal Commission (see the box in Combined electricity/heat production is not only about Chapter 1). achieving greater expansion but also making sure that it is compatible with the future energy system. The greater the The Electricity market 2.0 provides incentives for maintain- portion of renewable energies in electricity and heating ing existing or constructing new power plants, storage grids, the more important it is that CHP is compatible with facilities or using demand side management. Implementa- the expansion of renewables in these grids. CHP plants tion of the Clean energy for all Europeans package is need to be designed for lower carbon emissions and more strengthening the Electricity market 2.0 and anchoring it flexibility so that they can remain viable in the context of in the European context. As a result, the Electricity market the energy transition. To this end the Economic Affairs 2.0 is capable of satisfying power plant and storage demand Ministry is currently holding a discussion on the future of at the lowest possible cost to consumers. CHP with relevant actors in order to clarify what the future role of CHP will be in the energy transition and to deter- Monitoring of supply security of the electricity market mine what changes to the framework are necessary. Involved shows that it will be possible to provide high quality, stable in this process are the results of the evaluation of the Com- power supply in coming years. The Federal Ministry for bined Heat and Power Act mandated by law. The prelimi- Economic Affairs and Energy conducts an ongoing and nary evaluation results and the discussion process point proactive assessment of energy supply security, as stipu- out that to reach the sector goals for 2030, CHP funding lated in the Energy Industry Act (Sections 51 and 63 of the must be reformed (Act amending the CHP Act), beyond 9 POWER PLANTS AND SECURITY OF SUPPLY 145

Figure 9.4: Expected conventional generation capacities (including pumped storage reservoirs): new capacity added and dismantled capacity in the period from 2018 to 2021, in Germany overall and in southern Germany in MW 4,000

2,079 2,000

172 0

-2,000

-2,713 -2,541

-4,000

-6,000 -5,639

-8,000 -7,717

-10,000 capacity added capacity dismantled balance Germany capacity added capacity dismantled balance southern in Germany in Germany 2018-2021 in southern Germany in southern Germany Germany 2018-2021 2018-2021 2018-2021 2018-2021 2018-2021

natural gas nuclear energy pumped storage black coal other sources (non RES) balance

Source: Federal Network Agency, November 2018 The data for decommissioning take into account power plants that will be permanently shut down according to closure notification pursuant to Section 13a of the Energy Industry Act (old version) and Sec- tion 13b of the Energy Industry Act, as well as nuclear power plants. Numbers refer to nominal capacity.

simply extending the period of validity. The Coal Commis- adapting existing heat networks to new standards (e.g. tem- sion has also submitted recommendations on how trans- perature reduction). The Federal Government is currently form CHP plans into modern, flexible electricity/heat gen- working on a programme of measures to enhance the eration systems. In addition, the Commission recommends instruments available for the heating transition and to continuing to develop and fund cogeneration of heat and ensure that the 2030 sector goals are reached. Within this electricity by extending the CHP Act to 2030 (in 2023). framework, the Federal Ministry for Economic Affairs and Energy is planning a dialogue on ‘Heat networks in the In addition, there is the option of stepping up the supply of context of the heating transition’ to involve the Länder, renewable energies and waste heat to district heating for- associations and other relevant stakeholders (see Chapter merly operating on coal, and also to modern, flexible gas- 13). The goal is to create a mix of instruments not only for CHP systems. To tap this potential for ‘green district heat- pushing forward the transformation of the heat networks, ing’, in addition to the aforementioned amendments to the but also for contributing overall to the overall economic CHP Act other changes in the regulatory framework are and social acceptance of increased decarbonisation of the necessary, especially for funding for new heat networks or heating supply.

147

10 Affordable energy and a level playing field

Where do we stand? Final consumers spent more in 2017 for final energy than in the previous year. This was caused in part by the overall rise in consumption, and especially the sharp rise in prices on the international commodity markets.

The share of electricity costs in GDP declined once more in 2017, and reached the lowest level since 2010.

The average electricity prices for private households remained nearly constant in 2017 and 2018.

For industrial customers not covered by special compensation arrangements, electricity prices increased by 4.9% in 2017. In 2018 there was an increase of 2.7%.

Various special compensation arrangements mean that highly electro-intensive businesses that face strong international competition pay lower levies and surcharges under certain conditions, in order to retain their competitiveness.

What is new? The shift of the Renewable Energy Sources Act funding to competitive bidding achieved cost savings for the further expansion of renewables.

What is next? Cost efficiency is still one of the main criteria for optimal implementation of the energy transition. In particular, electricity must remain affordable – for both households and industry. Growth and jobs in Germany need strong, internationally competitive businesses. Special compensation arrangements for energy prices and costs continue to make a vital contribution to maintaining Germany’s position as a centre of industry.

In determining how to set the course in the energy sector, affordability and competitiveness remain central guiding principles. This applies for example in Germany for the phase-out of coal-fired power generation, but also in Europe for the additional development of regulations for lowering the cost burden for companies.

Digitisation can also help lower the cost of the energy transition (see Chapter 13).

Affordability Maintaining affordability of energy and ensuring Germany’s competitiveness competitiveness 148 10 AFFORDABLE ENERGY AND A LEVEL PLAYING FIELD

10.1 Present situation

10.1.1 Final consumer expenditures for energy

Final consumer expenditures for final energy consumption increased in 2017 from €210 billion to €218 billion, as indicated by the calculations on the basis of the energy balance. In addition to an analysis of energy spending broken down by consumer group, a macroeconomic look at energy spending can provide information on affordability in general. To this end, the aggregate spending across all final consumers is considered. A comparison of the trend in expenditures compared with value added provides insight into the economic viability of energy expenditures. Because the hike in final energy consumption was accompanied by growth in the gross domestic product of 2.2%, the share of final energy expenditures in the nominal GDP was unchanged over the past year, at 6.7%.

Final consumer expenditures for electricity went up by 1.2% in 2017, from €74.1 billion to €75.0 billion (see Table 10.1). This is attributable to the increase in costs due to government-induced and regulated electricity price com-

Macroeconomic expenditures for primary energy

Expenses incurred for provision of primary energy also have increase in demand, and also to the massive increase in an influence on final consumer expenditures for energy. import prices for fossil raw materials. Energy costs resulting After a significant drop in the previous year, in 2017 costs from the consumption of imported fossil-based primary went up by 15.8% to around €93 billion in comparison with energy sources went up from approximately €47.6 billion in the previous year (Figure 10.1). This was due in part to the 2016 to around €57.5 billion in 2017.

Figure 10.1: Macroeconomic expenditures for provision of primary energy in billion €

140 129.90 125.71 127.41 118.63 120 112.88 106.71 100 92.74 87.51 89.64 80.06 80

0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Source: Federal Ministry for Economic Affairs and Energy, own calculations on the basis of the Working Group on Energy Balances and the Federal Office for Economic Affairs and Export Control, 11/2018. 10 AFFORDABLE ENERGY AND A LEVEL PLAYING FIELD 149

Table 10.1: Final consumer expenditures for electricity in € billions

2010 2011 2012 2013 2014 2015 2016 2017

Total expenditures (in billions of euro) 65.6 68.6 69.4 76.7 75.9 75.3 74.1 75.1 Government-induced components 21.9 27.9 28.4 35.6 37.9 37.2 38.4 40.7 Of that VAT 4.7 4.9 5.1 5.6 5.7 5.8 5.7 6.0 Electricity tax 6.4 7.2 7.0 7.0 6.6 6.6 6.6 6.9 Concession fee 2.1 2.2 2.1 2.1 2.0 2.1 2.0 2.0 EEG surcharge 8.3 13.4 14.0 19.8 22.3 22.0 22.7 24.4 Combined Heat and Power Act surcharge 0.4 0.2 0.3 0.4 0.5 0.6 1.3 1.3 Offshore liability charge 0.0 0.0 0.0 0.7 0.8 0.0 0.2 0.0 and charge for interruptible loads Government-regulated components 15.2 15.4 16.5 18.1 17.9 18.0 18.8 20.7 Of that: Grid charges for the transmission grid 2.2 2.2 2.6 3.0 3.1 3.5 3.8 5.3 Grid charges for the distribution grid 13.0 13.2 13.9 15.1 14.7 14.5 14.9 15.5 Market-driven components 28.5 25.3 24.5 22.9 20.2 20.2 16.9 13.6 Of that: Market value of EEG power 3.5 4.4 4.8 4.2 4.1 4.7 4.3 5.8 Generation and distribution 25.0 20.8 19.7 18.6 16.0 15.4 12.6 7.9

Source: Federal Ministry for Economic Affairs and Energy and estimates of the Expert Commission on the Energy of the Future monitoring process on the basis of the Federal Statistical Office and the transmission system operators (2019). The calculation of overall expenditures is based on proceeds from electricity sales less tax benefits from subsequent tax relief assessments. Value-added tax is only shown for private households because companies can deduct it from their tax bill. ponents, including the EEG surcharge. Overall, after a Compared with GDP, the share of expenditures for electric- marked increase in 2013, final consumer expenditures for ity went down again in 2017, by around 3.0%. This was the electricity have remained stable in the past few years. If lowest level since 2010. In 2017, the share of nominal GDP necessary, analyses of final consumer expenditures can be comprising final consumer expenditures for electricity was broadened and refined in the future. at 2.3%, compared to 2.4% in 2016 (see Figure 10.2).

Figure 10.2: Share of nominal GDP comprising final consumer expenditures for electricity in %

3.0 2.7 2.6 2.5 2.5 2.5 2.5 2.5 2.4 2.3

2.0

1.5

1.0

0.5

0.0 2010 2011 2012 2013 2014 2015 2016 2017

Source: In-house calculations based on the Federal Statistical Office and evaluations of the Expert Commission on the Energy of the Future 150 10 AFFORDABLE ENERGY AND A LEVEL PLAYING FIELD

The debate on the cost of the energy transition

Statements made about the cost of the energy transition analytical comparison between an energy system based on are a subject of much public attention, because their pri- the energy transition, and one without. This requires a mary goal is to ensure that energy remains affordable and model-based macroeconomic analysis in which the energy to maintain Germany’s competitiveness. However, it is not supply of today and in the future is compared with a hypo- uncommon that a cost factor is mentioned that only thetical world without an energy transition. describes the financial cost of one specific intervention measure of energy policy, such as the Renewable Energy Using this type of model analysis, investments can be esti- Sources Act (EEG) and the EEG surcharge. The transforma- mated that would be necessary for implementing the tion of the energy system is accompanied by a number of energy transition in addition to ongoing maintenance measures, however, that originally affected the electricity investments (inter alia BCG, Prognos (2018), GWS, Prognos supply sector in particular, but increasingly addressed the (2018)). These additional investments in the energy system transformation in the heating and transport sectors, and cannot provide a complete picture of the macroeconomic their interaction (sector coupling). Even if there was no for- (net) costs of the energy transition, because these addi- mal decision on initiating an energy transition in Germany, tional investment impetuses also trigger new effects on the statutory regulations adopted between 1999 and 2002 employment and growth. on the Electricity Tax Act, the Renewable Energy Sources Act and the Atomic Energy Act provided an important mile- Furthermore, an energy system based on conventional stone in retrospect. energy sources inflicts climate and environmental burdens, as well as health hazards (GWS, Fh ISI 2018). that are not Each individual measure is aimed at finding an economic fully reflected in the market prices and costs but that are means of implementation that makes it possible to reach borne by society. The same is true for the residual risk from targets cost efficiently and to ensure that the transition is nuclear energy. These added costs of the previous energy affordable for all final customers. Impact studies provide system are gradually being scaled back with the energy assistance and can give indications regarding individual cost transition and an energy supply system that is increasingly components of the current electricity systems or on a based on renewable energy and efficiency. This is one breakdown of energy prices into its individual components. advantage of the energy transition that must be considered in any cost evaluation in order to provide a complete Adding up the individual cost elements of the current elec- picture. tricity system or of the cost of electricity (renewables surcharge, grid charges, etc.) cannot completely and correctly The Federal Government sees cost efficiency, in addition to reflect the overall costs of the energy transition. In particu- supply security and environmental compatibility as some lar, this method would give the impression that energy the main criteria for optimal implementation of the energy could be provided without additional cost without the transition. The EEG surcharge cost dynamics of previous energy transition. This is, however, not the case. To the con- years slowed appreciably, thanks to various amendments to trary, such calculations would have to include the necessary the EEG. Within the scope of the possibilities and chal- investments for continuation of previous, and in particular, lenges mentioned in the foregoing, monitoring the energy fossil-based generating installations and procurement costs transition contributes to a broader and deeper analysis of for fuel imports. This exercise clearly indicates that a com- costs. prehensive cost analysis of the energy transition requires an

10.1.2 Affordable energy for private households The share of energy expenditures in consumer spending was on average 9.4% in 2017. For households with low net Private households spent more on energy in 2017 than in income of less than €1,300 per month, this share was the previous year. On average, energy expenditures were higher, at about 11.1%. If we were to differentiate between about €2,782 per household (Figure 10.3), an increase of expenses for fuels on the hand, and expenses for other 4.1% over the prior year. Higher expenditures for fuels were energy for heating, cooking and electricity on the other, a major factor, at an increase of 7.1%. Households spent the differences would be even greater. While an average of 1.7% more on average in 2017 for lighting and process heat, 3.7% of consumer spending of households went to fuels, for example for cooking. Heating costs were 2.6% higher. the share for households with low income was only 2.2%. On the other hand, the energy expenditures for heating, 10 AFFORDABLE ENERGY AND A LEVEL PLAYING FIELD 151

Figure 10.3: Average annual energy spending of private households in €

3,500

3,081 3,143 3,000 2,841 2,889 2,752 2,746 2,782 2,712 2,673 2,507 2,500

2,000

1,500

1,000

500

0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

heating and warm water process heating (cooking) lighting and other fuels and lubricants

Source: BMWi based on the Federal Statistical Office and the Working Group on Energy Balances 11/2017

cooking and for electricity in households with low income of cost trends was also the aim of the Network Charges accounted for 8.9% of consumer expenditures. This is sig- Modernisation Act that entered into force in July 2017 that nificantly more than in households with average income, defines a removal of costs incurred from avoided grid where the figure was 5.7%. Households with low income charges. Due to the strong competition in the market for are still finding it a challenge to afford energy costs. suppliers of end user electricity, customers can also save money by changing their supplier. Electricity prices hardly changed in 2017. On the reference date in April 2017, households paid 29.86 ct/kWh on aver- The development in consumer prices for heating oil in 2017 age compared with 29.80 ct/kWh the year before, a slight is primarily attributable to the rise in commodity prices on increase of 0.2% over the previous year. The price compo- the international commodity markets in recent years. The nents for procurement and supply dropped significantly price of crude oil imports went up by 25%, for example. once again. However, the EEG surcharge went up in 2017 Consumer prices for natural gas however, went down by from 6.35 to 6.88 ct/kWh. Grid charges also went up, from 3.3%, even though the border-crossing price for natural gas 6.79 to 7.31 ct/kWh (see Figure 10.4). In 2018 the average went up in 2017 by 10.6%. electricity price was again stable in 2018, and at the reporting date was 29.88 ct/kWh. This trend was helped by the fact that the EEG surcharge in 2018 dropped slightly by 10.1.3 Affordable energy for industry 1.3%, to 6.79 ct/kWh. Because grid charges also went down, the increase in procurement prices was compensated. German industry spent 2.5% more on energy in 2017 than in the previous year. Energy is an important cost factor for It was possible to slow cost dynamics in electricity prices in industry and therefore has a bearing on the ability of indus- past years – this is also the result of efforts to make the try to compete with other countries. Industry spent a total energy transition as cost effective as possible. The Federal of €35.2 billion on energy in 2017 (see Figure 10.5). This Government has rigorously continued this policy. When increase in expenditures was attributable in particular to the Renewable Energy Sources Act came into force at the greater energy consumption, due in turn to positive eco- beginning of 2017, support for renewable energy and CHP nomic growth. The biggest portion of costs for industry is was shifted to competitive calls for bids. This led to very electricity. Industry paid somewhat less on average for elec- significant cost reductions in support for further develop- tricity in 2017, according to official figures, but consump- ment of renewables, as the results of first tenders for pho- tion went up. As a result, this led to an increase in expendi- tovoltaics and wind energy clearly indicate (see Chapter tures of 1.8% over the previous year. Additional cost 4.5). Further trends will depend on the level of competition components of industry are expenditures for gases as well and the availability of space. A medium-term attenuation as for coal products and solid fuels. The rise in expenditures 152 10 AFFORDABLE ENERGY AND A LEVEL PLAYING FIELD

Figure 10.4: Average electricity prices of private households in ct/kWh 35

29.80 29.86 29.88 30 29.24 29.53 29.11

25.45 26.06 25 22.75 23.42 21.39 20

0 1.04.2008 1.04.2009 1.04.2010 1.04.2011 1.04.2012 1.04.2013 1.04.2014 1.04.2015 1.04.2016 1.04.2017 1.04.2018

energy generation and distribution (incl. margin) grid charges surcharge under the EEG Combined Heat and Power Act surcharge Concession fee

charge under Sec. 19 of the StromNEV offshore liability charge charge for interruptible loads electricity tax VAT

Source: Federal Network Agency, November 2018 The data were captured on the reference date of April 1 of each year. A household with an annual consumption of 3,500 kWh was taken as the basis up to 2015. Since 2016, data have been based on an annual consumption of between 2,500 and 5,000 kWh.

for gases is also attributable to an increase in consumption, particularly relevant for energy costs. However, the share of with slightly lower prices. However, coal products and solid electricity in final energy consumption differs significantly fuels showed increases in prices and consumption, leading in the individual sectors. In addition, the prices can vary to an increase in these costs of 1.8%. widely from business to business. For example, individual offtake amounts and profiles have a bearing on the pricing. Electricity costs account for a good two-thirds of total Regional differences also exist, such as in the case of grid energy costs for industry. Electricity costs are therefore charges, for instance. Various special compensation

Figure 10.5: Energy costs for industry in billion € 45

40 38.5 38.1 36.6 36.9 35.6 34.4 35.2 35 33.3 33.3 30.5 30

0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

electricity gases coal products/solid fuels heating oil/petroleum products

Source: BMWi based on the Federal Statistical Office and the Working Group on Energy Balances 11/2018 10 AFFORDABLE ENERGY AND A LEVEL PLAYING FIELD 153

arrangements mean that highly electro-intensive busi- Electricity prices for industrial customers not covered by nesses that face strong international competition pay less special compensation arrangements went up in 2017. for electricity under certain conditions. According to the findings of the Federal Network Agency, electricity prices for industrial customers (annual offtake

Prices of electricity on the exchange

The upward trend in prices in power exchange trading that began in 2016 continued in 2017. On the European Energy Exchange (EEX), the annual average price in 2017 for delivery in the following year (baseload, year future) fell by 22% compared with 2016, to about €32.50/MWh (see Figure 10.6). This upward trend continued in 2018. In December, the exchange price was €54.10/MWh, the highest price since November 2011. The spot market prices were surpris- ingly high in early 2017. This was attributable to cool weather and high electricity demand in France. Seen over a long reference period, however, the exchange price in 2017 was still at a comparatively low level. On the spot market, prices indicated a comparable trend to that of the futures market, with expected high volatility. The price level was usually similar. Prices on the futures market indicate that the exchange participants on the exchange expect wholesale electricity prices to tend to rise in the near future.

If a large supply of cheap energy meets low demand, nega- increasingly, also demand. In 2017 there was a total of 146 tive exchange prices could be the result. This can happen hours with negative prices on the spot market – a share of for example if low demand either early in the morning, on 1.7%. On-exchange trading is the major portion of energy public holidays or on the weekend is met with high feed-in trade. Another part of electricity is traded through over- from wind and photovoltaics due to weather conditions. the-counter bilateral contracts which, however, are also Negative prices can provide an investment impetus for influenced by pricing signals from the electricity exchange. making conventional power generation more flexible and, Such contracts often have multi-year terms.

Figure 10.6: Electricity prices on the exchange in the spot market and in futures trading in €/MWh 100 90 80 70 60 50 40 30 20 10 0 Jan July Jan July Jan July Jan July Jan July Jan July Jan July Jan July Jan July Jan July Jan July Jan July Jan 07 07 08 08 09 09 10 10 11 11 12 12 13 13 14 14 15 15 16 16 17 17 18 18 19

spot market electricity price futures market electricity price

Source: EEX 05/2019 Monthly average values for the products „Day Base“ (hour contracts) and „Phelix Futures“ (baseload, year future) 154 10 AFFORDABLE ENERGY AND A LEVEL PLAYING FIELD

24 GWh) that do not fall within the scope of statutory spe- for industrial customers in Germany were 8.0% above the cial compensation arrangements were essentially in the European average. range from 13.74 to 16.23 ct/kWh (excluding VAT) on the reference date 01 April 2017. Average prices on the refer- Electricity prices for many German industry and commer- ence date in 2017 had increased by 4.9% compared with the cial companies were still above the EU average in 2017. previous year, from 14.21 to 14.90 ct/kWh (see Figure 10.7). According to figures released by Eurostat for the second This was due in particular to a higher EEG surcharge and half of 2017, the prices for small commercial and industrial higher grid fees. In this context it is important to note that customers with an annual consumption of less than 20 some industrial customers with high annual consumption MWh were 18.7% above the EU average, while medium- levels and steady offtake agree separate grid use contracts sized industrial customers with an annual consumption of with their system operator, and thereby pay customised 70 – 150 GWh had to contend with prices 42.4% above the grid charges. In 2018, electricity prices on April 1 for the EU average (figures are exclusive of VAT and recoverable consumption situation discussed here went up by 2.7% to taxes and levies). 15.30 ct/kWh. With regard to electricity prices for highly electro-intensive businesses, Germany is around average compared with 10.1.4 Affordable energy for a competitive economy other EU countries owing to various special compensation arrangements – this was the finding of a study conducted Growth and jobs in Germany require strong, internationally by Ecofys, Fh ISI (2015) on the basis of data for 2014. The competitive industries. The energy-intensive industries, in international comparison of electricity prices is particularly particular, are the basis for maintaining closed value chains relevant for businesses whose production process are and for downstream production sites to set up in Germany. energy-intensive and which are highly exposed to interna- Therefore they make a considerable contribution, both tional competition. Various special compensation arrange- directly and indirectly, to creating and keeping skilled jobs ments are in place to ensure that the cost of the energy in Germany. However, the competitiveness of German transition does not put such companies at a competitive companies, and particularly of industry, depends not least disadvantage. The electricity price for these companies is on local energy prices compared with other countries. primarily determined by the costs for procurement and supply, with the result that they have benefited from low Fuel and natural gas prices in Germany were at a level simi- prices on the electricity exchange in last few years. Accord- lar to the EU average in 2017. The prices of diesel fuels, for ingly, the increase in electricity exchange prices since 2017 example, were 1.4% below the EU average, while gas prices has also resulted in a clear increase in electricity prices.

Figure 10.7: Average Electricity prices for industrial companies not covered by special compensation arrangements in ct/kWh 18

16 15.30 15.11 14.80 14.90 14.44 14.21 14 13.26 13.22

12 11.40 10.86 11.23 10

0 1 April 2008 1 April 2009 1 April 2010 1 April 2011 1 April 2012 1 April 2013 1 April 2014 1 April 2015 1 April 2016 1 April 2017 1 April 2018

energy procurement and supply (margin incl.) grid charge concession fees EEG surcharge CHPA surcharche

surcharge Section 19 of the Electricity Network Charges Ordinance offshore liability surcharge charge for interruptible loads VAT

Source: Federal Cartel Office, November 2018 The data were captured on the reference date of April 1 of each year. Annual consumption of 24 GWh (annual peak load 4,000 kW and annual duration of use 6,000 hours) at medium-voltage level is assumed. Tax amounts before 2013 include VAT. 155

Overall, special compensation arrangements involving chains and industrial jobs in Germany in the long term. On energy prices and costs for privileged, energy-intensive the other hand, the special compensation arrangements for companies continue to make a vital contribution to main- energy-intensive companies under the Renewable Energy taining Germany’s position as a centre of industry. Sources Act and the Combined Heat and Power Act mean higher electricity prices for private households and non- Special compensation arrangements are essential to main- privileged businesses. On the basis of the current annual taining Germany’s position as a centre of industry and are accounts, the relief provided through the mechanism of in the interests of the economy as a whole. For the Federal special compensation arrangements was financed in 2017 Government it is clear that the competitiveness of German by 1.64 ct/kWh, or 24%, of the EEG surcharge. About 4% of industry must not be put at risk. The objective is still to industrial companies profit from the special compensation avoid production moving offshore to countries with lower arrangements, and 96% pay the full surcharge. Despite the environmental standards and/or lower levies on energy special compensation arrangements, industry still pays a (“carbon leakage”) and to secure and expand closed value substantial part of the cost of the Renewable Energy

Unit Energy Costs (UEC)

Apart from the price of energy, a business enterprise’s cally divided by gross value added or gross production energy costs are also dictated by the amount of energy it (gross value added plus intermediate inputs). However, vari- consumes. Energy consumption not only depends on how ous approaches to a more exact calculation are being dis- much is produced but also on how efficiently energy is cussed by academics. In general, its validity as an indicator used. Therefore, higher energy prices compared with of the cost burden of businesses and of competitiveness is another location can be offset to some extent by invest- controversial. ments in the more efficient use of energy and thereby by Calculations based on official statistics find, for example, reduced energy intensity in production in individual sectors. that the average UEC for German industry in 2016 stood at Both factors – energy prices and energy efficiency – can be €15.31 per €1,000 gross production value. The figure for considered together in the Unit Energy Costs (UEC) indica- 2015 was €17.15. tor. To determine UECs, aggregate energy costs are basi- 156 10 AFFORDABLE ENERGY AND A LEVEL PLAYING FIELD

Sources Act. If we look at the surcharge amounts for 2019, 10.3 Outlook and conclusions 31% of all costs of the EEG to be borne by consumers is paid by industry. On the other hand, industry regularly In determining how to set the course in the energy sector, consumes over 40% of overall electricity consumption in affordability and competitiveness remain a central guiding Germany. principle, in addition to environmental acceptability and security of supply. For example, it is important that meas- Regulations preventing carbon leakage help reconcile the ures for implementing the phase-out of coal-fired power competitiveness of German industry with climate change generation as recommended by the Coal Commission take mitigation requirements. It is already a fact today that the the trends in electricity prices into account. The Coal Com- German economy produces more but has less greenhouse mission has made its own recommendations to this effect. gas emissions (see Chapter 8.3). For businesses whose prod- It considers it necessary to find a way to balance out the ucts face strong international competition, the aim is to costs, to ease the burden on companies and households of limit the cost burden of CO2 reduction so that carbon leak- possible price increases. After power plant shutdowns age is avoided, thereby ensuring the local economy remains begin, a subsidy should be paid on the transmission grid strong. At the same time, appropriate regulations are charges or an equivalent measure that mitigates the rise needed for global climate change mitigation also, to limit in electricity prices. In addition, the Coal Commission rec- greenhouse gas emissions and not shift them to countries ommends that companies that do not profit from lower which also have lower climate change mitigation standards. grid charges be supported with additional measures. The

10.2 Key measures taken to date

Central measures in the area of affordable energy for private households and industry

Legislation Other measures The Renewable Energy Sources Act 2017 that entered into The efficient use of energy and energy conservation will be force at the beginning of 2017 strengthens the principle of the foundation for less energy spending in future and will the economic, cost-effective and environmentally compati- strengthen the competitive position of German companies. ble implementation of the energy transition by marking the To this end, the Federal Government launched the follow- transition to competitive auction systems, inter alia (see ing measures in particular: Chapter 4). zzNational Action Plan on Energy Efficiency (NAPE, see The Network Charges Modernisation Act entered into Chapter 5) force in July 2017, and also helps to regulate the gradual zzEnergy Efficiency Strategy for Buildings (see Chapter 6) removal of the costs incurred from avoided grid fees. Between 2017 and 2018, the costs for avoided grid charges Despite the progress made in the energy transition, Ger- in electricity distribution systems sank overall by more than many will continue to depend on imports of fossil fuels, at €1 billion, which resulted in a corresponding cost savings least on the medium term. For this reason, the cost of for energy consumers. Both measures can help to signifi- energy also depends greatly on the import prices. Germa- cantly reduce costs to the final consumer that arise from ny’s international energy policy will continue to aim at the operating, modernising and expanding the electricity grid greatest possible diversification of energy suppliers and (see Chapter 12). transport routes, also with a view to ensuring the stable development of import prices (see Chapter 3). With the Ordinance on the Transparent Itemisation of State-imposed or Regulated Price Components in the Basic Supply of Electricity and Gas, the Federal Government increased transparency for consumers, thereby making it easier to compare rates. Changing provider can help consumers reduce spending on energy. 10 AFFORDABLE ENERGY AND A LEVEL PLAYING FIELD 157

Central measures towards establishing a level playing field

zzEEG Special equalisation scheme and special compensa- zzrelief provided by the Energy Tax Act and electricity tax tion arrangements for self-supply legislation, e.g. energy tax cap zzreductions in the CHP surcharge zzfree allocation in the EU emissions trading system zzrelief from grid charges

existing compensation for parts of the electricity price Transparency of affordability of energy is getting better. To attributable to the EU emission allowance trade should be this end, monitoring of energy expenditures should be fur- enforced and further developed. ther expanded so that at the end of the day the overview of expenditures is even more reliable. In particular, there are In other areas, too, such as the further development of EU plans to extend the tracking of final consumer expendi- state aid rules, the affordability of energy plays a central tures for electricity to the heat and transport sectors. role for the Federal Government. Cost efficiency is a major criteria of the energy transition. In this vein, success stories such as the improved competitiveness achieved with the switch to bidding competition for the Renewable Energy Sources Act and the Combined Heat and Power Act have had the effect that the share of taxes, fees and charges has gone down continually since 2017. These success stories should be continued.

159

11 Environmental compatibility of the energy supply system

Where do we stand?

The energy transition gives rise not only to beneficial effects for the environment and human health, as well as synergies for sustainable energy, but also to possible new consequences for the environmental and health as well as impacts on nature and the landscape.

The goal is to use the basis of continual, scientifically-grounded monitoring to identify early on any possible environmental and health impacts.

A suitable indicator is currently being developed to correctly and scientifically reflect changes in the environment attributable to the energy transition.

What is new?

Extensive research is currently underway on assessing the ecological impacts of expanding renewables and modernising infrastructure. The results of these studies will be used to systematically develop an environmental monitoring process for the transition. thus boosting public acceptance.

What is next?

Determining suitable indicators and depicting the development over several years in a data base for environmental monitoring of the energy transition should provide an overview of the negative and positive factors and provide a prognosis and conclusion for further development of the energy transition.

Creating an energy supply system that is environmentally compatible and Environmental compatibility protects natural habitat 160 11 ENVIRONMENTAL COMPATIBILITY OF THE ENERGY SUPPLY SYSTEM

11.1 Present situation and the landscape. Another focus of research is developing means for avoiding conflicts between nature conservancy Starting with the triad of energy-policy goals as a central and the expansion of renewable energy. The Federal Office point of orientation, as well as the government goal of for Radiation Protection is running a research programme environmental protection under Article 20a of the Basic on radiation protection in conjunction with expansion of Law, this Second Progress Report has a separate chapter on renewable energy. environmental impacts of the energy transition, just as the Sixth Monitoring Report. In the energy transition process The results of this study will be used to systematically itself no quantitative goals were formulated regarding the develop a new environmental monitoring process for the environmental impact of the energy transition. Neverthe- energy transition. As described in more detail below, the less, they are already anchored in various ways in interna- focus should be on effects of the energy transition – the tional, European and national agreements and laws. In the energy system and its transformation – in the areas of context of the energy-policy triad, this means that achieve- ment of energy transition targets may not impair current zzsoil, air and water (Chapter 11.1.1) environmental goals. Any type of energy conversion usually has impacts on the natural environment, humans and zznatural resources and land use (Chapter 11.1.2) resources. For this reason it is important to provide necessary protection of natural sources of life, also as a responsi- zznature and the landscape (Chapter 11.1.3) bility to future generations. The goal of the environmental monitoring of the energy transition is to make clear what zzhuman health (11.1.4). the effects of the energy transition have already been in past years, in order to improve environmental performance fokussieren. Im Folgenden wird ein Überblick über ein- and to indicate what further impacts can be expected. Eco- zelne Aspekte des künftigen umweltbezogenen Monitor- logical compatibility is a central aspect of the future face of ings der Energiewende gegeben. the energy transition.

In this sense, it is essential not only to prove that green- 11.1.1 Soil, air and water house gases are decreasing, but also to ensure that any environmental impacts or effects on human health or the Today energy transformation processes are responsible for environment, or any other effects on the environment, a large portion of air pollution in Germany. In addition to nature and the landscape attributable to the energy transi- greenhouse gases, air pollutants in particular are released in tion, are identified early on. If, for example, fewer fossil all sectors in which fossil fuels and biogenics are burned. As fuels are used and Germany phases out the commercial use an example, in 2016 the energy sector was responsible for a of nuclear energy by the end of 2022, we can assume that major portion of nitrogen oxide emissions (almost 25%), the environmental impact will be reduced, as well as the sulphur dioxide emissions (about 60%), particulate matter health risks for humans, animals and the environment. On (PM2.5, almost 10%) and mercury emissions (almost 65%). the other hand, it is important to ensure that the continued Of all of the nitrogen oxide emissions of the energy sector, expansion of renewable energy (see Chapter 4) and other 75% are attributable to fossil energy sources. Of the sulphur technological developments (Chapter 14) generally exclude dioxide emissions, 89% are attributable to fossil energy negative – or especially serious – impacts on health and the sources, of particulate matter, 80%, and mercury emissions, environment. 97%. The remainder of these figures is attributable to combustion of biogenic fuels. These pollutants are not only The first step for monitoring the effects of the energy tran- harmful to the environment but also have an adverse effect sition on the environment and human health is to establish on human health. Emissions in the air also have a detri- a quality evaluation tool for the effects and changes in the mental effect on surface water. environment accompanying the energy transition. Compa- rable times series – like those for the development of In the energy sector, coal-fired power plants in particular greenhouse gas (see Chapter 8) or air pollution – are not yet emit substantial amounts of pollutants into the air. They available for assessing the environmental compatibility of contribute the largest portion of sulphur dioxide emissions the energy system. For this reason, the Federal Environ- produced by the entire energy sector, at 50%. Coal-fired ment Agency commissioned a study in order to close this plant mercury emissions are at over 75%, nitrogen oxide data gap. The results of other ongoing research projects emissions at 16% and particulate matter at over 9% of total carried out for the Federal Environmental Agency and the energy sector emissions. Even though energy-related emis- Federal Agency for Nature Conservation are taken into sions have gone down overall since 1990, this shows that account. These deal in particular with the question as to the share of “classic” air pollutants is still significant. how the energy transition impacts the environment, nature 161

However, biomass also creates additional emissions of air Data on regional emissions from energy production affect- pollutants and puts a strain on soil and water. Biomass is ing the soil and water are also always available, but are used as renewable energy in the transport sector and for more useful for determining the local or regional pollution generating electricity and heat, and when combusted in situation (see the national Pollutant Release and Transfer relatively small and decentralised facilities, nitrogen oxides register PRTR) than for describing the overall situation in and particulate matter are released. It is also noticeable that Germany. with the use of plant-based biomass for biogas plants, ammonia emissions have increased, causing acidification, In addition to material contamination, the non-solid eutrophication and creating secondary particulate matter. impact of the energy sector, for example, on bodies of For this reason it is important to evaluate new and previ- water, must be taken into account. For one, this includes ous energy conversion systems in their broader context. direct trading intrusions, especially when hydropower is used to create energy. For another, cooling thermal power Acreage for energy crops, in particular maize, has increased plants also disturbs the ecosystem of rivers in their mate- significantly in recent years in some regions. However, rial and thermal structure. This situation has improved in changes in the Renewable Energy Sources Act have helped Germany in the past years. For example, the volume of maintain maize acreage for bioelectricity production at a cooling water used went down between by about 8 billion steady level. In particular, as agricultural use has intensi- cubic metres between 2010 and 2016. However, this reduc- fied, nitrate levels in the groundwater and in surface waters tion was unevenly distributed across the river basins in may rise, as well as increases in discharges of ammonia, Germany. In some river basins, for example, the Weser, nitric oxide and nitrous oxide. In general, all pollutants there was a reduction in cooling water, and in others, for emitted into the ambient air eventually make their way example the Elbe, there was an increase. Supplying energy into soil and water. The effects of these deposits can be causes the largest portion of water extraction in Germany. massive, which must be considered at the time they are In 2016, the amount of water extracted for energy com- released into the air. prised about 52% of the total water extraction of 24 billion cubic meters (StBa 2018a). It is expected that this share will go down as a result of the phase-out of thermal power 162 11 ENVIRONMENTAL COMPATIBILITY OF THE ENERGY SUPPLY SYSTEM

plants and the expansion of renewable energies. The energy zation of land the energy transition can provide an exem- industry affects surface waters and also groundwater with plary contribution to climate protection and at the same its material pollution – for example from open-pit mining time, demand in Germany for primary natural resources or geothermal plants – but also by affecting the water level can be substantially reduced by 2050 (Günther et al 2017). and volume. Efficient use of resources requires resource-efficient planning, production and operation of plants as well as mostly It is important to measure the positive effects of renewa- closed resource loops. If natural resources must be imported, bles on transport as a result of electric mobility. The switch it is also essential to comply with international sustainabil- to electric and other alternative drivetrains lowers to a cer- ity standards during raw material extraction and to increase tain degree pollutants and climate gas emissions incurred transparency of resource supply chains. For example, there by combustion, and in some instances shifts them to the is a growing number of efficient recycling concepts for electricity supply sector, where more specific measures for materials used in plants operated with renewable energy. reducing pollutants could be taken (see Chapters 7.2 and Accompanying technologies are continually being devel- 13.1). oped and made more efficient. In the future it will be essential to put emphasis on recyclability during the R&D phase, especially for composite materials and lightweight 11.1.2 Natural resources and land use construction components. A greater emphasis on using power from renewable energy sources at the stage of raw The demand for natural resources and where energy plants material extraction as well as in manufacturing plant com- are located are factors for any type of energy conversion – ponents will reduce even further the climate and environ- due both to climate change mitigation and environmental mental impact of energy produced with renewables. considerations and to economic efficiency. The average consumption of natural resources per kilowatt hour of In order to minimise the amount of land used for extrac- electricity used is currently at about 0.7 kg, and the largest tion, processing and transporting energy sources and portion of this is fossil resources (Wiesen 2016). By means energy facilities, including upstream value chains, and to of efficient use of natural resources and sustainable utili- avoid the permanent deterioration of soils and the loss of 11 ENVIRONMENTAL COMPATIBILITY OF THE ENERGY SUPPLY SYSTEM 163

agricultural land, environmental monitoring should take the following facts into account: For one, the land required for conventional power plants and for extracting fossil fuels such as lignite. On the other hand, it is important to remember that renewable energy requires space or changes the use of those spaces. In order to reduce the competition between this type of use of space for such purposes and for food production, using bioenergy from residue and waste material can have a positive impact. However, developing efficient strategies for upstream use of biogenic resources is important in this process. In conventional generation, future changes in land use should be considered, for example in the case of lignite excavation sites that are replanted, to facilitate subsequent use, even if such use is diminished compared to the original condition of the land.

The individual renewable technologies require widely differing amounts of space and have differing effects on the environment, nature and the landscape. In the area of bioenergy, for example, about 2.18 million hectares of plants were cultivated for energy purposes (Agency for Renewable Resources) 2018). (This includes rapeseed for biodiesel production as well as plants for bioethanol, biogas or solid fuels production. However, the figure for 2016 only included a part of these.) This equates to 18.5% of agricultural land that was used for energy crops. In addition to non-agricultural effects, the negative effects on biodiversity come from higher intensity use and the loss of agricultural microstructures such as hedges, edges of fields that are not used and other bordering areas. According to the Biofuel and Bioelectricity Sustainability Ordinance, ploughing up areas that are valuable for biological diversity and areas 11.1.3 Nature and the landscape identified as such is not sustainable practice and would dis- qualify such areas for sustainability certification. Whenever efforts are made to protect biodiversity and basic resources for flora, fauna and humans, the energy Using bioenergy produced from residue and waste material transformation becomes much more acceptable. In general, is an important step toward reducing competition with it is apparent that structural change in the energy sector food producers for utilization and space and conflicts with brings about completely new effects on the environment – nature conservation, as well as rolling back the share of influencing the appearance of the landscape, the ecosystem bioenergy to make room for more space-efficient energy and biodiversity. At the same time, reduced use of conven- sources such as wind energy or photovoltaics. However, tional fuels lowers the burden on nature. Gradually reduc- developing efficient strategies for upstream use of biogenic ing coal-fired power generation and increasing the use of resources is important in this process. renewable energies result in more environmentally friendly power generation. Efficient generation of electricity and heating, low-loss distribution of renewable energies and reduced and flexible The effects on nature and the landscape from construction energy demand can decisively contribute to reducing com- and operation of various conventional and renewable petition for space and stress on the landscape. Technolo- energy plants as well as the network Infrastructure are very gies that are also helpful in reducing land consumption are diverse. This includes using up space, loss of biotopes, especially those that are close to consumers or are used on impairment of soil and water as well as the damage done to space that has already been sealed, such as generation of the image of the landscape. Furthermore, there are impacts solar energy on roofs and house exteriors as well as heat on animals, plants and biodiversity. A possible conflict pumps or geothermal energy. through disruption or loss will be regularly reflected in planning and approval in the scope of endangered species and territorial protection. In addition to national require- 164 11 ENVIRONMENTAL COMPATIBILITY OF THE ENERGY SUPPLY SYSTEM

ments, there are binding EU regulations that must be forest wood used in Germany is utilized directly for pro- adhered to. Beneficial to this process is that the amend- ducing energy (FNR 2018). Additional potential for wood ment of the Grid Expansion Acceleration Act of April 2019 utilisation is quite limited – any increase in demand could facilitates more prospective planning. This can lead to a lead to further loss of biodiversity in forests or to increased reduction in stress for some parts of the environment. imports if sustainability becomes an issue. However, lowering the energy consumption of buildings (see Chapter 6) Onshore wind turbines require careful planning regarding can also lead to a reduction in demand of biomass for their location. Optimising the selection of sites when plan- energy uses, and thereby contribute indirectly to protection ning, evaluating and grating approvals will serve to avoid of the forests. any possible negative effects on animal species, their living space and the landscape – not to mention the interests of The pressure on agricultural land use is growing due to bio- the residents. Regional planning of planning as well as mass cultivation for energy purposes. Risks to biodiversity municipal development planning in particular contribute can ensue, and water resources and water and soil quality to this. The major portion of wind-powered installations as well as the stability of terrestrial ecosystems could suffer, are located on agricultural land. Some Länder are starting which makes sustainable generation of agricultural raw to erect wind turbines in forests. For example, 19% of the materials essential. On the other hand, bioenergy can con- turbines taken into operation in 2017 were installed in for- tribute to reduction of GHG emissions as compared with ests (this equates to 7% of the aggregate number of installa- fossil fuels, yet this reduction is not usually GHG-neutral, tions) (Agency for Onshore Wind Energy 2018). Depending due to the GHG emissions caused by agricultural produc- on Länder regulations, some wind power plants are allowed tion and processing. However, this calculation includes in certain protected areas. Regarding the appearance of the only direct emissions, for example from cultivation, pro- landscape there is currently a consensus of most Länder duction and transport. Particularly conventional biofuels that damage cannot be reversed and therefore they have from imported plants could cause significantly higher determined direct compensation under the Federal Nature emissions than fossil fuels as a result of indirect land use Conservation Act. In addition to the selection of sites effects, Indirect land use changes that could take place in there are other ways to minimise conflict. This includes for non-EU countries are not trackable using the standard example newly developed technologies and avoidance evaluation method. measures. To avoid the risk of collision, for example to protect bats, there are multiple requirements for turning off Hydroelectric power plants could impair the ecological wind turbines, and to protect species of birds that are vul- functions of rivers: To limit the impact of construction and nerable to wind turbines there are regulations on distance operation of such installations on nature and the land- between towers. scape, well-known precautions are taken to protect animals, plants alluvial areas (e.g. fish ladders). The Federal Marine life must be protected from offshore wind powered Water Resources Act therefore requires that use of water installations. Construction and operation of the installa- power is only allowed if suitable measures are taken to pro- tions, not only poses a direct danger to seagulls (collision) tect the fish population. Existing structures must imple- and cuts off their migration routes, but also leads to the ment such measures within a reasonable period of time. loss of feeding and resting grounds, particularly due to Germany has only limited additional potential for hydro- noise pollution during construction. Noise can temporarily power plants. drive out harbour porpoises and fish from important habitat areas. Additional disruption to the sea floor is caused by The Nature Conservation and the Energy Transition centre construction and laying cables. On the other hand, such of expertise (KNE) that began its work in July 2016 provides sites can also create new habitats for ocean creatures. The impetus toward avoiding conflict during the increase in use Federal Ministry for the Environment in 2013 developed a of renewable energy. The KNE centre of expertise helps to noise abatement program for the Exclusive Economic Zone bring greater professionalism into the debate and assists in in the North Sea that would require construction on off- avoiding conflict on the ground. shore wind powered installations to be executed such that harbour porpoises would be provided with sufficient room to retreat (BMU/BfN 2013). 11.1.4 Impacts on human health

Wood is used especially for heating installations as well as The energy sector emissions described in Chapter 11.1 also heating systems and plants. Demand for agricultural and affect human health. For example, nitrogen oxide (NO2) is a forestry biomass for generating energy impairs biodiversity, by-product of combustion plants and combustion engines for example by causing loss of habitat and ecological natu- that is harmful to respiratory passages and makes other ral habitat functions. Currently, around one-fifth of the pollutants even more irritating, which may lead to respira- 11 ENVIRONMENTAL COMPATIBILITY OF THE ENERGY SUPPLY SYSTEM 165

tory or cardiovascular disease. Particulate matter is also This includes noise emissions from onshore wind energy harmful to human health. For one, hazardous substances generation. On the one hand, wind energy offers the great- can collect on the surface of dust, and for another thing, est potential for growth of all sources of renewable energy, dust particles themselves pose a health hazard. If humans yet on the other hand, because Germany is so heavily pop- are exposed to high particulate matter concentrations over ulated it is important to locate sites that are sufficiently a long period of time, cardiovascular disease, chronic removed from residential areas. Nevertheless, the technol- obstructive pulmonary disease (COPD) or lung cancer may ogy involved in wind-powered installations has greatly ensue. Recent studies also show the connection between improved in recent years. As a result, wind plants have not particulate matter pollution and occurrence of Type 2 dia- only become more efficient, but have also been improved betes, neuro-degenerative illnesses such as Alzheimers and to lessen their impact on the environment and human dementia, as well as low birth weights. In contrast to other health. Current research indicates that the noise impact of pollutants, the World Health Organisation (WHO) has infrasound is very minor compared with other sources, and determined that there is no particulate matter concentra- has no negative effects on human health. Other decentral- tion below which no damage can be expected. Regarding ized heating systems (e.g. heat pumps, CHPS) can mean- particulate matter that is not of a natural source, these while cause significant noise disruption due to low-fre- could also stem from combustion processes, such as wood quency noise and infrasound, especially if they were not furnaces, vehicles and some industry processes. A large por- installed properly. tion of particulate matter forms in in the atmosphere from gaseous substances such as sulphur oxides and nitric Traffic, a major component of the energy system, is one of oxides, ammonia or hydrocarbons. the major producers of noise. Every five years the impact of ambient noise in metropolitan areas is mapped, along the Not only emissions, but also noise pollution can have nega- main traffic arteries and at large airports. The noise map tive effects on human and animal health. Being exposed to from 2017 shows that at least 4.7 million residents are consistently high decibel ranges can lead to health issues. exposed to nightly noise levels of over 55 dBA and almost In order to properly assess the effects of the energy system, 3.4 million residents are exposed all day long to sound lev- it is important to take noise pollution into consideration. els exceeding 65 dBA. Further growth of electric mobility 166 11 ENVIRONMENTAL COMPATIBILITY OF THE ENERGY SUPPLY SYSTEM

(see Chapter 13) can help cities to reduce this noise expo- efficiency, strengthening environmental, social and trans- sure in some cases, and thereby improve the noise situa- parency standards in the natural resources sector and cre- tion. ating a more sustainable supply chain. In addition, including the aspect of preserving natural resources in product Electricity-conducting components may cause electromag- development is encouraged. Emphasis is also placed on the netic fields. High electric field strength may be a risk to development and implementation of production and pro- human health. Installation and operation of power lines in cessing methods that utilise resources efficiently. The next transmission and medium voltage grids are therefore sub- update of the German Resource Efficiency Programme is ject to the provisions of the 26th Regulation on Implemen- currently in progress. tation of the Federal Immission Control Act. This Regula- tion defines emission limits and a requirement to reduce The first Nitrogen Report of the Federal Government pub- emissions. Charging points and power trains in e-vehicles lished in May 2017 emphasizes the necessity of a cross-sec- (see Chapter 7.2) are subject to the requirements set forth in tor approach to reducing nitrogen pollution to an amount the Product Safety Act. The Immission Control Act is also that is compatible with the environment and human health. applicable to inductive charging stations operating above a The formulation of the energy transition affects the specific frequency band. amount of nitrogen emissions (e.g. spreading fermentation residues), including ammonia, nitrous oxide and nitrate In addition to environmental and health impacts of instal- emissions (agriculture) and nitric oxide emissions (energy lations during normal operation, the possibility of distur- generation and transport). In Germany, agriculture contrib- bance due to disruption of operation or damage should ute 63% to annual overall nitrogen emissions, in the also be taken into consideration. Severe cases are very sel- amount of 1.5 million tonnes of nitrogen. The energy sec- dom, but could have far-reaching consequences. The phase- tor and industry contribute 15% each, transport 13%, and out of nuclear power for production of electricity should the remaining 9% come from waste water and surface run- reduce the risks posed by release of radioactive substances. off. The safe permanent disposal of radioactive waste should help minimise over long periods of time the radioactive Environmental monitoring of the growth of renewable after-effects of the use of nuclear energy. Negative impacts energy in the area of electricity: Research commissioned by of renewable energy resources can be assessed as being the Federal Agency for Nature Conservation (BfN) aims to minor in general, due to their decentralised nature and in instigate environmental monitoring of the growth of comparison to large, centrally-located installations with renewable energy in the area of electricity. In addition, high energy output. As a result, it is expected that the instruments for avoiding disruption to nature and the energy transition will reduce the risk of damage overall. landscape will be developed.

BGZ Gesellschaft für Zwischenlagerung mbH, a federally- 11.2 Key measures taken to date owned company for interim storage of nuclear waste: The Act on the Redistribution of Responsibility for Nuclear German Resource Efficiency Programme II (ProsRess II): Waste Management that entered into force June 2017 cre- The German Resource Efficiency Programme has been ated new rules on who is responsible for shut-down and extended and expanded by the Federal Government. This dismantling of nuclear power plants and who deals with includes a holistic view of material efficiency and energy and pays for nuclear waste management.

Key measures taken to date for environmental compatibility

zzGerman Resource Efficiency Programme II zzProhibition on unconventional fracking for extracting zzThe first Nitrogen Report of the Federal Government natural gas and oil zzEnvironmental monitoring of the growth of renewable zzThe Nature Conservation and the Energy Transition cen- energy in the area of electricity tre of expertise (KNE) zzGesellschaft für Zwischenlagerung mbH, a federally- owned company for interim storage of nuclear waste 11 ENVIRONMENTAL COMPATIBILITY OF THE ENERGY SUPPLY SYSTEM 167

In February 2017 statutory rules on fracking entered into force that provide for extensive prohibitions and restrictions on the use of fracking technology in Germany. Frack- ing is generally prohibited. The Länder may approve of a total of four research measures nationally to provide answers to unresolved issues.

Any assessment of the future trend in influential indicators in the area of environmental compatibility of the energy supply system should be based on a multi-year database of environmental monitoring of the energy transition. Such an assessment and any conclusions must therefore be reserved for future reports.

169

12 Grid infrastructure

Where do we stand?

The Thüringer Strombrücke (Thuringia electricity network) went online completely in September 2017, and has saved approximately €600 million in redispatch costs. Around 45% of the Power Grid Expansion Act projects had been implemented by the end of the first quarter of 2019. More than two-thirds of the projects have already been approved, however.

Federal planning for the big extra-high voltage direct current transmission lines is progressing in line with the Federal Requirements Planning Act. In the fourth quarter of 2018 and the first quarter of 2019, a total of 115 km of the almost 6,000 km of lines under the Planning Act were constructed. This is a total of 300 km at the end of the first quarter of 2019.

Grid charges for household consumers and for certain industry consumers went up significantly in 2017.

In terms of grid stability and quality, the reliability of the grid infrastructure in Ger- many remains at a very high level.

What is new?

In order to reduce the costs for network shortage management in the transmission network, the Federal Ministry for Economic Affairs and Energy initiated a broad stakeholder process. Initial outcomes have already been included in the 2017 – 2030 Network Development Plan as ad-hoc measures. In the draft version of this plan, the transmission grid operators worked out more details for the measures and addressed new innovative technologies.

Costs of grid expansion and operations are distributed more fairly – the Network Charges Modernisation Act (NEMoG) aims to gradually harmonise grid-use charges in Germany by 2023 and to remove regional differences. Implementation was planned in more detail in 2018 with the Ordinance on the Gradual Introduction of Uniform Federal Transmission Grid Charges. The first five steps toward implementation were taken in January 2019.

The Amendment to the Grid Expansion Acceleration Act adopted in April 2019 by the Bundestag is an important milestone for rapid expansion of the grid. 170 12 GRID INFRASTRUCTURE

What is next?

The grid expansion measures that have been agreed must be expedited.

The Action Plan Electricity Grid submitted by the Federal Ministry for Economic Affairs and Energy in August 2018 will be further developed and implemented. It contains a two-pronged strategy: Technical improvements, new technologies and operating concepts as well as improved congestion management will optimize existing grids. At the same time, grid expansion will be accelerated with strategic controlling, simplifying the planning process and economic incentives.

It is important to maintain and strengthen acceptance of the energy transition. This applies in particular to construction of power lines. By conducting a dialogue with the public and making its actions transparent, the Federal Government is tackling the challenge of gaining approval of the energy transition, and not only abstractly, rather also where it directly affects people.

Calculations of the demand for grid expansion up to 2030 include the recommendations of the Coal Commission on the phase-out of coal, which is to take place by 2038 at the latest. The Federal Network Agency will present its draft of the 2019 – 2030 NEP to the public, and by the end of 2019 will formalise the required demand for grid expansion for the period up to 2030.

Grid expansion Expanding and modernising grids to meet demand 12 GRID INFRASTRUCTURE 171

12.1 Present situation Transition should also assist in this process. In addition, as part of the funding programme Smart Energy Showcases – 12.1.1 Expansion of the transmission systems Digital Agenda for the Energy Transition (SINTEG) initiated by the Federal Ministry for Economic Affairs and Energy, Of the plans set out in the Power Grid Expansion Act innovative processes, technologies and business models for (EnLAG), about 45% of the entire length had been com- a power infrastructure operating on a large share of renew- pleted at the end of the first quarter of 2019. This corre- ables are being tested for consumers, storage and grid oper- sponds to about 800 power line kilometres. Around 1,200 ators in five extensive showcase regions. This living labora- had been approved–approximately two-thirds of the pro- tory for digitisation of the energy landscape is developing ject. Transmission system operators estimate completion of blueprints for future operation of the grid and systems in almost 70% of the total length under the Act by 2020. The the electricity sector and making recommendations for fur- Thüringer Strombrücke (Thuringia electricity network) ther development of the legal framework (see Chapter 13). went online in September 2017, closing an historical bottle- neck between Thuringia and Bavaria. It serves above all to transport electricity generated from wind in North-east 12.1.3 Grid investment and grid charges Germany to Southern Germany. The expansion of the power grids requires greater invest- Of currently 43 projects included in the Federal Require- ment. Investments of network operators into German ments Planning Act, at the end of 2018, only 300 km had electricity grids (see Figure 12.2) declined in 2017, as did been completed. In the fourth quarter of 2018 and the first expenditures for maintenance, to a total of €9.7 billion. quarter of 2019, a total of 115 km of the almost 6,000 km of However, they were still far above the average of the period lines under the Planning Act were constructed. 600 km 2008 – 2017. Most of the investment in the transmission have already been approved. Formal federal sectoral plan- grid – about €2.7 billion – went to new grid construction ning efforts are underway for the newly planned high volt- and grid reinforcements. Further to this, €388 million were age direct current transmission lines (HVDC lines) SuedLink spent on grid maintenance and repair. At the distribution and SuedOstLink. Commissioning is slated for 2025. Federal grid level, grid operators invested around €3.5 billion in the sectoral planning for the A-Nord project was initiated in expansion and €3.1 billion in the maintenance and repair early 2018. of the infrastructure.

12.1.2 Expansion of the power distribution grids

Power distribution grids increasingly face new tasks. Tradi- tionally, the role of power distribution grids is to distribute electricity locally within a limited region. Increasingly, these grids have to contend with new challenges. For example, feed-in to the distribution grid is increasing, because over 90% of installed capacity from renewable energy installations are connected to it, and more and more energy consumers are also electricity producers. Because the distribution grids are not designed for such electricity feed-in, however, there is increased need for investment. The improvement of electro mobility will also present new challenges to the expansion and flexible operation of the power distribution grids.

The use of digital technologies plays an important role in the modernisation of the distribution grids. So that distribution grids can manage the new challenges described in the foregoing, they must be converted to smart grids. Con- ventional electricity grids become smart grids when they are fitted with communication technology, instrumenta- tion and control technology and IT components. In this manner, grids can be connected intelligently, and grids and can be connected intelligently with electricity generation and consumption. The Act on the Digitisation of the Energy 172 12 GRID INFRASTRUCTURE

Figure 12.1: Projects under the Energy Line Expansion Act and the Federal Requirements Planning Act

Offs hore Windpark Offshore Kriegers Windpark Bundesgrenze Flak 2(DK) Baltic 2(CGS) (DK) Kassø/Bundesgrenze 29 Klixbüll

Husum

8 Kiel Göhl Heide 1 Süderdonn 33 Wilster Lübeck Siems Güstrow Brunsbüttel

Kreis 42 Schwerin Pasewalk Halbemond Stade Segeberg Wilhelmshaven Hamburg 9 Görries 38 Dollern Abzweig 28 37 31 ParchimSüd 11 Conneforde Krümmel Neuburg Emden Bertikow Krajnik/Bundesgrenze Ost 34 Elsfleth Perleberg Vierraden Dörpen West Bremen Sottrum West Gander- 39 Cloppenburg kesee Ost Wechold/ 11 3 Mehringen 5 0 H e r t z 2 Te n n e T 6 7 Neuenhagen Stendal Wustermark Berlin Merzen Landes- West 18 bergen Hannover 10 Potsdam 12 1 Wehrendorf Wahle Wolmirstedt Eisenhüttenstadt Baczyna/ Wester- Bundesgrenze Lüstringen 5 kappeln Helmstedt ! Magdeburg Doetinchem/ 16 Bechterdissen AbzweigWelsleben Bundesgrenze 27 Gütersloh 4 13 7 17 Förderstedt Gersteinwerk Hamm-Uentrop 3 Niederrhein Bergkamen Bärwalde Kruckel 9 6 Wolkramshausen 14 Lauchstädt 26 Twistetal Osterath 44 Pulgar Düsseldorf 19 13 45 Dresden Schmölln Borken 12 Mecklar Oberzier Vieselbach Röhrsdorf Punkt Erfurt 30 2 43 Sonneborn Dauersberg Legend 15 Weida 14 Bundes- 4 Project is built grenze(BE) Rempten- Weißen- dorf thurm 20 Project is approved or under construction Punkt Landesgrenze Bayern/Thüringen Punkt 17 Metternich (Punkt Ts chirn) A m p r ii o n Hünfelden 46 Project before/in planning approval Mechlenreuth 8 Punkt 5 Project in Federal Sectoral Planning/ Eschborn 15 WiesbadenKriftel Redwitz Regional Planning Marxheim Kelsterbach 10 18 Project before approval procedure Niederstedem Mainz 21 Grafenrheinfeld Urberach Transmission grid Pfungstadt No. of project under Federal Requirements Etzenricht Planning Act (responsibility of the Federal 7 Network Agency) Weinheim No. of project under Federal Requirements G380 20 Ludersheim 7 Planning Act (responsibility of the Land 19 Raitersaich authorities) No. of project under Energy Line Expansion Saarbrücken Altlußheim Schwandorf Philippsburg 7 Act (responsibility of the Land authorities) Großgartach Kupferzell Start and end point Neckarwestheim 41 Daxlanden Mast Support point 35 115A Kuppenheim 23 Birkenfeld Sittling Mühlhausen Pleinting Stuttgart Bühl Isar T r a n s n e t B W Atlihe m 21 Punkt 32 Punkt Rommelsbach PunktMatzenhof Wullenstetten 47 AbzweigSimhar Oberbachern Bundesgrenze(AT) 24 Simbach Ottenhofen Pirach München Eichstetten Herbertingen 25

Punkt Neuravensburg Punkt Niederwangen 40 Bundesgrenze (AT)

0 50 100 km

Source: Federal Network Agency Q1/2019 Note: Graphic representation of the state of development of line expansion projects under the Power Grid Expansion Act and the Federal Requirements Planning Act as of 31/03/2019. The lines on the map merely represent the connections between the legally defined grid connection points (straight lines) and should not be interpreted as the visualisation of the power line routes. 12 GRID INFRASTRUCTURE 173

Figure 12.2: Investment in new construction and expansion, maintenance and restoration of power grids million € 12,000

10,000

8,000

6,845 7,157 6,629 6,000 6,193 6,005 5,777 6,930 6,401 4,000 5,574 5,752

2,000 3,627 3,047 3,261 3,096 2,531 2,609 1,611 1,183 911 1,025 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Transmission grid operator investments Distribution grid operator investments

Source: Federal Network Agency, October 2018

The costs for the operation, maintenance and expansion of Grid operator revenues are subject to the incentive regula- the power grids are financed by grid charges, which are borne tion. The power grid is a natural monopoly. The regulation by the grid. Grid charges averaging 7.31 ct/kWh were levied enforced by the Federal Network Agency and Land regula- in 2017 to supply domestic customers drawing between tion authorities protects electricity consumers from any 2,500 and 5,000 kWh annually. When considered in relation monopolistic abuse. According to the regulatory frame- to the average electricity price of 29.86 ct/kWh this is work, grid operators can only use the grid charge to refi- equivalent to a 24.5% share in the price. Grid charges in nance costs that would be incurred under efficient man- 2017 increased on the previous year, rising 7.7%. For indus- agement conditions. To this end, an individual revenue cap trial customers with an annual offtake of 24 GWh that are is set for each grid operator for every year of the regulation not covered by special compensation arrangements, grid period. This should allow grid operators to generate suffi- charges increased by 9.7% to 2.26 ct/kWh in 2017, with the cient revenue to cover their actual costs taking efficiency result that the share of grid charges in the electricity price requirements into consideration. The revenue cap is a amounted to 14.5%. On the reference date, 1 April 2017, determining factor for the grid charge amount. grid charges for household and industrial customers went up. On 1 April 2018, the grid charges for industrial customers went up again, yet decreased for household customers.

Utilise the potential offered by optimising the existing grid

In order to reduce costs of network congestion problems in especially installation and upgrade to high current cables, the transmission grid, in 2017 the Federal Ministry for Eco- and a more proactive control of electricity flows with phase nomic Affairs and Energy launched a comprehensive stake- shifters. These measures should be implemented by 2023. holder process together with the Federal Network Agency, The stakeholders involved expect to achieve a significant the German Energy Agency, BET Aachen, associations and reduction in costs in net network congestion management companies, and worked out an action plan (dena, BET 2017). by implementing these measures. The transmission grid The work group developed seven measures in addition to operators place this savings potential at more than €200 expanding the grid, that should lower economic costs and million annually. On the basis of these results, there are cur- improve utilisation of the electricity grid in the short term. rently additional calculations being made which will be This includes optimal grid monitoring and structural included in the detailed Action Plan Electricity Grid. improvements of five sections of the transmission grid, 174 12 GRID INFRASTRUCTURE

12.1.4 Stability and quality of the power grids Costs for frequency and voltage level maintenance for common types of energy dropped in 2017 compared to the The grid operators are responsible for the stability of the previous year by 27%, from €198 to €146 million, also power grids. To keep the grids stable, the grid operators rely because less balancing energy is needed in a functioning on certain measures, known as ancillary services, for exam- electricity market. ple in the event of frequency or voltage fluctuations or grid bottlenecks. For example, balancing capacity is used to correct frequency deviations. Grid congestion is handled by 12.2 Key measures taken to date redispatching conventional power stations and managing the feed-in from renewable energy plants. Generally speak- The Power Grid Expansion Act defined the requirements ing, producers of renewable electricity, as well as storage for the construction of new power lines as well as strength- systems and flexible demand, will also need to contribute ening existing power lines. The expansion projects act as more to system stability in the future. Grid operators can the baseline for calculations in the Power Grid Expansion already use interruptible loads today, for example. In addi- Act. Currently the Power Grid Expansion Act comprises 22 tion, modern renewable energy plants provide system ser- projects which were categorised as urgent as early as 2009. vices. They already contribute significantly to maintaining Taking into account the Federal Network Agency’s fourth voltage and can provide balancing capacity. quarterly report for 2018, the total length of the lines under the Power Grid Expansion Act amounts to around 1,800 km. Costs for system services increased in 2017, reaching €1.9 The Federal Network Agency continuously documents the billion, compared with €1.6 billion in the previous year (see current state of infrastructure planning and construction Figure 12.3). This results in average costs of 0.37 cent per projects. The status of implementation of projects under kilowatt hour of electricity consumed, 0.06 cent more than the Act is described in Chapter 12.1.1. the previous year. The costs for ancillary services are borne by electricity customers largely through the grid charges The Federal Requirements Plan in the Federal Require- (see Chapter 10). The share of ancillary service expenses that ments Planning Act of 2015 is based on the projects of the can be attributed to congestion in the power grid (espe- 2024 Grid Development Plan that have been approved by cially redispatch, feed-in management and grid reserve) has the Federal Network Agency. The swift expansion of increased by 28%, from €1.4 billion in 2016 to €1.8 billion renewable energy requires further expansion of the grid in 2017. It is important to keep in mind that the costs beyond the projects under the Power Grid Expansion Act. incurred in 2017 also included compensation paid for feed- The Federal Requirements Plan currently comprises a total in management for claims from previous years (2015, 2016). of 43 projects, 16 of which are categorized as interstate or

Figure 12.3: Costs for ancillary services million €

2,000 1,946.8

1,800 1,627.3 1,606.3 1,600 1,367.0 1,400 1,320.0 1,190.4 1,200 1,119.4 1,112.3 1,090.2 1,068.0 1,000

800

600

400

200

0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017*

redispatch, countertrading, black start capability, reactive power, interruptible loads Feed-in management (paid out compensation)

energy to cover transmission losses minute reserve secondary balancing power primary balancing power grid reserve

Source: Federal Network Agency, November 2018 12 GRID INFRASTRUCTURE 175

cross-border projects. The total length of the lines under the transmission system and avoid further increases in grid the Federal Requirements Planning Act is currently at congestion. The remaining expansion amounts are distrib- around 5,900 km. In the Grid Development Plan, 3,050 of uted across the other regions in Germany. In the case of this amount is categorised as network reinforcement and offshore wind, the annual auction volume is distributed as about 2,850 as new construction. The status of implemen- follows: 500 MW in 2021 and 2022, 700 MW in 2023 to 2025 tation of projects the Federal Requirements Planning Act is and an average of 840 MW from 2026 onwards. This seeks described in Chapter 12.1.1. to ensure a continuous deployment path while also guaranteeing that the necessary connection lines for transport- Underground electro cabling has priority for HVDC trans- ing electricity are already in place when new offshore wind mission lines specifically marked as such. The Act to Amend turbines commence operation. Furthermore, additional Provisions of the Law Governing Power Line Construction capacity construction for 2021 is focussed on the Baltic Sea. gives priority to the planning principle of underground These measures relieve the strain on the grids. cabling for new HVDC lines. This prioritisation concerns the major north-south power line route projects – SuedLink The Network Charges Modernisation Act that entered into and SuedOstLink – as well as the northern part of Corridor force in July 2017 gradually reduces regional disparities in A. With this approach, legislators are addressing concerns grid charges and creates more distribution equality. After regarding large-scale overhead power lines. The aim is to the first step has been taken in January 2019, the Federal increase local acceptance for the projects and speed up the transmission grid charges will be standardised nationwide expansion of the grid. by January 2023 in four additional phases. Implementation was planned in more detail in 2018 with the Ordinance on The 2017 Renewable Energy Sources Act introduced grid the Gradual Introduction of Uniform Federal Transmission expansion areas for onshore wind energy and a minimum Grid Charges. In addition, the Network Charges Modernisa- quota for offshore wind energy for the Baltic Sea. Initial tion Act (NEMog) stipulated that payments made by distri- steps were taken to better orchestrate grid expansion and bution network operators to power producers for avoided expansion of renewables. The expansion of wind energy grid fees will be gradually removed. This could lead to a will temporarily be adapted locally in areas with high grid palpable slowing of the increase in network costs, espe- congestion. In these areas, the volume put out for auction cially in the north and the south of Germany. Cost develop- for onshore wind facilities will temporarily be limited - ment from 2017 to 2018 has already provided specific evi- until the end of 2019 - to 58% of the average capacity added dence of this. This development benefits power customers. for the years 2013 to 2015. This helps relieve the strain on 176 12 GRID INFRASTRUCTURE

Major measures for the grid infrastructure

zzNetwork Charges Modernisation Act (NEMoG) zzintroduction of strategic controlling for grid expansion zzAd-hoc grid measures in the Network Development Plan zzElectricity Market Act (see Chapter 9) zzAmendment to the Grid Expansion Acceleration Act zzAct on the Digitisation of the Energy Transition (see zzOptimisation of network shortage management Chapter 13)

The NEMoG and the Ordinance on Calculation of Offshore tricity sector, as well as the goals of the 2050 Climate Action Grid Charges that entered into force in March 2019, that Plan. This will be achieved by 2030 in the individual scenar- provided more detail on the Act and adapted regulatory ios with variations in the renewables mix (offshore wind: laws, made the costs for offshore grid connection uniform 17 – 20 GW, onshore wind: 74 – 86 GW; photovoltaics 73 – 105 for transmission grid operators as of 2019, as part of the GW). The 2030 climate goal will accordingly be achieved in offshore compensation charge, and passed on the costs to all scenarios. The assumptions for installed coal capacity in electricity consumers. Offshore connection costs are no Scenario C 2030 correspond almost exactly with the recom- longer part of grid charges, yet are still a component of mendations of the Coal Commission (17 GW). Accordingly, electricity prices. The Federal Network Agency conducts grid planning also factors in the phasing out of coal. To annual cost monitoring in place of the former incentive reflect a larger scheme of probable developments, the sce- regulation. narios include assumptions on various intensities of sector coupling (e.g. number of electric cars and heat pumps, The Amendment to the Grid Expansion Acceleration Act power-to-gas) and thereby also regarding various amounts adopted in April 2019 by the Bundestag and the Bundesrat of electricity consumption. is an important milestone for rapid expansion of the grid. The simplification and acceleration of planning and The potential grid demand is identified in the Network approval processes is key, achieved by partially waiving fed- Development Plan. The goal of the NDP 2019 – 2030 is to eral planning, strengthening the notification procedure and identify the demand for grid expansion. In April 2019 providing the possibility of proactive planning by laying transmission system operators submitted a second draft of empty pipes. All of these specific measures, taken together, the NDP describing future grid expansion needs. The trans- will help accelerate expansion, especially of the transmis- mission system operators project in all scenarios for 2030 – sion network. At the same time, substantive standards in beyond the projects under the Power Grid Expansion Act environmental law, and particularly health protection, will and the Federal Requirements Plan Act – the need for a not be weakened. Furthermore, planning at the Federal, new HVDC corridor from the North Sea coast to North Länder and municipal levels will be better coordinated. Rhine-Westphalia, and from there on to Baden-Württem- Measures under the Grid Expansion Acceleration Act will berg. They also see additional need for three-phase current be supplemented with the authorisation of the Federal expansion (reinforcing existing power lines, including Government to decree a federal compensation ordinance installation and upgrade to high current cables as well as in order to create uniform federal standards for expenses new construction). The Federal Network Agency will use incurred under nature conservation legislation relating to this as a base for its draft and will consult with the public power lines for which the Federal Network Agency is in the summer. The Federal Network Agency will also fac- responsible. tor in the recommendations of the Coal Commission on the phasing out of coal. They recommend that coal capacity in 2030 should be limited to 17 GW and a complete 12.3 Outlook phase out be finished by 2038. At the end of 2019, the Fed- eral Network Agency is expected to approve of the final The scenario framework for the Network Development NDP 2019 – 2030. Plan provides an outlook on the complicated energy landscape in the target year 2030. In June 2018 the Federal Net- work Agency approved of the scenario framework for the 12.4 Conclusions Network Development Plan 2019 – 2030, taking into account the breadth of probable developments relating to the energy The expansion of the extra-high voltage grid infrastructure policy goals of the Federal Government for the period to is of central importance to the success of the energy transi- 2030. The scenarios factor in the goal set out in the coalition tion and to Germany reaching its climate goals. As renewa- agreement of about 65% share of renewables in the elec- ble energy expands and nuclear energy is phased-out, elec- 12 GRID INFRASTRUCTURE 177

tricity is increasingly produced and consumed in separate zzall large direct current electricity motorways from north geographical areas. Therefore the swift expansion of the to south, power grids at the transmission system level is essential, particularly in order to transport the electricity derived zzhalf of all other alternating current projects managed by from offshore and onshore wind, which is primarily pro- the Länder and duced in the north and east, to the power consumption hubs in the south and west of the country. zzhalf of all other alternating current programs managed by the Federal Network Agency The expansion of the transmission systems is also a must if we are to make the European internal energy market a real- should be approved. The Federal Government expects that ity. European electricity trading boosts the efficiency of the important milestones will be reached in the near future. power supply system and increases security of supply. With For example, planning the corridors for the major electric- supply and demand balanced over larger areas, it also ena- ity highways is progressing well. However, the exact routes bles, inter alia, the cost-effective integration of renewable for the electricity highways are not yet clear. For this rea- energy. Besides the domestic expansion of the grid, suffi- son Figure 12.1 shows the Federal Requirements Plan Act cient cross-border grid capacities are also needed for a projects Ultranet, SuedLink, SuedOstLink and A-Nord as functioning internal electricity market (see Chapter 3). simple straight lines. The rough outlines of these routes will be available soon. The Federal Network Agency is cur- Progress in the approval process is important for rapid rently working on procedures for federal sectoral planning expansion of the power grid. The energy ministers at the to this end. They form the basis for the plan approval pro- Federal and Länder levels confirmed at the Grid Summit in cedures that follow, and thereby for reaching the approval September 2018 that they want to jointly push ahead with goals. The Federal Government expects additional approv- grid expansion programmes. They agreed that by the end als in 2019 for additional projects under the Power Grid of 2021: Expansion Act and the Federal Requirements Plan Act. zzall projects under the Power Grid Expansion Act,

Transparency, participation and acceptance of grid expansion

The energy transition can only be successful if acceptance Grid initiative, which has ten citizens’ advice centres nation- is ensured where the transition is specifically implemented. wide, hosts a wide range of events in the local region, pro- This applies in particular to grid expansion. In the sense of vides online information about its services and offers for- a dialogue-driven grid expansion, the Federal Minister for mats for dialogue. Economic Affairs and Energy has placed a specific focus on local conversations with citizens and has gotten a direct Regular, comprehensive monitoring of the expansion pro- impression while travelling to North Rhine-Westfalia, Nied- jects creates transparency for all stakeholders on the pro- ersachsen, Thuringia, Bavaria and most recently, Hessen. gress of the infrastructure projects. The Federal Network Agency also publishes a report every three months, accessi- The public is closely involved in the grid expansion plan- ble under www.netzausbau.de. This monitoring documents ning process. This applies to demand assessment, federal the state of implementation of projects under the Federal sectoral planning and planning approval procedures. For Requirements Plan Act and projects under the Offshore example, transmission system operators and the Federal Grid Development Plan, i.e. the connection lines for off- Network Agency make draft grid development plans availa- shore wind farms. In the reports, projects are also marked ble for public consultation. In each case the public has the either as grid expansion or grid reinforcement projects. As opportunity to submit written opinions concerning these of mid-2018, monitoring also includes measures for opti- plans. In addition to participating in these formal proce- mising existing networks (e.g. using available grid monitor- dures, the public can also get involved in informal dialogue ing or high-temperature conductors). Applying Directive processes at an early stage. For example, the TSOs and the 2007/2/EC can also assist in creating geographic informa- Federal Network Agency organise numerous local events. tion bases in connection with power line routes and thereby increase transparency of grid expansion and net- In addition, the Federal Ministry for Economic Affairs and work optimisation. Energy has been promoting the Civil Dialogue on the Power 178 12 GRID INFRASTRUCTURE

The Action Plan Electricity Grid submitted by the Federal zzCongestion management will be optimised and costs Ministry for Economic Affairs and Energy will be further reduced. Feed-in management will be adapted to con- developed and specific measures will be incorporated. The form with new legal requirements, and will be converted plan contains a double strategy consisting of better utiliza- into a uniform regime with redispatching, so that optimi- tion of the existing grid and accelerated grid expansion. sation of congestion management is carried out uni- Technical improvements, new technologies and operating formly by transmission system operators, while at the concepts as well as improved congestion management will same time maintaining priority access. Legislative adjust- optimize existing grids. At the same time, grid expansion ments make it possible if needed to curtail production at will be accelerated with strategic controlling, simplifying renewable energy and CHP plants that function well for the planning process and economic incentives. The Action relieving congestion, even if the capacity of less effective Plan comprises the following building blocks: conventional plants is not yet exhausted in a particular case. This makes congestion management more efficient: zzThe existing grid will be utilized better. There are a num- overall fewer plants will need to adjust their input vol- ber of ways to increase the efficiency of the existing grid. ume and be compensated for it. The costs of congestion This can be done with existing technology. This includes management will go down. Legislative adjustments will in particular systematic and widespread monitoring of also require that in the future all plants are regularly overhead cables in real time and constructing phase scaled back or started up on the basis of grid load fore- shifters that manage current flows to better utilise exist- casts. The grid operator curtailing output at a plant must ing power grids. This is dependent on rapidly implement- replace the curtailed volumes. This enhances system ing the approved measures of the NDP. security. At the same time, it puts an end to the unequal treatment of renewable and CHP plants compared with zzDigitisation and technical improvements provide new conventional power plants. Up to now only conventional possibilities, even for grid operation. Automation of plants have been included in scheduled, compensated power grids can play an important role. Newly auto- congestion management. This legislation amends the mated operation systems that detect and remedy power Incentive Regulation Ordinance to ensure that, under line overloads in fractions of a second could help to bet- certain conditions, costs incurred by network operators ter utilise existing safety reserves. In addition, new digital for preparing for the new system are taken into account technologies can also help to better manage power flow when revenue caps are set. The introduction of the new in the grids and to distribute loads more evenly over the procedures must be well prepared. In addition, until the power lines. The goal is “smart grids”. new regulation enters into force on 1 October 2021, a 12 GRID INFRASTRUCTURE 179

reasonable solution should be found and implemented zzPlanners will then assess whether and how the legal regarding the treatment of all costs of congestion man- framework can provide effective monetary incentives for agement. The Federal Network Agency will present a cost-efficient optimisation of the electricity grid and grid report by September 2019 on feed-in management and expansion. Accompanied by a dialogue conducted with redispatching costs and will put forward a proposal on various branches of industry, recommendations are to be how to include these costs in the incentive regulation. worked out by the end of 2019 for creating regulatory incentives for reducing congestion management. zzStrategic controlling will be introduced. The federal level Approaches should also be discussed for linking grid and the Länder have agreed to create strategic control- expansion and redispatching costs (bonus systems); in ling of network expansion programs. The goal is that the essence, more power line construction also means less programs can be completed on time. For each program congestion management. the participants (Federal Network Agency, the Länder and the project sponsors) will first work out a specific As the energy transition continues, non-transmission ser- schedule that clearly defines milestones and responsibili- vices must also be continually developed. In addition to ties. The controlling will then ensure that hurdles to the developing technical rules, efforts must be made to ensure individual projects are recognised early on and measures that non-transmission services can also be provided cost- are taken in time to avoid delays in network expansion. efficiently. To this end, evaluations are currently being conducted as to whether provision of voltage stability could be zzStatutory measures accelerate network expansion. With more economically efficient if idle power were compen- the proposed draft legislation on accelerating network sated. expansion (law to amend the Grid Expansion Accelera- tion Act), numerous changes to the law were suggested, some with immediate and some with long-term effects on accelerating the planning and approval procedures. The basic substance of the changes is simplification and acceleration of approval procedures for optimisation, reinforcement and expansion of power lines. Approval procedures already in process will be simplified. Further- more, with prescient planning, future plans for additional expansion of the transmission network can be factored into ongoing procedures.

181

13 Integrated development of the energy system

Where do we stand?

The economically efficient integration of the electricity, heating and transport sectors contributes increasingly to decarbonisation, greater efficiency and a more flexible energy system. The importance of heat pumps for heat generation has increased dramatically.

Decarbonising the heating supply (heating transition) for buildings, industry and the crafts, trades and services sector is absolutely necessary for achieving the energy transition. Heating networks play a key role in this process.

Digitisation is changing the structure of the energy sector in major ways, And is therefore a decisive driving force of the energy transition. Smart metering systems are provided for in the Act on the Digitisation of the Energy Transition (GDEW) to serve as communication platforms for exchanging data across various utilities and sectors. The first Barometer of Digitisation of the Energy Transition presented on behalf of the Federal Ministry for Economic Affairs and Energy reported that progress has been made in specific areas. At the same time, there is work to be done yet on implementing the system and platform aspects of the Act on the Digitisation of the Energy Transition (GDEW).

What is new?

The heating transition was given a boost in 2017 with the launch of the Pilot Project Heating Networks 4.0 Funding Programme, which is aimed at especially cost-efficient and largely renewables-operated heat networks, as well as the innovation necessary for such networks.

Under the Combined Heat and Power Act, the first bids for innovative CHP systems took place in June 2018. These systems can provide flexible, highly efficient operating assistance for the electricity market and networks.

The first certification of a Smart Meter Gateway in December 2018 was an important milestone for the digitisation process. This sets a new standard for smart metering in Germany, and provides a strong impetus for creating a technologically advanced smart grid. 182 13 INTEGRATED DEVELOPMENT OF THE ENERGY SYSTEM

What is next?

Integrated development of the energy system is essential for the energy transition. To achieve this, the framework must be quickly adapted and planning reliability ensured.

The Federal Government will promote the heating transition. This includes creating new heat networks, but also modernising existing heat networks and a stronger emphasis on renewable energy in the heating supply.

Regarding digitisation it is especially important to utilise the potential that the GDEW provides for creating smart grids for an affordable energy supply. The Standardisation Strategy Roadmap for Cross-sector Digitisation in accordance with the GDEW is a road map that was presented in 2019, and describes how the smart meter gateways are forming a comprehensive communications platform for the energy transition. The blockchain strategy to be presented by the Federal Government in the summer of 2019 will help foster the development of digital technologies.

Sector coupling Unlocking the potential of efficient sector coupling, the heating transition Heating transition and digitisation for a successful energy transition Digitisation 13 INTEGRATED DEVELOPMENT OF THE ENERGY SYSTEM 183

13.1 Present situation and key measures same quantity of heat or propulsion energy than conven- taken to date tional fossil fuels or technologies involving several conversion steps. For this reason, they are particularly important 13.1.1 Sector coupling – integrating the electricity, for the energy transition and are the subject of evaluations. heating and transport sectors The importance of heat pumps for heat generation has Renewable electricity is becoming the most important increased dramatically in recent years. Since 2008, the num- source of energy. Efficient use of renewable electricity ber of installed electric heat pump systems has risen from increasingly assist in the decarbonisation process. The less than 457,000 to over 964,000 in 2017. This is attributa- demand for energy that remains after tapping existing effi- ble both to the continuous reduction in the cost of the sys- ciency potential and using renewable energy directly in the tems and to regulatory minimum requirements with regard heating and transport sector will increasingly be covered by to renewable energy and energy efficiency (e.g. Energy Con- the efficient use of renewable electricity (sector coupling). servation Ordinance, Renewable Energies Heat Act), as well

In the transport sector, this will be accomplished, in par- as funding programmes (e.g. CO2 Building Modernisation ticular, through the roll-out and uptake of direct-electric Programme, Market Incentive Programme). Over the same drive technologies based on a power supply increasingly period, the installed thermal capacity also grew by a factor derived from renewables. In the buildings sector, alongside of 2.5, from 3,651 MW to 9,277 MW. This is because the other renewable energy sources electricity from renewables increasing numbers of pumps being installed are also is playing an increasingly important role in the heating supply, e.g. through the use of heat pumps. Considering the limited amounts available, sustainably produced renewable fuels (e.g. biomass) will be employed where the use of electricity is not technically or economically feasible. This can apply to the aviation or shipping sectors, in particular, and to some parts of industry. However, fossil fuels are still cheaper than electricity for transport and heat, because electricity prices are burdened with various government- induced price components.

High-efficiency heat pumps and electric vehicles require comparatively little electricity and can make a major contribution to decarbonisation and efficiency improvements in the heating and transport sectors. As Table 13.1 illustrates, both these technologies need less electricity to generate the

Table 13.1: Different quantities of fossil fuels replaced by different sector-coupling technologies with one kilowatt hour of electricity (in the heat supply and transport sector)

regenerative energy supply savings in fossil energy substitution ratio input technology energy or use technology input provided 1 kWh regenerative Power-to-Heat 3.3 kWh of heat condensing boiler 3.1 kWh of natural 3.1 electricity heat pump gas 1 kWh regenerative e-vehicle 4.6 km combustion engine 2.6 kWh of diesel 2.6 electricity 1 kWh regenerative Power-to-Heat 1.0 kWh of heat condensing boiler 0.9 kWh of natural 0.9 electricity dielectric gas 1 kWh regenerative Power-to-Gas 0.7 kWh hydrogen steam reforming 0.9 kWh of natural 0.9 electricity (hydrogen) residue gas 1 kWh regenerative Power-to-Gas 0.6 kWh methane 0.6 kWh of natural 0.6 electricity (methane) gas 1 kWh regenerative Power-to-Liquid 0.5 kWh of liquid 0.5 kWh of liquid 0.5 electricity fuel fuel

Source: Federal Environment Agency (2016a) and (2016b). The calculations in the sources are based on plausible assumptions. The values in the table have been rounded off. 184 13 INTEGRATED DEVELOPMENT OF THE ENERGY SYSTEM

increasingly bigger and more powerful. The development tems in new building construction, see Chapter 6: Build- of the electricity consumption of all heat pumps has been ings). More R&D is needed to optimise the installation and largely in step with the thermal capacity, and stood at use of heat pumps. roughly 5.9 TWh in 2017. In 2017 the share of heat pumps in heating systems in new residential spaces was about The number of electric and plug-in hybrid vehicles on Ger- 27%, according to the Working Group on Energy Balances; man roads rose again in 2016. Having said that, with the however, this share for existing accommodations was only exception of the rail sector the electrification of vehicle 2% for electric heat pumps (for information on heating sys- drives in Germany is still in its infancy (see Chapter 7).

Figure 13.1: Number and electricity consumption of heat pumps in GWh 1,200,000 8,000

1,053,066 7,000 1,000,000 964,552 6,000 884,343 5,878 5,438 814,437 800,000 755,180 5,035 5,000 695,670 4,671 637,589 4,315 4,000 583,569 3,933 600,000 539,074 3,518 499,982 456,730 3,107 3,000 2,724 400,000 2,360 1,982 2,000 200,000 1,000

0 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

energy consumption of heat pumps (existing) number of heat pumps (existing)

Source: Federal Environment Agency/Working Group on Renewable Energy Statistics based on data from the Centre for Solar Energy and Hydrogen Research and the Bochum Geothermal Centre, 02/2019

Figure 13.2: Quantity and electricity consumption of two-wheel and three-wheel-plus electric vehicles in GWh in millions 250 3.0 224 2.7 2.5 200 2.2

163 1.8 2.0 150

1.4 121 1.5

100 1.1 88 1.0 59 50 0.5

0 0 2012 2013 2014 2015 2016

all-electric cars plug-in hybrid passenger cars two-wheel vehicles buses light-duty vehichles up to 3.5t HDV and tracktor units

total number of e-vehicles, annual average

Source: Federal Environment Agency’s TREMOD model 5.65 5/2017, includes all-electric drives and plug-in hybrids. 13 INTEGRATED DEVELOPMENT OF THE ENERGY SYSTEM 185

Figure 13.3: Degree of electrification in industry in %

100 100 100 100 100 100 100 100 100 100 100 98.2 97.8 98.1 98.2 97.2 90 95.7 95.9 95.7 95.7 95.7

20 8.8 10 7.9 7.8 7.8 8.0 7.6 7.9 8.0 7.5 7.4

0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Degree of electrication for heating applications Degree of electrication for cooling applications Degree of electrication for mechanical energy

Source: AGEB 11/2018

Nonetheless, electricity consumption deriving from electric try process still uses primarily gas, followed by coal. Power mobility using two-wheel and three-wheel-plus vehicles consumption of the industry in 2017 of 836 PJ is broken increased in 2016 by around 37% to roughly 224 GWh com- down into 68% (567.5 PJ) for mechanical applications, pared with the previous year (see Figure 13.2). Due to the 17.5% (146.7 PJ) for heating (mostly process heat), and 6.7% increasing share of renewables in the electricity sector, (55.6 PJ) for cooling. transport-related final energy consumption from renewables also increased. However, calculations made using the Sector coupling is an important option for helping achieve Federal Environment Agency’s TREMOD model show that energy and climate goals, and is the object of multiple electricity consumption for the rails between 2008 and 2016 funding programmes. The Federal Government supports dropped by about 4%. The Federal Government is commit- innovative technologies with various programmes that ted to ensuring further progress is made in the field of alter- enable sector coupling, for example under the Market native drive technologies (see Chapter 7.2). Incentives Programme for heating with renewable ener-

gies, the CO2 Building Rehabilitation Programme and the The share of electricity in final energy consumption of Heating Networks 4.0 funding programme. For the SINTEG industry went up by 2.5% in 2017, and at 836 PJ was around Programme a regulation with experimental options was 31% of total consumption. In the years under study there created that enables participants to experiment with sector has been no major change in the structure of energy con- coupling in practice (SINTEG Regulation). sumption according to area of application or energy source. Whereas the degree of electrification for cooling uses has A substantial impetus for sector coupling is the ‘Gas 2030 remained unchanged at 100% over the years, and for dialogue process’. The issue is whether renewable electric- mechanical applications at 95%, the share of electricity in ity can be utilised in the long term, and to what extent (see heating applications hovered around 7%. This type of indus- Chapter 9).

Key measures taken to date for sector coupling

zzMarket Incentives Programme for heating with zzLow-temperature heat networks with seasonal thermal renewable energies (see Chapter 6) energy storage zzElectric mobility eco-bonus (see Chapter 7) zzPromotion of innovative CHP systems under the CHP Act zzpromotion of heat pumps zzSINTEG Regulation 186 13 INTEGRATED DEVELOPMENT OF THE ENERGY SYSTEM

13.1.2 Heating transition provide the flexibility required for transitioning to heating supply that functions well in the framework of the energy The heating sector accounts for more than half of total transition. In particular, in dense construction in urban German final energy consumption. More than 3,200 PJ are areas and historic city centres with construction restric- attributable to the buildings sector, and 1,800 PJ to process tions, pipe-based heating supply for buildings allows for heat in the industrial sector. At the same time, there is sub- use of high percentages of renewables and waste heat from stantial potential for improving efficiency and using industrial or commercial use. In addition, heating networks renewable energies. are especially efficient at providing renewable energies, since several buildings or neighbourhoods can be supplied Up until now, capacity has been increased in the electricity at once. In connection with large heat accumulators, heat sector in particular. Putting more emphasis on using elec- networks make it possible to economically store renewable tricity directly to generate heat (power-to-heat) would energy heat seasonally. however lead to a sharp increase in German electricity consumption. On the other hand, as with efficiency improve- The Pilot Project Heating Networks 4.0 Funding Pro- ments, heat generated directly with renewable energies gramme was launched in July 2017. This programme was would reduce the need to expand generation and grid the first systemic funding in the area of heating infrastruc- capacities in the electricity sector. More efficiency and heat ture that focuses not only on individual technologies and from renewable energies will help to reach the energy and components, but also on whole systems, to discover new climate targets for 2030 and to make the energy transition means for lowering costs and tapping efficiency potential generally more efficient and cost-effective. at the systemic level. Funding is provided for feasibility studies as well as for covering the costs of creating heating Heating networks are key in decarbonising the heating sup- networks based to a large extent on renewables, the effi- ply. They make it possible to combine various technologies cient use of waste heat, and for significant reductions in the for reducing CO2, such as geothermal and solar thermal temperature level compared with common heating net- power, large heat pumps or waste heat recovery. At the works. The low temperature level minimises energy loss, same time they can serve as heat accumulators and thereby raises the output of renewable heat generating plants such as heat pumps and solar thermal plants, and renders them more energy and cost efficient. Such innovative systems can also provide additional flexibility for the electricity market by combining heat pumps and seasonal large heat storage facilities, and can also provide a boost to sector coupling by enabling additional loads to be distributed efficiently and to the benefit of the electricity market, and to store energy for the long term.

Additional incentives for a low-carbon heating supply are to be created with the bids for innovative CHP systems, which first took place in June 2018. These comprise a combination of heat generated with renewables and electrical heat generators (e.g. integrating a refuse-fired CHP installation and a heat pump). Innovative CHP systems should show how CHP plants can integrate renewable heat and renewable electricity by reacting flexibly in two ways. Dur- ing a period of high feed-in of heat from renewables, the heat production of CHP plants is reduced, saving fuels and emissions. During a period of high feed-in of electricity from renewable energies, the CHP plant reduces electricity

Key measures taken to date for the heating transition

zzPilot Project Heating Networks 4.0 Funding Programme zzbids for innovative CHP systems zzPromotion of heat pumps (see Chapter 9) 13 INTEGRATED DEVELOPMENT OF THE ENERGY SYSTEM 187

production and saves fuels and emissions. If there is a large zzDigitisation allows consumers to have more say in how, offer of electricity generated with renewables and thereby where and when they generate or consume their own low or negative exchange prices, an electric heat producer energy. It facilitates easier and more exact metering of can take additional pressure off of the electricity market. energy consumption, which is a major step in increasing This technology transforms inflexible, heating-dependent energy efficiency. minimum generation capacity into flexible electricity demand. To solve acute grid bottlenecks, this technology is zzDigitisation makes it possible to develop new business also used under the approach of ‘using instead of curtailing’. models and lower systems costs and transaction costs for administrative processes.

13.1.3 Digitisation of the energy transition Digitisation will accordingly become a decisive driving force of the energy transition. If it is correctly carried out, Digitisation is changing the structure of the energy sector digitisation can provide a major contribution to supply in major ways: security, and to affordability and sustainability of the energy supply. Digitisation affects all levels of the value zzDigitisation allows for structural solutions for complex- chain in the energy industry – generation, grids, trade, sup- ity. Numerous energy providers and consumers are ply and consumption. The goal is a networked value chain. becoming active participants in developments in the Smart networks and management of generation and con- energy market. Digital connectivity is the basic condi- sumption using innovative digital technologies are the tion for operating the decentrally organised energy sup- essential factors for launching the digital transformation of ply systems of the future, including the optimal integra- the energy sector. If it is possible to create attractive condition of renewable energies into the electricity system. It tions for using digital technologies in the German energy is absolutely essential for integrating consumers flexibly sector, this could provide German companies substantial in the grid, and for scaling back the need to expand to economic advantages. For this reason, the Federal Govern- grid to a reasonable level. ment has launched many measures for digitisation of the energy transition. zzIntelligent metering systems are the basis for digitisation of the energy transition. At the heart of this process The Act on the Digitisation of the Energy Transition (GDEW) is the smart meter gateway certified by the Federal has established a clear legal framework for digitisation of Office for Information Security – a platform that can be the energy transition. The need to exchange data will used broadly for all energy transition related applica- increase tremendously in the energy sector. Millions of tions. It satisfies the strictest data protection and secu- generating plants, charging points for electric vehicles, heat rity standards. pumps and storage facilities must be securely and reliably 188 13 INTEGRATED DEVELOPMENT OF THE ENERGY SYSTEM

integrated into the electricity grid of tomorrow. The recon- part of supplying energy, for example, in the smart home struction and new construction of our electricity grids area. should be limited to the absolute minimum. The most important task of the government is therefore to create a The heart of the GDEW is the Metering Act (Gesetz über framework for this exchange of information that facilitates den Messstellenbetrieb und die Datenkommunikation in security, interoperability between various IT systems and intelligenten Energienetzen: MsbG). As a new independent innovative solutions. This is expedited by the Act on the piece of legislation, it stands alone next to the Energy Digitisation of the Energy Transition (GDEW) that entered Industry Act, the Renewable Energy Sources Act and the into force in 2016, with the four pillars of standardisation, Combined Heat and Power Act, and contains basic rules on data protection and security, investment security and digitisation. A key element of the Act are the strict rules on acceptance. the protection of personal data, which set out which market participants may use what data for what purposes. The Smart metering systems provided for in the GDEW are to data protection rules in the GDEW were designed to conserve as communication platforms for exchanging data form with the General Data Protection Regulation from the across various utilities (electricity, heating, gas and water) outset, and were developed in consensus with the German and in the sense of sector coupling (including electric Federal Commissioner for Data Protection and Freedom of mobility, heating, smart homes). They comprise modern Information. measuring devises (digital metres) and a smart meter gateway, and connect meters, generating plants, charging Operation of critical infrastructure such as the electricity points and much more, integrating them into communica- supply requires high standards for IT security of the sys- tion networks. Smart meter gateways make bi-directional tems in use. The energy system may not be rendered more communication possible – meaning that they can also susceptible to hacking, for example, in the process of digiti- transmit control signals to consumer units. As communica- sation. For this reason, smart meter gateways are subject to tion platforms for the smart grid, gateways are therefore an extensive certification process conducted by the Federal important for the infrastructure of digitisation. Smart Office for Information Security (BSI). The implementation meter gateways as provided for in the GDEW should ulti- and certification of suitable protection measures is a deci- mately function as infrastructure also beyond the energy sive factor in order to guarantee security of supply, even as sector. For that reason, these systems should be equipped the degree of digitisation increases. One manufacturer has with technology that enables them to administer value- already passed the certification process and the several added services – for example, functions that are not directly meter operators have initiated installation of certified gate- 13 INTEGRATED DEVELOPMENT OF THE ENERGY SYSTEM 189

ways. As soon as three gateways of various manufacturers The expansion of electric mobility and more emphasis on have been certified by BSI, the statutory roll out of smart flexible consumer appliances (e.g. home storage, heat metering systems as a digital infrastructure for the energy pumps) can impose major burdens on the distribution transition may begin. grids. If used well, however, these new, flexible loads can provide the opportunity to counteract the volatility of The Federal Ministry for Economic Affairs and Energy renewable energy generators, and to increase the stability started its own monitoring of the digitisation process with of the electric system. In this way existing grids can be uti- the project Digitisation of the Energy Transition: Barometer lised better and the demand for expansion reduced. Digital and Major Topics (Digitalisierung Energiewende: Barometer communication in a smart grid is one of the major applica- und Topthemen), launched in October 2017. An annual tions for intelligent metering systems. The Federal Ministry barometer provides an overview of progress of implemen- for Economic Affairs and energy is currently working on tation of the Act on the Digitisation of the Energy Transi- draft regulations that utilise the advantages of digitisation tion. In addition, expert reports are prepared for major top- for introducing flexibility to distribution grids, sector cou- ics: How can digitisation make consumers actors in the pling and integrating electric mobility into the networks. energy transition? Which business models does a digitised These drafts are to provide the groundwork for discussions energy landscape offer? How can grid regulation based on taking place in the second half of 2019 regarding what the Metering Act provide additional impetus to flexibilise changes must be made in the legal framework. the grid-based energy supply and coupling of the heating and transport sectors? Are the telecommunications struc- Modern metering equipment has been available in the ture and regulation ready for the smart grid? There is an market since the beginning of 2017. This has encouraged advisory board for the Barometer that includes experts the move away from electromechanical meters (Ferraris from various sectors; in addition, the Working Group on meters). Modern metering stations are defined by Section 2 Smart Grids and Metres of the Energy Grids Platform is no. 15 of the Metering Act as digital metres that can be closely tied into the overall project. safely connected to a communication network through a smart meter gateway. There are already such devices The first Barometer was published in January 2019. It installed in around 560,000 meter points (Federal Network reported that progress has been made regarding various Agency, Federal Cartel Office, 2018c). In 2016, there were aspects of digitisation of the energy sector. For example, only 50,000 such metering devices in use. the first certification of a smart meter gateway was an important intermediate step toward the obligatory roll-out In addition to establishing a digital communications struc- of intelligent metering systems (EY, 2019). ture, the Federal Government has provided a testing ground for digitally interconnected solutions for the energy At the same time, the experts commissioned by the Federal system of the future. The funding program Smart Energy Ministry for Economic Affairs and Energy still see room for Showcases – Digital Agenda for the Energy Transition (SIN- improvement in implementing the system and platform as TEG) created in 2017 living laboratories for the smart provided for in the Act on the Digitisation of the Energy energy supply of the future. In five showcase regions smart Transition. The GDEW is not being implemented quickly networks of generation and consumption as well as market enough by business and government. The overall potential and grid are being developed and demonstrated. The solu- for the energy and transport transition is not currently tions that survive real situations are to be later introduced being tapped. New thinking and actions of all actors across to large-scale application and knowledge gathered in the all sectors, value-added stages and competencies is required. process is to be used for refining the regulatory framework Companies, associations and government agencies have (see box). been locked into old structures for too long, and should put more joint effort into digitisation, across all businesses, sec- In the first two years of the SINTEG Funding Programme tors and competencies. This calls for centralised, trans-sec- the major emphasis was on creating the foundation for a tor project management. Up to now, the framework for the number of innovative projects. Two of the projects that roll-out has been developed in relative isolation in the vari- were tested for the first time were platforms on which pro- ous associations, standardisation committees and agencies. vision of flexibility, previously mostly in the industrial area, This could cause the problem of ‘silos’ creating suboptimal can be traded. The goal is to avoid congestion by adapting solutions. Alternative solutions to smart meter gateways energy consumption. In the remaining project period end- that are currently on the market often do not fulfil the high ing at the end of 2020 practical experience will be acquired standards for IT security and interoperability required by in a number of various test applications. the GDEW. An important step in better cooperation between the actors would be to set up a gateway standardisation Digitisation also enables improvements in energy efficiency committee pursuant to Section 27 of the Metering Act and through innovative funding business models and the provi- create a supervisory project management team. sion of better information to consumers and planners. New 190 13 INTEGRATED DEVELOPMENT OF THE ENERGY SYSTEM

SINTEG: Support programme “Smart Energy – Digital Agenda for the Energy Transition”

zzDesignnetz: A blueprint for the energy transition The ‘Designnetz’ showcases in North Rhine-Westphalia, Rhineland-Palatinate and Saarland seek to use decentralized energy (mixture of solar and wind power) to supply energy to (industrial) high consumption areas. The goal of DESIGNETZ is to develop the appropriate SCHAUFENSTER INTELLIGENTE ENERGIE framework and workable solutions for the future energy supply with millions of small generating systems that feed in fluctuating amounts of electricity from renewa- In five large showcase regions involving over 300 compa- bles into the distribution grid. nies and other participants, the SINTEG programme develops and demonstrates solutions for technology, economic zzenera: Smart connectivity of energy and regulatory issues posed by the smart energy system of The ‘enera’ showcase in Lower Saxony aims to demon- the future. The focus is in particular on safe and efficient strate the transformation of the energy system from a processes that can be used on a wide scale, innovate tech- static and centralised system to a dynamic system. With nologies and market-based mechanisms for flexible smart the help of a systemic approach the complete digitisa- grids and markets. The main emphasis is on digitisation of tion and technical flexibility of the energy system is the energy sector. tested using the interaction of innovative solutions in the areas of the grid, the market and data. In the model Another goal of the programme is to collect practical expe- region, a share of 235% of electricity was generated with rience for the future development of the legal framework. renewables in 2016 – much more regenerative energy To this end the Federal Government concluded the SINTEG was produced than consumed. Ordinance, effective 21 June 2017, which includes time- limited Experimentation Options. The Ordinance provides zzNEW 4.0: The Northern German Energy Transition SINTEG participants the opportunity to test technologies, This project aims to demonstrate on a large scale how processes and business models without economic draw- a model region with 4.8 million inhabitants (Schleswig- backs, for example for digitisation and electricity-heating Holstein and Hamburg) can achieve 100% supply secu- sector coupling. SINTEG thus becomes a Living Laboratory rity, cost effectively and environmentally sound and for a smart energy supply of the future, and the Federal with high public acceptance when using renewables to Government gains insight tested in the real world on future cover its energy demand. At the same time, large por- adaptation of the legal framework. tions of the heating and mobility sectors are to be supplied with renewable energies. The goal is to reduced The BMWi is sponsoring the five SINTEG showcases with carbon emissions by 50% to 70%. over €200 million. Together with additional investments from the participating companies, a total of over €500 mil- zzWindNODE: Showcase for smart energy from the lion is being invested in digitisation of the energy sector. north-east of Germany: The WindNODE showcase spans the five eastern Ger- The projects were launched on 1 December 2016 and 1 man states plus Berlin. WindNODE aims to show how January 2017, and run for four years. The five showcases large renewable capacities can be utilized in a digitally each have their own thematic focus: interconnected supply system, economically efficient, in the right place at the right time, and spanning more zzC/sells: Large-scale showcase in the Solar Arch in than one sector. Innovative products and services are to southern Germany: be developed, that will replace the standard business of C/sells showcase model solutions in the sunny states of volume-based energy sales. Baden-Württemberg, Bavaria and Hessen. The “C” in C/ sells stands for autonomous regional cells that interact in a supra-regional network. This cellular approach enables the energy system to be flexible, by joining a number of smart properties, urban quarters and cities with a digital infrastructure without endangering the overall stability of the system. 13 INTEGRATED DEVELOPMENT OF THE ENERGY SYSTEM 191

possibilities of analysis and user information become pos- The amended funding announcement for the Energy Sav- sible. On this basis, it is possible to develop energy effi- ings Meter pilot programme provides funding for digital ciency services, which – in this format – were previously platforms and smart services in the areas of energy effi- impossible or too expensive. For example, the Energy Sav- ciency and the energy transition. The innovation projects ings Meter pilot programme, which was launched in May are usually based on new software or hardware develop- 2016, promotes innovative and IT-based pilot projects to ments, as well as the development and application of digi- reduce energy consumption using energy services that are tally-assisted services for saving energy at the customer. based on the digital collection and processing of energy Some of the key changes in the new funding announce- consumption data. ment include increasing maximum funding from €1 million to €2 million, increasing the share of funding made Two years after the start, a lively startup scene has been contingent upon evidence of energy saved (from 50% to established on the basis of this programme. This currently 75), as well as specific funding for lighthouse projects on includes around four dozen digital platforms and energy strengthening the market for financing energy efficiency. savings services. They have in common that they develop energy savings measures into business models, closing the In the buildings sector it is important to investigate the gap between research and practical application. Customers potential for digitisation as early as the planning process. – private households, the crafts, services, manufacturing, Building Information Modelling (BIM) is a means to pro- buildings and industry, as well as public services, associa- mote energy-related optimisation and facilitate transpar- tions and churches – can be outfitted with energy savings ent and comprehensible solutions for all plant processes meters. These systems make all energy consumption of a related to energy efficiency. building transparent, using a digital platform that enables uniform operation. In 2018 the Energy Savings Meter pilot Smart building automation and energy management sys- programme was increased to a total of €69 million. In tems can increase energy efficiency in building operation March 2019 the programme was restructured and funding and at the same time enhance living comfort (smart home). increased once again, to increase incentives for developing In addition to continually updated information on energy new business models as well as energy efficiency services consumption and savings achieved, specific control of (see Chapter 5). heating or cooling systems dependent on weather residents

Energy Savings Meter pilot programme: Development and application of digital energy savings assistants

The Energy Savings Meter programme provides funding for zzA second group is working on creating integrated digital pilot projects and digital platforms for the energy transi- systems. Renewable electricity generation and supply is tion. Participants discover and develop digital solutions for combined with efficiency measures and an automated technical and economical digital energy savings platforms consumption management to create a joint energy ser- that can be scaled into a business model. The Federal Min- vice. istry for Economic Affairs and Energy provides a total of zzA third group is attempting to integrate several systems €170 million for the funding period 2016 to 2022. The pro- and energy sources into a joint digital platform and aims jects are to run for five years and each project has its own to use digital sector coupling to adapt energy consump- focus, depending on the application, the target group and tion to volatile generation of renewable electricity. the digital platform used. Savings potential can reach 10%, depending on the target group, and in some cases even Since 2016, the Federal Office for Economic Affairs and more savings can be realised. In the pilot project various Export Control has approved more than 50 pilot projects on innovation categories and approaches are taken for digital energy savings for the Federal Ministry for Economic Affairs energy services. and Energy. For example, projects that develop real time, digitally assisted and individualised energy consulting are zzOne group of projects concentrates on sector-specific funded, as well as automatically operating ‘energy savings energy savings services and finds custom-made solu- assistants’ or innovative building and heating technology tions for its customers, for example for hospitals, hotels that is individualised, uses the weather forecast and is sup- and restaurants. Analysis, consulting and sometimes ported by artificial intelligence. The projects that are maintenance and financing services are created for the funded allow for energy-optimised operation of office and needs of these customer groups. retail space, hospitals, indoor swimming pools, hotels and restaurants and industrial production processes. 192 13 INTEGRATED DEVELOPMENT OF THE ENERGY SYSTEM

are in the building or not or user profiles can provide major In the transport sector digitisation can also provide solu- efficiency potential. The KfW programme on refurbish- tions for better management and optimisation of energy ment of buildings to save carbon emissions is therefore a consumption. For example, automated and connected driv- versatile source of support for digital measurement and ing redefine mobility in motorised private transport, control technology as well as other measures for building freight transport and public passenger transport. Auto- automation. The KfW Efficiency House 40 Plus, a user mated and connected driving is an innovative technology interface for demonstrating electricity generation and con- at the interface of mobility and digital advances, which, on sumption in each living unit is a prerequisite for funding. the one hand can contribute to increased traffic safety and efficiency as well as reducing mobility-related emissions, At the European level, additional measures are being insti- and on the other hand, can give rise to new business gated to enhance smart metering and managing of energy opportunities in the service and mobility sectors (see Chap- consumption in the buildings sector. On the basis of the ter 7). Germany has seen dynamic growth in the areas of amended Buildings Directive that entered into force in July car sharing and ride hailing in particular. These ride-shar- 2018, the European Commission is currently preparing to ing possibilities are smartphone apps that have established introduce an optional smart readiness indicator in con- a whole new transport segment in urban areas. junction with the Member States. A background study on the basic concept and valuation matrix (valuation criteria, Digitisation is a cross-section topic that has far-reaching valuation areas, etc.) was prepared in the summer of 2018. effects, and as such is an important aspect of the 7th An in-depth technical study is currently underway. Energy Research Programme. With research funding, the many opportunities for digitisation, but also its challenges The digital transformation of the economy and, moreover, can be investigated. This can address interdisciplinary the digitisation of industrial production processes along needs for research and development in areas such as artifi- the entire value chain - known as Industry 4.0 - present cial intelligence, ICT security, simulation methods or robot- enormous potential to make production processes more ics. As a cross-section topic, digitisation is addressed in all energy-efficient and climate-friendly and to thereby make energy research networks. Where innovative ideas on dig- a major contribution to the energy efficiency goal of the itisation of the energy transition cannot easily be realised energy transition. The Federal Government supports these under the current regulatory framework, living laboratories efforts with funding programmes for investment in mod- of the energy transition can in some cases provide a testing ern sensing technology, software, hardware and smart effi- ground for new technologies and concepts. In February ciency solutions. Specific programme examples include 2019, an idea competition was published on living labora- Autonomics for Industry 4.0, E-Energy, energy efficiency in tories of the energy transition. Specific funding formats for business, SINTEG and Copernicus projects for long-term startups are being created, including application proce- research issues (see Chapter 14). dures adapted to this target group (see Chapter 14). 13 INTEGRATED DEVELOPMENT OF THE ENERGY SYSTEM 193

Key measures taken to date in the digitisation of the energy transition

zzAct on the Digitisation of the Energy Transition (GDEW) zzEnergy Savings Meter pilot programme zz‘Digitisation of the energy transition: Barometer and zzStrategy for Automated and Connected Driving Main Topics’ project (see Chapter 7) zzStandardisation Strategy Roadmap for Cross-sector Dig- zzDigitisation as a cross-section topic of the 7th Energy itisation in accordance with the GDEW Research Programme See Chapter 14 zz‘Smart Energy Showcases – Digital Agenda for the Energy Transition’ (see box)

The digitisation of the energy transition has begun. With ciency, renewables and buildings directives in the Clean the Act on the Digitisation of the Energy Transition and Energy for All Europeans legislative package. This contains the SINTEG programme (Smart Energy Showcases – Digital obligatory measures for renewable energies in the heating Agenda for the Energy Transition), the Federal Government and cooling sectors that should help to increase the renew- has taken important steps towards defining the framework ables share by 1.3% annually. In heating networks the for digitisation in the power sector. However, the energy renewables share should increase by 1% annually (see transition and the transport transition require more than Chapter 3). just “intelligent metres”. It is therefore important to move beyond simple metering functions to the path to smart The potential of digital technologies will develop exponen- grids, smart mobility and smart homes and to take full tially in many areas. New technologies such as blockchain, advantage of digitisation. Applications in these areas bene- artificial intelligence or quantum computing can propel fit from a communication platform modelled after the digitisation to new levels and improve the prospects for principle Data Protection and IT Security By Design. This new applications and means for analysis, controlling and platform includes transparent rules for data communica- automation. This will have a substantial impact on struction. tures and processes of the energy industry. Many companies in the energy industry and research institutions are already testing possible applications of blockchain technol- 13.2 Outlook ogy in pilot projects, especially in the area of energy trading. The AI strategy and the blockchain strategy of the Fed- Sector coupling will continue to open up new potential for eral Government planned for the summer of 2019 will efficiency and reduce the use of fossil fuels. In order to continue to accelerate these developments. reach the long-term goal of a mostly greenhouse gas-neutral energy supply, it is increasingly important to further reduce overall energy demand with such cross-sectoral 13.3 Conclusions efforts (“Efficiency First” principle) and to make the power system even more flexible. In the case of applications that Integrated development of the energy system is essential do not offer easy options for reducing greenhouse gas for the energy transition. To achieve this, the framework emissions (for example in the aviation and sea transport must be quickly adapted and planning reliability ensured. sectors or for some industrial processes), sector coupling There is significant potential in the areas of research, devel- technologies remain an important option for achieving opment and demonstration to further enhance sector cou- energy and climate goals. This potential has obviously not pling technologies. To take advantage of this potential, the been optimally tapped under previous conditions. This is 7th Energy Research Programme of the Federal Govern- indicated at least by the mixed results of trends up to now. ment has a focus on linking various sectors while research- Heat pumps have become more important, yet Germany ing technologies and plans for sector coupling. In addition, has far to go in electrification of vehicle drives, with the the idea competition Living Laboratories of the Energy exception of rail traffic (see Chapters 7 and 13.1.1). Transition is currently focussed on Sector Coupling and Hydrogen Technologies (see Chapters 14 and 16). Further- It will be a challenge for the heating transition to keep more, various sector coupling technologies are already pace with the goals and objectives of the EU for 2030. The being sponsored with existing funding programmes such obligational targets for 2030 in the national heating sector as MAP and industry funding programmes. These programs are set out in the specific emission reduction targets of the are made even more attractive and efficient with funding 2050 Climate Action Plan for buildings and industry (pro- strategies of the Federal Ministry for Economic Affairs and cess heat and cooling) at the EU level in the amended effi- Energy. Ultimately, sector coupling technologies should be 194 13 INTEGRATED DEVELOPMENT OF THE ENERGY SYSTEM

Blockchain – Potential and Challenges

Blockchain technology is based on decentralised informa- The blockchain is a relatively new technology. Its potential tion storage and transmission, and is considered a potential and risks cannot yet be completely assessed. For this reason new basic technology of digitisation. It has features that it is being tested extensively in business, the scientific com- open up a wide, cross-sector field of application possibili- munity and government. ties. It could for example become an important key technology of digitisation and could also cause disruptive The study Blockchain in the Integrated Energy Transition change to business and society. recently published by dena (dena, 2019) researched in detail eleven areas of application in the areas of asset and data There are many areas of application for blockchain technol- management, market communication and trade (both for ogies, including energy. Its potential is in allowing for direct electricity) and the area of financing. The study researched contractual relationships between the actors of the energy the aspects of market. In an increasingly dynamic energy market, reliable zztechnical requirements and up-to-date data are major requirements. zzeconomic benefit, and zzregulatory impact Such data are increasingly automated – provided by machines. With the help of blockchain technology, the for these areas. The results of the study show that the use source of such data can be verified and its reliability of the blockchain in individual energy applications can pro- enhanced. At the same time, various process steps taken by vide companies with value added under economic, techno- participating actors, for example communication or on the logical and regulatory aspects. However, these dimensions second accounting for services, can be automated and must always must evaluated separately and their aggregate accelerated, because the blockchain eliminates intermedi- impact taken into consideration. It is undisputed that The aries. blockchain technology basically holds potential, also in a macroeconomic respect.

used that are competitive in the market. In order to improve tions. Because the heating sector is largely dependent on the conditions for sector coupling, the Federal Government local conditions, the low-carbon heating supply of the will evaluate the effectiveness of existing components of future will not be based exclusively on one technology, energy prices mandated by the government in form of rather a mix of improved energy efficiency and various charges, fees and taxes (see the box ‘CO2 price reform and technologies such as heat pumps, geothermal and solar other financing aspects’ in Chapter 3). thermal energy, as well as accumulators. This makes it possible to provide the necessary flexibility and at the same The Federal Government will promote the heating transition. time ensure that the heat supply is secure. Total energy Corresponding measures should become important ele- consumption for heating purposes must be drastically ments of the NAPE 2.0 package planned for the 2021 – 2030 reduced, direct thermal use of renewable energies must be decade. The Federal Government will concentrate basically better exploited and the remaining demand satisfied with on three areas when implementing the heating transition: sector coupling. zzcreating and modernising heating networks Creation of newer, more modern and more efficient heating network is one means, but modernisation of existing zzimproving energy efficiency and using renewable ener- heat networks also holds unexpected potential. For this gies in industry and trade (see Chapter 5) reason, it is important for the future to provide impetus for transforming existing networks and to focus it on decar- zzmeasures for creating low-carbon heating supply for the bonisation of heating supply. In addition to creating incen- buildings sector, especially for existing building stock tives with funding programmes in the efficiency and build- (see Chapter 6) ings area (see Chapters 5 and 6), the Energy Efficiency and Heating with Renewable Energy assistance programme run The heating transition makes it possible to generate value by the Federal Ministry for Economic Affairs and Energy added where German companies are traditionally strong: also has a funding programme for heating infrastructures. with technically sophisticated and systemically smart solu- In addition to the Heating Systems 4.0 programme, the new 13 INTEGRATED DEVELOPMENT OF THE ENERGY SYSTEM 195

heating infrastructure funding programme aims to assist in energy transition. This calls for minimum standards that modernising existing heating networks, improving their can keep pace with the requirements of the energy transi- efficiency and making them compatible with the energy tion, ensure value added for the consumer, across all areas transition. This requires using renewable energies and and in the sense of sector coupling (in particular heating, waste heat. smart homes), involve electric mobility and be designed to deal with threat scenarios, for example hacking. The road- Regarding digitisation this means in particular tapping the map will be continually updated in close cooperation with potential created by the Act on the Digitisation of the the relevant actors. Energy Transition for all areas of the energy transition. Smart meter gateways will be established as platforms for Impetus for new solutions and business models can be the energy system based on renewable energies. In order expected from funding for development and testing of new to exploit the full potential of smart metering systems in digital applications from the SINTEG Funding Programme, all operating environments, it is imperative to continually the Energy Saving Meters Programme and funding for develop minimum technical standards. The Standardisa- energy research. In addition, the energy sector demon- tion Strategy for Cross-sectoral Digitalisation of the strated a significant dynamism in start-ups in past years, Energy Transition (Roadmap) published by the Federal which enables new participants to establish themselves in Ministry for Economic Affairs and Energy and the Federal the market. The Federal Ministry for Economic Affairs and Office for Information Security describes this process. The Energy will actively support new technologies, for example standardisation strategy defines all necessary technical in the area of blockchain and creation of new business standards for applications, for example feed-in and load models, in order to make any necessary changes to the reg- management (smart grid) and electric mobility (smart ulatory framework early on. Furthermore, the framework mobility) one by one, as required for secure and efficient for start-ups in the energy sector will be continually digitisation of the energy transition. The Metering Act, as improved to support the dynamism of the start-up scene, part of the Act on the Digitisation of the Energy Transi- and to allow for quicker scaling of economically and sys- tion, provides for continual, progressive expansion of temically meaningful business models for the integrated smart meter gateways to all applications relevant to the energy transition.

197

14 Energy research and innovation

Where do we stand?

Energy research plays a key role in a successful energy transition. In 2017, around €1 billion were mobilised as part of the Federal Government’s 6th Energy Research Programme, with three-quarters of the funds channelled into the renewable energy and energy efficiency research fields.

The energy research programme of the Federal Government prioritises energy efficiency, renewable energies, system integration (grids, storage and sector coupling) as well as broad topics such as digitisation and social issues.

What is new?

The Federal Government adopted the 7th Energy Research Programme titled ‘Innovations for the Energy Transition’ in September 2018. This programme addresses current and expected challenges with a holistic approach to funding policy. A new focus is on technology and innovation transfer facilitated with living laboratories of the energy transition. This new funding area serves to prepare innovative solutions for introduction to the market. Dynamic transfer of practical experience is supplemented with stronger cooperation with startups. In addition to the main research topics – energy efficiency and renewable energies – the programme has new focuses on cross-sector and cross-system issues of the energy transition, such as digitisation and sector coupling. Current financial planning has earmarked approximately €6.4 billion for energy research under this program for the period 2018 to 2022, yet another increase in federal funding for energy research.

In view of the challenges of increased integration of renewable energies into the energy systems and coupling of the electricity, heating and transport sectors, research funding is increasingly systemically oriented. In addition to the living laboratories of the energy transition, there are broad initiatives such as the Solar Con- struction/Energy-efficient Cities funding initiative and the Copernicus projects for the energy transition. 198 14 ENERGY RESEARCH AND INNOVATION

What is next?

Immediate, extensive and strongly focused research and development is essential in order to efficiently implement the energy transition and to cost-effectively achieve ambitious energy and climate goals. This positive trend will continue and will strengthen the role of energy research in the context of the Federal Government’s energy policy.

The Federal Government is using the new energy research programme to establish as a new pillar of research funding, living laboratories of the energy transition, to boost the transfer of practical experience with innovative energy technologies. At the same time, startups as important sources of impetus for the energy transition should receive more support.

In the international and European context too, Germany will continue to push for a holistic approach geared towards the transformation of the energy system.

Research Fostering forward-looking innovations for restructuring the energy supply Innovation 14 ENERGY RESEARCH AND INNOVATION 199

14.1 Present situation and key measures innovative technologies cheaper and marketable. This taken to date involves regular changes to regulatory law, as well as specific measures to support the transfer of research and mar- 14.1.1 Research and Development ket preparation.

The research, development and demonstration of innova- Business investment for research and development in the tive energy technologies are first and foremost the tasks of area of innovative energy technologies under government the business sector. Besides supporting basic research, pub- research programs continued to increase in 2017. Within lic-sector research funding generally also aims to support the framework of publicly funded energy research projects applied research, technological developments and innova- alone, businesses invested around €213 million in the devel- tive activities in the business community, research institu- opment of innovative energy technologies in 2017, com- tions and universities. pared with €155 million in the previous year. Added to this are third-party funding payments to universities and The Federal Government adopted the 7th Energy Research research centres as part of collaborative projects. The total Programme titled ‘Innovations for the Energy Transition’ in volume invested by the business community in the research September 2018. This programme addresses current and and development of energy technologies is far higher than expected challenges with a holistic approach to funding this. The energy sector spent €2.75 billion on energy policy. Four fundamental principles define the energy research and development in 2017, according to the Associ- research policy over the next few years: ation for the Promotion of German Science and Humanities (Stifterverband für die Deutsche Wissenschaft). zza new focus on technology and innovation transfer by means of living laboratories of the energy transition is a Industry-oriented energy research safeguards the competi- new pillar of funding for market readiness of innovative tiveness of German industry. In applied research and tech- solutions at the same time, the dynamic transfer of prac- nological development the focus is on industrial applica- tical experience is supplemented with stronger coopera- tions. These programs are conducted in close cooperation tion with startups. The Energy Research networks and between the research institutions and universities. In total, research communications will be expanded in this con- industry participated in 46% of all current research projects text; on applied energy research in 2017. Industry also committed €206 million to newly approved research projects. zzthe new focus on cross-sector and cross-system issues of the energy transition, such as digitisation and sector The Federal Government again increased the budget for coupling; energy research in 2017. From 2013 to 2017, the Federal Government provided a total of about €4.4 billion to pro- zzbetter coordination of funding instruments used for mote the research and development of modern energy project funding and institutional funding; technologies. In 2017, around one billion euro were mobilised as part of the Federal Government’s 6th Energy zzstronger European and international cooperation. Research Programme, This corresponds to an increase of 15.7% over the previous year, nearly doubling the amount in In addition to the main research topics – energy efficiency ten years (see overview in Figure 14.1). Funding for energy and renewable energies – the programme has new focuses research is in high demand, and is popular with companies on sector coupling, digitisation and the energy transition in and research institutes. In 2017, 90% of the funding set aside the heating, industrial and transport sectors, as well as on was paid out. About three-fourths of the annual budget wen social issues. The responsibilities at the ministry level are to energy efficiency and renewable energy. The annual Fed- being determined for the first time based on the Technol- eral report on energy research gives a comprehensive over- ogy Readiness Level, that is, the desired degree of maturity view of all major developments. In this way, the Federal of a specific technology. The new energy research pro- Government creates transparency on funding policies of gramme thereby covers the entire innovation cycle span- energy research and provides information on which energy ning all ministries. Current financial planning has ear- technologies are being promoted. marked approximately €6.4 billion for energy research in the scope of the 7th Energy Research Programme for the Since the beginning of project assistance in 1977 (1st Energy period 2018 to 2022, yet another increase in federal funding Research Programme), the Federal Government has invested for energy research. around €13 billion in funding non-nuclear energy research. EnArgus, a new, centralised information system provides a Apart from research funding, however, support in the form comprehensive overview of federal energy research proof suitable policy frameworks is also essential to make grammes over the past 40 years. 200 14 ENERGY RESEARCH AND INNOVATION

Horizon 2020, the European research and innovation This cross-sector and cross-system energy research makes framework programme, is given high priority in Germany. a central contribution to the energy transition. The 7th Of the total budget of approximately €80 billion for the Energy Research Programme expands technology and programme Horizon 2020, around €6 billion are earmarked innovation funding in the energy area to include societal for non-nuclear energy research projects (see 2018 Federal and systemic approaches. Large overarching trends in the Report on Energy Research).In the period between 2014 energy area are given more focus: the integration of the and 2017, approximately €2.4 billion were spent on funding electricity, heating and transport sectors (sector coupling) selected projects. German applicants received 15.7% of total and system integration of innovative energy technologies funds, around €376 million. are decisive for achieving energy transition targets (see Chapter 12). Digitisation also plays a key role in modernis- International collaborations provide assistance in achieving the energy system. Interministerial research initiatives ing European and global climate protection targets and covering the areas of buildings and urban quarters and transformation of energy systems. Germany is involved hydrogen and fuel cell technology will be continued and in many facets of international cooperation in energy will incorporate new projects on smart sector coupling in research. At present, Germany is actively involved in 22 of the energy transition using electricity-based fuels. the 38 current IEA Technology Collaboration Programmes (TCP). The Mission Innovation initiative was launched at the 21st session of the Conference of the Parties to the 14.1.2 Innovative energy technologies Framework Convention on Climate Change in Paris (COP21) in December 2015. Currently 23 countries and the Promising results of research are the basis for new, low- European Union participate in the initiative. These coun- cost and marketable energy technologies. As illustrated tries, including Germany, have agreed to double within below, examples of the growth of innovative technologies five years their public investment in research and devel- that are characterised by greater efficiency, lower costs or opment of clean energy. resource conservation can be found across the board in all areas of the energy transition. The fact that there is a consistently high outflow of funds from an annually growing budget underlines the key The number of patents filed in the area of renewable energy importance of energy research for implementing the energy are testament to the high level of innovation in this field. In transition. Energy research creates the technology basis for 2017, 1,133 patents were filed in the area of renewable conversion of the energy supply system and is a strategic energy (DPMA 2019). This corresponds roughly to the level element of federal energy policy. in the previous year (2016: 1,139 patents). German and foreign patent applications are basically no longer declining.

Figure 14.1: Federal research spending for the Energy Research Programme million € 1,200

1,013 1,000

863 876 809 819 800 706 648 604 620 600 493 440 399 400

200

0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

renewable energy energy efciency fusion safety of nuclear energy

Source: 2018 Federal Report on Energy Research published by the Federal Ministry for Economic Affairs and Energy 14 ENERGY RESEARCH AND INNOVATION 201

Transparency, participation and acceptance of energy research

Energy Research Networks Federal Government has set up a central web portal with To transfer the results energy research directly to the pro- extensive information directed at specific target groups. tagonists of the energy transition and to support the dialogue between the scientific community, business and gov- In addition to detailed information on energy research, this ernment funding policy, the BMWi has initiated seven portal also lists research portals on various topics and research networks since 2015 focused on major funding descriptions of special research initiatives. priorities: zzConstruction for the energy transition Consultation on the 7th Energy Research Programme zzPower grids Consultation on the 7th Energy Research Programme zzSystem analysis began in December 2016 and was concluded 2017. The zzRenewable energy broadly designed consultation procedure involved all zzEnergy efficiency in industry and commerce important participants in energy research and the energy zzFlexible energy conversion sector at an early phase in discussing future energy policy. zzBiomass energy use The goal was to realign funding policy strictly to the goals of the energy transition and to exploit successes. By keep- The Startup Research Network is new, with the goal of ing an open approach to the participatory process, trans- including more young companies in research funding and parency and an open dialogue were made possible. The strengthening transfer of research findings. As the interface evaluation of these consultation sessions indicates the between research, practice and policy-making, the net- entire research demand, but also which overarching works help to provide subject-specific guidance for funding research topics are new priorities, in particular sector cou- strategies with a practical orientation, and to coordinate pling and digitisation. new measures. This also puts transparency and efficiency at the centre of energy research. The Energy Transition Energy Transition Research Forum Research and Innovation Platform (R&I platform) brings The research projects of the four Copernicus projects (grids, together and coordinates the energy research networks, storage, industry processes and system integration) were which are established on a long-term basis. identified in the Energy Transition Research Forum in a comprehensive participatory process with over 90 institu- Research communication tions and organisations from the scientific community, In addition to research funding, research communication is business and the public. a key task of federal energy research policy, especially reporting on future developments and research content, as The four project consortia being sponsored combine partic- well as the transfer of research findings into practice. In ipants from the scientific community, business and the addition, research communication should create transpar- public. This real example of practised, early involvement of ency regarding the use of funding. For this purpose, the the public in research is a major thrust of the projects.

Particularly reassuring is the clear rise in domestic patent Trademark Office 2018). Overall, the number of patents applications for wind power plant technology (239 in 2017 filed for combustion engines still exceeds the number of compared with 181 in 2016).The majority of filings – a total patents for alternative drives. However, the 15% increase in of 63.7% – were submitted from abroad. Patents, however, filings for purely electricity-driven vehicles in 2017 is worth are just one of many facets of innovation and therefore are noting. Since 2009, applications have even gone up by not an indicator in their own right. More decisive is to what 220%. Germany is the leader, with 170 applications, ahead extent new products actually come into use and bring eco- of Japan (91) and the USA (72).In particular, the growth in nomic benefit. The number of patents cannot provide this the number of patent applications filed by companies reg- information. In addition, the rate of patent applications istered in Germany is notable, whereas companies located varies greatly in different technological disciplines. abroad have stagnating or declining numbers of applications. The Federal Government is committed to ensuring The German patents filed in the area of automotive engi- further progress is made in the field of alternative drive neering are a reflection of innovative transformation pro- technology (see Chapter 7). cesses. Patent applications for hybrid and electric drives have more than doubled between 2017 (German Patent and 202 14 ENERGY RESEARCH AND INNOVATION

Key measures taken to date in the area of energy research

zz7th Energy Research Programme zzNational Hydrogen and Fuel Cell Technology Innovation zzEnergy transition - Research and Innovation platform Programme (NIP 2) for the 2016 to 2026 funding period (R&I platform) zzCopernicus projects zzEnergy transition in the Transport Sector, of the Research zz‘Energy Systems of the Future’ Academies’ project Networks research funding initiative zzEnergy Transition Research Forum zz‘Energy-efficient Buildings 2050’ funding initiative zzBiomass Energy Use funding programme zz‘Solar Construction/Energy-efficient Cities’ funding initi- zzRenewable Resources funding programme ative zzProgramme collaboration: Energy Transition Research zz‘Sustainable Power Grids’ research initiative Alliance at the German Federation of Industrial Research zz‘Energy Storage’ research initiative Associations (AiF) zzLaunch of the central web portal zz‘Carbon2Chem’ research initiative www.energieforschung.de on research communication zzMobility2Grid and Flexible Electrical Networks research zzLaunch of the information portal campuses www.strom-forschung.de

Technological advancements and innovations in RES tech- Seventh Energy Research Programme, and supports a large nology in the field of power generation are driving down range of storage technologies with its projects. It will con- costs. This applies in connection with the enormous tinue to address new storage ideas and press ahead with growth in market volume and economies of scale, especially technological developments already begun. for photovoltaics and increasingly, for wind energy. While the remuneration rates for PV for small roof-mounted Priorities of research and development of power plant pro- installations were over 50 ct/kWh Year 2007 ago, they now cesses are shifting toward flexibility, as the increasing inte- stand at around 12 ct/kWh for roof-mounted installations gration of renewable energy in the electricity market has and below 10 cent for PV ground-mounted installations given rise to new requirements. Research activities in this not part of competitive pricing processes. The average con- area create the framework to ensure that Germany’s power tract prices are much lower for PV ground-mounted instal- plant fleet can better meet these requirements in future. lations and large roof-mounted installations from the bidding rounds of 2017. Within the 9-month period between The trend towards products with the highest energy effi- January 2017 to October 2017, the average contract price ciency ratings continues. Energy-efficient technologies and dropped by around 30% to less than 5 ct/kWh. Similar cost devices experienced increasing popularity again in 2017. reductions indicate the results of the first bids for onshore The EU eco-design and the EU energy labelling system wind energy. The average contract price from the bidding continue to make a central contribution to this develop- rounds in 2017 sank within 6 months by one-third (see ment. The new EU Ordinance on Energy Consumption Chapter 4). Labelling entered into force on 1 August 2017, stipulating a shift from the A+++ to A-G labelling, as well as introducing Energy storage is becoming increasingly important with the a product database (see Chapter 5, Energy Labels). continually growing share of renewable energy in the energy supply. If electricity is converted before being stored, Energy efficiency continues to be the focus of building for example into hydrogen or other chemical energy modernisation measures. Efficiency developments in sources, in addition to being reverted to power, there is the energy retrofits funded through the CO2 Building Renova- possibility for use of this energy in other sectors, in the tion Programme, the Market Incentive Programme for sense of coupling. Up to now, however, only a few storage Renewable Energies in the Heating Market and the Energy technologies have achieved the requisite maturity regard- Efficiency Incentive Programme are evidence of this. The ing competitive cost. The last projects of the joint Energy market share of efficient condensing boilers also expanded Storage funding initiative conducted by the BMWi and the significantly in the heating and warm water sector in 2017. BMBF were concluded in 2018. Hydrogen, batteries and Furthermore, the share of electric heat pumps is also heat accumulators for distribution of energy loads are the increasing continuously (see Chapter 13). Other generators technology paths to be taken in the future for network-ori- of heat, such as biomass and solar thermal, are also part of ented, stationary energy storage. The Federal Government the market (see Chapter 6). is developing customised funding activities as part of its 14 ENERGY RESEARCH AND INNOVATION 203

There is an increasing number of electric and other alterna- ing electric mobility, heating, smart homes). The SINTEG tive vehicle drive systems among the new passenger cars programme (Smart Energy Showcases - Digital Agenda for registered each year. Over 111,000 battery-powered the Energy Transition), is also an important step taken by 3-wheel-plus vehicles were registered in 2017, 44,465 of the Federal Government towards defining the framework which were externally chargeable hybrid electric vehicles for digitisation in the power sector. It is therefore impera- (see Chapter 7). There is still room for efficiency improve- tive to move beyond simple metering functions and on to ments in fossil fuel-based vehicles. To this end, the New smart grids, smart mobility and smart homes and to take Vehicle and System Technologies programme was full advantage of digitisation (see Chapter 13). Automated launched. Vehicles with hydrogen-powered fuel cells and and connected driving is an innovative technology at the natural gas-powered vehicles are a mature technology and interface of mobility and digital advances which on the one are available (see Chapter 7). hand can contribute to increased traffic safety and efficiency as well as reducing mobility-related emissions, and The power-to-X technology market is still in the phase of on the other hand, can give rise to new business opportuni- operation of demonstration facilities. Power-to-X and, in ties in the service and mobility sectors (see Chapter 7). particular, power-to-gas or also power-to-fuel technologies, offer promising opportunities to interlink the power gen- Innovative and highly efficient energy technologies are eration, gas and mobility sectors both technologically and essential requirements for a secure, economical and cli- economically (see Chapter 13). Electricity-based fuels will mate-friendly energy supply. Only through increased R&D be required in the long term, especially in view of the can the German economy continue to maintain a leading ambitious climate targets, and in particular in air and sea position in technology and competitiveness. There are transport and for certain industrial processes for which plans in particular for specific funding for energy research electrification is hardly technologically possible. At this on developing industry processes that are low in CO2 emis- point in time, electricity-based fuels are still very costly. sions or developing a CO2 circular economy. One example Accordingly, one focus of energy research is on power-to-x is the Carbon2Chem project initiated by the Federal Minis- technologies, to further develop them and reduce the cost. try of Education and Research to provide financial assis- In particular, the living laboratories of the energy transi- tance for research on a global solution for economic recy- tion introduced with the 7th Energy Research Programme cling of blast-furnace gas using renewable energy. In will contribute to bridging the difficult gap between the addition, the MACOR project sponsored by the Federal development phase and market penetration, by allowing for testing of innovative technologies such as power-to-x on a relevant industrial scale. In addition to technical and non-technical innovations, research may focus on socio- economic aspects and social issues, as well as future market models, business models and regulatory schemes. Living Laboratories as large-scale innovation projects can also stoke growing demand for technologies still produced in small series or as part of the manufacturing process, a step toward more industrial production methods. The cross-sectoral funding initiative Energy Transition in Transport places the focus on manufacture and use of alternative, electricity-based fuels and incorporating new technologies into the energy sector. By 2022 a roadmap is to be created based on research findings that will provide recommendations for development, production and market entry of sustainable fuels– a prerequisite for a more climate-friendly mobility. Both the P2X Copernicus project and Car- bon2Chem research large-scale electrolysis systems that can produce hydrogen ecologically from renewable energy at competitive prices.

Digital solutions are making their mark across all industries and sectors. Smart metering systems provided for in the GDEW will function as communication platforms for exchanging data across various utilities (electricity, heating, gas and water) and in the sense of sector coupling (includ- 204 14 ENERGY RESEARCH AND INNOVATION

New market potential from innovation provided by small and medium-sized businesses

The Central Innovation Programme for SMEs (ZIM) is a ties for German SMEs to open up new business areas and technology-oriented and sector-neutral funding initiative to expand digitisation of the energy transition to the bene- provided by the BMWi that also sponsors R&D projects in fit of everyone. This includes smart energy storage and energy technologies. SMEs and research institution that generation systems, application of Industrie 4.0 methods, cooperate with these companies receive subsidies for ambi- and It-assisted resource management that reflects energy tious market-driven R&D projects. This leads to opportuni- saving aspects.

Ministry of Education and Research contains a feasibility complexity of this task. In actuality, a radical transforma- study on large-scale integration of hydrogen-based direct tion of the energy system is at issue. The major challenges reduction in an existing smelting process. of the energy transition are to continue the synchronised expansion of the share of renewable energies in all consumption sectors and the necessary infrastructures, such as 14.2 Outlook transport networks, to use energy highly efficiently and to substantially lower energy-related carbon emissions (see Energy research will become even more important going Chapters 4, 5, 8 and 12). In order to master this major task, forward. Current financial planning has earmarked approx- innovation and new and further developed technologies imately €6.4 billion for energy research in the scope of the are absolutely necessary. 7th Energy Research Programme for the period 2018 to 2022. For 2020 a volume of approximately €1.3 billion is planned, of which €863.1 million will go to project funding. 14.3 Conclusions

Innovations are increasingly the subject of interdisciplinary, To efficiently implement the energy transition and to cost- supranational and international cooperation. Individual effectively achieve the ambitious energy and climate goals, innovations are being replaced more and more by complex immediate and strongly focused research and development innovation and transformation processes. Prognoses regard- is required. This positive trend as described in the Outlook ing the specific year of such developments are hardly relia- will continue and will strengthen the role of energy ble. However, it does some plausible that openness, adapta- research in the context of the Federal Government’s energy bility and cooperation will be the structural characteristics policy. of innovation in 2030, and that accordingly, extensive changes are more likely to be expected at the global level Future areas for focus in research and development are (Fraunhofer-Verbund Innovationsforschung, 2018). especially the following:

At the same time, the demands on research, development zzlow-carbon energy production and technologies for and innovation are growing. National, international and buildings, industry and transport European energy and climate targets are ambitious (see Chapters 2 and 3). Some speak of the energy transition as zztechnologies for using renewable energies in the heating the German moon landing, as a way of illustrating the and electricity sectors

Key measures taken to date for the funding the marketing of innovative technologies

zzPromotion of stationary fuel cell heating as part of zzStrategy for Automated and Connected Driving the Energy Efficiency Incentive Programme (see Chapter 7) zzHydrogen and Fuel Cell Technology Government zzElectric Mobility Showcase Programme for the 2016 – 2026 funding period zzPV Battery Storage Systems funding programme (see Chapter 9) Additional examples of innovation funding zzEnergy Efficiency Incentive Programme (see Chapter 5) 14 ENERGY RESEARCH AND INNOVATION 205

zzsector-coupling technologies to reduce carbon emissions currently not suited to these actors. If startups are not in buildings, industry and transport included more strongly in energy research, an important driver of innovation will be left out of the process. For this zztechnologies for reducing carbon dioxide emissions reason, the Federal Government aims to appeal more

from industry processes; the creation of CO2 closed strongly to startups with new and adapted funding formats cycles is a long-term perspective and to increase their participation in all topics of energy research. Existing hurdles will be removed successively: It is important to combine existing and new technologies across sectors, to take advantages of opportunities pro- zzby expanding the programme to non-technical innova- vided by digitisation, to allow for new business models and tions (business models, new services) related to technical to involve more and more actors in the process. The 7th improvements; Energy Research Programme provides the basis by strengthening technology and innovation funding in the zzby adapting and accelerating administrative procedures, energy area, extending this funding to include societal and for example with specific startup advisory services and a systemic approaches and thereby focusing on the major “fast track” option for applications; trends: sector coupling and digitisation (see Chapter 13). zzwith new, more agile project customization and compe- To support the transfer of practical experience in innova- tition formats; and tive energy technologies such as power-to-x, and to enable new approaches to regulatory issues, the Federal Govern- zzwith the new networking platform Research Network ment will set up Living Laboratories of the Energy Transi- for Energy Startups (Forschungsnetzwerk Energie tion as new pillars of research promotion. These Living Startups). Laboratories will take on the major systemic challenges of German energy policy in clearly defined large-scale pro- Just how important networking is for startups was also jects. They will be pioneers for the transformation of the illustrated by the successful completion of the Startup energy system and will be dedicated to research issues that Energy Transition Laboratory in December 2018. This pro- play a key role in implementing the energy transition. This ject run jointly by dena (German Energy Agency) and the initially includes sector coupling technologies such as Federal Ministry of Economic Affairs and Energy offered large-scale electrolysis plants using waste heat in grid con- young and innovative companies a forum for presenting gestion areas, large thermal storage facilities for carbon- ideas for further development of the energy system and to free sustainable exploitation of existing energy infrastruc- have dialogues with experts from government and industry. tures, technologies for carbon use or smart networks for energy infrastructure in climate-neutral urban quarters. In the international and European context too, Germany These living laboratories will not only be larger and address will continue to push for a holistic approach geared more topics than previous demonstration projects, but will towards the transformation of the energy system. With its also open up new paths to “regulatory learning”. In this 7th Energy Research Programme the Federal Government manner, technological and regulatory findings can be put wishes to create a strong research network at the interna- to practical use in both areas, and reveal potential for sys- tional and European level. The Energy transition is and will temic optimisation. remain a global challenge. In the context of EU programmes such as Horizon 2020, this also helps to At the same time, startups as important sources of impetus strengthen European competitive power. Starting in 2021, for the energy transition should receive more support. the new, 9th EU Framework Programme will continue the Startups are highly focused, dynamic and are subject to the efforts of this programme with a new approach. This shows pressure to succeed from their investors. The classic instru- that the energy transition is becoming more and more ments and mechanisms of project funding are however European.

207

15 Investment, growth and jobs

Where do we stand?

The energy transition in Germany is a modernisation strategy to open up new market potential and to provide tangible impetus for growth and jobs. Innovative business models offer big opportunities in this process.

A total of €24.7 billion was invested in the energy sector in 2017. On focus of investment was again the expansion of renewable energies, with an investment volume of €15.7 billion.

In 2017 365,000 individuals worked in the energy sector; however, the number of jobs directly related to investments drop to about 290,000. Investments in energy- saving building refurbishment continued to provide employment for more than 573,000 people. With 317,000, the renewable energies area is an important economic factor, despite the significant drop in employment figures.

In 2017 German exports of technology goods related to renewable energies amounted to about €8 billion.

What is new?

In 2017 the Renewable Energy Sources Act entered into force, rounding out a number of regulations that make planning feasible and create a stable framework for investment in the energy system. This includes the Electricity Market Act, the Act on Digitisation of the Energy Transition (GDEW) and the revision of the incentive regulation.

What is next?

For transitioning to a viable energy system in Germany, investments must be made on an ongoing basis, especially in the areas of energy-efficient building refurbishment and electricity supply. These annual investments in the double-digit billions will provide additional impetus for more growth and employment in Germany.

Investment Growth Retaining and creating jobs in Germany and laying the foundations for Jobs sustainable prosperity and quality of life 208 15 INVESTMENT, GROWTH AND JOBS

15.1 Present situation billion was invested in these areas of the energy sector in 2017. This is somewhat lower than in the previous year 15.1.1 Investments (DIW, DLR 2019). The largest portion was spent on investments in providing electricity and heat, at €15.4 billion. In To make the energy transition successful and at the same 2017 €7.3 billion was invested in infrastructure for distribu- time provide a modern and powerful infrastructure, more tion of final energy (electricity, gas, heat). The remaining investment will be required in the years to come. An easily amount went to storage technology (gas, electricity, heating understandable and stable investment framework increases estimated €0.6 billion), as well as facilities for providing investment and planning security, which in turn have a fuels and motor fuels (coal, petroleum, crude oil and natu- positive effect on investment decisions of companies and ral gas, as well as biomass and biofuels, at €1.4 billion). the economic viability of innovative business models. Important measures that improved this framework were in Investment in the power grids remains high. According to particular the adoption of the Renewable Energy Sources numbers provided by the Federal Network Agency, trans- Act 2017 (see Chapter 4), the Electricity Market Act (see mission and distribution system operators invested about Chapter 9) and the reform of the Incentive Regulation €9.7 billion in grid maintenance expansion in 2017; this Ordinance (see Chapter 12) in July 2016. The Amendment includes investment in cross-border connections as well as to the Grid Expansion Acceleration Act adopted in April measurement, control and communication facilities. Com- 2019 by the Bundestag is an important milestone for more pared to the previous year, this was a slight decrease (see rapid expansion of the grid and investments required for Chapter 12). this that go into the billions. In addition, all key measures of NAPE and the Immediate Action Programme for more Investments in construction of installations using renewa- private investment in efficiency technology have been car- bles once again increased slightly in 2017. However, at ried out by now. Furthermore, the Act on the Digitisation €15.7 billion they were only slightly above the previous of the Energy Transition (GDEW) that entered into force in year’s level and below the level of years prior to 2015 (See September 2016 paves the way for innovative business Figure 15.1). Investments were made especially in electricity models in the field of digital technologies (see Chapter 13). generation as well as also to a small degree in generating heat from renewable sources. The moderate growth in In 2017 the energy industry again invested large amounts investment when, at the same time, capacity was increas- in the transition of the energy system. The energy sector ingly added in the electricity sector (see Chapter 4) shows comprises provision of fuels, operation and maintenance of that costs for capacity expansion per installation are going equipment for energy generation, storage and distribution, down. Investment is still concentrated on wind energy and as well as trading in final energy. This includes both fossil photovoltaic. In 2017 they amounted to over 75% of all and, increasingly, renewable energy sources. A total of €24.7 investments.

Figure 15.1: Investment in renewable energy billion €

30 27.9 26.1 25 23.6 22.5

20 17.7 16.5 16.4 15.4 15.7 15 13.9

0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

solar thermal geothermal biomass heating biomass electricity hydropower photovoltaics onshore wind energy offshore wind energy

Source: BMWi according to the ZSW 2/2019 15 INVESTMENT, GROWTH AND JOBS 209

Energy transition investments also involve the areas of final effect, generating value add in many areas of the national energy use, especially in the heating and transport sector. economy. A current study conducted by GWS and Prognos Spending on improving the energy performance of build- (2018) compares the current situation with a hypothetical ings are an important factor. In 2017, €46.3 billion were situation without the energy transition. The study con- invested in this area, almost 11% more than in the previous cludes that the energy transition increased value added in year (BMWi 2019). Energy retrofitting for buildings is one Germany in 2015 by over €30 billion (approx. 1.3%) com- of the key measures to increase energy efficiency; informa- pared with a situation without the energy transition. We can tion on investments of other areas of energy efficiency is assume that the effect was similar in 2017. According to the still incomplete. study, the largest contribution of the energy transition to value added was in the area of equipment investments, Indirect investment effects for industrial energy consumers meaning investments in power plants as well as efficient may be attributable to electricity and power expenditures vehicles, equipment and installations. or possible price increases. For example, German electricity prices have been high by international standards for a long The energy transition has led to a moderate increase in time, which is in part a reason for low investment activity macroeconomic price levels. GWS and Prognos (2018) are of in energy-intensive industries. Gross investment in these the opinion that inflation in Germany was slightly higher in industries – including in particular the sectors paper, glass 2015 than it would have been in the absence of measures and ceramics, chemicals, metal production and processing taken for the energy transition (since 2005, on average 0.1 – has gone down every year since 2002. In order to prevent percentage points). This development is understood in the the energy transition from contributing to this general context of continued low-to-moderate overall inflation in trend, energy-intensive industries that are faced with inter- Germany. national competition receive various types of compensation. These industries were able in part to profit from Germany currently covers around 70% of its energy needs declining electricity prices in 2017 (see Chapter 10). through energy imports. The trend in these imports affects Germany’s value added, and thereby, also economic growth. In 2017 97% of the petroleum consumed, about 92% of nat- 15.1.2 Growth ural gas, and almost 94% of black coal were imported. This greatly exposes the German economy to often volatile Investments made as part of the energy transition have a global market prices. Prices for fossil fuels recently went up positive impact on growth. Owing to the interdependencies again significantly; for this reason it is important to perma- of intermediate inputs, these investments have a knock-on nently lower the dependency on individual supply source. 210 15 INVESTMENT, GROWTH AND JOBS

With more renewable energies and attempts toward energy international demand took place in Germany for energy efficiency, there is less need to import fossil fuels. Accord- plants and components for utilising renewable energies. ing to the Federal Environmental Agency, a total of 2202 This fairly young industry originally had a strong emphasis billion PJ of energy from fossil fuels were replaced with on the domestic market, yet has begun to diversify its sales renewables in the electricity, transport and heating sectors markets over time with various export strategies. However, in 2017 (see Figure 15.2). This meant that the trend of in comparison to the previous year (2016: €12 billion) increasing avoidance of fossil fuels continued; compared exports dropped in 2017 to €8 billion; net exports were with the previous year, an additional 226 PJ were avoided. €3.4 billion. One reason for the strong dip is the downward In this way, renewable energies can reduce dependency on trend in markets in which German companies had been imports and increase supply security. In addition, increased active in past years; in addition, these companies could not energy efficiency reduces energy demand in general (see hold their previous competitive position in the new growth Chapter 5), and thereby also the need for imports. markets (DIW, DLR 2019). However, if we look beyond goods related to the energy transition to the larger environ- One benefit of the energy transition is lower expenditures mental and climate protection goods market, German com- for fossil fuel imports. The demand for imports of fossil panies are still global leaders in exporting these technolo- fuels would have been higher in the absence of investments gies (UBA 2019). in renewable energy and energy efficiency efforts. Accord- ing to GWS estimates (2018b), renewable energies and energy efficiency dampened imports of fossil fuels in 2016 15.1.3 Jobs by about €16 billion. This effect will probably have been strengthened in 2017 by the rise in fuel prices that year. In The job impact of the energy transition affects both the this respect, estimates of the IEA for 2016 conclude that the energy sector in the stricter sense and industries that sup- annual energy expenditures of private households in Ger- ply the energy sector with goods. These two areas must be many would have been €500 higher per capita without considered together. The energy sector comprises a broad progress that has been made in energy efficiency (OECD/ spectrum of services, including provision of fuels, opera- IEA 2017). Long-term savings of a similar magnitude can tion and maintenance of equipment for energy generation, also be expected from diversification of energy sources and storage and distribution, up to trading in final energy. Each transport routes for natural resources. Accordingly, this individual area requires workers. The expansion of renewa- remains a priority of the Federal Government. bles and investments in energy efficiency sharpens the focus on the fact that growing demand for capital goods in German investment goods for the energy transition are these areas also impacts manufacturing and jobs in indus- exported. In recent years a marked shift from domestic to tries outside of the actual energy sector.

Figure 15.2: Avoided primary energy use of fossil fuels by using renewable energies in Germany in 2017

electricity 1,617.3 PJ 1,095.6 521.8

natural gas 33 % petroleum/heating oil heating1 43.5 8 % 488.2 PJ 47.1 213.5 178.8 5.4 diesel fuel 3 % total avoided petrol fuel primary energy use: 2 % 1.8 2,202 PJ lignite 2 % transport2 62.7 32.5 96.90 PJ black coal 52 %

0 200 400 600 800 1,000 1,200 1,400 1,600 1,800

lignite black coal natural gas petroleum/heating oil diesel fuel petrol fuel

Source: UBA on the basis of the AGEE-Stat 02/2019 211

Direct employment in the energy sector remained stable in importance of electrical mobility can lead to changes in 2017. As in the previous year, 365,000 individuals were value added and employment. Changes may impact the employed in this sector in 2017. Almost 215,000 individuals automobile industry and its suppliers in particular, as well were employed directly in the traditional and mostly con- as related industries. This trend must be assessed in more ventional energy sector (electricity generation, transmission detail in the years to come. Significant aspects will be the and distribution; electricity trading, gas and district heating, degree of market penetration of alternative drive technolo- coal mining and refining, extraction of crude oil and natural gies, the trend in the share in imported upstream manufac- gas and petroleum processing). Approximately 150,000 turing for electrical automobile production, and future employees were involved in the operation and maintenance growth in productivity of the automobile industry and the of renewable energy plants and the provision of biomass demand in European and international markets. Further- and biofuels used for generating energy (DIW, DLR 2019). more, it must be kept in mind that the expected structural changes in this sector – important for Germany’s economy Investment activities in the energy industry continue to – will also be affected by other international trends such as induce high employment. In addition to direct employment, digitisation, multimodal mobility and connectivity and the energy industry also creates jobs through investment in automation. the various sectors and value-added steps of providing energy. In 2017 more than 292,000 jobs were related to Employment figures in the area of renewable energies investment activities that are sufficiently identifiable as amounted to a total of 317,000. Renewable energies pro- such and for which there is data. However, due to the vide jobs both in connection with investments in generat- decline in investments in electricity generating plants, the ing plants and with direct provision of energy. Parallel to number of jobs was lower than in the previous year (DIW, the ongoing expansion of domestic renewable energies DLR 2019). (Chapter 4), exports of German technology have become a second pillar for securing employment in the renewables Investments on the energy demand side also create jobs. sector. However, gross employment in 2017 was substan- Here, investments in energy-saving refurbishment of build- tially below the previous year’s level of 348,000. This was ings to increase energy efficiency are decisive. In 2017 about due in part to the recent drop in exports, particularly for 573,000 individuals were employed in this area, particularly wind energy. in the construction business. Additional employment was created in efficiency services such energy consulting, energy The personnel shortage is perceived to be one of the major contracting, energy management or information service economic bottlenecks – but what is the ultimate effect on activities. According to estimates, at least 35,000 people were the energy transition? After a period of high unemploy- employed in this area in 2017 (BMWi 2018b). ment in Germany, the focus was on demand for work, that is, the effect on employment, the focus is now increasingly In 2017, there was no noticeable impact yet on employment on the supply of jobs and accordingly the issue of finding as a result of the transition to electric mobility. With regard sufficiently available and qualified trained workers. Accord- to energy demand in the transport sector, the growing ing to a study by GWS (2018a) there are signs of a worker 212 15 INVESTMENT, GROWTH AND JOBS

shortage for professions that might be related to the energy tional value added can be achieved with a small amount of transition, such as technical and construction professions. energy. Because energy consumption is a relevant cost fac- However, the picture for construction professions in particu- tor in parts of German industrial production, efficient man- lar is not uniform: The worker shortage varies according to ufacturing processes and certified energy management sys- profession, level of expertise and region – in some Länder tems are also decisive in being able to survive in international there is no shortage or there are only small signs of such. competition. If this helps to keep fossil energy in the ground Professional groups related to the energy transition and the instead of burning it, this is also good for the environment overall share in jobs attributable to the energy transition and the climate. are hard to completely assess. Because the implementation of the energy transition also impacts employment in the Because the energy transition is finding more followers in upstream value-added chains, there is also an indirect other countries, which will open up more export opportuni- demand for qualified workers in this area. ties for the German economy. The global effort to comply with the Paris Agreement and the substantial cost digres- sion for renewable energy technologies, together with rapid 15.2 Outlook advances in digitisation, all result in more and more countries making efforts to redesign and decarbonise their Investments are a key to finding growth and employment energy systems (OECD/IEA 2018b). German companies that possibilities in the German economy and also remaining lead the market in key energy technology goods will find competitive in the future. Investments in coming years will export markets that can help create value added, employ- determine whether Germany can continue to provide a ment and innovation in Germany. modern and powerful infrastructure and ensure the success of the energy transition. For transitioning to a viable energy Employment in the energy sector is changing. Beyond the system investments will be continually required, especially current upheaval of structural change and employment in in the areas of energy efficient building refurbishment and the coal regions there has been a slow but perceptible shift electricity supply. Annual investments in the double digit since 2000 from employment in traditional and conven- billions will provide additional impetus for more growth tional energy businesses to renewable energies. This is espe- and employment in Germany (GWS, Prognos 2018). cially the case when the effects on employment in areas of investment in renewables are taken into account (DIW, DLR, In order to provide continual economic growth while pro- GWS 2019). This trend is the logical consequence of the tection our natural basic resources, increasing energy effi- effort to decarbonise the energy system in Germany, and it ciency will play a key role. The German economy has been will continue. growing for ten years in a row. The continuing success story of Germany’s social market economy as a strong economic In some areas of the German economy there is a shortage of order is proof of this. Now the path must be set for contin- technical personnel, especially those with formal qualifica- ued economic growth. Investments in energy efficiency play tions. This is already attributable to the demographic shirt, an important role. Being energy efficient means that addi- and could slow macroeconomic growth and hamper inno-

Key measures taken to date in the areas of investment, growth and jobs

Creating planning security and a stable framework for Government to add new projects to existing projects for investment in the energy system: regions affected by the coal phase-out, such as providing zzRenewable Energy Sources Act 2017 (see Chapter 4) substantial funds to assist the Länder in managing the zzEnergy Efficiency Strategy (see Chapter 5) structural transformation in the coal-mining areas. (see zzElectricity Market Act (see Chapter 9) Chapter 1) zzAct on the Digitisation of the Energy Transition (GDEW, see Chapter 13) Support German companies in their leading role regarding zzRevision of the Incentive Regulation (see Chapter 12). capital goods for the energy transition and reduce dependency on natural resources: Providing assistance for the structural transformation zzPromoting exports with the Energy Export Initiative caused by the energy transition and opening up new zzCooperation in the context of around 20 energy partner- employment opportunities: ships and dialogues zzCoal Commission, in particular the Immediate Action Pro- gramme with up to €240 million, used by the Federal 15 INVESTMENT, GROWTH AND JOBS 213

vation. Whether and to what extent the economic sectors example (see Chapter 3). This directive contains the ambi- involved in the energy transition are affected must be tious goal of increasing the share of renewable energies in observed more closely. gross final consumption of energy in the EU to 32% by 2030, which provides additional momentum to demand for In the transport sector, the shift from conventional drives related technology. German companies that wish to tap to electrical mobility is expected to bring about changes in markets outside the EU receive assistance from the Federal employment and value added. However, these changes Government in the form of export subsidies, such as the cannot yet be completely projected. To date, there have Energy Export Initiative. The cooperation within energy only been a few comprehensive studies on the overall partnerships and dialogues also provide important contri- effects. They are driven by assumptions and forecast both butions to export promotion. In addition to enabling con- declines and growth in employment, for instance due to a sultation with partner countries in expanding renewables, number of new jobs in the energy industry and new ser- international partnerships also provide a platform for inno- vices. The broad range of results shows that there is still a vation “made in Germany”. need for detailed studies on the gross and net effects of the shift to electrical mobility on employment and value Previous studies concur that the energy transition has had a added. positive effect on employment. One particular focus is currently on the coal-mining areas that are faced with rapid structural changes due to the phase of coal-fired power 15.3 Conclusions generation. The Federal Government will spend substantial amounts together with the Länder to help these regions to The energy transition is a macroeconomic strategy for create new value-added chains and sustainable employ- modernising Germany as a place to do business. Significant ment opportunities. If there is a lack of skilled workers in investments in climate-friendly energy and efficient tech- implementing the energy transition, this will be counter- nologies, in municipal infrastructure for electricity and acted with a suitable monitoring and regulatory frame- heat networks, in building insulation, storage, electric work. mobility and much more strengthens the domestic economy and makes Germany competitive and ready for the The energy transition will contribute to lasting prosperity future. This makes Germany less dependent on fossil fuel and quality of life. Overall, the energy transition provides imports. In addition, diversification of energy sources and many benefits, some of which however are difficult to transport routes for fossil natural resources will remain a express in macroeconomic terms. For example, the energy high priority for the Federal Government. transition is beneficial in that greenhouse gas emissions and air pollution are reduced, thereby reducing the negative The Federal Government is creating transparent and stable impacts on humans and the environment (see Chapter 11). conditions for investment. This increases investment and With the energy transition the Federal Government creates planning security, which in turn has a positive effect on the necessary prerequisites for growth, employment and investment decisions of companies and the economic via- innovation, on the one hand, and on the other, also ensures bility of innovative business models. lasting prosperity and quality of life. At the same time, the energy transition must be seen in a global and holistic con- This will also help German companies to remain leaders in text. Holistic means that the energy transition is successful international markets. Export opportunities are created by in all sectors and that the socio-economic aspect is always the amendment of the EU Renewable Energy Directive, for part of the equation. 214

16 Overview of measures

If measures described in the table above are also measures The measures are implemented under the applicable budg- funded under the 2020 Climate Action Programme, etary and financial planning principles of the ministries detailed information on their state of implementation is (including positions and permanent posts) subject to the provided in the annual climate reports issued by the Fed- availability of the necessary budget funds. eral Government.

Instrument State of implementation Chapter 3 EU and International Aspects 1. EU regulation for the Governance Goal: This regulation introduces a new planning and monitoring system for implementing the System of the Energy Union five dimensions of the Energy Union, especially the 2030 Energy and Climate Framework. To (Governance Regulation) this end, the regulation creates the necessary groundwork for a larger convergence of national energy and climate policies in the various Member States. Facts and figures: A major component of the Governance Regulation comprises the integrated National Energy and Climate Plans (NECP) that each Member State must submit to the Europe- an Commission by December 2019 (draft was to be submitted and published in December 2018). They should provide a perspective for the coming 10 years for the national goals and contributions to the EU 2030 Goals in the five dimensions of the Energy Union (decarbonisation, energy efficiency, the energy supply security, the European internal energy market, research, innovation and competitiveness), as well as measures for reaching these goals. To create comparability, the Governance Regulation sets exact specifications for the content and structure of the Plan. These Plans can be updated after five years. In addition to the NECP, starting in 2023, the Member States are to submit NECP progress reports; in addition, the Euro- pean Commission is to monitor the process. This will ensure that the Member States make sufficient contributions with their planned activities toward achieving the 2030 energy and climate goals for the EU, or that adjustments can be made, where appropriate. In the event that voluntary efforts or progress in achieving the 2030 EU goals are not satisfactory, the proposal for the Governance Regulation contains in particular concrete rules for additional measures at the EU or Member State level in the area of renewable energy (Gap-filler Mechanism) that should ensure that the joint EU goals are achieved. Status: The Governance Ordinance entered into force in December 2018 2. Draft for an integrated Energy and Goal/Scope: The NECP stipulated by the new EU regulation on a governance system for the Climate Plan (NECP) energy union is the first European planning and monitoring instrument that provides the framework for achieving the EU 2030 targets for energy and the climate by means of national targets and monitoring mechanisms for reaching these targets with a degree of certainty. Each EU Member State will develop such a plan and present it. The Federal Government will continue work on the NECP during 2019, confer on the draft and submit the final plan at the end of 2019 and send it to the European Commission. The NECP is an important strategic document on energy and climate policy and is based in particular on the Energy Concept. Status: The NECP draft was submitted to the European Commission in December 2018 and was published. 3. Revised EU Renewable Energy Goal: The Directive defines the European framework for funding renewable energy sources for Directive (REDII) the period between 2020 and 2030. Together with the Governance Regulation, it ensures that the binding EU target of expanding renewable energies such that they provide a share of at least 32% of gross final energy consumption in 2030. Scope: The Directive contains regulations for funding energy from renewable sources in the electricity, heating and cooling sectors as well as in transport. It also contains sustainability criteria for gaseous, liquefied and solid biofuels and bioliquids. The directive defines the specific framework for how Member States may set up their funding for renewables in the electricity supply sector. Furthermore, the directive contains rules on voluntary and in some instances opening up funding for electricity across national borders, as well as for encouraging self-supply using renewables and citizens energy projects (‘renewable energy communities’). Binding sectoral targets were agreed on for the first time for the heating and cooling sectors. Accord- ingly, the EU Member States are required to reach an increase in the share of renewables of at least 1.3 percentage points annually (a maximum of 40% share for waste heat and cooling can be included in the calculation). Special rules are planned to ensure that the heating and cooling networks also make a reasonable contribution. In the transport sector, marketers of fuels will be obligated to increase their renewables percentage to at least 14% by 2030. Use of conventional biofuels should be capped. Specific incentives have been created for new technologies, such as advanced biofuels, electric mobility and power-to-x. Status: The RED II entered into force in December 2018, and must be transposed into national law by 30 June 2021. 16 OVERVIEW OF MEASURES 215

Instrument State of implementation 4. Amended Energy Efficiency Goal: The Directive defines the European framework for improving energy efficiency, for exam- Directive (EED) ple with concrete energy efficiency targets by 2030, a final energy savings obligation currently extended to 2030, as well as revised regulations on energy consumption metering. Facts and figures: Along with the Governance Regulation, the EED ensures that the EU energy efficiency target of 32.5% will be reached by 2030 (compared with a projection of the European Commission for 2007). The final energy consumption savings obligation under Art. 7 of the EED also serves this goal. The most recent amendment cumulatively extended this obligation to 2030, with a real savings factor of 0.8% Furthermore, the provisions on energy consumption metering were revised. Status: The EED entered into force in December 2018 and must be transposed into national law by June 25 or October 25 2020 (dependent on the provisions). 5. Amended EU Energy Performance Goal: Update of the EPBD, whereby basic rules will be retained. of Buildings Directive (EPBD) Scope: The amendment contains the following benchmarks: zz The rules on long-term refurbishing strategies previously contained in the EED has been integrated into the EPBD. zz Another change was an obligation to instigate preparatory measures for creating an electric mobility infrastructure in the buildings sector. zz Also implemented were rules on initial steps toward building automation as well as on a voluntary building assessment instrument, the smart readiness indicator. Status: The EPBD is part of the package of measures title Clean Energy for All Europeans; the amendment entered into force in July 2018. Most of the provisions of the Directive must be transposed into national law by 10 March 2020. 6. Speeding-up the Conversion of Goal: This strategy should help identify potential for sustainable energy in buildings, and Buildings to Clean Energy remove hurdles to more investment in this area. Scope: To exploit the potential for sustainable energy in buildings, numerous social, financial and technical hurdles must be overcome and administrative challenges dealt with. For example, consumers should be able to choose energy-efficient solutions in renovating their apartments and houses. A sufficient legal framework is necessary, and financing is an especially important aspect. To this end, a new measure, ‘Smart Finance for Smart Buildings’ in close cooperation with the European Investment Bank should mobilise additional public and private funding for energy efficiency and renewables. Status: The initiative is part of the package of measures titled Clean Energy for All Europeans that the European Commission published in November 2016. Facts and Figures: The initiative can mobilise an additional €10 billion by 2020 from public and private funding for energy efficiency measures and renewable energies. 7. Regulation on setting up the LIFE Goal: Supporting the transition to a cyclical, energy-efficient, low-emission and climate resist- Programme for the Environment ant economic system based on renewable energies. and Climate Action Scope: The LIFE programme was already included in the budgetary period 2014–2020 and should be continued in the period 2021–2027. Funding will be provided for projects, for example in a new subprogramme for the energy transition, that help create capacities and distribute knowledge and innovation, in order to achieve renewables and efficiency targets at the EU level. Status: The Regulation on extending the LIFE programme was proposed by the European Com- mission in December 2018. Facts and Figures: The programme is to be funded with €5.45 billion, of that €1.95 billion are for climate policy and of that amount, €1 billion for the subprogramme Energy Transition. 8. Communication on a long-term Goal: The communication is the basis for a discussion on developing a long-term strategy for EU climate protection strategy EU climate policy, as required by the Paris Agreement, to be prepared by 2020 and reported to the EU. Scope: In the communication and the analysis on which it is based eight scenarios are described that aim to achieve by 2050 a reduction in greenhouse gases of between 80% and 100% compared with 1990, and enable a socially equitable and cost-efficient transition to a carbon reduced, and eventually, a greenhouse gas neutral EU economy. Status: The draft strategy will be discussed at the European level in 2019. The goal is to develop a conclusive strategy by 2020. 9. Declaration on the European Goal: Hydrogen should be given greater priority in the European energy supply. Hydrogen Initiative Scope: The declaration describes potential uses and future perspectives for green hydrogen. Status: Twenty-five EU Member States and a large number of companies signed the declaration in September 2018. However, it does not contain any binding agreements. 10. Revising the EU energy label Goal: Energy labels should be designed to be more consumer-friendly and allow the customer to make a sound decision. Scope: The previous energy efficiency scale for household appliances, with categories from A+ to A+++, had become confusing and will be replaced with a simpler scale with categories from A to G. In addition, an EU-wide product database will be introduced that will show consumers the appliance with the greatest energy savings. Status: The framework regulation for this new scale entered into force on 1 August 2017; the rules will now be implemented for individual products, starting with washing machines, refrigerators, dishwashers, televisions and monitors, and lighting. The new energy labels will be visible in stores as of the end of 2020. 216 16 OVERVIEW OF MEASURES

Instrument State of implementation 11. Revision or new version of the Goal: The regulation defines requirements for ecological design of energy consuming products, Directive on laying down ecodesign so that design improvements can be made that improve the products’ environmental impact. requirements (11 product groups) Scope: The regulations set out requirements for energy efficiency, and for the first time, and also on the reparability and the availability of spare parts. The regulations apply directly and do not need to be transposed into national law. The annual energy savings potential for all of Europe is estimated at almost 120 TWh in 2030. This correlates to a reduction in greenhouse gas emissions

of almost 40 million tonnes of CO2 equivalent annually. Status: Between September 2018 and January 2019, new ecodesign regulations were agreed upon for the product group comprising household cooling appliances, lighting, televisions and electronic displays, household dishwashers, household washing machines, motors, transformers, external power supplies, welding equipment and professional refrigerators. The new regulations are planned to enter into force in July or August of 2019. 12. Risk provisioning regulation Goal: This regulation provides a framework for prevention and management of electricity crisis situations and obligates Member States to cooperate in a spirit of solidarity. Scope: The regulation requires the European Network of Transmission System Operators for Electricity (ENTSO-E) and the competent national agencies to develop relevant scenarios for electricity crises in various regions or EU Member States. Furthermore, national authorities must prepare risk plans containing measure for preventing and managing electricity crisis situations. Cross-border measures must be agreed between Member States and measures not con- forming to the Market are only allowed in exceptional circumstances. If an electricity crisis looms in a Member State, this State must warn the European Commission and affected Member States beforehand. Member States should work towards solving the crisis and support each other in their efforts. Status: In November 2018 the European Commission, the European Council and the European Parliament reached an agreement in a trialogue. The EU parliament adopted the regulation on first reading on March 26. The official consent was provided by the Council on May 22. The regulation is applicable as of the 20th day after publication in the Official Journal of the European Union. 13. Act amending the Gas Supply Goal: Increase gas supply security in the EU Security Regulation Scope: The Gas Supply Security Regulation (EU) 2017/1938 provides for joint, regionally-coordinated measures to secure gas supply. This includes risk assessments and prevention and emergency plans, the notion of solidarity for drastic gas shortages, as well as the obligation for natural gas companies to present gas supply contracts and any amendments to them to the European Commission and to the Member States. Status: The Gas Supply Security Regulation entered into force on 25 October 2017. The Federal Government is currently working on solidarity agreements with neighbouring countries. 14. Commission Communication on Goal: Among other things, protecting electricity, gas, oil and nuclear energy infrastructures protecting Europe’s cross-border from threats from terrorist attacks, for example, or natural disasters. energy and transport infrastructure Scope: The Communication contains criteria for identifying critical infrastructures. After this analysis, Member States should conduct risk assessments and together with the Commission, determine what protection measures should be taken. Status: The Framework Directive of the European Programme for Critical Infrastructure Protec- tion (EPCIP 2008/114) was adopted on 8 December 2008 and entered into force on 12 January 2009. The directive was to be implemented by the Member States by 12 January 2011. It was transformed into German law under Section 12g of the Energy Industry Act. Since September 2018, the EPCIP was evaluated; follow-up measures indicated by the evaluation are expected in 2019. 15. Cross-border grid expansion Goal: Expansion of cross-border interconnectors should be accelerated, to create the physical conditions for a functioning internal electricity market, simplify the integration of renewable energy and strengthen security of supply. Additional grid expansion projects must be implemented and ongoing projects completed to also reach the European 10% interconnection target in 2020 and further development toward the 2030 target year. Scope: Legislation has been passed for ten interconnector projects to further expand numerous interconnection points with our neighbours. An additional five interconnector projects were included in the grid development plan at the end of 2017. Additional interconnector projects are also be reviewed in the 2019–2030 Grid Development Plan. Status: The majority of legislated projects are in the approval phase or under construction, with scheduled ramp-up by 2025. The concrete planning and approval of additional interconnector projects is not expected until after they have been confirmed in the Grid Development Plan and included in the Federal Requirements Planning Act. Facts and Figures: If all of the planned interconnectors are put into operation, over 1,000 km of lines would be reinforced or newly constructed, and the cross-border interconnector capacity would be increased by over 10 GW by 2030. 16 OVERVIEW OF MEASURES 217

Instrument State of implementation 16. Communication of the Commission Goal and scope: The expansion of cross-border interconnectors is to be strengthened in order on the 15% interconnection target to reduce current congestion and thereby also create the physical framework for a functioning by 2030 internal electricity market, simplify the integration of renewable energy and strengthen security of supply. The European Council underlined the importance of cross-border interconnector capacity for the internal electricity market in October 2014 and confirmed the 15% interconnection target for 2030 which had been proposed the European Commission. Status/Facts and Figures: The European Commission presented recommendations in a communication in November 2017, made on the basis of an expert commission report regarding how to operationalize an increase of the interconnection target to 15% by 2030. Three threshold levels were established as indicators for the urgency of taking action. zz €2/Mwh price difference between two bidding zones, Member States or regions zz 30% thermal transmission capacity/renewables generating capacity zz 30% thermal transmission capacity/peak load The thresholds were set out in Exhibit 1 of the Regulation on the Governance of the Energy Union that entered into force in December 2018. 17. Regional partnerships Goal: Regional partnerships can enable Member States to contribute to the implementation of European regulations, to test new policy measures before they become European law, and to consult with neighbouring countries on a regular basis regarding new developments. Regional partnerships thus support mutual consensus for national challenges and lead to further integration of European electricity markets. Regional partnerships are also key in preparing the NECP of the Federal Government. Scope/Status: Electricity neighbour networks have most recently focused on creating a basic consensus on how to make electricity markets more flexible. The Pentalateral Energy Forum is currently working on strengthening coupling of regional electricity markets, creating regional supply security reports and on better cooperation in preventing crises and also exchanges more specific information on NECPs. The North Sea cooperation was formalized in the energy area in 2016, and includes the topics of maritime spatial planning, network development and co-ordi- nation, sponsoring and financial support for offshore wind energy and creating standards for offshore wind energy generation. The North Sea cooperation conducts abstract and practical studies on hybrid infrastructure that can be used both for trading and for transmitting offshore wind power. There is also discussion on NECPS as part of the North Sea Cooperation. The Baltic Energy Market Interconnection Plan (BEMIP) encourages coupling of regional electricity markets as well as regional aspects of supply security. 18. Revised Cross-Border Renewable Goal: Open up some of the auctions under the Renewable Energy Sources Act to bidders from Energy Ordinance (GEEV) other Member States. Scope: Bidding for renewable energy resources will be opened up for 5% of annual capacity to be installed to include installations in other EU Member States; this applies both to PV and onshore wind generators. These cross-border bid invitations will accompany national bids. Status: The new Ordinance was adopted by the German government in June 2017, and extends its previous application of use of PV installations to include onshore wind-powered installations. In the fourth quarter of 2016, a pilot cooperation project was successfully conducted, in which Germany and Denmark reciprocally opened their bid invitations for ground-mounted solar PV systems. The Federal Government is conducting negotiations with other Member States on conducting additional open bid invitations. 19. Energy congestion management Goal: Less network load in Germany, Poland and the Czech Republic, more energy supply secu- on the Austria-German border rity and savings for grid operators. Scope: Electricity trading between Germany and Austria has reached a level that exceeds the ability of grids to transport this energy. Both countries therefore agreed on introducing congestion management starting in October 2018. Energy trading will be limited, yet at least 4.9 gigawatt should be available for trading. Status: Energy congestion management entered into force in October 2018 and has been beneficial to German electricity consumers. 20. Programme for financing electricity Goal: Improved integration of European electricity and gas markets and better supply security. and gas infrastructure Scope: The EU conducts a policy for creating trans-European energy grids (TEN-E). Various funding programs help cover this need for investment, for example, the Connecting Europe Facility (CEF) or the European energy programme for recovery (EEPR). Financial support of the EU in the scope of the CEF is an important factor in implementing significant energy infrastructure projects of common interest (‘Projects of Common Interest’: PCI) in the areas of electricity and gas. Status: The current budgetary period is 2014–2020. The European Council and Parliament agreed in March 2019 on a new funding phase of the Connecting Europe Facility for the 2021– 2027 budgetary period (CEF Regulation). Facts and Figures: The EU Commission has identified an aggregate need for investment in the European electricity and gas infrastructure in the amount of more than €200 billion. During the current budgetary period the CEF has funding of €27.4 billion, of which €4.1 billion goes to energy infrastructure. With respect to the PCIs, 109 measures that served to execute 80 PCIs have received funding for construction projects and studies in the aggregate amount of €2.46 billion (as of summer 2018). The third current PCI list published in November 2017 with 173 PCIs is strongly focussed on electricity connectivity and storage and smart grids. The new CEF recommendation provides for a budget of over €42 billion; of that, €8.7 billion is planned for energy infrastructure, 15% of that are to be invested in cross-border renewable energy projects. 218 16 OVERVIEW OF MEASURES

Instrument State of implementation 21. Regulation on the internal Goal: Further develop and strengthen the internal electricity market electricity market in the EU Scope: The electricity market regulation contains a number of rules on how to set up and develop the European retail electricity market. This includes ground rules for retail electricity and balancing energy markets that should simplify cross-border electricity trade and make market access easier for various flexibility options. Furthermore, Member States will be able to decide themselves how to solve their network congestion problems. They can either restructure their bidding zones or solve network congestion problems by expanding the grid, optimising existing networks and redispatching. Member States are required to submit a catalogue of measures. Furthermore, the regulation includes rules for creating capacity mechanisms that are to be tem-

porary, market-driven and technology neutral, including requirements for heavy CO2-emitting power stations. Other requirements apply to structure and tasks of European associations of transmission and distribution system operators, as well as a legal framework for Network Codes and Guidelines. Status: The regulation is part of the ‘Clean Energy for All Europeans’ package. The trialogue between the European Council, the Commission and Parliament was concluded in December 2018. The EU parliament adopted the regulation on first reading on March 26. The official consent was provided by the Council on May 22. Most of the provisions of the regulation enter into force on 1 January 2020. 22. Directive on the internal electricity Goal: Expanding flexibility, competitiveness and fair pricing in the electricity market; consumers market in the EU are the focal point of the energy transition. Scope: The electricity market directive strengthens consumer rights. Consumers should now be able to more easily adjust and monitor their energy consumption, e.g. using dynamic electricity price agreements that reflect prices on the electricity exchange, or using smart meters that provide consumers transparent overviews of their electricity consumption. Consumers may participate in electricity markets as active customers or may join an energy community. Aggregators will also help make markets more flexible. In addition, there are rules that enable transmission and distribution system operator to own and operate battery-storage system under strict conditions, if they commit to investments by 2024. Status: The Directive is part of the ‘Clean Energy for All Europeans’ package. The trilogue between the European Council, the Commission and Parliament was concluded in December 2018. The EU parliament adopted the Directive on first reading on March 26. The official consent was provided by the Council on May 22. The Directive must be transposed into national law within 18 months. 23. ACER Regulation Goal: Adapting ACER (Agency for the Cooperation of Energy Regulators) to the new electricity market design Scope: The Commission’s recommendation provides for adapting voting rules in the Board of Regulators (from a two-thirds majority decision to simple majority) and simplifying the voting on new methods. ACER contains additional competencies, for example for approving a method for European monitoring of supply security. In addition, the role of working groups in ACER will be formalized and strengthened within the organisation. Status: The regulation is part of the ‘Clean Energy for All Europeans’ package. The trilogue between the European Council, the Commission and Parliament was concluded in December 2018. The EU parliament adopted the regulation on first reading on March 26. The official consent was provided by the Council on May 22. The regulation is applicable as of the 20th day after publication in the Official Journal of the European Union. 24. Regulation on determining a Goal: This regulation aims to ensure harmonisation of European procurement and provision of guideline for system equilibration balancing energy. It should provide more efficiency in system equilibration and balancing ener- in the electricity system gy markets, allow for cross-border exchange of balancing energy and open up the market for system balancing energy to all potential providers. Scope: The regulation contains technical, operational and market-related provisions that affect the functionality of balancing markets in the EU. This includes procurement of balancing energy, activating balancing energy and billing for market participants. The regulation also requires the transmission system operators to develop harmonised methods for transmission capacity for cross-border exchange of balancing capacity reserves. Status: The regulation entered into force November 2017. 25. Directive to amend Directive Goal: The amendment directive will now also subject gas pipelines from non-member countries 2009/73/EC concerning common to the directive in accordance with the third single market package of 2009. rules for the single market in Scope: The amendment directive will expand the definition of an interconnector, which until now natural gas applied only between EU Member States, to operation of connecting pipelines with non-member countries, if these lines are in the territory or territorial waters (12-nautical-mile zone) of a Mem- ber State and have their first connection in these areas with the gas grid of the Member State. Applicable provisions include in particular ownership unbundling, non-member access, regulation of charges and transparency. Offshore pipelines are subject to the authority of national regulatory bodies (in Germany the Federal Network Agency) in matters of single market law in territorial waters. Pipelines in existence before the directive enters into force may be exempted. If agreements with non-member countries are planned the Member States should obtain authorisation from the European Commission on the relevant negotiations, while complying with single market rules. Status: After the directive was adopted in first reading by the European Council and Parliament in April 2019, it entered into force on 24 May 2019 and must be transposed into national law within nine months. 16 OVERVIEW OF MEASURES 219

Instrument State of implementation 26. Tallinn e-Energy Declaration Goal: Strengthening digital solutions in the energy sector Scope: The non-binding declaration suggests various ways to develop a European digital energy strategy, including forums and stakeholder working groups, regional pilot projects for test runs of innovative digital energy systems, more use of national and EU funding for digital innovations in the energy area. How the overall strategy will be coordinated and financed is as yet still unresolved. Status: Signed by the Commission and the Member States in September 2017. 27. Energy Diplomacy Action Plan Goal: Strengthening the external dimension of the Energy Union with a coherent EU foreign policy for energy Scope: This action plan specifies four priorities: diversification of sources, suppliers and routes; expanding energy partnerships and dialogues; continual improvement of nuclear safety; and defining international energy architecture and multilateral initiatives. Status/Facts and Figures: The action plan was resolved in July 2015, and will be in effect for an undetermined period. Since then, energy has become an important component of cooperation between the EU and neighbouring countries. Plans provide for improved information exchange between the EU and neighbouring countries, to encourage transfer of knowledge and technology. In recent years, the link to climate diplomacy was reinforced. 28. Market stability reserve in the Goal: Reduce the surplus of ETS allowances EU emissions trading system Scope: If the entire amount of allowances in circulation exceeds €833 million, allowances are taken out of the market at a certain rate, by reducing the bidding amounts. If the entire amount of allowances in circulation is less than €400 million, certificates are issued from the Market Stability Reserve (MSR). The EU-ETS can in this way also take into account a part of the minimising measures also taken by Member States, and cap the amount of allowances. In addition, if electricity generating capacity is shut down due to additional national climate protection measures, the Member States may now delete a corresponding amount of allowances from national auctions that is compliant with the Emissions Trading Directive. Germany has transposed the directive into national law and created a legal basis for deletion. Consent from the Federal Government is required before exercising this option. Status: The MSR came into force in January 2019. Facts and Figures: The ETS reform for the fourth trading period also stipulates that the amount of emission allowances that the MSR reserve absorbs should be raised to 24% by 2023 (instead of currently 12%). 29. Reform of the EU emissions Goal: The price signals of the ETS should be strengthened and at the same time the industrial trading system for the period competitiveness of energy-intensive industry maintained. 2021–2030 Scope: The total number of emission allowances will be lowered further starting in 2021, by raising the linear factor of currently 1.74% p.a. to 2.2% p.a., so that by 2030 emissions in the ETS sectors will sink by 43% compared with 2005. It is no longer possible to use allowances from international project mechanisms. The rules on distributing allowances to energy-intensive industries at no cost will be maintained in any case. The list of sectors subject to possible carbon leakage is compiled on the basis of trade and emission intensities. Furthermore, various funds will be created for modernising energy systems and to sponsor innovative technologies that should contribute in the long term to transforming the economy to make it more climate friendly. Facts and Figures: The reform will lower the allowances available by about 435 million tonnes

of CO2 equivalent between 2021 and 2030 (a reduction of 43% compared with 2005). Status: Entered into force April 2018 30. Moving allowances that were held Goal: Retain the functionality of the EU-ETS in the face of high surpluses in emission allowances back into the market stability and price erosion. reserve Scope/Status/Facts and Figures: Retention of 900 million EU-ETS allowances between 2014 and 2016 that should have been auctioned in the period 2019–2020 (backloading). These allowances should be deposited to the Market Stability Reserve (MSR), to strengthen the EU-ETS and to reduce the surplus. The MSR should successively reduce the surplus starting in 2019 by having additional auction amounts deposited in the reserve. In 2023, the number of allowances in the MSR that exceed the amount auctioned in the EU in the previous year will be deleted. 31. Linking the EU emissions trading Goal: First step toward the long-term goal of an international emissions trading market. system with the Swiss emissions Scope: The link should harmonize the market conditions for European and Swiss companies by trading system means of allowance prices that align. Status: The link should enter into force in January 2020. 32. Effort Sharing Regulation Goal: Setting binding national emission targets in the non-ETS sectors for the EU Member States by 2030. Scope: National goals range between 0% and 40% of GHG reductions compared with 2005, depending on GDP per capita in the respective Member State. However, flexible mechanisms are allowed for reaching the targets. Status: The new effort sharing regulation entered into force in the summer of 2018. Facts and figures: Germany has a reduction target of 38% over 2005. 33. Electricity price compensation see Measure 172 220 16 OVERVIEW OF MEASURES

Instrument State of implementation 34. EU Action Plan: Financing Goal: reorient capital flows towards sustainable investment in order to achieve sustainable and Sustainable Growth inclusive growth; manage financial risks stemming from climate change, resource depletion, environmental degradation and social issues; foster transparency and long-termism in financial and economic activity Scope: The Action Plan embodies various measures for reaching the goals mentioned in the foregoing. This include for example the introduction of an EU classification system for sustainable activities, developing standards and labels for sustainable financial products, as well as sustainability benchmarks and sponsoring investment in sustainable projects. Status: The Action Plan was announced in March 2018 as a communication from the European Commission. 35. G20 Action Plan on Climate and Goal: The G20 countries, with the exception of the USA, have expressed in the Action Plan their Energy for Growth commitment to the unqualified implementation of the Paris Agreement and to efficient transformation of the energy systems in accordance with climate policy goals of the Paris Accord. Increased energy efficiency and use of renewables as well as aligning financing efforts with the goals of the Paris Accord with investments in low-carbon technologies and future-oriented infrastructure play a major role. Scope: In the Plan, the G20 countries agreed to more cooperation in implementing national contributions (NDCs), developing long-term climate protection strategies and aligning global financing with the Paris Agreement. They emphasize the importance of creating a proper investment framework and commit to stronger cooperation and exchange of successful examples of energy efficiency and renewable energy, to improving access to energy and removing inefficient subsidies for fossil fuels. An optional monitoring process was also suggested, for supervising progress of the energy transition. Status: The Action Plan was resolved at the G20 Summit in Hamburg on 7-8 July 2017, by 19 of 20 countries (excluding the USA) as an annex to the joint closing statement. 36. 24th World Climate Conference Goal: Adoption of uniform rules on implementing the Paris Climate Agreement. (COP 24) Scope: The rules adopted in Katowice will provide information on how emissions of all signatories of the Paris agreement are managed, details on their climate goals , and which measures will be implemented. The costs of climate protection financing will be more predictable and more details will be provided. In addition to international transparency among the countries, there will be an improved base for planning national climate protection and adjustment measures. Every five years the countries will assess the global status quo using an comprehensible process and on the basis of reliable data. The criteria for this assessment are the goals of the Paris agreement on reduction, adaptation and financing. Status: The conference took place in Katowice in December 2018. 37. IEA/IRENA Study: Perspectives Goal: This study commissioned by the BMWi provides an initial look into the effects of imple- for the Energy Transition – Invest- mentation of the Paris Agreement on the energy sector It should provide impetus for future ment Needs for a Low-Carbon investment plans. Energy System carried out under Scope/Facts and Figures: The study shows that extensive decarbonisation of the energy system the auspices of the German G20 by 2050 is ambitious, yet technically possible and economically feasible. The additional invest- presidency ment required for this in the period up to 2050 would be equivalent to about 0.3% of global GDP. Investments in energy efficiency of all sectors will have to increase by a factor of 10 compared with the current level. Investments in energy generation would not increase significantly, but much of the funding would have to be diverted, especially to renewables. The study also found that this type of modern energy supply will provide impetus for innovation, sustained economic growth and skilled employment. Status: This study was published in March 2017. 38. Berlin Energy Transition Dialogue Goal: This conference provides a forum for international decision makers in energy and foreign (BETD) policy, for industry, the scientific community and the general public, in order to discuss current developments in energy policy, innovative policy mechanisms, new investment opportunities and business models in connection with the global energy transition. Status/Scope: The fifth international Energy Transition Conference took place on 9-10 April 2019. More than 2,300 energy experts from around 100 countries took part, including 50 energy ministers or deputy ministers. Participants shared their ideas mainly on the topics of digitisation in the energy sector, sector coupling, geopolitical effects of the global energy transition and structural change. 39. Bilateral energy partnership with Goal: Renewable energies should be expanded more quickly and energy efficiency enhanced. Jordan Scope: The partners should focus especially on grid integration, digitisation and storage technologies. Status: Germany and Jordan agreed at high-status meetings on the sidelines of the BETD 2018 to broaden the energy dialogue to become an energy partnership. In the following year’s BETD, they signed a declaration of intent. 40. Bilateral energy partnership with Goal: Close cooperation in the areas of renewable energies and energy efficiency Chile Scope: zz Phase-out of coal-fired power generation energy zz Shift the electricity supply for mining to a sustainable foundation Status: Germany and Chile signed a declaration of intent on founding an energy partnership at the BETD 2019. 16 OVERVIEW OF MEASURES 221

Instrument State of implementation 41. A New World report from Goal: Multilateral exchange of information the Global Commission on the Scope: This is an international expert commission that analyses the geopolitical effects of the Geopolitics of Energy global energy transition and had identified far-reaching effects on the Gulf and RUS regions in Transformation particular. Status: The initiative was founded by Germany, Norway and the United Arab Emirates under the auspices of IRENA. The Global Commission presented its final report in Abu Dhabi in January 2019. 42. Energy Export Initiative Goal: The Federal Government specifically supports German businesses in tapping into foreign markets and expanding exports of climate-friendly energy technologies. Target groups are small and medium-sized enterprises (SMEs). The Energy Export Initiative was created in 2015 as the follow-up organisation of the Renewable Energy Export Initiative and the Energy Efficiency Export Initiative. Scope: The focus is on technical solutions and services in the areas of renewable energies, energy efficiency, storage technologies and smart grids, and also new technologies such as fuel cells. Please see the following link for more details: Status and figures: Each year there are around 190 events taking place in connection with the Energy Export Initiative, include up to 10 official German trade fair appearances throughout the globe. 43. Travelling exhibition: Goal: The goal of this exhibition is to clear up misunderstandings that frequently arise regarding “Energiewende – Germany’s the German energy transition, to provide information on the basic elements of the transition and Energy Transition” to advertise for better international networking for sustainable energy policy. The target audience of the exhibition is the general, interested and international public. Scope: The development of German energy policy since the 1970s is illustrated in uncomplicated terms at 19 interactive stations. The exhibition is presented in six languages: twice in English, and one each in German, Spanish, Mandarin Chinese and Arabic. Status/Facts and Figures: The exhibition was open in Peking in April 2016. It has since been shown in 96 different places in 36 countries (as of early 2019). 44. Cooperation on creating funding Goal: To assist developing and emerging countries with their national energy transition, the Fed- for the global energy transition eral Government provides learning experiences and solutions from the energy transition in Ger- many (and from other partnering countries). To this effect, it draws on development work (technical and financial), reliable global instruments and multilateral efforts as well as collaboration with business. The goal of German development work in the energy area is to overcome energy poverty with massive and acceleration expansion of demand-based renewable energy systems and increasing energy efficiency, and in the mid- to long term, to decarbonise the energy sector, and subsequently, whole economies. Scope: The main topics of German development work toward a global energy transition and for reaching both Sustainable Development Goals and complying with the climate targets of the Paris Agreement are: zz expansion of renewable energies, that is both large installations that are connected to the grid and decentralised generation; zz expansion and modernisation of the gird infrastructure and energy storage facilities, to securely integrate the growing share of fluctuating renewable energies; and zz measures for improving energy efficiency, especially in buildings and industry. The possibility of productive use of energy is key, because this is the basis for economic development, creating jobs and positive prospects for the future. Status/Facts and Figures: In 2018, €3.0 billion in funding was allocated for financial cooperation, and of that, €2.0 billion was provided for power generation. Total funding for projects running in 2018 for technical cooperation was around €600 million. Chapter 4 Renewable energy 45. Revision of the Renewable Energy Goal: The Act aims to ensure the cost-effective continued expansion of renewables, establish a Sources Act 2017 (EEG 2017) level playing field for all stakeholders in the auction system, maintain stakeholder diversity and comply with the deployment corridors for renewable energy. Scope: The necessary remuneration for most of electricity from renewable energy installations is determined through auctions. Better dovetailing between the expansion of renewables and grid expansion by temporarily limiting local onshore wind expansion in case of grid congestion. The remuneration for onshore and offshore wind, photovoltaics and biomass is determined through an auction system. Small installations are exempted from the obligation to take part in the auction process. Status: Adopted in July 2016. Entered into force in January 2017. Facts and Figures: Annual expansion targets/quantities up for auction: zz Photovoltaic: 600 MW per year zz Onshore wind up to 2019: 2,800 MW gross per year; then 2,900 MW from 2020 onwards zz Offshore wind: 500 MW each year in 2021 and 2022; 700 MW per year from 2023–2025, and on average 840 MW per year starting in 2026 zz Biomass: 150 MW from 2017–2019 and 200 MW from 2020–2022 zz Joint auctions (onshore wind and photovoltaic): 400 MW from 2018–2020 222 16 OVERVIEW OF MEASURES

Instrument State of implementation 46. Act to Revise the Renewable Goal: A funding system designed in a way that respects state aid law, and better systematisation Energy Sources Act (EEG) 2017 of the rules governing self-supply. Scope: The rules surrounding self-supply were revised, but only certain areas of the current legal situation were modified (particularly with regard to modernised existing plants and reporting requirements). With vested rights adequately protected, existing self-supply installations will have to contribute partially to the EEG surcharge in the future if they undergo modernisation measures. The surcharge relief for new CHP installations (initial use for self-supply after 31 August 2014) will be revised and adapted to state aid rules. Reporting obligations for self-supply which were previously regulated by both the Equalisation Mechanism Ordinance and the Renew- able Energy Sources Act are now harmonised in the Renewable Energy Sources Act. Status: Adopted in December 2016. Entered into force in January 2017. 47. Revision of the Renewable Energy Goal and scope: With the Landlord-to-Tenant Electricity Act, the EEG Act provided funding Sources Act (landlord-to-tenant availability for solar power supplied by the operator of a solar PV installation installed on a resi- electricity) dential building, or a third party without putting it on the grid, to a tenant of the same building or an adjacent building in the immediate vicinity. Status: Adopted in June 2017. Entered into force in July 2017. 48. Omnibus Energy Act Goal: This Act provides the framework for the special bidding processes for onshore wind and photovoltaics (PV) set forth in the EEG, as stipulated in the Coalition Agreement between the CDU, CSU and SPD. In addition to this, the Act addresses other urgent energy policy issues. Scope: Between 2019 and 2021, the EEG 2017 provides for additional auction volumes of 4 GW each for onshore wind and PV. In addition, cross-technology innovation auctions will be conducted between 2019 and 2021. They are to provide a testing ground for innovate concepts for especially useful grid and system projects as well as for new pricing mechanisms and auction processes. In order to increase acceptance in particular of onshore wind, a demand-oriented night signal system. This will put an end to continual blinking of wind turbines at night. They will only light up if an airplane is near. In addition, European law will be complied with, including: zz EEG privileged status for new CHP installations: implementation of the state-aid compromise with the EU. The new law gives 98% of installations the privileges applicable until the end of 2017 (i.e. Only 40% EEG surcharge on self-production of energy. The surcharge will be raised gradually for around 200 installations, according to capacity. The new law applies retroactively to 1 August 2018. zz Lowering the compensation for new solar installations in the 40 to 750 kW segment: The cost for solar installations have decreased more than the compensation under the EEG. This led to significant over-funding, which was to the detriment of all consumers. State-aid rules also strictly require that this over-funding be repealed. The lower compensation also affects the landlord-to-tenant electricity premium, due to the coupling of this premium to feed in payments. To ameliorate this effect, the Omibus Energy Act lowers the discount for calculating the landlord-to-tenant premium in the 40 kW segment to 8 ct/kWh. However, this reduction must be approved under state aid rules by the European Commission. There is no change for installations up to 40 kW. Private households are therefore not affected. Status: The Omnibus Energy Act entered into force in December 2018. 49. Ordinance on Innovation Auctions Goal: Trials for innovative auctions in practice Scope: The ordinance will introduce for a pilot phase of 3 years (2019–2021) joint auctions for various renewable technologies. The results will be evaluated in incorporated in further development of the EEG. Status: The ordinance is scheduled for discussion and adoption in parliament in the autumn of 2019. Facts and Figures: The auction volume throughout the entire period is planned for 1,150 MW. 50. The Regionalnachweisregister, a Goal/Scope: The Guarantee of Regional Origin makes it possible for consumers to buy EEG power registry of local origin for electricity from their region. The region is comprised of postal code areas in a 50-km radius of a postal generated with renewable energy code area in which electricity is consumed. With the help of the Register, power facility operators can apply for a Guarantee of Regional Origin and transmit this along with the electricity to electricity suppliers. These suppliers validate the Guarantee of Regional Origin and indicate the regional source of the EEG power in the fuel mix disclosure. By paying the EEG surcharge that finances power plants using solar, wind, water and biomass, every consumer is participating in the energy transition. This is indicated in the fuel mix disclosure in the information showing the EEG portion (‘Renewable energies, financed with the EEG surcharge’). With the new instrument this share can be drawn regionally, that is, from EEG power from the region. The Guarantee of Regional Origin provides the mapping required for this, and protects consumers from double marketing and false advertising. The legal basis for the new Register, the amended Implementing Ordinance on Guarantees of Origin and Guarantees of Regional Origin – HkRNDV – entered into force in November 2018. Status: The Regional Register started operating in January 2019. The Federal Environment Agen- cy thereby implemented Section 79e of the 2017 EEG. 51. EU Directive on biofuels and see Chapter 7 indirect land use change 16 OVERVIEW OF MEASURES 223

Instrument State of implementation 52. ‘Renewable Energy Storage’ Goal: Strengthen measures to serve the system and deliver more cost reduction in storage tech- KfW funding programme nologies Scope: The programme supports investment in battery storage units that are installed in connection with a PV installation and connected to the electricity grid. Status: The programme ran from 2013 to 2018. Facts and Figures: The KfW approved of around 32,600 applications for funding, and the funding amount was around €80 million. 53. Renewable Energy Export Initiative See Chapter 3 54. Renewable Energies Heat Act See Chapter 6 55. Market Incentive Programme for See measure monitoring Chapter 6.4 renewables in the heating market 56. Low temperature heat networks Goal: Preparing for a broader market introduction of innovative heat networks systems of the with seasonal thermal energy fourth generation with a high share of renewable energy sources and efficiently used waste heat. storage (‘Model project heat Scope: Funding with four modules in total: Funding for feasibility studies of up to 60 % of costs, networks systems 4.0’) for realisation of a Heating Network System 4.0 of up to 50 %, supplemental funding for scientific cooperation (capacity building) as well as for information campaigns for potential customers for reaching a higher subscriber numbers for model projects. Status: Entered into force July 2017 Facts and Figures: Market reaction greatly exceeded expectations, by early June 2018, 54 applications for feasibility studies and 3 applications for realisation of heating network systems 4.0. Chapter 5: Energy consumption and energy efficiency 57. KfW Energy efficiency improve- Monitoring of central measures for funding energy savings is outlined in Chapter 5.4 ment Programme for Production Facilities and Processes 58. Energy Efficient Networks Initiative 59. Energy audit for non-SMEs 60. Programme to Promote High-efficiency Cross-cutting Technologies 61. Waste heat 62. Refinement of the SME Energy Transition and Climate Action Initiative 63. Programme to Promote Energy- efficient and Climate-smart Pro- duction Processes 64. Support for market monitoring 65. National Top Runner Initiative 66. EU Energy Label Directive 67. Competitive tendering scheme for electrical energy efficiency measures (STEP up!) 68. Energy Savings Meter pilot programme 69. Funding guidelines for energy management systems 70. ‘Germany Makes it Efficient’ Goal: The “Germany Makes it Efficient” awareness-raising and mobilisation campaign is aimed at awareness-raising and mobilisation informing all the stakeholders about the joint project that is the energy transition, and convinc- campaign ing them of the need for yet more efficient use of energy. Scope: The campaign is geared to private households, business enterprises and public institutions alike, and involves all the stakeholders in a stakeholder dialogue. Status: The campaign started in May 2016; consumer information is an ongoing task. 224 16 OVERVIEW OF MEASURES

Instrument State of implementation 71. Energy and Climate Action Cam- Goal: The campaigns run by the Environment Ministry are some of the first and largest industry paign of the German Hotel and campaigns for climate protection in Germany. The primary goal is to provide specific information Catering Association (DEHOGA) relevant to the sector and to advise on climate protection measures. Scope: On the basis of the very successful DEHOGA energy campaign a climate protection campaign is being set up since 2019 for businesses in the German Association for Wholesale and International Trade and Services (BGA). The goal of DEHOGA and BGA is to organise the transfer of know-how from the DEHOGA model project. Information and experience garnered by DEHO- GA are actively passed on to BGA and synergies are exploited where they are useful for issues involving both organisations. Climate protection should become a fixed component of association policies and of business policies in the participating companies. Status: The campaigns make a major contribution to reducing carbon and to climate protection. They serve as a model for the development of other sector-specific campaigns. Plans are in place for sharing experience with other industries/associations. 72. Promotion of energy efficiency Goal: Sponsoring climate change mitigation in industrial and commercial centres managers to unlock potential, Scope: Funding concepts and personnel for implementation e.g. in business parks Status: The ‘Energy-related urban renewal KfW 432’ programme facilitates funding for establishing refurbishing managers for urban quarters, which can also comprise business parks. Up to the end of 2018, the Municipal Guidelines (Kommunalrichtlinie) of the Environment Ministry provided for a sub-category ‘Climate change mitigation in Industry and Business Parks’ and climate protection management for implementing the measures thus identified. In the amendment of the Guidelines municipal energy management is being funded for all energy consumption in a municipality as of the beginning of 2019. Funding for the sub-category ‘Climate change mitigation in Industry and Business Parks’ was discontinued. However, it should still be possible to apply for funding of a study on the potential of using waste heat from industry and trade. The BMU is responsible for the Municipal Guidelines. Facts and Figures: Around 200 urban quarters are currently being funded in the scope of the ‘Energy-related urban renewal’ programme. There is no data on how many of the urban quarters also include business parks. A total of 22 climate change mitigation projects for the category ‘Industry and Business Parks’ were funded between 2013 and 2018. 73. Energy Efficiency Export Initiative See Chapter 3 74. Energy Efficiency Platform Goal: Continual dialogue platform for further development of energy efficiency policy Scope: The Energy Efficiency Platform was founded in 2014. It assists in development of the National Action Plan on Energy Efficiency (NAPE) and is involved in its implementation. Status: There were two plenary meetings in 2017. In addition, a special workshop on energy services and other efficiency measures on the topic Market Development and Opportunities was held in May 2017 and a special workshop on digitalisation and energy efficiency on the topic Opportunities and Challenges was held in June 2017. The working groups Innovative Financing Concepts, Legal Framework/EDL and Competitive Bidding Models also met in 2017. There was one plenary meeting in 2018. In November 2018 a special workshop on energy efficiency strategy was held. The Competitive Bidding Models working group also met in 2018. 75. Development of KPIs and bench- Goal: To capture current and future energy consumption and to compare both using accepted, marks in the commercial sector objective benchmarks Scope: Support is given to R&D projects focussing on the development of comparative KPIs, standards and benchmarks for the trade, commerce and services sector, and industry. The major finding of the UFOPLAN project was that the reporting mechanisms for energy policy instruments (especially the special compensation arrangement, energy tax cap, energy audit requirement under the Energy Services Act (EDL-G), EU emissions trading and electricity price compensation) do not provide a sufficient database for generating energy efficiency KPIs and benchmarks. Status: The project started in January 2016 and was concluded in March 2018. 76. ‘Development of ICT electricity Goal: Measure energy consumption in the ICT area and observe its development. needs in Germany’ study Scope: A study conducted in 2015 forecast trends in consumption and identified savings potential for the various subsectors of ICT. On the basis of this information, measures to unlock the identified potential are developed in a stakeholder process. Status: This study has been concluded. 77. Federal programme of the Federal Goal and scope: Advisors approved by the Federal Office for Agriculture and Food are to develop Ministry of Food and Agriculture to energy savings strategies for single farms. improve energy efficiency in the Status/Facts and Figures: A total of €73 million was provided for the first funding period up to the agricultural sector. end of 2018; according to current figures, applications will be filed for the entire amount by the end of the year. In 2018 the programme was evaluated and given a very positive mark, so that the BMEL decided to continue it. 16 OVERVIEW OF MEASURES 225

Instrument State of implementation 78. Federal Programme to Promote Goal and scope: Funding for measures to increase energy efficiency in agricultural and landscape Energy Efficiency in Agriculture production processes within the businesses by advising, transfer of know-how and funding for and Horticulture investments. Funding is provided as a share of costs depending on the savings potential. Status: The federal programme was evaluated in the first half of 2018 and found to be successful. However, the evaluation also pointed out room for improvement in individual funding areas. Adjustments were made to the funding guidelines, and the area of funding new construction of low-energy buildings in particular was divided into two areas: 1) funding for low-energy buildings for cultivating plants (e.g. greenhouses), and b) new construction of low-energy equipment (e.g. for drying or cooling purposes). The amended funding guidelines entered into force on 1 January 2019. Facts and Figures: In the first funding period, 2016–2018, €73 million were available. Total programme funding for the second period, 2019–2021, is €81.6 million. 79. Review of the efficiency require- Goal/Scope: The Federal Government is examining the extent to which the economical and effi- ment in the Federal Immission cient use of energy under the Federal Pollution Control Act can be further clarified as an opera- Control Act tor obligation. The research project titled ‘Defining energy-efficiency related operator obligations under the Federal Immission Control Act’ aims to more specifically define the legal framework for operator obligations under the Immission Act and to clarify the legal scope for more specific requirements. Status: An evaluation of research results now available showed that there was no need to change the procedure or use of the results under applicable law. Chapter 6: Buildings

80. CO2-Building Modernisation Monitoring of central measures for funding energy conservation is outlined in Chapter 6.2 Programme: Residential buildings

81. CO2-Building Modernisation Programme: non-buildings 82. Energy Efficiency Incentive Pro- gramme (APEE), measures carried out by KfW (Reconstruction Loan Corporation) and BAFA 83. National Efficiency Label for old heating systems 84. Promotion of heating optimisation using high-efficiency pumps and hydraulic balancing 85. Market Incentive Programme on Promoting Measures for Use of Renewable Energy in the Heating Market( MAP) 86. Energy-efficient Buildings 2050 – Innovative Projects for a Virtually Climate-Neutral Building Stock in 2050 87. Energy consulting 88. Research network Energiewende- Goal: Strengthening exchange of information at the interface between research, policy and prac- bauen (Building the energy transi- tice. Faster transfer of results and further development of research funding. tion) Scope: An online platform is provided for exchange of information. In addition, regular events and workshops are held, for example in January 2019 the 2nd Building the Energy Transition conference, with over 350 participants, or in November 2019 a workshop on Building Monitoring and Building Tools, and Solar Exteriors (the latter in cooperation with the Renewable Energies Research Network). The accompanying research programmes Building the Energy Transition and Energy-efficient Buildings 2050 serve as a motor of the network. To systematize exchange of information with the professional divisions of the BMWi, a Ministerial Counsellor was created in late 2017. Status: The research network established in 2014 now has over 950 members. Recommendations from experts in the research network formed the basis for the 7th Energy Research Programme. Various funding initiatives for example Living Laboratories of the Energy Transition, or the Solar Construction/Energy-efficient Cities funding initiative received assistance by experts from the research networks. 226 16 OVERVIEW OF MEASURES

Instrument State of implementation 89. ‘Efficiency House Plus’ funding Goal: Continuing development of climate-friendly, affordable buildings A federal Efficiency Plus initiative Building Standard will be established that will encourage viewing the relationship between primary and final energy demand and use of renewables in the buildings sector. Scope: Transfer of technology takes places by means of exemplary model projects, a network, and information and competence centre for future-oriented construction operated by the Feder- al Government in Berlin and on online platforms. In addition, there are regular events, workshops, appearances at trade fairs and special events regarding this sustainable building standard that will conserve energy (e.g. national and international construction trade fairs, Berliner Energi- etage, and the World Exposition in Astana 2017). The Efficiency House Plus initiative and its network build on the accompanying research of the Efficiency House Plus Model Project and other research topics relating to this building standard. To provide additional large-scale social impetus and an active dialogue with citizens, the government Information and Competency Centre for Future-oriented Construction was opened as part of the federal model project ‘Efficiency House Plus’ in Berlin. Status: Since 2017 over 40 federal model projects confirm that this building standard is practica- ble and climate-friendly. Scientific projections see a carbon-savings of 18 million t/a as of 2050 given a market penetration of 15% for this building standard in new construction and remodel- ling. In addition, the energy surplus provided by the Efficiency House Plus houses can also make up for buildings that do not achieve climate neutrality by 2050. The Efficiency House Plus will be continued and expanded. 90. Energy conservation law for Goal: The Federal Government will amend in 2019 the energy conservation law for buildings pre- buildings viously regulated in the Energy Conservation Act, the Energy Conservation Ordinance and the Renewable Energy Heat Act Sources. As set forth in the coalition agreement, the Buildings Ener- gy Act (GEG) will reduce bureaucracy and simplify regulatory law and conform to EU law. Cur- rent energy-savings requirements for existing and new buildings shall still apply. While respect- ing the principles of economic efficiency, the set of regulations helps achieve federal energy policy targets, especially the goal of a practically climate-neutral building stock by 2050. Scope: The conservation ordinance and the act regulate the energy requirements for existing buildings and those to be constructed, including building installation technology and energy certificates. The heat act regulates the obligation to use renewables in buildings. The Energy Con- servation Act, the Energy Saving Ordinance and the Renewable Energies Heat Act will be combined into the Buildings Energy Act. 91. Energy Transition Platform for Goal: Continual dialogue platform for further development of energy efficiency policy Buildings Scope: The Energy Transition for Buildings Platform was founded in 2014. Given the ambitious goals in the building sector, the potential, challenges and measures are discussed with stakeholders from the property sector, business, industry, consumer representatives and the public sector in both the plenary session and in working groups. Status: The 9th meeting of the platform took place in in November 2018. 92. Customised renovation road maps Goal: Standardised recommendations for tailor-made, gradual energy retrofits for buildings Scope: The customised renovation road maps provide building owners a clear overview for a phased renovation of their buildings. Besides strictly energy-related aspects, the roadmap also focuses on the specific options for the building owner and the specific condition of the building when identifying the renovation approach. Status: Individual renovation plans for buildings receive a subsidy of 60% of the cost through the Energy Advising for Residential Buildings (on site advice, drawing up an individual renovation plan) as of June 2017. 93. Heat Networks 4.0 Goal: Sponsoring by means of basic funding supplemented by performance-related scaled bonuses is provided for climate-friendly and especially cheap network heating with high shares of renewables and waste heat use. Scope: Model projects for innovative climate-friendly heat supply for urban quarters and districts using networks of the 4th generation. These demonstrate low temperature levels, renewable shares of between 50% and 100% and usually have large seasonal heating storage. Status/Facts and Figures: The Programme was initiated on 1 July 2017. Funding is provided for feasibility studies and construction as well as information campaigns and scientific accompani- ment of model projects. Chapter 7: Transport 94. Continued development of the Goal: The Mobility and Fuels Strategy adopted by the Federal Cabinet in 2013 is continued as a 2013 Mobility and Fuels Strategy vehicle for implementing the energy transition in the transport sector as defined in the National Sustainability Strategy. It currently provides an overview of technologies as well as energy and fuel options for the various modes of transport. Scope: As a ‘learning strategy’ the Mobility and Fuels Strategy shows how the energy transition in the transport sector can be implemented in the long term. A central issue in this context is to identify where it is possible to gradually replace the combustion engine with an electric motor, given that (i) the energy efficiency of an electric motor is at least twice that of a combustion engine and (ii) renewable energy can be integrated far more easily into electric motors than into combustion engines. To reach the goals of the Federal Government’s Energy Concept, overland transport should be electrified to the greatest extent possible on a step-by-step basis. The keys to achieving this are the promotion of electric mobility with battery and fuel cells and the redou- bling of efforts to move traffic to rail. 16 OVERVIEW OF MEASURES 227

Instrument State of implementation 95. National Platform on the Future Goal: This platform involves the government, industry and society to discover ideas and concepts of Mobility to ensure affordable, sustainable and climate-friendly mobility. Scope/Status: The Platform began its task in September 2018. The platform provides for a steering committee and seven working groups. Topics of the working groups are climate protection in transport; sustainable mobility (alternative drives and fuels); digitisation; automated driving and new means of mobility (including social aspects of mobility); securing mobility and production sites, battery cell production; sustainable natural resources and recycling; education and qualifi- cation; sector coupling (especially linking transport and energy networks); and standardisation, norms, certification and registration. A commission for working out a strategy on the future of affordable and sustainable mobility is integrated in the platform, as set out by the Coalition Agreement between the CDU, CSU and SPD. Working Group 1 deals with climate protection in the transport sector, and published an interim report in March 2019. 96. Research programme Sustainable Goal: The research agenda outlines how the scientific community and practical application can Urban Mobility pave the way to a humane and environmentally-friendly mobility system. Scope: The research agenda of the BMBF integrates the results of participatory consultation processes during which numerous experts from science, municipalities, business and society present their views, needs and ideas. It emphasizes systemic, cross-disciplinary mobility research: the possibilities of new technologies should be combined with design possibilities from the municipal level in particular, and with the mobility needs of citizens. A systemic approach can link technological and social innovation to reach the goal of sustainable mobility. Status: Published in December 2018. 97. Funding Guideline Mobilitäts Goal: Support municipalities in working together with key actors and multipliers from business, WerkStadt 2025 (mobility society and the scientific community to create the mobility transition. workbench for the city) Scope: A phased model allows communities to join the programme with low entry requirements and helps promote mobility. A common goal is to develop sustainable, innovative and custom- made local mobility concepts. Status: Entered into force February 2019 98. Funding Guideline Mobility Lab Goal: Fund interdisciplinary research projects that develop new systemic approaches and create for the Future 2050 the basis for innovative mobility concepts of the future. Scope: Among the research topics are how social transformation can be aligned with more sustainable means of mobility. The projects should also develop a well-founded basis for long-term innovation and transformation management. Status: Entered into force February 2019 99. Clean Air Immediate Action Goal: Finance implementation of measures in municipalities where nitrogen dioxide thresholds Programme are exceeded. Nitrogen dioxide emissions should be greatly reduced and the thresholds observed very soon, however at the latest by 2020. The programme is based on existing funding guidelines. Scope: The focus is on electrification of urban vehicle parks (especially taxis and public buses), including expansion of charging infrastructure and measures on stabilising the power networks, upgrading in the transport sector diesel buses to low-emission motors, improved traffic management and digitalization of municipal traffic routing. Additional measures include a purchase premium for electric vehicles, improvement of logistics strategies and encouraging bicycle traffic. Status/Facts and Figures: Adopted November 2017 In 2018 the Energy Savings Meter pilot programme was increased to €1.5 billion. An additional €432 million are earmarked for specific upgrades. 100. Funding guidelines Digitisation of Goal/Scope: The goal of funding is to implement projects for digitisation of the transport system Municipal Transport Systems that can provide short-term or medium-term reductions in emissions of nitrogen dioxide in cities exceeding thresholds. This includes measures to create networks of transport means, ideas for making local public passenger transport more attractive, efficient logistics, demand-oriented use of automated vehicles in city transport and rail transport, as well as making all environmental, mobility and transport data available. Status: Entered into force January 2018 101. Electric Mobility Funding Goal and scope: The focus is on electrical vehicles and the accompanying charging infrastructure Guidelines for municipal fleets and fleets in surrounding areas. In particular, it is important to reduce air pollution in inner cities. Status: Entered into force December 2017 102. Electric Mobility Funding Goal and scope: The Electric Mobility programme funds creation of charging infrastructures on Guidelines short notice and assistance and evaluation of such regarding the removal of hurdles in expanding the electricity grid and grid stability. Charging infrastructure is created immediately in public, publicly accessible, non-public or business and in private areas. In living laboratories the full-load situation is tested and scientifically reviewed. The findings are to be used directly for efficient grid expansion. Status: Entered into force December 2017 228 16 OVERVIEW OF MEASURES

Instrument State of implementation 103. Call for funding of battery cell Goal: Create an alliance for manufacturing battery cells of the newest Generation, together with manufacture other European countries. Scope: Project funding Main thrust: It is important to have proprietary know-how for future business success in the context of a value-added chain for competitive, innovative and environmentally-friendly battery cell production in German and Europe. Facts and Figures: The Federal Ministry for Economic Affairs and Energy plans to provide up to one billion euro between 2019 and 2022. Status: The Ministry’s funding announcement was published in the Federal Gazette in February 2019, effective 15 March 2019. Currently the project proposals received are being reviewed. 104. Funding guideline for upgrading Goal/Scope: The goal of funding is to achieve an appreciable reduction in nitrogen dioxide pollu- diesel buses in the emissions tion in cities exceeding the threshold by encouraging demand for nitrogen reduction systems by classes III, IV, V and EEV in local means of financial incentives for the non-binding required upgrade of buses with diesel engines. public passenger transport Status: Entered into force March 2018 105. Funding guidelines for upgrading Goal and scope: Workmen and delivery vehicles such as those of glasswork businesses, plumbers heavy municipal vehicles and com- or delivery services as well as municipal vehicles such as waste disposal and street cleaning vehi- mercial light and heavy workmen cles are common in the municipal traffic scene. Because they are usually operated with diesel and delivery vehicles with nitrogen engines, they contribute to nitrogen dioxide pollution in the cities. Because these vehicles are in oxide reduction systems operation daily and to a large extent, there is a potential for reducing emissions that should be exploited in cities exceeding nitrogen dioxide emissions thresholds. Status: Entered into force January 2019 106. Thirteenth Act to Amend the Goal/Scope: The amendment of the Federal Immission Control Act aims to provide uniform Federal Immission Control Act requirements for the reasonableness of transport means due to the fact that nitrogen dioxide thresholds under European law are being exceeded and standardise federal exceptions of such traffic prohibitions, and thereby create legal certainty. Status: Entered into force April 2019 107. Ninth Act amending the Road Goal and scope: Municipalities need an effective instrument for monitoring mandatory traffic Traffic Act restrictions and prohibitions related to emission limits. The agencies responsible at the Länder level will have the capability to determine if required whether a particular vehicle is permitted in a restricted area. Status: Entered into force April 2019 108. New procedure for the type Goal/Scope: The goal is to create a new framework for type approvals that will reinforce inde- approval and market monitoring pendent testing, market monitoring and enforcement of regulations in Europe. The objective is of vehicles to create an EU regulation to harmonise and tighten the approval procedure and market monitoring of motor vehicles and their trailers as well as other vehicle components.

109. New World Harmonised Light Goal: Make available more representative and reproducible CO2 emissions and fuel consumption Vehicle Test Procedure (WLTP) levels so that vehicle fuel consumption rates in the test scenario once again correlate more with the statistics that vehicle drivers see on their displays while on the road. Scope: The emission standards and consumption standards for passenger cars and light commercial vehicles are defined for the post-2020 period on the basis of this new procedure, wherein the stricter requirements of this procedure must be taken into account. Once the national Ordinance for Energy Consumption Labelling has been amended, the new test cycle will also be included in the passenger car label and increase the credibility and effectiveness of the label. 110. ‘Europe on the Move’ mobility Goal: Create street and mobility systems for the future that enhance competitiveness and social package justice and provide a clear path for achieving zero emissions. Scope: ‘Europe on the Move’ comprises: zz a policy statement outlining a long-term plan for clean, equitable and competitive mobility zz eight initiatives especially aimed at improving the functionality of the road haulage market and employment conditions and social protection of employees and introducing a smart system for collecting road usage fees in Europe zz a number of non-legislative accompanying documents with flanking measures that will accelerate the transition to a sustainable, digital and integrated mobility system (investment financing for infrastructure, research and innovation, collaborative platforms, etc.) Status: The package was published in May 2017.

111. Reform of the EU regulations on Goal: Reducing CO2 emissions in transport

reducing CO2 emissions of new Scope: CO2 emissions of new fleets of passenger cars should be reduced from 2021 to 2025 by

passenger vehicles and light com- 15%, and by 2030, by 37.5%. Scope: CO2 emissions of new fleets of light commercial vehicles mercial vehicles should be reduced from 2020 to 2025 by 15%, and by 2030, by 31%. Status: The package was adopted when the EU Council of Ministers approved of it in April 2019.

112. EU Regulation to reduce CO2 Goal: Reducing CO2 emissions in transport

emissions of heavy-duty vehicles Scope: CO2 emissions of new commercial vehicles should be reduced by 15% by 2025, as compared (HDV) with 2019, and by 30% by 2030. Zero-emissions and low-emissions vehicles will be promoted with an incentive system. Status: A consensus was reached in February 2019 in a trialogue between the European Commis- sion, the European Council of Ministers and the European Parliament. The European Parliament consented to the agreement in April 2019. Approval by the EU Council of Ministers is slated for June 2019. 16 OVERVIEW OF MEASURES 229

Instrument State of implementation 113. Declaration of EU Member States Goal: Create a clean energy and mobility future on the future of clean energy and Scope: The necessary measures were categorised in five areas: 1. rapid introduction of zero- mobility emission vehicles and options for renewable fuels; 2. mobility management; 3. funding for active mobility (bicycles, walking); 4. the independence of mobility from social status; and 5. the linking of various transport systems. Status: The declaration was adopted by the EU Member States in October 2018 114. Strategy for Automated and Goal: Create the framework and necessary conditions for the introduction of automated and Connected Driving – Remain a lead connected driving systems in conjunction with smart transport systems provider, become a lead market, Scope: Implement measures in the areas of infrastructure, law, innovation, interconnectivity, introduce regular operations cyber security and data protection, and promote social dialogue to unlock the potential offered by the technologies – namely greater traffic safety, increased traffic efficiency, lower mobility- related emissions and the strengthening of Germany’s position as a business and innovation hub. 115. Passenger car label Goal: The aim is to reduce the fuel consumption and emissions of passenger cars. Scope: As of 2011, new vehicles display a passenger car label that shows the vehicle’s efficiency class. It indicates the energy efficiency of the vehicle, with green standing for energy-efficient. In

addition, it also provides clear information on the fuel consumption, fuel costs and CO2 emissions of the vehicle. The Federal Government is planning to update the label and thereby adapt it to the WLTP test procedure. 116. Programmes to promote energy- Goal: The aim is to support the market roll-out and market penetration of energy-efficient and/

efficient commercial vehicles or low-CO2 commercial vehicles with a fixed-term funding programme. Scope: Promoting the purchase of trucks and tractor units with compressed natural gas – CNG), liquefied natural gas (LNG), and certain electric drivetrains (battery electric vehicles and fuel cell powered vehicles) that are designed for road haulage services and whose permitted total weight is at least 7.5 tonnes. Status: The programme started in June 2018 and runs until 31 December 2020. Facts and Figures: A total of €10 m will be available annually. 117. Electric Mobility Market Incentive Goal: Force the pace on the expansion of electric mobility and the charging infrastructure. Package Scope: A premium of €4,000 is paid for purchases of new all-electric vehicles and of €3,000 for plug-in hybrids (eco bonus). The Federal Government is providing €300 million to improve the vehicle charging infrastructure. Status: Adopted in May 2016. Applications from vehicle buyers are to be submitted to the Feder- al Office for Economic Affairs and Export Control as of July 2016. Facts and Figures: To speed up the development of the market for electric vehicles, funding in the amount of €1.5 billion was provided as of 2016 for the eco bonus and charging infrastructure. Total funding for the eco bonus was set at €1.2 billion, whereby the Federal Government and the automobile industry each supply half of this amount. The Federal Government is provided up to €300 million to improve the vehicle charging infrastructure. 118. ‘Local Electric Mobility’ funding Goal: Support the market uptake of electric vehicles by supporting EV procurement in a munici- programme pal context and associated measures to develop charging infrastructures. Promotion of strategic research and demonstration projects in the local public passenger transport system and with electric delivery vehicles or light-duty vehicles. Scope/Status: The funding guidelines came into force in 2015, and were slightly updated in 2017. Seven calls for applications have been conducted up to now, one of them on execution of the Clean Air 2017–2020 immediate action programme. Facts and Figures: Approximately €140 million are available for the period 2017–2020. In addition, funding for purchasing vehicles under the programme will be augmented with €175 million. Procurement of around 2,300 e-vehicles including the requisite charging infrastructure was funded by the end of 2017. In addition, approx. 130 e-mobility projects and several R&D projects were sponsored. 119. Act Granting Privileges to Users Goal/Scope: The Electric Mobility Act and the new regulations based thereon (the 50th Ordi- of Electrically Powered Vehicles nance to amend road traffic regulations and accompanying administrative provisions) give cities, (Electric Mobility Act) and new towns and municipalities the legal framework to grant privileged status to electric cars. Local regulations based on the act incentive measures can include the provision of free parking spaces or the exemption of electric vehicles from access restrictions. The opening of bus lanes or special lanes to electric vehicles is also a possibility. By making an exception in driving licence legislation for electric-drive category

N2 vehicles, battery-powered vehicles with a maximum total weight of up to 4.25 tonnes can be driven with a Class B driver’s licence (passenger car licence). 120. 2011 Government Programme on Goal: The aim is to support the market uptake of electric-drive vehicles. Many measures from Electric Mobility this programme have already been implemented. 121. Electric Mobility Procurement Ini- Goal/Scope/Facts and Figures: The share of all new vehicle purchases or hires with a vehicle tiative emissions rating of less than 50g (alternatively: minimum electrical range of 40 km) is to be increased beyond the already agreed share of 10% to 20% in the future. 230 16 OVERVIEW OF MEASURES

Instrument State of implementation 122. Tax regulations concerning the Goal/Scope: Under the Income Tax Act, employees who charge an electric or hybrid electric use of electric vehicles for private vehicle at their employer’s place of business or at an affiliated business and who use in-company purposes charging facilities temporarily for private purposes can treat this as a tax-free benefit in their income tax returns (Section 3, number 46 of the Income Tax Act). Employers can also apply a 25% flat income tax rate for non-cash benefits deriving from the free or reduced-rate provision of charging facilities and for grants towards employee expenses for the purchase and use of a charging facility (Section 40 (2), sentence 1, number 6 of the Income Tax Act). Status: The new regulations apply from 1 January 2017 through to 31 December 2020. 123. Amendment of the Eco-Bonus Goal/Scope: First change: Prohibition on cumulation is abolished. The incentive to purchase an Guideline electric vehicle will be strengthened by combining various funding instruments and price differences between electric vehicles and traditional combustion engines should be reduced. Second change: The guideline will be extended to the end of 2020, and a requirement for installation of acoustic warning systems for electric vehicles that are sometimes audibly almost imperceptible, to serve the safety of blind and visually handicapped individuals. Status: The first change entered into force March 2018. Second change is planned for the second quarter of 2019. 124. ICT for electric mobility: Smart Goal/Sscope: This funding aims to support necessary changes toward environmentally- and Applications for Mobility, Logistics user-friendly connected mobility and the further development of traffic and logistics systems and Energy with the help of information and communications technology (ICT). At the focus of funding is developing and testing open, ICT-based system approaches that optimally link (commercial) electric mobility with smart mobility, logistics and energy infrastructures and operating environments. Status: The funding announcement was made in January 2019. Project sketches may be submitted twice a year. The last possible date to make a submission is 31 October 2021. 125. ‘Renewable and Mobile’ funding Goal: Funding for research projects on the topic of electric mobility for the purpose of increasing programme its potential for climate, environmental and resource conservation, as well as contributing to an increase in the quality of life and sustainable urban development. Scope: The BMU has provided funding since 2009 to companies and institutes conducting sophisticated R&D projects for electric mobility. The funding project initiated in the second stim- ulus package was successful, and has been continued since 2012 in the Renewable and Mobile programme, including vehicle and drive designs and coupling e-vehicles with energy supply systems. Support for field trials of trolley trucks is also provided by this programme, with additional funding from the National Climate Protection Initiative of the Federal Ministry for the Environ- ment. Status: On 15 December 2017 the 4th funding announcement for this program was published, this time as a joint initiative of the BMWi and the Federal Ministry for the Environment. In addition, through the Renewable and Mobile programme, the Environment Ministry also par- ticipates in implementation of the Clean Air immediate action programme, by sponsoring purchases of electrically operated light commercial vehicles and/or passenger vehicles for taxi operation, as rental cars and for car sharing in urban transport. Facts and Figures: The Renewable and Mobile programme has funded more than 100 projects in Germany since 2012, with more than 150 project partners and a funding volume of over €350 million (status: January 2019). 126. Electric Mobility Funding Goal: The aim is to promote application R&D measures and the procurement of electric vehicles Guidelines (drives, value chain optimisation, information and communication technology) across all modes of transport. 127. Funding guideline for procuring Goal/Scope: Procurement of electric buses or plug-in hybrid buses and the accompanying charg- electric buses for local public ing infrastructure, as well as measures required for operating the electric buses or plug-in hybrid passenger transport systems buses (e.g. training and repair shop equipment). Status: Entered into force March 2018 128. Motor vehicle tax Goal, scope and status: The Act to Modify Transport Taxes of December 2012 expanded the previous motor vehicle tax exemption – limited to all-electric passenger cars – to include all- electric vehicles of all vehicle categories. In addition, tax exemption for these vehicles, if registered for the first time between 18 May 2011 and 31 December 2015, was extended from five to ten years. A five-year tax exemption was provided for such vehicles registered for the first time between 1 January 2016 and 31 December 2020. This tax exemption period was extended to a uniform 10 years for all all-electric vehicles with first registration between 18 May 2011 and 30 December 2020, with the Act to Promote Electric Mobility in Road Traffic through Tax Incen- tives of November 2016. Passenger cars re-engineered to all-electric drivetrains also receive preferential treatment if conversion takes place between 18 May 2016 and 31 December 2020. 16 OVERVIEW OF MEASURES 231

Instrument State of implementation 129. Round Table on Gas-based Goal: Organise dialogue between the various market players and work with the Federal Ministry Mobility for Economic Affairs and Energy to develop a package of measures by the end of the first quarter of 2017 to reach the 4% target for natural gas mobility. Scope: The first step was to identify a range of focus regions in Germany where the use of natural gas vehicles and infrastructure expansion could be moved forward particularly quickly. Status/Facts and Figures: The Round Table on Gas-based Mobility has been concluded. Since the programme was launched in September 2016, up to March 2017 three Round Tables have taken place, accompanied by more than 20 working group meetings. Inter alia, eight large-scale focal regions in Germany were identified where the battery of measures developed are designed to move gas-based mobility forward, both with regard to the supply of vehicles and with regard to customers and users of mobility services. Fact sheets were prepared that listed the merits of natural gas mobility in various sub-markets, in passenger car traffic as well as bus and heavy goods vehicle traffic. In an action paper, the participants listed the possibilities they perceived for advancing natural gas mobility. 130. Maritime Technologies of the Goal: Developing new technologies in the maritime sector This should increase safety and relia- Next Generation R&D programme bility, as well as the economic viability in the shipbuilding industry. Scope: The four research priorities were marine engineering, manufacturing marine systems, shipping industry and marine technology. One focus was on novel production technology, organisation and connectivity. Status: The programme ended December 2017. Facts and Figures: Around €32 m were invested annually in the form of repayable subsidies, where the beneficiary’s contribution was usually around 50%. 131. Task force on LNG in heavy-duty Goal: Accelerate the market entry of LNG in heavy-duty freight transport. vehicles Scope: 1. Development of measures for the development of the LNG market in Germany; 2. Assessment of the environmental and climate effects and evaluation of economic viability based on real-life values from the demonstration projects implemented by the Federal Ministry of Transport and Digital Infrastructure; 3. Creation of an information basis for feasibility and implementation aspects for users of LNG HDVs. Status: Founded at the initiative of the Federal Ministry of Transport in November 2015 132. Regulations on Minimum Technical Goal: Creation of uniform standards for the EV charging infrastructure. This encourages the Requirements for the Safe and expansion of publicly accessible charging points to fit demand with funds from the private sec- Interoperable Deployment and tor, thereby assisting the market ramp-up of e-vehicles in Germany. Operation of Publicly Accessible Scope: I. Contains charger plug standards and minimum requirements for the development and Electric Vehicle Recharging Points operation of public-access charging points for electric vehicles. II. Aims to standardise authentication and payment at charging stations. III: Amends the existing Charging Station Ordinance to include EU requirements for intermittent charging: Operators of recharging points accessible to the public must accordingly allow any e-vehicle user to use the recharging points, even if they have no long-term electricity supply agreement. Status: Entered into force June 2017 133. 2014 EU Directive on the Goal: Providing an appropriate minimum number of refuelling and charging points for alternative Deployment of Alternative Fuels fuels and establishing necessary minimum technical standards and minimum standards for con- Infrastructure sumer information. Scope: The implementation of the EU Directive is an integral part of the Mobility and Fuels Strat- egy, as the swift development of an effective refilling and charging infrastructure for alternative fuels is at the core of the energy transition in the transport sector. Status: The National Policy Framework adopted by the Federal Cabinet was submitted to the EU Commission in November 2016. The measures of the Policy Framework will be implemented by the various ministries responsible. 134. Funding guidelines for an ‘Electric Goal: Development of a nationwide charging infrastructure with 15,000 charging stations across Vehicle Charging Infrastructure in the country. Of these, 10,000 will be normal charging stations, and 5,000 will be rapid charging Germany’ points. The Charging Infrastructure Funding Guidelines are part of the Electric Mobility Market Incentive Package adopted by the government in May 2016. Scope: The funding guidelines grant a subsidy (max. 60%) for investment costs for charging points and network connection. Regular calls for applications for funding set out the terms and conditions for the respective funding phase. Status/Facts and Figures: Entered into force in February 2017. A total of €300 m will be mobilised for the funding programme which runs from 2017 to 2020. Two calls for applications were conducted in 2017, and 3,000 applications ensued. 135. Hydrogen infrastructure develop- Goal and scope: Develop 400 hydrogen filling stations in Germany by 2025. The first 100 filling ment (H2 Mobility project) stations will be built irrespective of vehicle uptake (chicken and egg dilemma). Status: The first 50 hydrogen filling stations are part-funded by the Federal Government under the National Hydrogen and Fuel Cell Technology Innovation Programme (NIP). Applications for funding of additional filling stations have been filed under NIP II (2016–2026). Facts and Figures: In May 2019, 68 hydrogen filling stations were in operation. 232 16 OVERVIEW OF MEASURES

Instrument State of implementation 136. National Policy Framework for the Goal: The National Policy Framework sets goals for publicly accessible refilling and charging deployment of alternative fuels infrastructures and underpins these goals with specific measures, which must be implemented infrastructure (NPF) by the Federal Government (in conjunction with industry where applicable) in order to reach the goals. Scope: The National Policy Framework adopted by the Federal Cabinet comprises the charging infrastructure for electric vehicles, the infrastructure for the supply of natural gas (CNG and LNG) and the infrastructure for the supply of hydrogen to vehicles powered by fuel cells. It forms part of the implementation of EU Directive 2014/94/EU. The National Policy Framework is a ‘learning strategy’ and will be reviewed regularly and adapted where necessary throughout the course of the implementation of the EU Directive. The Federal Ministry of Transport and Digital Infrastructure will set up an ongoing monitoring procedure to this end. Under the provisions of the EU Directive, a report on the state of infrastructure development must be submitted to the European Commission after three years. Status: The Federal Government communicated the National Policy Framework to the Europe- an Commission in November 2016. 137. Promotion of intermodal transport Goal: The aim of efforts to promote intermodal transport is to transfer freight transport in stand- through the expansion and new ardised loading units from road to rail and federal waterways. construction of transhipment Scope: The Federal Government promotes intermodal transport by providing grants towards the terminals cost of constructing transhipment terminals. For Deutsche Bahn terminals, this is done through the Act on the Expansion of Federal Railways, and through a funding guideline of the Federal Min- istry of Transport and Digital Infrastructure for private terminals. The funding guideline for private intermodal transhipment terminals provides support for up to 80% of eligible costs for the upgrading and construction of terminals. Following a decision by the Federal Cabinet, a spending review of the programme of financial assistance to private undertakings was conducted in 2015/2016. Within this context, it was agreed to relax rules surrounding guarantees for repayment obligations to the Federal Government. The Federal Ministry of Transport and Digital Infrastruc- ture updated the funding guideline and submitted it to the European Commission for approval. Status: The new guideline came into force in January 2017. 138. 2020 National Cycling Plan Goal: The promotion of bicycle transport is a joint objective of the Federal Government, the Länder and municipalities. Facts and Figures: Federal funding for non-investment innovative projects amounted to €3.2 million in 2016. Further to this, cycle paths also received €98 m in funding by way of federal trunk roads. An additional €1.2 million were also provided for the improvement of paths along federal waterways. Equal amounts are set out in the 2017 budget. In addition, around €1.3 billion are provided each year from the federal budget, inter alia for the improvement of municipal transport conditions, (known as ‘unbundling funds’). This level of funding will continue through to 2019 and the funds can also go towards the development of the cycling infrastructure. 139. Initiative for Digital Connectivity Goal: At its core is a dialogue and stakeholder process with representatives of the Länder, trans- in Public Passenger Transport port authorities, municipalities, transport companies and associations, industry and consumer associations. Scope: Involved participants and decision-makers developed a joint roadmap outlining areas where there is a need for action, as well as the necessary steps and responsibilities. The Federal Ministry of Transport and Digital Infrastructure makes a financial contribution towards the implementation of the roadmap. Status: The Initiative started in early 2015. The roadmap was adopted in June 2016. Facts and Figures: A total of €16 million were available in the Future Investment Programme in the years 2016 through 2018. 140. Federal Transport Infrastructure Goal: Maintenance and replacement before expansion and construction, elimination of conges- Plan tion on main routes, strengthening of the more climate-friendly modes of transport. Scope: The infrastructure expansion legislation adopted by the Bundestag forms the basis for the financing and realisation of infrastructure expansion and construction projects. Status: The 2030 Federal Transport Infrastructure Plan was adopted in the Cabinet in August 2016. Facts and Figures: A total of over €270 billion are earmarked for maintenance and replacement projects and for road, rail and waterway infrastructure expansion and construction projects. 141. Promotion of hydrogen-based Goal/Scope/Status/Facts and Figures: The world’s first-ever hydrogen-powered train was mobility in rail transport as part unveiled in September 2016. In the state of Lower Saxony, 14 hydrogen trains are to be intro- of the NIP duced on non-electrified routes between 2018 and 2020, thereby replacing diesel locomotives. A total of 50 trains are to be rolled out in the passenger transport sector by 2021. In this way, the aim is to take advantage of the synergies from the development of hydrogen-based on-road mobility, particularly with regard to the production, transportation and provision of the fuel. 16 OVERVIEW OF MEASURES 233

Instrument State of implementation 142. Further development of the HGV Goal/Scope: The HGV toll system is to be developed further to make freight transport more cli- toll/ adaptation of the European mate-friendly. The aim is to scale the HGV toll depending on the energy consumption of the Infrastructure Costs Directive vehicles in a manner that is revenue neutral. This will first require an amendment to European Infrastructure Costs Directive 1999/62/EC at the EU level which defines the legal framework for Member States to levy tolls. Directive 1999/62/EC currently does not contain any provisions for a toll scale based on vehicle energy efficiency categories. Status: The directive is currently being renegotiated; in particular, at this time the Commission’s recommendation on changing the Infrastructure Costs Directive is being discussed in Council work groups. This provides for introduction of a carbon-emission related spread of infrastructure fees (at first this should be optional, later, obligatory). 143. Future Alliance for Rail Transport Goal: The Future Alliance for Rail Transport initiated in October 2018 by the Federal Ministry for Transport and Digital Infrastructure and comprising members from the government, industry and associations will boost digitisation, automation and innovation, and help strengthen competitiveness, reduce noise emissions, create more capacity and introduce the Deutschlandtakt (nationwide integrated regular interval timetable). Scope: The Deutschland Takt is a nationwide integrated regular timetable for all of Germany – from regional routes to main traffic axes. It integrates local and long-distance transport and is implemented together with the Länder responsible for the local transport systems. A train should be running every 30 minutes on main arteries. The infrastructure measures required to implement this are to be carried out after 2020. By 2030, the Deutschlandtakt should be in operation. Status: Start in October 2018 144. Strengthening of rail freight Goal/Scope/Status/Facts and Figures: Expansion of rail transport should be accelerated. To this transport end, far higher investment in the expansion of the rail infrastructure was made between 2016 and 2018 with funds from the Future Investment Programme. Besides the implementation of projects under the requirements plan, the measures of the Second Immediate Action Programme for Seaport Hinterland Transport, which are designed to increase capacity, will be implemented starting in 2015 and through to 2020. The financing agreement for a first tranche of the Second Immediate Action Programme for Sea- port Hinterland Transport has been concluded. To strengthen rail freight transport in the long term, the measures of the Rail Freight Master Plan must be implemented: Funding of Rail Freight Transport that provides for partial financing of approved track access charges with additional federal funds under the Guideline for Reducing Track Assess Charges in Rail Freight aims to create an incentive to reduce prices in rail transport and to shift freight transport from the roads to the more environmentally-friendly rails. The competitiveness of rails should be thereby enhanced. To this end, €175 million in federal funds were provided as of July 2018, from 2019 to 2022 €350 million will be available annually, and in 2023 €175 million. This funding is to be evaluated in 2021. Rail freight transport is also strengthened through federal support for private intermodal transhipment terminals and for private sidings. 145. Strengthening waterways as a Goal/Scope/Status/Facts and Figures: The Regulation on Contributions to Waterway Transport mode of transport Enterprises for the Sustainable Modernisation of Inland Waterway Vessels of 21 July 2015 replaces the funding guideline for lower-emission engines. The federal funding guideline for private transhipment facilities also applies to facilities to transfer to waterways. 146. Strengthening of regional Goal/Scope/Status/Facts and Figures: Preparations are underway for awarding a preliminary economic cycles Federal Government study on regional economic cycles. The aim of the study is to provide a preparatory analysis that will be the basis for the creation of guidelines for local authorities. 147. Strengthening of local public Goal/Scope/Status/Facts and Figures: State subsidies for local and regional passenger services passenger transport (regionalisation funds) were increased to €8.2 billion in 2016 and this will be increased by 1.8% annually in the following years. As of 2020, the Länder are to receive compensation for the dis- continuation of unbundling funding within the framework of general payments from VAT tax revenue. 148. Strengthening of cycling and Goal: Further development of the cycling infrastructure and linking the bicycle transport system pedestrian infrastructure to other modes of transport via investment, non-investment and communication measures. Improvement of framework conditions. Status: Current invitation for projects under the National Cycling Plan for the 2016 funding year with a focus on electric mobility as well as cycling and space. 149. Eighth Act amending the Road Goal: Creating a legal basis for highly and completely automated driving. Traffic Act (automated driving) Status: Entered into force June 2017 150. Action plan to create ethic rules Goal: Creating the necessary framework for developing these new technologies as well as helping for self-driving computers Germany retain a leading role in this process. Scope: Action plan based on recommendations presented by the Ethics Commission for Automat- ed and Connected Driving. Status: Published in September 2017 151. Reduced tax rate for local public Goal: This tax break should promote use of plug-in hybrid electric vehicles and e-vehicles in local transport under the Electricity public transport. In addition to electricity tax breaks for rails and the energy tax break for fuels in Tax Act local public transport, a tax break is provided for advanced technology in the form of plug-in hybrid electric vehicle and e-vehicles. Scope/Status: The Electricity Tax Act was amended on 1 January 2018 to lower the tax rate to €11.42 per MWh. Facts and Figures: Revenue shortfalls are estimated at €1 million annually. 234 16 OVERVIEW OF MEASURES

Instrument State of implementation 152. Continuation of reduced tax rates Goal: This tax break serves as an incentive to use alternative fuels public and private transporta- for natural gas and liquefied tion in the inner cities. petroleum gas Scope/Status: The Act to amend the Energy Tax Act of 1 January 2018 extends the tax break for natural gas up to and including 31 December 2026, with a gradual reduction in the tax rate starting 1 January 2024. Tax breaks for LP and LNG are gradually being decreased starting 1 January 2019, and by 1 January 2023 the regular tax rates should apply. Facts and Figures: Lost tax revenue for continuation of tax breaks for natural gas and liquefied petroleum gas are estimated at €1 billion for the entire term. The exact amount depends on actual fuel consumption. 153. Act on Avoiding Value-Added Tax Goal: This act includes incentives for electric mobility and other environmentally-friendly alter- Losses in Internet Trade in Goods natives to vehicles with combustion engines. Scope: This law contains, inter alia, the following provisions: zz Promoting electric mobility reducing by half the assessment basis applicable to private use of company cars that are electric and externally chargeable hybrid vehicles for calculating company car taxation, and that were purchased between 2019 and 2021; zz Tax exemption for private use of company e-bikes and conventional bicycles; zz Tax exemption for subsidies provided by the employer for employee expenses for travel with public transport between the employee’s place of residents and the initial place of work, as well as for related benefits in kind. Status: Act was adopted on 11 December 2018. Most of the Act entered into force on 1 January 2019. Chapter 8: Greenhouse gas emissions 154. 2020 Climate Action Programme Goal: This programme should achieve the climate goal set for 2020, i.e. reduce greenhouse gas emissions in Germany by at least 40% from 1990 levels, as quickly as possible. Scope: More than 110 individual measures in all sectors of the economy Status: Adopted in December 2014. In February 2019 decree issued by the Federal Government on the 2018 Climate Protection Report that monitors implementation of the measures set forth in the 2020 Climate Action Pro- gramme. This Report presents current trends in the development of emissions in the various action areas, describes progress in the implementation of the measures contained in the Climate Action Programme and provides an outlook of the expected effect the individual measures will have on reducing emissions by 2020. 155. 2050 Climate Action Plan Goal: The 2050 Climate Action Plan defines the long-term strategy of German energy and climate policies. Scope: The 2050 Climate Action Plan addresses the following action areas: energy sector, buildings, transport, industry, agriculture as well as land use and forestry. Overriding objectives and strategic measures are also presented. Status: The Federal Government adopted the 2050 Climate Action Plan in November 2016 and is currently preparing a programme of measures to implement the plan. 156. Climate Action Alliance Goal: Support implementation of the measures adopted under the Climate Action Programme, make it easier to realise potential that is currently rated as “not yet quantifiable” and identify additional possibilities for action Scope: Up to now, discussions have taken place on climate protection in the transport sector, in municipalities, agriculture, small and medium-sized enterprises, the craft sector and industry. Status: The Action Alliance meets semi-annually and will also assist with implementation of the 2050 Climate Action Plan according to a resolution of the Federal Government. 157. Recommendations from the Coal See Chapter 1 Commission Chapter 9: Power plants and security of supply 158. Electricity Market Act Goal: The aim is to make the electricity market fit for the increasing share of renewable energy and to set the course for competition between flexible generation, flexible demand and storage. Scope: Continued development of the electricity market into an Electricity Market 2.0, specifically: zz strengthening of existing market mechanisms zz removal of barriers to access for providers of demand side management measures zz more efficient grid planning zz increased monitoring of security of supply zz more transparency in the electricity market zz introduction of a capacity reserve established separately from the electricity market zz creation of a security standby reserve Status: At the end of 2017 three power generation units with a total capacity of around 900 MW were transferred to security standby. In 2018, three additional power generation units were also transferred, with a total capacity of around 1,050 MW. In 2019, two additional units with a capacity of around 750 MW will be transferred to security standby. 16 OVERVIEW OF MEASURES 235

Instrument State of implementation 159. Capacity Reserve Ordinance Goal: Reserving 2 GW of capacity for emergency situations. Scope: A type of strategic storage for reserves on the part of the transmission system operators. This should put them in a position to ensure electricity supply in emergencies by falling back on capacity reserves in order to provide additional electricity feed-in. Status: The Capacity Reserve Ordinance should be amended as soon as possible with a view to state aid clearance; after that, the first auction will take place. 160. Omnibus Energy Act Scope: zz Extending the Combined Heat and Power Act by three years to 2025. This should improve the conditions for investments in new CHP plants. However, this extensions has not yet been approved under state aid rules by the European Commission. zz Transferred electricity capacity Provisions will be made for estimating the amount of electricity transferred to third parties. The German Federal Office for Economic Affairs and Export Con- trol (BAFA) announced this in advance in a notice for electricity metres for special compensation arrangements. This ensures that the companies affected will retain their renewable energy surcharge privileges. zz Facilitating modernisation of large steam busbars CHP installations: It was necessary to adjust the basis for funding, in order to facilitate continued funding of modernisation of large CHP installations in the event of an adjustment in state-aid rules. zz The capacity reserve that serves to ensure supply security will be adapted to the requirements for approval under state aid rules and will commence on 1 October 2020. See Chapter 4 161. Act on the Redistribution of Goal: Guarantee the financing of decommissioning and dismantling of nuclear power plants and Responsibility for Nuclear Waste the disposal of radioactive waste. Management Scope: Operators of nuclear plants will continue to be responsible for the management and reserve-backed financing of plant decommissioning and dismantling. The Federal Government has sole responsibility for interim and final storage of radioactive waste as of July 2017; the public-law foundation ‘Fund for Financing Nuclear Waste Disposal’ (KENFO) reimburses the Federal Government all related costs it incurs. Status/Facts and Figures: The Act entered into force on 16 June 2017. On 3 July 2017 German nuclear power plant operators paid a total of €24.1 billion to KENFO. 162. Commission for the storage of Goal: Develop a proposal for a fair and transparent procedure for the permanent disposal of high- high-level radioactive waste level radioactive waste (Final Repository Commission) Scope: Comprising representatives from the business community, industry, environmental organisations, religious communities, trade unions, as well as non-voting members of the Bundestag and the Land governments, the Commission presented its final report on 5 July 2016. In the search for a final repository, it is in favour of a multi-stage, transparent and science-based process, which is open as to the outcome, and defines selection criteria to identify the best possible site for the final repository. 163. Act Modernising the Repository Goal: Implementation of recommendations of the Final Repository Commission and as such, Site Selection Act and other determining the site selection procedure Legislation Scope: Specifying the site selection procedure, starting with a blank map and ending up with the best possible final repository site. 164. Core energy market data register Goal: Create a central energy industry register to simplify official and private-sector reporting, reduce the number of registers to which industry must report, and enhance data quality and transparency Scope: Starting in 2017, the Register merges the master data of all the plants in grid-bound energy supply in Germany’s electricity and gas market, as well as the master data of market stakeholders, to create a single online database. Status: The Core Energy Market Data Register Ordinance entered into force in July 2017 The Register started operation in January 2019. 165. ‘Renewable Energy Storage’ See No. 52 KfW funding programm 166. Amendment to the Electricity Goal: Optimise the gas network access system and adapt it to the new energy sector circum- Network Access Ordinance stances (StromNZV) Scope: Gas pipeline network operators must always offer transport customers intra-day capacities as of 2018. In addition, both existing German natural gas market areas must be combined by 1 April 2022 at the latest. Status: Entered into force in August 2017. 236 16 OVERVIEW OF MEASURES

Instrument State of implementation 167. Ordinance on Improving the Goal: Ensuring natural gas supply be diversifying import routes. Framework for Creating LNG Scope: The direct import of LNG using both European and German infrastructure is an important Infrastructure in Germany component of diversification. One hurdle to building the LNG infrastructure in Germany has been connecting the LNG plants to the national pipeline network. Under current laws, plant operators were responsible for installing and paying for this connection themselves. In the future, transmission operators will be required to set up the pipelines between the German LNG terminals and the pipeline network. In the future, pipeline network operators will bear 90% of the costs, and the terminal operator 10%. This Ordinance puts LNG import terminals on an equal basis with the landfall points of pipeline gas. Status: Adopted in the Cabinet in March 2019. The ordinance must still be ratified by the Bun- desrat. 168. SMARD electricity market data Goal: Transparent representation of the German electricity market. Scope: At https://www.smard.de/en/5790, key data for the German electricity market and some for other European markets can be accessed in real time, presented in graphics and downloaded. It is possible to look up data on generation, consumption, wholesale prices, imports and exports, as well as data on balancing energy, for differing time periods and in graphic form. Status: The platform has been online since July 2017. Chapter 10: Affordable energy and a level playing field 169. Special compensation arrangements Goal: The aim is to ensure that electro-intensive businesses and rail operators are not put at a in the Renewable Energy Sources disadvantage in relation to international competitors, and that jobs are therefore not lost, as a Act result of the promotion of renewable energy in Germany. Scope: Electro-intensive businesses in sectors facing international competition can apply to pay a lower EEG surcharge. Facts and Figures: In 2017, 1,979 businesses in the manufacturing industry with an electricity consumption of 93 TWh received privileges under the special compensation arrangements (BAFA 2018). 170. Reductions in the CHP surcharge Goal: The aim is to ensure that promotion of combined heat and power does not put German businesses at a disadvantage in relation to international competitors, and that jobs are therefore not lost. Scope: The CHP surcharge can be reduced for energy-intensive companies that face international competition, and for rail operators. In addition, the CHP Act also facilitates reductions in the CHP surcharge under additional special circumstances related to self-supply. Status/Facts and Figures: The scope of reduction of the CHP surcharge depends on the specific situation. In 2017, a reduced CHP surcharge was paid for almost 218 TWh, yet the complete CHP surcharge was due to 271 TWh. The total amount of CHP surcharges paid amounted to around €1.3 billion. Companies saved almost €800 million with various discounts (compared with the current surcharge). The largest individual share was saved by energy-intensive companies for which the CHP surcharge was also reduced due to reduction of the EEG surcharge under the special compensation rules. It must always be kept in mind that without the various reductions, the CHP surcharge itself would be lower (by almost 40%). The macroeconomic financial relief is therefore lower than described in the foregoing. 171. Relief under the Energy Tax Act Goal: In addition to the discounts that are in part due to mandatory discounts under EU law, and Electricity Tax Act there are tax advantages in energy and electricity tax law that serve to undergird competitiveness in the international market while observing environmental protection. Scope: For example, businesses can apply for tax relief on various legal grounds (e.g. relief for particularly energy-intensive or electro-intensive processes, general energy tax and electricity tax relief for the manufacturing industry, tax capping). Energy efficiency requirements must also be met to qualify for the tax cap mechanism (certification to ISO 50001 or EMAS enrolment; tax relief for SMEs). Status: According to current information, about 15,000 companies have benefited from energy tax relief, and around 34,000 companies from electricity tax relief. Status: According to current information, about 15,000 companies have benefited from energy tax relief, and around 34,000 companies from electricity tax relief. Facts and Figures: Energy tax relief as described in the foregoing amounted to €890 million in 2017 (€796 million in 2018), while electricity tax relief in 2017 amounted to €3.27 billion (€3.36 billion in 2018). 172. Electricity price compensation Goal: Prevent manufacturing from moving abroad. Scope: Since the start of the third trading period, businesses whose production processes are highly electro-intensive and that are at risk of moving production abroad (carbon leakage) –

because of high costs due to CO2 emissions from electricity generation – can apply for compen-

sation for the costs they incur as a result of the indirect CO2 costs of the EU emissions trading scheme which are passed on in electricity prices. The amount of compensation is based on the

CO2 allowance price for the specific accounting period. Facts and Figures: For the accounting year 2017 (disbursement 2018), assistance was approved for 891 industrial plants, as a result of which support amounting to €202 m was disbursed. 16 OVERVIEW OF MEASURES 237

Instrument State of implementation

173. CO2 allowance price and free allo- See Chapter 3 cation, in some cases, in the EU emissions trading system 174. Relief from grid charges Goal: The Network Charges Modernisation Act (NEMoG) gradually reduces regional disparities in transmission grid charges, creates more distribution equality and reduces network costs. Scope: Transmission grid charges will be aligned nationwide, starting in January 2019, in five steps. Offshore connection costs will no longer be financed with grid charges starting in 2019, rather with a levy. Payments made by distribution network operators to power producers for avoided grid fees will be gradually removed, thus lowering distribution network costs. Status: The Network Charges Modernisation Act entered into force July 2017. Implementation was planned in more detail in 2018 with the Ordinance on the Gradual Introduction of Uniform Federal Transmission Grid Charges. Facts and Figures: The cost burden carried by the distribution networks for payments for avoided grid charges was reduced from 2017 to 2018 by over €1 million, according to preliminary figures. Chapter 11: Measures for increasing environmental compatibility of the energy supply system 175. Environmentally-compatible Goal: Increase in the share of renewables in the energy system while simultaneously reducing expansion of renewable energies coal-fired power generation and phasing out nuclear energy. Scope: see Chapters 1, 4 and 9 176. Distance between residential Goal: Complying with agreed thresholds. areas and wind power plants in Scope: Measurement and assessment of low-frequency noise emissions in accordance with Num- compliance with the Technical bers 7.3 and A.1.5 of the Technical Instructions. Instructions for Noise Protection 177. Drafting a general administrative Goal: Preventative minimization of electric and magnetic fields in relevant areas in accordance regulation on minimization of elec- with technological developments. trical and magnetic fields created Scope: Catalogue of technical measures to be implemented when erecting or substantially modi- by newly erected and substantially fying electricity lines and ancillary installations with a nominal voltage of 1,000–2,000 volts, and modified electricity supply installa- monitored using a predetermined evaluation plan. tions and similar plants Status: In 2016, the 26th Regulation on Implementation of the Federal Immission Control Act entered into force (26. BImSchVVwV). 178. Initiation of a research programme Goal: Continued improvement of risk assessment and communication regarding static and low- on radiation protection accompa- frequency electrical and magnetic fields that occur during transmission and use of electricity. nying the expansion of the power Scope: Investigating a possible connection between low frequency magnetic fields and neurode- grid. generative illnesses; setting perception and effects thresholds; determining causes of leukaemia in childhood; co-cancerous effect of exposure to magnetic fields; research on a possible connection between exposure to magnetic fields and miscarriages; investigation of the occurrence, expansion and absorption of corona ions; exposure analysis, evaluation and current data for the general public; risk awareness and risk communication Status/Facts and Figures: First event for this research programme took place in July 2017 with subsequent online consultation. Of a total of 36 projects, six have already begun and three have been concluded. 179. Establishing of the EMF Compe- Goal/Scope: In April 2018, the Federal Office for Radiation Protection was established as an tency Centre: Radiation Protection information office for all enquiries regarding electric, magnetic and electromagnetic fields. and Electricity Grid Expansion” 180. German Resource Efficiency Goal: Extract mineral and fossil resources in a more climate-friendly manner; strengthen envi- Programme II (ProsRess II) ronmental, social and transparency standards in the international resources sector and create more sustainable supply chains; emphasize compliance with social and ecological minimum requirements in production and in supply chains of resources and goods imported into Germany; support for companies that encourage sustainable supply chain management Scope: The recommendations in Programme II for managing resources refer to the resource demands of energy plants. Numerous new developments have been applied to strengthen sustainability in relevant and suggestions from Programme II are put to good use. Ecological aspects have hardly been taken into consideration, despite the need for action in conserving natural resources and despite the strong connection between environmental pollution and social and human rights conflicts. Status: Specific implementation in many instances still has not taken place. The effectiveness of this programme can therefore not be assessed. Chapter 12: Grid infrastructure 181. Network Charges Modernisation Goal: This Act gradually equalises transmission grid charges by 2023. As of 1 January 2023 the Act charges for transmission networks will be the same everywhere in Germany. Furthermore, the Act provides for the removal of avoided network charges. Status: Entered into force July 2017 238 16 OVERVIEW OF MEASURES

Instrument State of implementation 182. Revision of the Incentive Goal: Improve investment conditions for distribution grids and strengthen incentives for efficien- Regulation Ordinance cy, while keeping the costs for consumers to a minimum and increasing transparency. Scope: A capital expenditure true-up was introduced for distribution system operators. This instrument adapts reliable grid operator revenues directly to a change in capital costs. In addition, efficient grid operators are given a bonus, and new publication obligations render the decisions of the regulation authorities and the costs and revenues of the TSOs more transparent. Status: Entered into force September 2016. The true-up of capital expenditure applies as of the 3rd regulatory period, i.e. as of 2019 (electricity) or 2018 (gas). 183. Federal Requirements Planning Act Goal: Legal basis for the necessity of meeting energy supply requirements and the great need for new transmission lines. Status: The act was most recently amended in December 2015 with the Act to Amend Provisions of Law on Energy Grid Construction (inclusion of additional projects from the 2024 Grid Devel- opment Plan). On the basis of the grid 2019–2030 Grid Development Plan to be confirmed by the Federal Net- work Agency by the end of 2019, incorporation of additional measures into the Federal Require- ments Planning Act. This will take into account the measures already confirmed in the 2017– 2030 Grid Development Plan. 184. Amendment of the Grid Expansion Goal: Accelerate the planning and approval process, in particular for grid reinforcement. Acceleration Act Scope: Quicker notification procedures, waiver of planning steps for construction in existing power lines, future-oriented planning, better coordination of recommendations from the Länder, facilitating timely begin of construction. Status: The Act was adopted in April 2019, and entered into force in May 2019. 185. Power Grid Expansion Act Scope: The Power Grid Expansion Act defines the high priority given to the need for expansion and the necessary to meet energy supply requirements with 22 projects. Six of the projects can be realised on sub-loops as pilot projects for the use of underground cables at the ultra-high voltage level. Status: The Act was already adopted in 2009 by the Bundestag and the upper house, and most recently amended in 2015 with the Act to Amend Provisions of the Law Governing Power Line Construction (expansion of ground cable pilot projects). 186. Act to Amend Provisions of the Goal/Scope: For large ‘electricity motorways’ (= new ultra-high voltage-direct current-transmis- Law Governing Power Line sion lines) the use of ground cable is established as a planning principle in federal sectoral plan- Construction ning new EHV-DC lines. The goal is to increase acceptance of grid expansion; only if the local population accepts such construction will grid expansion succeed. In the case of AC or three- phase power lines, the number of pilot routes for underground cabling is increased and the criteria for underground cabling expanded. Key grid expansion projects from the 2024 Grid Develop- ment Plan that has been approved by the Federal Network Agency are ultimately given a legal basis in the Federal Requirements Planning Act. Status: The Act entered into force July 2016. 187. Continued development of the Goal: Create transparency and awareness among all stakeholders with regard to realistic plan- monitoring of German grid expan- ning and implementation assumptions, and identify delays in grid expansion at an early stage. sion projects as well as monitoring Making better use of existing capacity is also important. of measures to increase utilization Scope/Status: Previously concentrating on projects under the Power Grid Expansion Act, the of the electricity grid quarterly Monitoring Report published by the Federal Network Agency (www.netzausbau.de) was refined with effect from the first quarter of 2016. In future a separate report will be published for projects under the Power Grid Expansion Act (22), the Federal Requirements Planning Act (43) and offshore projects (24), along with a summary bar chart, to indicate progress in the planning and approval procedure for the individual projects. In addition, the bar chart for projects under the Power Grid Expansion Act and Federal Requirements Planning Act also indicates the planned launch dates. In the Power Grid Expansion Act reports and the Federal Requirements Planning Act reports, as of the fourth quarter 2017, projects are also marked either as grid expansion or grid reinforcement projects. In the 2nd quarter of 2018, monitoring also included measures for optimising existing networks (e.g. using available grid monitoring or high-temperature conductors) that should help to quickly increase transmission capacity of existing networks. 188. Introduction of strategic Goal/Scope: The federal level and the Länder have agreed to create strategic controlling of net- controlling for grid expansion work expansion programs, And have agreed on concreted schedules and milestones with grid transmission operators for all network expansion projects. The schedules were adopted at the meeting of the energy ministers on 24 May and published on netzausbau.de. This way the public can access information at any time regarding progress on grid expansion. The schedules provides targets to be used in further controlling processes. The federal and Länder energy ministers as transmission grid operators will meet annually, better yet, semi-annually, to discuss progress of grid expansion. The responsible department heads will discuss the individual projects with grid operators on a semi-annual basis as usual, and will actively pursue these projects. 16 OVERVIEW OF MEASURES 239

Instrument State of implementation 189. Further development of the Goal: Ensure grid stability and therefore security of supply Ordinance on Agreements Scope/Status: Interruptible loads are industrial operations that continuously consume a large Concerning Interruptible Loads volume of electricity and which, when called upon, can temporarily ‘interrupt/reduce’ their demand. The procurement and use of interruptible loads has undergone continued, consistent development since the previous regulation that was in place. In particular, the procurement process has become more competitive and the framework to utilise interruptible loads has been extended and optimised. The revised version of the Ordinance entered into force on 1 October 2016. The European Commission has confirmed that it complies with European rules on state aid. Facts and Figures: As of August 2018, installations with a total of 1,110 MW capacity are pre- qualified for quickly interrupting or reducing their demand. Of this amount, 929 MW are defined as immediately interruptible load. 190. Electricity Market Act See No. 158 191. Act on the Digitisation of the See Chapter 13 Energy Transition 192. ‘Civil Dialogue on the Power Grid’ Goal: The Civil Dialogue on the Power Grid initiative strives to facilitate an open and transparent initiative dialogue between all parties involved in power grid expansion. Scope: To this end, the initiative provides basic information on grid expansion early on, and gives citizens advice on how to participate. Staff provide information nationwide in Bürgerbüros (citizens bureaus), at events, weekly markets, in front of city halls or in pedestrian zones, as well as online, regarding the relationships between grid expansion and the energy transition. Status: The BMWi has been sponsoring this initiative since 2015. Information events take place regularly in the affected regions. Facts and figures: In addition to a Dialogmobil, the Initiative has over ten offices in all of Germany. 193. dena Ancillary Services Platform Goal: Further development of the ancillary services required for the energy transition Scope: Stakeholder platform run by dena, in which market players such as manufacturers and network and plant operators as well as the BMWi participate. 194. Improved congestion management Goal: More efficient and cheaper congestion management Scope: Including all generating plants (100 KW or more), also renewables and CHP, In an optimised concept for congestion management, in order to achieve the most efficient grid load possible, while always observing priority access. Status: The legal framework was created with the amendment of the Grid Expansion Accelera- tion Act, and it will enter into force on 1 October 2021. 195. Ordinance on certification of Goal: Compliance with technical standards by means of mandatory certification. electrotechnical characteristics of Scope: This ordinance entered into force on 1 July 2017, and replaces the System Service Ordi- energy plants (NELEV) nance for Wind (SDLWindV) that applied to wind energy installations. In contrast to the SDL- WindV, this ordinance applies to all types of decentralised generation and for storage systems. Chapter 13: Integrated development of the energy system 196. Electric mobility eco-bonus see Chapter 7 197. Pilot Project Heating Networks 4.0 Goal: Sponsoring by means of basic funding supplemented by performance-related scaled Funding Programme bonuses is provided for climate-friendly and especially cheap network heating with high shares (Low-temperature heat networks of renewables and waste heat use. with seasonal thermal energy Scope: Model projects for innovative climate-friendly heat supply for urban quarters and districts storage) using networks of the 4th generation. These demonstrate low temperature levels, renewable shares of between 50% and 100% and usually have large seasonal heating storage. Status/Facts and Figures: The Programme was initiated on 1 July 2017. Funding is provided for feasibility studies and construction as well as information campaigns and scientific accompani- ment of model projects. 198. Promotion of innovative CHP See Chapter 9 systems under the CHP Act 199. Act on the Digitisation of the Goal: Creating the technical framework for demand side and generation management measures Energy Transition and for more flexibility in the power grid Scope: Introducing smart metering systems: Smart Grid, Smart Meter, Smart Home. These are to serve as a secure communication platform to create a stronger network for the energy supply system. Status: Entered into force September 2016. 200. Ordinance for creating a legal Goal: Broad-scale solutions for technology, economic and regulatory issues facing energy supply framework for collecting knowl- of the future. edge in the funding programme Scope: The main emphasis is digitisation of the energy sector. The SINTEG Ordinance has creat- titled Smart Energy Showcases – ed numerous simplifications and possibilities for programme participants. Digital Agenda for the Energy Status: Entered into force 21 July 2017 Transition (SINTEG Ordinance) 201. Energy Savings Meter pilot see Chapter 5 programme 240 16 OVERVIEW OF MEASURES

Instrument State of implementation 202. The Standardisation Strategy for Goal: Continued development of the smart meter gateway into a comprehensive communica- Cross-sectoral Digitalisation under tions platform for the energy transition, to exploit the full potential of digitisation for the energy the Act on the Digitisation of the transition. To do this, minimum technical standards must continually be developed for smart Energy Transition (Roadmap) pub- metering systems. lished by the Federal Ministry for Scope: The necessary technical standards will be prepared for all energy-relevant areas such as Economic Affairs and Energy and grid-related feed-in and load management as well as electric mobility, and will be adapted to the the Federal Office for Information most current standards for the energy transition. They must ensure value added for the consum- Security er, across all areas and in the sense of sector coupling (in particular heating, smart homes), involve electric mobility and be designed to deal with threat scenarios, for e.g. hacking. Status: Published in January 2019 Chapter 14: Energy research and innovation 203. 7th Energy Research Programme Goal: Contribution to implementing the energy transition of the Federal Government Scope: This Programme addresses current and expected challenges with a holistic approach to funding policy. A new focus is on technology and innovation transfer facilitated with living laboratories of the energy transition. This new funding area serves to prepare innovative solutions for introduction to the market. Dynamic transfer of practical experience is supplemented with stronger cooperation with startups. In addition to the main research topics – energy efficiency and renewable energies – the programme has new focuses on cross-sector and cross-system issues of the energy transition, such as digitisation and sector coupling. Status: Adopted in September 2018 Facts and Figures: Current financial planning has earmarked approximately €6.4 billion for energy research in the scope of the 7th Energy Research Programme for the period 2018 to 2022, yet another increase in federal funding for energy research. 204. Funding initiative for the Living Goal: Living Laboratories were established in the 7th Energy Research Programme of the Federal Laboratories of the Energy Government as a new funding pillar to accelerate technology and innovation transfer from Transition ideas competition research to practice. Living Laboratories of the Energy Transition will accelerate future energy technologies under real conditions and provide a testing situation on an industrial scale, thereby speeding up the transformation of the energy system. In selected Living Laboratories the Federal Ministry for Economic Affairs and Energy assists enterprises and researchers in developing their innovative energy and contributing to the implementation of the energy transition in the regions. The Living Laboratories of the energy transition can help to develop the regulatory framework in Germany with an eye to the future. In addition, they can assist traditional energy regions in developing sustainable energy and industrial policies. Scope: The Living Laboratories of the Energy Transition ideas competition was initiated by the Federal Ministry for Economic Affairs and Energy and offers companies the opportunity to implement their technical and non-technical innovations and test them in a real situation in conjunction with researchers. This involves energy technologies and concepts that offer great potential for effective climate protection when designing the energy system, but have not yet achieved good market penetration. The support for new and innovative ideas in the context of large infrastructure-relevant projects should ease market access. At the same time, direct and large-format application of promising technologies can show where and how regulatory hurdles can be overcome in order to speed up market positioning of energy innovation. To become a Living Labora- tory of the Energy Transition, the project must have a systemic dimension and testing should be possible in a relevant, industrial scale. In addition, research may focus on socio-economic aspects and social issues, as well as future market models, business models and regulatory schemes. The focus of the first call for applications is Sector Coupling and Hydrogen Technologies (in particular P2X technologies), Large-scale Energy Storage Systems in the Electricity Sector and Energy Optimised Urban Quarters. Facts and Figures: In the 2019–2022 period, up to €100 million in funding annually will be provided. Status: The first call for applications to bid took place in February 2019. 16 OVERVIEW OF MEASURES 241

Instrument State of implementation 205. Living Laboratories strategy Goal: The Living Laboratories strategy aims to make regulations in Germany more attuned to the future and more adaptable. Scope: The strategy devised by the Federal Ministry for Economic Affairs and Energy indicates how testing rooms for innovation and regulations can be established as a digital policy instrument in Germany. There are three pillars planned: zz Create free spaces, for example in the form of experimentation clauses in regulations: The strategy is basically aimed at making laws and ordinances more open to innovation with the use of experimentation clauses, to further develop existing experimentation clauses so that they provide more legal certainty and flexibility for implementing Living Laboratories, and to encourage their use. zz To interconnect participants in business, the scientific community and government more strongly: Information in the form of a Living Laboratories Handbook is planned. Furthermore, an information platform is to be created and information exchange improved in a Living Labo- ratories Network, to reduce hurdles and uncertainty (e.g. regarding liability) related to creating Living Laboratories. zz Testing innovation and regulation should be more strongly anchored in practice: For example, in the context of Living Laboratories competition in specific areas of innovation (e.g. Sharing Economy, blockchain, AI, autonomous mobility, logistics), ideas and plans for Living Laborato- ries should be drawn from business and regulatory hurdles identified. The concept for this should be worked out in close cooperation with the business community. Status: This Living Laboratories strategy was published in December 2018. The Living Laborato- ries interministerial working group was created. 206. Horizon 2020/Research and Goal: Enhancing Europe’s competitiveness Innovation Framework Programme Status: Horizon 2020, the European research and innovation framework programme, commenced in 2014. Facts and Figures: Around €5.9 billion was allocated for the 2014–2020 funding period for ‘safe, clean and efficient energy’ in the area of non-nuclear energy research. 207. Energy transition – Research and Goal: Exchange and dialogue with representatives of the government, the business community Innovation platform (R&I platform) and academia for further development of energy research policy, as well as to accelerate transfer of results of energy research into practice. Scope: Discussions take place on current developments in energy research, in particular new formats and scope of research funding. In addition, the platform pools and coordinates the Energy Research Networks (see no. No. 174). Status: Plenary meetings of the full platform take place annually. At the end of 2016, the R&I Platform was the forum for the consultation procedure for the new Energy Research Pro- gramme. The spring conference took place on 2 May 2017 as an official ceremony for the 40th anniversary of the Energy Research Programme, followed by a conference on the future of energy research in Germany. On 28 November 2017 expert recommendations from research networks were presented as a contribution to the consultation procedure for the new Energy Research Programme. At the meeting on 21 February 2019, new items from the 7th Energy Research Pro- gramme were presented and discussed, including Living Laboratories and current developments in the Energy Research Networks. 208. Energy Research Networks Goal/Scope/Status/Facts and figures: The BMWi Energy Research Networks comprise around 3,900 members. There are currently eight Energy Research Networks: Renewable Energies, Flexi- ble Energy Conversion, Electricity Networks, Energy System Analysis, Bioenergy, Construction for the Energy Transition, Energy Efficiency in Industry and Commerce, and Startups. These networks represent the broad research landscape in Germany. They supply valuable impetus to important research topics from the perspective of the scientific community and research, and provide a platform for connecting researchers, business and government. In addition to participation and transparency, the research networks should provide a stronger impetus for rapid transfer of research results to the energy sector. As part of the consultation procedure for a 7th Energy Research Programme, the Energy Research Networks grouped members into topic-related task groups that provided strategy input and expert recommendations. These relate both to further development of federal energy research policy and to the relevant need for funding and future use of various energy and efficiency technologies. 209. Energy Transition Research Forum Goal: Key players from the Länder, the business community, academia and civil society have been meeting since 2013 to drive forward the effective coordination and long-term direction of energy research. Scope: Conclusions are reached with regard to the structures, instruments and future topics of research policy. 242 16 OVERVIEW OF MEASURES

Instrument State of implementation 210. Funding initiative ‘Energy Goal: The four Copernicus projects will facilitate the move from basic research to practical appli- Transition Copernicus Projects’ cation in four key areas of the energy transition. In the first phase of funding the aim is to create the basis for a technologically outstanding and economically competitive energy system which also enjoys the greatest possible level of public acceptance. Scope: Each of the four projects addresses a core issue of the energy transition: electricity networks with high shares of renewable energy (ENSURE); storage and conversion of renewable electricity (P2X); reorienting industry processes to fluctuating energy supplies and sector coupling (SynErgie); and system integration (ENavi) Status: The four Copernicus projects ENSURE, P2X, SynErgie and ENavi involve about 260 project partners and started in 2016. The first funding phase runs until 2019. Facts and figures: The projected funding amount is estimated at over €120 million. 211. Carbon2Chem research project Goal: Conversion of blast-furnace gas from steel production into base chemicals using renewable energy. Scope: Valuable chemical primary products for fuels, plastics or fertilizers that replace fossil fuels

are produced from blast furnace gas. Thanks to the project, 20 million tonnes of annual CO2 emissions from the German steel industry can be used commercially. Status: The project started in 2016. In September 2018 the Technikum was opened in Duisburg, where for the first time, methanol and ammoniac are being converted from blast-furnace gas under industrial conditions. The first funding phase runs until 2020. Facts and Figures: The Federal Ministry of Education and Research will make more than €62 million available in the first funding phase. 212. MACOR Feasibility Study Goal: A feasibility study on climate-friendly steel production using hydrogen-based direct reduction. Scope: The MACOR feasibility study looks at large-scale integration of a combination of direct reduction using “green” hydrogen electric smelting ovens in an existing smelting works. The focus is on technical and economic aspects. Status: The project started in 2017. The funding phase runs until 2020. Facts and Figures: The Federal Ministry of Education and Research has provided €1.3 million. 213. NAMOSYN collaborative project Goal: Developing synthetic fuels for diesel and petrol engines. Scope: The NAMOSYN project addresses the large technical production of oxymethylene ethers (OME) as a synthetic fuel using renewable energies. Status: The project started in in April 2019. Facts and figures: The Federal Ministry of Education and Research has provided funding up to 2022 in the amount of €20.6 million. 214. ‘Energy Systems of the Future’ Goal/Scope/Status/Facts and figures: 120 representatives from German science academies Academies’ project develop systemic policy options for the area of basic research with a focus on the energy system of the future, and in doing so provide a scientifically sound basis for society-wide debates on issues that are of medium- to long-term relevance to a successful energy transition. In addition to questions about technological feasibility, the project also addresses economic and legal issues, as well as aspects regarding the efficient use of resources and public acceptance. 215. ‘Sustainable Power Grids’ research Goal/Scope: Joint initiative of the Federal Ministry for Economic Affairs and Energy and the Fed- initiative eral Ministry of Education and Research to create the necessary technological framework for the future transmission and distribution of electricity to create a reliable, affordable and environmentally friendly power supply system. Facts and Figures: Around 300 projects have received funding of €150 million since 2014. 216. Solar Construction/Energy-effi- Goal: Joint initiative of the Federal Ministry for Economic Affairs and Energy and the Federal cient Cities funding initiative Ministry of Education and Research concerning new technologies and strategies for better energy efficiency and the integration of renewables in order to move the energy transition forward in buildings and urban areas. Scope: Module I (Federal Ministry for Economic Affairs and Energy): Focus on demonstrating Concepts for retrofitting and new construction of residential buildings with more than one floor; eight collaborative projects started work in Module I in 2017. Module II (BMWi and BMBF): Comprehensive and systemic flagship projects at the urban quarter level in Esslingen, Heide (Holstein), Kaiserslautern, Oldenburg, Stuttgart/Überlingen and Zwickau. In Module II five of the six flagship projects selected were launched in 2017. The sixth project started early 2018. Facts and Figures: Module I: approx. €20 million. For Module II, BMBF and BMWi each pay one- half of the over €100 m being provided. 16 OVERVIEW OF MEASURES 243

Instrument State of implementation 217. Research Campus – Public The Federal Ministry of Education and Research funds cooperation between the scientific com- private Partnership for Innovation munity and business in energy research with the Mobility2Grid and Flexible Electrical Networks (Mobility2Grid and Flexible research campuses: Electrical Networks research zz Mobility2Grid research campus campuses) Goal: Integrating commercial and private e-vehicles in decentralised energy grids based on renewable energy resources. Scope: Creating a reference urban quarter in Berlin-Schöneberg with research and industry stakeholders for synergistic interworking of electric mobility, electric and heating supply networks. Status: Funding started in January 2016, with the first five-year main phase. Facts and Figures: The Federal Ministry of Education and Research is providing up to €10 million for the first main phase. zz Flexible Electrical Networks research campus: Goal: Research of innovative technologies for electrical networks using a high percentage of regenerative and decentralised energy sources. Scope: The research campus in Aachen is a joint effort between RWTH Aachen University and industry stakeholders. Transdisciplinary research is focused on the development and integration of direct current technologies. Status: Funding started in October 2014, with the first five-year main phase. Facts and Figures: The Federal Ministry of Education and Research is providing up to €10 million for the first main phase. 218. National Innovation Programme Goal: Accelerating the development of hydrogen and fuel cell technology to achieve the status for Hydrogen and Fuel Cell of a mature technology. Technology (NIP) Status: The goals of NIP1 (2006 to 2016) were reached. It was replaced by the government program NIP2 which runs until 2026. Facts and Figures: The scope of the programme that ran from 2006 to 2016 was approx. €1.4 billion, of that, €700 million from industry and €700 million from the budgets of BMVI and BMWi. 219. Hydrogen and Fuel Cell Technolo- Goal: Expansion of R&D funding from NIP1 to include measure for market activation of products gy Government Programme for the and applications that are based on hydrogen and fuel cell technology with the goal of achieving 2016–2026 funding period (NIP 2) marketability and market uptake. Scope: NIP2 is designed as a framework programme that is implemented with individual measures. Facts and Figures: From 2016 to 2026, grants from industry of €2.0 billion, that are to be supplemented with €1.4 billion in government funds. 220. Programme cooperation Pro- Goal/Scope: Joint initiative of energy research and industrial collective research launched by the gramme collaboration: Energy Federal Ministry for Economic Affairs and Energy to specifically strengthen the innovative capac- Transition Research Alliance at the ity of non-research-focussed SMEs in the development of energy solutions. German Federation of Industrial Status: The first projects started at the end of 2016. Research Associations (AiF) Facts and Figures: As of 2016, €18 million in funding will be available. 221. Renewable Resources funding Goal: Initiative of the Federal Ministry of Food and Agriculture for the promotion of research, programme development and demonstration projects in the use of renewable resources as materials and for energy purposes. Facts and Figures: Between 2016 and 2017, €25 million in funds were available. In addition, €24.6 million were provided from the ECF for bioenergy projects, and €23.05 million in 2017. 222. Biomass Energy Use funding Goal: Research and development work, with a practical orientation, on forward-looking technol- programme ogies and the optimisation of processes which enable the efficient, economic and sustainable use of bioenergy and help contribute to security of supply. Scope: Support granted in particular to solutions with a practical orientation that are promising for demonstration projects and pilot schemes and help flexibilise the generation of electricity and heat using biomass. In particular, the aim is to tap the potential of biomass by-products and waste to improve sustainable energy-related use in the (coupled) heating and electricity sectors. Status: This programme ended in 2018. The topic of biomass energy use is covered in the 7th Energy Research Programme as funding focus 3.7. Facts and Figures: Since 2009 there have been 388 individual projects, mostly collaborative projects, with funding amounting to around €67.3 million. €6 million were available in 2017. €9.1 million were available in 2018. 223. WIPANO – Knowledge and Goal: Promotion of public research, support for companies to help them patent and exploit their Technology Transfer via Patents ideas, and support for innovative projects. and Standards Scope: To promote patenting, some of the costs are covered for patent advice, consulting a patent attorney or for filing the patent. Status/Facts and Figures: The measure runs from January 2016 to December 2019 with a budget of €23 million. Businesses, high-education institutes, universities and non-university research centres are eligible to apply. 244 16 OVERVIEW OF MEASURES

Instrument State of implementation 224. Promotion of stationary fuel cell Goal: Support the introduction of fuel cell technology in the heating and electricity supply sys- heating as part of the Energy tems of residential buildings Efficiency Incentive Programme Scope: Funding is granted for the installation of fuel cell systems with a capacity of between 0.25 kWel and 5 kWel in residential buildings if the fuel cell is incorporated into the building’s heating and power supply system. Both new buildings and energy retrofits in existing buildings are eligible for support. Support is provided in the form of a grant and can be combined with funding under the CHP Act. Status: The funding programme for Energy Efficient Construction and Refurbishing – Subsidy for Fuel Cells (Programme No. 433) that was developed for introducing stationary fuel cell-based heating systems to the market has been available since July 2017 not only to private residential property owners but also companies (including contractors), municipalities, municipal enterprises and charitable organisations. This helps fund the installation of highly efficient fuel cell systems both in residential buildings and non-residential buildings. Funding is available until the end of 2019. Facts and Figures: A total of €150 million is available annually in the period 2016–2019 for investment support measures under the Energy Efficiency Incentive Programme (heating package, ventilation package and fuel cells). In 2017, the funding volume was €23.1 million for fuel cell heating. In 2018, the funding volume was increased to €52.6 million. 225. New Vehicle and System Goal: Improving the innovative potential and competitiveness of the German automotive industry Technologies funding programme Scope: Financial support for practical technology innovations in the two programme areas, Auto- mated Driving and Interconnected Driving and Innovative Vehicles, in particular regarding lightweight construction and modern drivetrains. Status: Various ongoing funding projects on reducing weight, waste heat recovery, improving the combustion concept and using electricity-based fuels. In December 2018 funding was extended for another four years. Facts and figures: Funding was raised by €60 million annually for both program pillars. 226. ‘Energy Transition in Transport Goal: Coupling of the electricity and transport sectors should be accelerated to significantly reduce funding initiative: Sector coupling greenhouse gas emissions. by using electricity-based fuels’ Scope: Alternative fuels are a particularly promising option for implementing the energy transition in the transport sector, especially when large amounts are transported for long distances, as is the case in air travel or maritime travel. In addition, the related coupling of infrastructure for energy and transport expands policy options. For this reason, innovate research approaches on sector coupling should be supported so that the necessary progress can be implemented quickly. This research initiative has 16 projects in total, all projects are collaborations between industry and research. They involve manufacture or use of innovative electricity-based fuels. A roadmap based on research findings is planned for 2022, that will provide recommendations for development, production and market introduction of sustainable fuels. Status: The Initiative started in February 2019. Facts and Figures: The Federal Ministry for Economic Affairs and Energy will fund the research initiative with about €87 million over the coming three years. 227. Maritime Research Programme Goal/Scope: The Maritime Research Programme of the Federal Ministry for Economic Affairs and Energy is the R&E programme for the maritime economy in marine engineering, manufacturing marine systems, shipping industry and marine technology. It addresses the entire technology spectrum relevant to innovation in the maritime sector. There are many ideas for innovation across businesses and sectors. In addition to strengthening innovation and competitiveness, research and development aim to achieve progress in the following four areas: environmentally- friendly technologies (MARITIME.green), digitisation and smart technologies (MARITIME.smart), safety (MARITIME.safe) and resources (MARITIME.value). Projects contributing significantly to the maritime energy transition will be the focus of funding. This requires effective funding instruments to force technology developments, planning security for businesses and a strategy spanning various industry sectors. Current challenges are the mobility transition, lowering air pollution and greenhouse gases, smart systems, process digitisation, new requirements for maritime security architecture and environmentally-friendly, sustainable use of maritime resources. The long-term goal is a zero-emission ship. Facts and Figures: The Federal Government is providing a total of €215 million in funding for maritime research between 2018 and 2021. 245

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List of abbreviations

AA Federal Foreign Office dena German Energy Agency AGEB Working Group on Energy Balances DIW German Institute of Economic Research AGEE-Stat Working Group on Renewable Energy DLR German Aerospace Centre Statistics DPMA German Patent and Trademark Office AiF German Federation of Industrial Research Associations EDL-G Energy Services Act Climate Action Programme Renewable energy APEE Energy Efficiency Incentive Programme EEA European Environment Agency AVF Automated and Connected Driving EED Energy Efficiency Directive EEG Renewable Energy Sources Act BAFA Federal Office for Economic Affairs and EEWärmeG Renewable Energies Heat Act Export Control EEX European Energy Exchange BBPlG Federal Requirements Planning Act ECF Energy and Climate Fund BDEW German Association of Energy and Water EnEG Energy Conservation Act Industries EnEV Energy Conservation Ordinance BET Büro für Energiewirtschaft und technische EnergieStG Energy Tax Act Planung GmbH (Office for the Energy Indus- EnLAG Power Grid Expansion Act try and Technical Planning GmbH) EnStatG Energy Statistics Act BETD Berlin Energy Transition Dialogue ENTSO-E European Network of Transmission System BImSchG Federal Immission Control Act Operators for Electricity BKartA Federal Cartel Office EPBD Energy Performance of Buildings Directive BLE Federal Office for Agriculture and Food ESB Energy Renovation Plan for Federal BMBF Federal Ministry of Education and Research Government property BMEL Federal Ministry of Food and Agriculture ESD Effort Sharing Decision BMU Federal Ministry for the Environment, Nature ESG Efficiency Strategy for Buildings Conservation and Nuclear Safety ESR Effort Sharing Regulation BMWi Federal Ministry for Economic Affairs and ETS Emissions Trading System Energy EU European Union BMZ Federal Ministry for Economic Cooperation EWI Institute of Energy Economics at the and Development University of Cologne BNetzA Federal Network Agency for Electricity, Gas, EZ Development work Telecommunications, Post and Rail bn. Billion Fh ISI Fraunhofer Institute for Systems and Innova- BSI Federal Office for Information Security tion Research BVWP Federal Transport Infrastructure Plan GDP Gross domestic product CDM Clean Development Mechanism GHG greenhouse gas CEC Commission of the European Communities GVFG Local Authority Transport Infrastructure CEER Council of European Energy Regulators Financing Act CNG Compressed natural gas GW Gigawatt CHP combined heat-power generation GWh Gigawatt hour Combined Heat and Power Act GWS Institute of Economic Structures Research

CH4 Methane

CO2 Carbon dioxide HZO Promotion of Heating Optimisation using

CO2 equivalent CO2-eq. Carbon dioxide equivalent High-efficiency Pumps and Hydraulic COP21 21st session of the Conference of the Parties Balancing to the United Nations Framework Convention on Climate Change ct cent LIST OF ABBREVIATIONS 251

IAEW Institute of Power Systems and Power REN21 Renewable Energy Policy Network for the 21st Economics, RWTH Aachen Century directive IEA International Energy Agency R&D Research and development IFAM Fraunhofer Institute for Manufacturing crafts, trades and services Technology and Advanced Materials ifeu Institute for Energy and Environmental SAIDI System Average Interruption Index Research, Heidelberg SINTEG Smart Energy Showcases– Digital Agenda for ICT Information and Communication Technology the Energy Transition IRENA International Renewable Energy Agency SME small and medium-sized enterprises iSFP Individual Renovation Roadmap heavy goods vehicle ITD Institute for Transportation Design StBA Federal Statistical Office StVO German Road Traffic Regulations JI Joint Implementation t Tonne KFK Commission to Review the Financing for the TCP Technology Collaboration Programme of the Phase-out of Nuclear Energy IEA KfW Reconstruction Loan Corporation, Germany’s tkm Tonne-kilometre state-owned development bank TSO Transmission System Operator km Kilometre TWh terawatt hour

KSB Climate Change Report UBA Federal Environment Agency 2050 Climate Action Plan UNFCCC UN Framework Convention on Climate multimodal transport Change administrative provision kW Kilowatt kWh Kilowatt hour WLTP World Harmonised Light Vehicle Test LEK Federal property roadmaps Procedure heavy goods vehicle WSB Coal Commission LNG Liquefied Natural Gas LULUCF LandUse, Land-use Change and Forestry ZSW Centre for Solar Energy and Hydrogen market incentive programme with-measures Research Baden-Württemberg scenario m Million MSR Market Stability Reserve MW Megawatt MWh Megawatt hour with-additional-measures scenario

NAPE National Action Plan on Energy Efficiency NEP Network development plan NEMoG Network Charges Modernisation Act NIP National Hydrogen and Fuel Cell Technology Innovation Programme National Climate Protection Programme NPE National Platform for Electric Mobility Nati onal Platform on the Future of Mobility national cycling plan public transport local public transport

P2X Power to X PJ Petajoule Pkm Passenger Kilometre Pkw passenger car PV Photovoltaic www.bmwi.de