20 Jul 2016
A new chapter in the energy transition
Three major steps taken: Renewable Energy Sources Act, Electricity Market Act, and
Digitisation of the Energy Transition all approved by both houses of the German
parliament. Find out more
A new chapter in the energy transition
Three major steps taken: Renewable Energy Sources Act, Electricity Market Act,
and Digitisation of the Energy Transition all approved by both houses of the
German parliament.
Screenshot: © Deutscher Bundestag
Germany has adopted major legislation which will open up a new chapter in the country’s energy
transition. Together, the three pieces of legislation mark a major step in Germany’s efforts to prepare
its energy system for the age of renewables. What exactly is to change under the new laws?
On Friday, 8 July 2016, the German Bundestag and the Bundesrat (the parliamentary chamber in
which the 16 German states are represented) both approved three major pieces of legislation on
energy.
▪ the 2017 revision of the Renewable Energy Sources Act,
▪ the Electricity Market Act, and
▪ the Act on the Digitisation of the Energy Transition.
Federal Minister Sigmar Gabriel said: “The decisions taken by the German Bundestag and the
Bundesrat today bring to a conclusion what we set out to do ever since the beginning of this
parliament. We have now put in place all of the essentials of the framework we need in order for the
next phase of the energy transition to be able to start.”
The three pieces of legislation that have been enacted will ensure that the transition of our energy
supply can proceed in a foreseeable and cost-efficient way that leads to long-term success. Policymakers have succeeded in bringing together the various strands of the energy transition and making
Germany’s energy system shipshape for the future. Renewable energy, the electricity market, energy
efficiency, the grids and digitisation used to be treated as separate elements, but have now been
turned into a consistent overall framework for the energy transition. Here’s a brief summary.
2017 version of the Renewable Energy Sources Act: Introducing market-based
auctions of renewables funding
The 2017 version of the Renewable Energy Sources Act is absolutely key to ensuring energy security
and affordable energy prices into the future. Its focus is firmly on expanding renewables capacity, but
in a cost-efficient and planned manner. The new Renewable Energy Sources Act marks the beginning
of a new stage of the energy transition – one that will be based on new rules: rather than being fixed
by the government, future rates of renewables funding will be determined by the market by means of
dedicated auction schemes. “The Renewable Energy Sources Act was about promoting technologies
that were at the time considered to be niche technologies”, Minister Gabriel explained right before
the vote in parliament. “Today, renewables are the mainstay of our electricity market.” The minister
went on to explain that the electricity market now needs to be equipped to be able to deal with
renewables, and that renewables need to be made fit for the market. As of now, they must face
competition on the market.
The auctions will ensure that the expansion of renewables can proceed in a manner that is costefficient, steady, and controlled. Furthermore, the legislation is to ensure that the high level of
market-player diversity that has characterised the energy transition will be upheld. The law gives the
first-ever definition of a “citizens’ energy company” and provides for these to participate in the
auctions on simplified terms. Auctions will be held for funding for onshore and offshore wind energy,
pv energy and biomass. Small-scale installations will be exempt, meaning that operators will continue
to receive funding based on fixed rates.
Ensuring that capacity expansion is in sync with the rate of grid expansion
The 2017 version of the Renewable Energy Sources Act will ensure that the pace at which renewables’
capacity is added corresponds better to the pace at which the grids are developed. The goal, after all,
is to generate clean electricity, but also to make sure that it reaches consumers. In recent years, the
grids have increasingly struggled to keep up with the speed at which Germany’s renewables capacity
has been developed. This is causing some trouble, as the following example shows: when grid
congestion prevents wind power from being taken from the north of Germany to the country’s south,
where most of our electricity is consumed, electricity consumers have to pay twice: the operator of
the wind farm will be paid damages for having to reduce their installations’ output, and a power
station in the south of Germany will be paid to generate more electricity locally.
The only way to sort out this problem is to slow down the pace at which wind power capacity is being
developed, so as to allow for the grids to catch up. When addressing the Bundestag right before the
vote, Minister Gabriel made this very clear. As of 2017, a new ordinance will designate areas in
Germany within which the pace at which wind power capacity is being developed will be limited to a
maximum of 58 per cent of the average capacity added over the last three years. It goes without
saying that this does not change the fact that both the Federation and the Länder (states) concerned
must do their utmost to speed up the development of the grids in Germany.
Electricity market 2.0: it’s all about flexibility
The new Electricity Market Act is also key to ensuring that we can continue to rely on a secure supply
of affordable electricity in Germany – even and especially when wind and solar power dominate the
market.
At present, renewables account for roughly a third of our electricity supply. This figure is to rise to 45
per cent by 2025. The more we rely on wind and solar power, which of course, depend on the
weather, the greater the fluctuations in the amounts fed into the grid. The Electricity Market Act
seeks to make the power market ready to cope with growing shares of renewables. It also encourages
competition between supply-side flexibility, demand-side flexibility and storage. The new legislation
introduces the most important reform of the electricity market since it was deregulated in the 1990s.
Our improved electricity market 2.0 will ensure that Germany can continue to rely on a cost-effective
and reliable supply of electricity, even when the share of wind and solar energy keeps rising.
Our future energy system will be designed around flexibility. It won’t be up to the demand side alone
to determine how much electricity will be available – the opposite will also be true.
Let’s take the following example: At present, it doesn’t matter when you put a load of washing on –
you will be charged the same amount for the electricity you use. Future electricity prices, however,
will vary depending on the amount of electricity that is available at the time you’re using it. This
means that it will be cheaper for consumers to use electricity when there is a lot of it in the grid. This
could be at night, for instance. In this case, the lower electricity price would work as an incentive to
consumers to do their laundry at night. Flexible tariffs will make it possible for end users to be
rewarded financially for using electricity when there is plenty of it.
Energy security at all times
The Electricity Market Act also seeks to ensure that electricity dealers do their bit to ensure energy
security. It provides incentives for them to try hard to keep the amount of power they buy and sell in
balance. This is important for grid stability. The way the grid works is that you can only take as much
power out as is being fed in at this time – and vice versa.
The Electricity Market Act also strengthens the European electricity market. After all, the energy
transition will only be successful if we adopt a European angle on it. This is why Germany is in close
dialogue with its neighbouring countries about how to best develop a Single European Electricity
Market.
On top of all this, we are also creating a new capacity reserve which is to provide back-up power at
times of extreme scarcity. The reserve is strictly separate from the ordinary electricity market and
works merely as a safety net for unforeseeable situations.
The less lignite we use, the better for the climate
The Electricity Market Act will also help us attain our climate targets. It stipulates that 13% of our
lignite capacity is to be put on reserve and later to be decommissioned for good. This will help us
reach our climate targets for the power sector up to 2020.
Digitisation: introducing the secure smart network – which is to be gradually
rolled out as of 2017
The third piece of legislation to be enacted is to take energy transition into the digital age. Smart
grids, smart meters and smart homes are innovative ingredients of a digital infrastructure that will
successfully create networks bringing together generators of electricity and large-scale consumers –
more than 1.5 million participants. The Act centres on the introduction of smart meters.
Starting with the largest consumers, working our way down to small-scale
consumers
Beginning in 2017, large-scale consumers and generators of electricity will be fitted with smart
metering systems. As of 2020, these systems will be rolled out to private households using more than
6,000 kWh of electricity per year. To put things in perspective: this is well above the average German
household’s annual consumption of 3,500 kWh.
Consumers will benefit from having their power consumption visualised and will find it easier to make
some changes in the way they use energy. Smart meters also eliminate the need for someone to come
round to read your meter. Furthermore, equipment whose power consumption can be controlled and
timed, such as night storage heating systems and electric vehicles, can be charged at times when
there is a great deal of electricity available. Flexible electricity tariffs are another option. This would
mean that, depending on the individual tariff, you could be charged different amounts for a kWh of
electricity, depending on when you use it.
Just like with regular electricity meters, the cost for having the device fitted and the operational cost
will be borne by consumers/operators of generation facilities. Having a smart meter fitted will,
however, only be binding in cases where the devices generate a return. Strict price caps apply, which
will prevent consumers from having to pay too much for their device. The exact limit that applies
depends on how much the meter is expected to generate in savings.
Strict data privacy rules will apply
The use of smart meters depends on more data being transferred. This is why strict safeguards apply
to ensure that consumer data is kept secure and private. We don’t want hackers to stand a chance.
This is why Germany has outlawed all systems that don’t comply with the strict rules that apply in
Germany – which are also the toughest in the whole of Europe.
The 2017 version of the Renewable Energy Sources Act will enter into force on 1 January, the
Electricity Market Act and the Act on the Digitisation of the Energy Transition will enter into force this
summer.
FURTHER INFORMATION
Information about key legislative projects on energy policy (PDF, in German only)
2017 revision of the Renewable Energy Sources Act (PDF, in German only)
Our website about the 2017 Renewable Energy Sources Act
Our ministry’s strategy for the energy transition
Our website about the future electricity market
Our website about future electricity grids
Our website about smart metering systems
Massive potential for solar power across the globe
At present, solar power accounts for 2 per cent of global power capacity. This
figure could rise to 13 per cent by 2030. This is not least thanks to the fact that –
as the International Renewable Energy Agency (IRENA) tells us – the cost of PV
generation will keep falling.
© Federal Ministry for Economic Affairs and Energy; data from International Renewable Energy Agency (IRENA)
By 2030, solar power might account for up to 13 per cent of the global electricity supply. This is an
estimate released by the International Renewable Energy Agency (IRENA). At present, photovoltaics
(PV) accounts for roughly 2 per cent of the global power supply.
PV capacity set to grow from 227 GW to up to 2,500 GW
IRENA is assuming that global PV capacity is to massively increase from today’s 227 Gigawatts (GW)
to between 1,760 and 2,500 GW in 2030. This is not least due to the fact that the cost of solar energy
is expected to continue to fall.
China, the US and Japan to fuel growth in global PV capacity
China, the US and Japan are expected to be the main growth markets for solar energy, says the
German Solar Industry Federation. At a global scale, market analysts are expecting a whopping 65 GW
of PV capacity to be added this year alone. The total capacity of all PV installations in Germany is
approx. 40 GW.
The Renewables 2016 Global Status Report, which was published a few weeks ago, shows that
renewables in general are picking up speed. This is true not only for pv installations, but also of other
technologies including onshore and offshore wind power. At a global level, a total of 147 GW of
additional renewables capacity was installed last year, which compares to approx. 135 GW in 2014.
For more information, please click here.
FURTHER INFORMATION
Press release by IRENA (International Renewable Energy Agency)
About the Renewables 2016 Global Status Report
G20 Meeting of Energy Ministers – Joining forces to
find good solutions
How can we successfully make the transition to an energy system that is clean
and sustainable? This question was the focus of the first G20 Meeting of Energy
Ministers after the Paris Agreement which took place in Beijing on 29 and 30 June.
© China’s G20 Presidency
At the Paris Conference in late 2015, 195 states agreed that climate neutrality is to be achieved in the
second half of this century. However, there is some controversy around how this pro-climate decision
is to be put into practice. It is a fact that the lion’s share of global greenhouse gas emissions results
from energy being generated and being used. Both the energy system’s demand and supply side will
therefore have to undergo some changes.
A few days ago at their meeting in Beijing, the Energy Ministers of the G20 (short for the Group of the
20 most important industrialised countries and emerging economies) discussed ways in which this
could be delivered.
20 countries account for almost 80 per cent of global energy consumption
Together, the G20 nations account for more than three quarters of global energy consumption and
global greenhouse gas emissions. This of course means that whether or not the targets agreed at the
Paris Conference can be achieved will very much depend on these countries’ energy policies. The
status quo varies widely across the 20 countries in question. On one end of the spectrum, there are
industrialised countries including the US, France and Germany, whose energy consumption is flat. On
the other, there are large emerging economies like China or India which are having to invest a great
deal of money to be able to meet their growing demand for energy. And then there are countries like
Saudi Arabia or Russia that generate a great deal of income from exporting fossil fuels.
Despite all these differences, the Beijing meeting showed that there is a near consensus that the overarching objective must be to make the transition towards a future carbon-free energy system and to
implement this in a way that makes sense in terms of economics and the environment. This is a major
challenge and won’t be easy for any state. Close cooperation within the G20 can help countries find
workable solutions. These solutions must then be put in place at national level. This is to ensure that
they are tailored to the particular needs of each country and brought in line with the priorities it has
chosen for its energy policy.
Joining forces for a clean future
The G20 countries have agreed that they want to work together more closely when it comes to
expanding renewables capacity. For instance, they want to consult with one another about efficient
funding schemes and on how to integrate renewables into the grids and the overall energy system.
Furthermore, all G20 countries share an interest in improving energy efficiency which will play a
crucial role in making a sustainable, low-carbon future a reality. Better energy efficiency also helps
companies be more competitive and helps consumers save money. Many countries have adopted
energy efficiency targets and launched programmes to achieve these. Germany’s National Action Plan
on Energy Efficiency is a very good example. International cooperation is also useful when it comes to
developing new efficient technologies and bringing them to market.
The G20 has made access to energy another of its focal areas. Under the Chinese presidency, the
G20’s activities in this field have been rolled out to the Asia-Pacific region where approx. 500 million
people are still lacking access to electricity and modern cooking and heating energy. Around half of
the people who don’t have access to energy live in the Asia-Pacific region. There are various ways in
which this can be addressed, ranging from financial support to establishing distributed energy
systems, to help with developing the grids, or to supporting innovative business models that seek to
develop the necessary infrastructure.
Investment in renewables and energy efficiency should come first
State Secretary Rainer Baake who represented Germany at the Energy Minister’s meeting was pleased
with the outcomes. He used the meeting to advocate investment in renewables and better energy
efficiency. Moreover, he made the implications that the Paris Agreement will have on investment in
the energy sector a priority for Germany’s G20 presidency in 2017.
Mr Baake pointed out that investment in modern technology is essential: “The G20 countries ought to
lead the way on establishing a new standard of investment. Given that investment cycles in the energy
sector are long, the goal must be to avoid any foreseeable mistakes in the investments made. We
must replace fossil fuels, that is oil, coal and gas, with investments in energy efficiency technologies
and in renewables.”
Next year, the meetings of the G20 will be held in Germany.
FURTHER INFORMATION
For additional information about the G20 Meeting of Energy Ministers, please refer to the website
of the Chinese presidency “G20 2016 China”
For more information about the Ministry’s European and international energy policy
What exactly is meant by “sector coupling”?
Apart from the power sector, heating, cooling and transport are other areas in
which fossil fuels are to be gradually replaced with renewables. Sector coupling
helps to make this possible. Read on to learn more about how this can work in
practice.
© BMWi
It’s about using electricity from renewables for heating, cooling and for driveline technology. The aim
is to eliminate the need for fossil fuels.
Last year, electricity from renewables accounted for more than 33 per cent of Germany’s energy
consumption. However, its share in the country’s gross final electricity consumption was no more
than 13.4 per cent (Q1/2016). So it’s about a third versus a little more than a tenth. Why is it that the
share of renewables in our electricity consumption is so much higher?
For the very simple reason that energy is more than just electricity. Energy that is used for heating or
transport also counts towards a country’s final energy consumption. Most households as well as the
transport sector continue to rely on fossil energy for heating, cooling and mobility.
If we want to bring the energy transition to a long-term success, we cannot stop at transforming the
power sector. We must also start using renewables for heating, cooling and transport. This can either
be achieved by using renewables directly – for instance by using solar thermal energy to heat a house.
Or by using electricity from renewables to bring the energy transition to other sectors. This transfer of
clean electricity into other sectors, where it is used to reduce the amount of fossil energy required, is
referred to as ‘sector coupling’. Let’s take a closer look at the power, heating, and transport sectors.
Power sector: growing shares of renewables, foreseeable developments, low-cost
Germany has made immense progress when it comes to generating electricity from renewables. In
2010, renewables accounted for 17 per cent of the country’s electricity consumption, the current
figure stands at more than 33 per cent. By 2025, the share of renewables is to rise to up to 45 per cent.
The Bundestag and the Bundesrat want to ensure that the further expansion of wind turbine and PV
capacity becomes more foreseeable and cost-effective. This is why, on 8 July 2016, they adopted a
new version of the Renewable Energy Sources Act (the 2017 version of the Act). The new legislation is
also to ensure better synchronisation between the expansion of renewables capacity and the
expansion of the grids. You can find out more about this here.
Heating sector: Replacing oil and gas-fired heating systems with electric systems
powered by renewables
Germany continues to be a country that mostly relies on fossil fuels like oil and gas for heating. We
want this to change. In future, heating will be another area where renewables have a stronger role to
play. The magic word here is power-to-heat.
Technologies that convert electricity into heat have massive potential that we can use to make the
energy transition a success. They can help us replace fossil fuels with electricity. The greater the share
of renewables in the electricity used for this, the more these technologies will help us combat climate
change and replace fossil fuels with better alternatives.
Let’s take heat pumps as an example. They use electricity to soak up warmth from the Earth and
concentrate it to the point that it can be used to operate the heating system. This is a highly efficient
technology. If the building has been retrofitted to be highly energy efficient, a good heat pump will be
able to generate several kWh worth of warmth from just one KWh of power.
And if you add inexpensive heat storage to the mix, the whole system becomes even more efficient.
This is a perfect way of converting power into heat.
Transport sector: electric mobility fuelled by renewables
The third area in which a great deal of energy is used in Germany is transport. Again, this is a sector
that lends itself to electrification. Most trains are already powered by electricity. Recently, the
government took action to encourage more drivers to switch over to electric vehicles. A purchase
premium for buyers of electric vehicles has been introduced and the charging infrastructure is being
expanded. There are trials going to see whether it makes sense to have overhead power lines for
trucks on German motorways.
Other non-fossil drives can also deliver green mobility but they require much more electricity. For
instance, it is possible for cars to be powered by hydrogen which can be produced by means of
electrolysis. This process of turning power into gas can be conducted using electricity from
renewables.
It is also becoming more common for heavy-duty vehicles to be powered by liquefied natural gas
(LNG). Just like biomethanol, LNG can be used to replace fossil fuels like crude oil. To learn more
about how this works, please click here.
FURTHER INFORMATION
Our website about renewable energy
Our website about power-to-gas
Our website about electric mobility
Quote of the week
© BSW
“Solar technology has become so cheap that there are an increasing number of places in the world
where it can offer a true alternative to conventional sources of power and heat – not only for
ecological reasons but also for economic ones.”
Carsten Körnig, Chief Executive Officer, German Solar Association (BSW-Solar)
German-Tunisian Energy Partnership: State
Secretary Baake meets with Tunisian Energy
Minister
State Secretary Rainer Baake met with Tunisian Energy Minister Mongi Marzoug
on 11 July. Mr Marzoug visited Berlin to attend the meeting of the steering
committee of the German-Tunisian Energy Partnership. By 2030, Tunisia wants to
raise the share of renewables in its energy supply to 30 per cent. State Secretary
Baake said: “I am delighted that we can use our energy partnership to support
Tunisia in this.” (Further information in German only)
Energy talks in Greece
Investing into Greece’s future and sending a strong signal to Europe’s renewables
sector – this is to be the result of closer cooperation on renewables, something
that Federal Minister for Economic Affairs Sigmar Gabriel discussed at his
meetings in Athens a few days ago.
Purchase grant for electric vehicles introduced on 2
July 2016
The funding guideline implementing the purchase grant for electric vehicles
entered into force on 2 July 2016, with retroactive effect as of 18 May 2016.
(Further information in German only)
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