IEEJ：November 2016 © IEEJ2016

Prof. Dr. Peter Hennicke

The German-Japanese Energy Transition Council:

How can international cooperation drive theEnergiewende?
Reflections on the role of energy efficiency
Speech at the German-Japanese Energy Dialogue
On the occasion of the delegation trip of the German Foreign OfficeNovember 14th, TokyoIEEJ：November 2016 © IEEJ2016

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The German-Japanese
Energy Transition Council (GJETC)

Organized by:

Financed by:

Supported by:

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Media Partner:

Prof. Dr. Peter Hennicke

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Structure of the Expert Council (GJETC)First meeting in Tokyo 28./29. September 2016
JAPANGERMANY

METIFinancing

CHAIR: Masakazu Toyoda

DBU + Mercator + Others

Management

CHAIR: Prof. Peter Hennicke
Organization/Consulting:
ECOS Consult
Scientific Secretariat:
Wuppertal Institute

Organization Office &Scientific Secretariat: IEEJ

Full Member Experts
Jun Arima

Yasumasa Fujii

Claudia Kemfert

Patrick Graichen

Toshiharu Ikaga

Koji Nomura

Felix C. Matthes

Miranda Schreurs

Junichi Ogasawara

Tomihiro Taniguchi

Stefan Thomas

Eicke Weber

Associated Members
Mami
Ito24.11.2016

HiroshiOkamoto

ShinichiSasayama

Uwe
LeprichProf. Dr. Peter Hennicke

ManfredRauschen

Franzjosef
Schafhausen
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The study Program of the GJETC- focus on strategic topics

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Enabling international knowledge exchange
and mutual learning

GJETC
Japan

• Reinforcing existing bilateral cooperation

GermanyGovernment/ multilevel• Research driven initiative

Government/ multilevel

Privatesector /Industry
Civil
Society/NGOs
Media/Print,Internet• 20 renowned scientists• Scientific secretariats (IEEJ, WI)• Independent knowledge generation anddissemination• Long term strategies (scenarios)• Consultancy on systemic problem solutions• Continuity of cooperation

Fostering the Energy Transition

Privatesector /Industry
Civil
Society/NGOs
Media/Print,
Internetto a low-carbon and risk minimizing energy system

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Common point of departure

Despite differences in policies on energy and its supply, Japan and Germany
are confronted with similar challenges of the energy transition:• Restructuring the energy systems in such a way that they are low-risk,
reliable, resource-efficient and decarbonized in the long term
• At the same time remaining internationally competitive and raising
security of supply on the basis of ecological modernization

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Reflections on the role of energy efficiency
and the German Energiewende

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Global pathway to zero emissions: Efficiency + Renewables
IEA Current Policy (CP) vs. Energy (r)evolution (E(R))

Source: DLR 201524.11.2016

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IEEJ：November 2016 © IEEJ2016“Efficiency first” (IEA): Reduce losses of global energy system…by the “energy efficiency revolution” and decentralized power

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Forecasted cost degression of new PV power- in North America, Australia, India and Mena region (in cts/kWh)Solar (PV) tender in Abu Dhabi (9/2016): 2.4 cts/kWh“Today, wind power costs only 3 cts/kWh” (Siemens)

Source: Agora, Current and Future Cost of PV, 2015.

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IEEJ：November 2016 © IEEJ2016“Revolutionary Targets” (Chancellor Merkel)
Energy Concept, Federal German Government, 28 September 2010; reduction-80%; Reduktion Wärmeverbrauch

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Research consensus: “Energiewende” is technically feasible
Decoupling GDP from quality of life

Source: Particular scenario studies and AG Energiebilanzen 2015.

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Feed-in law opens the markets for German green electricity…and for tremendous cost degression of wind and PV power
2015: Wind ca. 42 GW and PV ca. 40 GW; total share REN: 30% of electricity production

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Typical scenarios of future German electricity production
Many options, but uncertainty on electricity demand in 2050

Source: B. Lunz et al. 2016.
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Controversial topics of the Energiewende• Costs: How much, how long, for whom?
• Security of power supply vs. system integration of intermittent power?

• When phasing out coal, how much increase and incentives for REN?
• Focus on power: system transformation of heat and transport sector?
• Supply side biased; how to foster energy (resource) efficiency?
• Decentralized (“smart grids”) vs. centralized power (“coal”)?
• Citizens participation and democratization?
• Lifestyle changes: sustainable consumption and production?
• Political Leadership: Management and responsibilities?

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Projections of the differential costs of the “Energiewende”
All sectors; according to German “Lead Scenario 2011”

Source: BMU 2012.

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Additional investments in climate and resource protection-> a core strategy to raise the investment and innovation rate
International comparison of gross investment rates (1970-2006)

Source: C. Jäger, PIK, 2009.

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Ownership of installed renewable power capacitiesin Germany 2010

Source: Greenpeace International 2013.

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The split of E.ON: “A matter of survival”
FR 12.03.2015: “Tottering giants. Billions oflosses for RWE and E.ON”!

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Absolut decoupling of GDP from energy consumption
A success, but not sufficient<-Source: BMWi, Green Book Energy Efficiency 201624.11.2016

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IEEJ：November 2016 © IEEJ2016“Revolutionary Targets” (Chancellor Merkel)-> still a long way to go for energy efficiency!

<-00

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Regional efficiency initiatives: ProKlima Fund in HannoverUnique in the EU , but a transferable success story for each city globallyActivities:•Founded in 1998•

49 million € support for CHP, passivhouses, energy saving projects, solar andbiogas•

1€ fund incentive mobilizes 12€ private investment•

1000 jobs secured

Financing:•

Hannover and the involved municipalities

Ca. 5 million € per year out of 3 sources:• Ca. 40% from utility profits• Ca. 40% fee (0.2 cts/kWh on sales)• Ca. 20% by the other municipalities
Comparable project discussed in•

Wuppertal•

Düsseldorf

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The economics of “Negawatts” compared to “Megawatts”
140 TWh can be saved with a profit – when barriers are removed!
Example for Germany

Source: Wuppertal Institute 2006

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Levelised costs for electricity saving programsby sector in the US

Source: LBNL 2014

 Lowest costs: residential programs with 0.018 $/kWh (0.65 ฿/kWh) due to a large
share (44%) of low-cost lighting programs (0.007 $/kWh and 0.25 ฿/kWh),without lighting programs: 0.028 $/kWh (1 ฿/kWh) Higher costs for low-income programs: 0.070 $/kWh (2.52 ฿/kWh) Commercial and industrial (C&I) programs: 0.021 $/kWh (0.76 ฿/kWh)24.11.2016

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US: Cost of utility efficiency programs (average: 2.8 cents per kWh)A factor of 50-75% less than levelized cost of new power supply

The “MEGAwatts”  The “NEGAwatts”

The high-end range of coal includes 90 percent carbon capture and ompression. PV stands for photovoltaics. IGCC stands for
integrated gasification combined cycle, a technology that converts coal into a synthesis gas and produces steam.
Source: ACEE 2014. Energy efficiency portfolio data from Molina 2014; all other data from Lazard 2013.

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Why do “often neglected, but economic potentials” exist?
Barriers and market failures to be removed by “sticks,carrots and tambourines”
Typical barriers and market failures:•Efficiency is not “visible”, but “measurable” – embedded in appliances, building,cars ...

•No “fair level playing field” for energy services – dominating energy supplystructures•

Huge subsidies for fossil and nuclear power – need for internalisation of externalcosts•

Higher upfront cost – no life cycle cost calculation•

Huge variety of technologies and suppliers – no market transparency•

Many information deficits and low awareness of efficiency benefits and Cobenefits•

Investor-User-Dilemma (“split incentives”)•

Weak autonomous market incentive – small share of energy costs, low elasticity

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Paradigm shift to binding targets
The EU Energy Efficiency Directive (EED 12/2012)

Within the framework of the EU 20-20-20 targets:• Reduction of 20% primary energy not on track  main reason for EED
Key points of the Energy Efficiency Directive (EED):• Binding national targets (Art. 7): 1,5% proven conservation of energy peryaer (exemptions: can be reduced to 1.25%)• Energy savings fund can be installed• Energy saving obligations of the power industry (sytem operator or energyprovider) or• Alternatives are possible, e.g. existing and new promotion of policies &measures• ENVI, ITRE and EuP demand a 40% binding reduction target fir 2030!

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German „National Action Plan of Energy Efficiency“- only a selection of about 100 P&M für EE

Source: BMWi, NAPE 201424.11.2016

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National Agency for Energy Efficiency + Savings Fund
A proposal for a new “poli-centric governance” ofenergy efficiency policies

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Energy Services: Fair “level playing field” by EERS
(EERS = Energy Efficiency Resource Standards)

EERS is• A saving target for utilities(electricity and/or natural gas, oil)
• Target needs to be achieved
through customer energy
efficiency programs• Adopted through legislation orregulation
EERS is also called Energy Saving
Obligation or White Certificate
Schemes

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Why should utilities engage in efficieny?

Reduced needsfor additionalpower
plants/avoided
difficulties withpopulation
acceptanceUtilities are well suited for
implementing energy
efficiency programs due to:••••••

Existing customer relations
Availability of energy data
Infrastructure & expertise inEE
Integrated resource
planning
New business fields(Energy services)

Avoided or
postponed
T&D network
upgrades dueto peak load
reductions

Benefitsforutilities

Developmentof newmarkets in thefield of energy
services

Cost recovery mechanism
is crucial (“Profits fromNEGAWAtts”)
Strengthened
costumer
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Prof. Dr. Peter Hennicke

Improved
reputation

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ERRS: International diffusion

EERS is a well-established policy instrument – particulary in the USA (experience over 30 years). The number of countries with EERS schemes is growing.

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Utility-delivered energy efficiency activities
Advice and assistance
Information, education and promotion
Financial incentives
Direct installation
Comprehensive implementation

Equipment replacement
On‐bill financing
Technology development

Bulk procurement and distribution
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Conclusions•After COP 22: all countries need a new governance structure for “speeding up,scaling up and tightening up” the energy system transition.

•International Cooperation is key: Demonstrating a successful energy transition in
Japan and Germany could be global game changer.

•

Identify and maximize the co-benefits of the energy transition: Ecologicalmodernization, long-term competitiveness, supply security, risk minimization….

•Foster the “efficiency revolution” by ambitious energy efficiency policies to makeclimate and resource protection an economic success•Create a new type of “green technological progress” - implement a “greatsocietal transformation” to raise quality of life••

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Avoid path dependencies and lock-in effects
Exchange and disseminate good practices globally

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IEEJ：November 2016 © IEEJ2016

Prof. Dr. Peter Hennicke

Thank you for your attention!
New publication: The Energiewende
Available under: www.wupperinst.org/info/details/wi/a/ad/3319/

Contact :report@tky.ieej.or.jp