Germany's Energiewende Requires New Electric Infrastructure

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Post date: October 10, 2014
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Energiewende. This German word has been getting lots of attention in recent years. It translates to “Energy Transition,” and represents the country’s commitment to dramatically ramping up renewable energy and energy efficiency while phasing out nuclear power over the next few decades. The target is 80% electricity production from renewables by 2050. Being the world’s fourth largest economy, the rest of the world has taken notice - other nations are watching the German experiment closely as they also contemplate how to decarbonize their energy sectors.

I recently traveled to Germany as part of a transatlantic delegationan opportunity sponsored by the German Federal Government and managed by the German American Chambers of Commerce. I experienced the Germany energy sector from many different angles - including suit-and-tie meetings with federal regulators and utility executives, visits with rural renewable energy communities surrounded by goat pastures, and late night conversations with young wind developers over dünkel beer and sausage platters (prost!).

Germany has moved very fast on renewables, increasing production more than six-fold in the last 15 years. Renewable energy contributed roughly 30% of the country’s total electricity supply during the first three quarters of 2014 (see Figure 1). This trajectory will continue, as Germany’s law aims for 50% renewables by 2030 and 80% by 2050. The key policy mechanism driving this is called a feed-in tariff, which is nicely described by one of my fellow delegates in this recent blog

                                                                   

Figure 1: Germany electricity production by fuel source, first nine months of 2014. Source: Fraunhofer Institute

 

A need for new infrastructure

Significant new investment in Germany’s energy infrastructure is required to enable their energy transition. In contrast to large, centralized power plants, renewable energy is distributed across the country, and requires new electric transmission lines to transport the energy to where people consume it.

Without sufficient interconnections, too much wind and solar can quickly outpace energy demand, sometimes causing negative power prices and requiring intervention by grid operators. For example 50 Hertz, the grid operator for Northeast Germany, needed to curtail renewable generation on 77 days in 2012.

Recognizing this issue, the German federal government passed the Power Grid Expansion Act of 2009 (EnLAG) and the Grid Expansion Acceleration Act in 2011 (NABEG). These two laws established a nationally-coordinated grid planning process, overseen by the Federal Network Agency (the Bundesnetzagentur). The national plan calls for $25 billion in transmission investment over the next ten years, and includes 24 projects identified in the national interest and subject to expedited permitting (see map). There is no doubting this is a large investment, but the impact on individual electricity bills are modest if costs are spread evenly.

National transmission planning is a new responsibility for the Federal Network Agency, who is currently in the process of hiring 200 additional staff to handle the work load. Historically, transmission expansion was largely conducted at a state-by-state level. Balancing differing local interests with national projects has proven to be a challenge, and many projects are experiencing delays. 

 

What about the rest of Europe?

One strategy to deal with challenges posed by the Energiwende is to expand interconnections to other European countries with spare generating capacity, including hydropower-rich Scandinavia. Additional integration of Europe’s electricity market is complicated by inconsistent market structures and differing policies on renewables. For example, some European countries are moving towards implementing markets to provide capacity and flexibility revenues to generators, in addition to energy. 

Under the guidance of the European Union, the European Network of Transmission System Operators (ENTSO-E) has started EU-wide transmission planning. They have recently identified a number of transmission and storage projects that are of “pan-European significance.” The transmission plan includes $190 billion of investment needs by 2030.  Looking at these projects on the map to the right shows how central Germany will be for future development of the EU electricity market. 

The infrastructure needs posed by renewable energy development in Germany and Europe are large. Similar to our experiences in the United States, developing transmission is a difficult, long process, complicated by differing jurisdictional layers and market structures across states and regions. 

Nevertheless, new transmission is a necessary enabler for meeting our renewable energy goals. 

 

References:

ENTSO-E 10 Year Network Development Plan 2014

EnLAG Federal Requirements Plan Monitoring Report