The German Renewable Energy Act- Success and ongoing Challenges -Dr. Manfred Fischedick
Director “Future Energy and Transport Structures”
Wuppertal Institute
ICORE 2004 Conference for Renewable Energies
Bangalore (India)
January 2004

The Wuppertal InstituteMission: “Sustainability Research” - exploring interdependencies between
ecology, economy and society, and innovations to decouple resource usefrom wealth.

Profile: Practice and solution oriented research; policy advice on theregional, national and international level; issues: energy, transportation,climate protection, resource flows and sustainable production/consumption

Organisation: “Non-Profit” Organisation owned by the State and memberof the Science Centre of North Rhine-Westphalia

Staff: 140 members (80 full time) from all disciplines working in 80 projects/a
Budget: 3,4 mil. Euro from the state of North Rhine-Westphalia; about 4 mil.
Euro from different sources (International; EU, Ministries, Private Sector)

WI-Research Agenda
Research Groups – Focus Projects – Cross Cutting Projects
1. Future Energy and Transport
Structure

2. Energy-, Transport- and Climate
Policy New Energy Carriers and Fuels
 Energy- and Transport Saving SpatialPatterns

 Institutions and Actors in Multi-Level
Governance Diffusion of Good Practice

Cross Cutting Projects
 Integrated Sustainability
Scenarios Sustainable Globalisation
 Eco-Sufficiency and Quality ofLife
3. Material Flows and4. Sustainable Production and Resource...
Management

 Increasing Resource Productivity without
Problem Shifting Integrated Assessment of Land Use andResource FlowsJanuary 2004

Consumption

 Resource Productivity and Employment
 Accountability along Product Chains

The German Renewable Energy Act - Successes and ongoing Challenges

Overview•

Introduction•General incentives for energy supply based on renewableenergies•

Meaning of renewable energies for the German energysystem and for fulfilling ecological targets•

Policy targets for renewable energies•The Renewable Energy Act as main pillar for extension
electricity generation based on renewable energies- Successful story in the past- Perspectives- Ongoing challenges

January 2004

The German Renewable Energy Act - Successes and ongoing Challenges

General incentives for energy supply based on renewableenergies - why renewable energies should be used?
•National energy resource ( independent from import risks,
contribution to a higher security of supply)•Protection of limited fossil energy reserves•Reduction of economic risks ( high price volatility of fossil
energy carrier)•Contribution to environmental/climate requirements•

Innovation potential - technology developments ( increasing export options, employment effects)•Low risk potential ( low accident potential, resistant toterrorist attacks and sabotage)•

International acceptability ( resistant to policy crises)

January 2004

The German Renewable Energy Act - Successes and ongoing Challenges

European Union : Import dependency
100%
90%

Oil

80%
70%
60%
50%

Total

40%
30%
20%
10%
0%

Solid fuels
Natural gas
1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020

* Baseline for Shared Analysis from 2000 onwards

January 2004

The German Renewable Energy Act - Successes and ongoing Challenges

Crude oil and natural gas resources worldwidein percent
Natural gas resource
Crude oil resource

Countries of theformerSowjetunionJanuary 2004

The German Renewable Energy Act - Successes and ongoing Challenges

Targets for a sustainable energy future
Climate protection goals•Kyoto-Protocol:- 21% GHG (2008-2012)•Agreement of government coalition:- 40% (2020)
if EU decides to decrease GHG emissions by 30%•Recommendation of Enquête Commission of the German
Parliament- 80% (2050)
comparable recommendations by: WBGU, SRU, IPCC
(Governmental Advisory Boards)

January 2004

The German Renewable Energy Act - Successes and ongoing Challenges

A gap between Business as Usual and sustainability goals

1200,0Emission in Mio. t
CO2CO2-Äquivalenz
Klimaschutzziele

1000,0800,0SVE 2005
600,0

Kyoto-Ziel
400,0

Koalitionsvereinbarung 2002

200,0

Enquete/IPCC
0,01990

January 2004

2000

2010

2020

2030

The German Renewable Energy Act - Successes and ongoing Challenges

2050

Strategy options for climate protectionawarenessenergy
consumption

renewableenergy

January 2004

The German Renewable Energy Act - Successes and ongoing Challenges

rational useof energy

substitution
coal to gas

Renewable Energies in Germany - Status Quo• comparable low supply share
RE - heat:RE - electricity:
RE - fuels:

3,9 %
7,8 %
0,8 %

• dynamic increase rates• technological progress

Primary energy 390 PJ in2001• high technical potential

Wasserkraft
21,6%

Biomasse fest
54,4%

Solarthermie
1,5%• but: still higher costs thanconventional options
 RE-extension is not going by itsown, policy support is necessary
January 2004

Windenergie
9,6%Photovoltaik
0,1%Geothermie
0,9%Biomasse flüssig
4,3%

The German Renewable Energy Act - Successes and ongoing Challenges

Biogas2,3%Deponiegas
3,6%
Klärgas1,7%Electricity production costs (Euro/kWh)

Comparison of electricity costs of new power plants
fossil mix: 50% coal, 50% natural gas
0,10

0,08

0,06

0,04

0,02

0,00
2000

REG
fossiler
Mixzusätzl.
CO2-Rückhalt.
mix Mixofmix
of fossil
additional
CO2-Sequest.
Basis Kostenbandbreite
15 EUR/tCO2 CO2Kostenbandbreite
renewables
fuels (cost range)
15 EUR/t(cost range)

2010

2020

2030

2040

2050
oeko/kost-kw.pre; 15.09.03

January 2004

The German Renewable Energy Act - Successes and ongoing Challenges

Policy Framework I:
Setting Extension Targets for the future• doubling supply share until 2010
compared to 2000 status, following- EU White book
- EU Directive Renewable Energies
RE-Electricity > 12,5% in 2010
RE-Primary Energy > 4.2% in 2010
• Amendment Renewable Energy Act
RE-Electricity > 20% in 2020
RE-Primary Energy > 10% in 2020
•Long Term Goal Ministry for Environment
RE-Primary Energy > 50% in 2050

January 2004

The German Renewable Energy Act - Successes and ongoing Challenges

Necessary capacity extension for renewable electricity
generation for fulfilling long term policy targets
7068

60

58Europ.
REGEurop. REG
Verbund
Network
Wasser,Hydro/Geothermie
Geothermal

Installed capacity (MW)Photovoltaic
Fotovoltaik
Wind-OffWind
Offshoreshore
WindWind-OnOnshore
shore
Biomass/+ BZ
BHKW(Biomasse)
Fuelcells

4950
40
3130
2120
13100

January 2004

bmu/oeko/kw-50neu; 3.10.03

2005

2010

2015

20202025

The German Renewable Energy Act - Successes and ongoing Challenges

2030Perspectives:Two Indispensable Pillars for Sustainability
Only the combination of Energy Efficiency and Forced Market Introduction ofRenewable Energies can lead to a carbon free energy system
10.000Status Quo
Status
Quo

8.000

6.000

4.000

Referencecase(Enquete)
Referenz(Enquete)

Efficiency
Effizienz

REG REN-"NACHHALTIGKEIT"“Sustainability”
REG
REN"MAXIMAL"“Maximal”

Nachhaltigkeit
Sustainability

2.000

0/vision2.pre; 7.2.02

January 2004

1999

2010

2020

2030

2040

2050

2060

The German Renewable Energy Act - Successes and ongoing Challenges

2070

2080

2090

2100

Policy Framework II:
Policy Supporting Scheme for Renewable Energies
Policy supporting scheme started in the early 1990’s- Feed in Law in 1991
- Grants for Wind energy (250 MW Program)- information program- etc
Renewable Energy Act Came into Force in April 2001
 Resulting in a significant
market increase
For example:
Development of wind energy inGermany since the beginning of
the 90s (VDEW- and IWRstatistics) following the policy
supporting scheme

3500

neue installierte Leistung in MW/agesamte installierte Leistung in MW

14000

3000

12000

250010000

2000

8000

1500

6000

1000

4000

500

2000

00
1990

Quelle: iwr 2002

January 2004

1991

1992

1993

1994

1995

1996

jährlich inst. Leistung

The German Renewable Energy Act - Successes and ongoing Challenges

1997

1998

1999

gesamte inst. Leistung

2000

2001

2002

The German Renewable Energy Act
General Principles and Advantages
 Fix remuneration for electricity feed in, e.g. per kWh (depending from plant size)- 54 to 57.4 cent for solar electricity (photovoltaic)- 5.5 to 8.7 cent for electricity from wind energy- 8.95 to 15 cent for geothermal electricity- 6.65 to 7.67 cent for hydro power- 8.4 to 11.5 cent for electricity based on biomass
gives incentives following the specific market conditions for each technology
 Simple and transparent structure Incentives for a continuous cost reduction (yearly cost degression factor for
remuneration of new plants)
 High security for investors (long term remuneration guarantee) compared to quotasystems
 No dependence from public budgets
 Financed by Energy Utilities according to their electricity sale to electricity users
Implementation of a nation wide compensation scheme - indirectly financed byelectricity users First step for an internalisation of external costs
 Evaluation of principles and remuneration scheme every two years
January 2004

The German Renewable Energy Act - Successes and ongoing Challenges

Legal Interrelationshipsof German Renewable Energy Sources Act („EEG“)Transmission System Operator
net-use contract

Power feeder

feed-in contract

EEG cost-sharing(pass on allocation)

EEG cost-sharing(push down allocation)

DSO*

Supplier

net-usecontract

supplycontract

Customer
Source: Mahn, U. (BWK 1/2-2001, 36); own presentation* Distribution System Operator
January 2004

The German Renewable Energy Act - Successes and ongoing Challenges

Implication of the German Renewable Energy Act I
Incentives for Technology development of wind energy
5 MW160m
140

ø 115 m2,5 MW
3 MW

120

1,5 MW

ø 100 mø 80 mø 65 m100500 kW

8060ø 40 m100 kWø 34 m

250 kWø 25 m40
20
Growian

Hütter
W3401957

1982
m/s

January 2004

1990
(10 m)
GWh/a

1993

1998

2000

?

5 7
0.9 1.557
2.7 4.575
4.5 7.557
9.0 15.0

The German Renewable Energy Act - Successes and ongoing Challenges

Implication of the German Renewable Energy Act IICost reduction of wind energy following market success
4000
specific investment cost in Euro/kW
3500

3000

2500

2000

1500

1000

500

January 2004

The German Renewable Energy Act - Successes and ongoing Challenges

01
2000
2099
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
1988
1987
1986
1985
1984
1983
1919820Implication of the German Renewable Energy Act III
Market success, employment and ecological effects
 Significant increase of electricity generation based on renewable energies (4.6% in 1998 - 24.8 TWh and6.3% in 2000 - 36.3 TWh up to more than 8% in 2002 - 45.6 TWh = +83% compared to 1998 ) Market volume by more than 8.1 billion Euro per year Creation of more than 80.000 jobs (now: 130.000 people are working in the field of
renewable energies, more than in the nuclear industry and mining) - creation of a successful
manufacturer structure Reduction of CO2-emissions by more than 30 Million tons per year through additional
electricity contribution (e. g. 3.6% of overall annual emissions)January 2004

The German Renewable Energy Act - Successes and ongoing Challenges

Implication of the German Renewable Energy Act IV
Development of overall remuneration
 Increasing remuneration since implementation of the renewable energy act

 Compared to the market price of electricity the difference cost result to 1.35 Billion Euro in2002 (e. g. 0.29 cent per kWh - ca. 2.2% of tariff for private customers resp.1 Euro perhousehold a month) Until 2008 and the annual remuneration might increase to 4.8 billion Euro and the specificcosts to more than 0.6 cent per kWhexemptions for industrial customers with high electricity demand might be necessary toguarantee competitivenessJanuary 2004

The German Renewable Energy Act - Successes and ongoing Challenges

Implication of the German Renewable Energy Act V
Market success compared to other countries
installed capacity
MW

Germany
Spain
Denmark
Netherlands
Italy
UK
SwedenGreeceIreland
Portugal
Austria
FranceFinlandTurkeyLuxembourg
NorwayBelgium
Czech Republic
RussiaPolandSwitzerland
LatviaRomaniaSum

January 2004

1995
1.132
133
637
249
33
200
69
28
79

36










2.506

1996
1.545
249
857
299
71
270
105
29
1120
3
1080
2477
5
12
1
0
3.5061997
2.080
512
1.116
325
100
320
117
2951
38
20
10120
247
7
532
10
4.761

1998
2.874
834
1.450
363
180
334
150
3963
60
30
19
1795987533116.464

1999
4.443
1.225
1.761
411
283
353
215
82
73
60
42
22
38
9
10
13
9
12
5
5
3
1
19.076

The German Renewable Energy Act - Successes and ongoing Challenges

2000
6.113
2.538
2.364
449
427
406
241
226
129
99
79
62
38
19
15
13
13
12
5531113.258

2001
8.754
3.337
2.534
483
697
474
290
299
153
12595116391915173112528
31117.528

2002
12.001
4.830
2.880
686
785
552
328
276
137
194
139
148
41
1916974412728
31123.225

Implication of the German Renewable Energy Act VI
Germany is on a good way to fulfill 2010 doubling target
25,0%
share of electricity based on renewable energies

20,0%

15,0%

EU 15 1997
EU 15 20012010 (target)
Germany 1997
Germany 2002

10,0%

2010 (target)

5,0%0,0%
1997

2001
EU 15

January 20042010 (target)

1997

2002
Germany

The German Renewable Energy Act - Successes and ongoing Challenges

2010 (target)

Implication of the German Renewable Energy Act VII•

Transfer of principles of The Renewable Energy Act as
success factor in other countries, like
 Spain France
 Greece Austria
 Japan Brazil, Argentina, Taiwan (in the process ofestablishing) etc.

January 2004

The German Renewable Energy Act - Successes and ongoing Challenges

Perspectives for wind energy in the near future ongoing challenges for policy measures
3500

3000

2500

2000

18000

In spite of the Renewable Energy Act
annual extension rates could partly decrease:- more and more exhausted potential- Increasing resistance by neighbors(r. g. negative influence on landscape)Markets for young wind mill industry
could decrease in the next years

16000

14000

RepoweringOffshore?

12000

10000

8000

1500

6000
1000
4000
500
2000

00
1990

1991

1992

1993

1994

1995

1996

1997

1998

annual installed powerJanuary 2004

1999

2000

2001

2002

2003

cumulated installed power

The German Renewable Energy Act - Successes and ongoing Challenges

2004

2005

2006

The German Renewable Energy Act
Amendment Requirements
 Integration of bigger hydropower plants (> 5 MWel) Increase of remuneration for small biomass power plants to strengthentechnology development activities in this area
 Modification of the incentives for wind mills as response to increasing opposition
against wind energy- General reduction of specific remuneration for wind mills following the costdegression which could be achieved in the last years- Exclusion of places with comparable low wind velocity (in average) from
remuneration scheme- Additional incentives for repowering through extension of period with higher
remuneration rate
- Higher remuneration rates for offshore wind projects
 Implementation of an additional bonus system for the employment of innovativetechnologies (e. g. biomass gasification) or cogeneration
 Limitation of charge to 0.05 cent/kWh for industrial customers with specificelectricity costs which are higher than 15% of the annual value added
January 2004

The German Renewable Energy Act - Successes and ongoing Challenges

Conclusions•

Renewable Energies are a growing market in Germany•

The Renewable Energy Act is the most important successfactor, but- following the market dynamic it must be proofed
continuously to guarantee the right incentives- embedded in further policy support measures, in Germany
like information programs
 R&D programs
 Specific grants for projects outside electricity sector
 tax exemptions for bio fuels

January 2004

The German Renewable Energy Act - Successes and ongoing Challenges

Thank you for your attention!