A model for decarbonisation

TRANSITION: Germany's move away from carbon is called Energlewende
BERGHEIM, GERMANY - FEBRUARY 16: Electricity pylons and wind turbines stand beside the RWE Niederaussem coal-fired power plant while Steam rises from cooling towers on February 16, 2016 near Bergheim, Germany. Germany is maintaining ambitious goals for transitioning itself away from its traditional power sources such as coal and nuclear towards renewables, such as wind and solar. In 2015 Germany produced approximately 30% of its electricity from renewables, by 2025 it hopes to attain 40-45% and by 2035 55-60%. (Photo by Volker Hartmann/Getty Images)

Germany is in the process of transitioning away from nuclear and fossil fuels towards a low carbon, environmentally sound, reliable and affordable energy policy.

This turnaround in German energy policy, the so-called “Energiewende”, has huge implications for the economy, the energy industry, and energy customers.

Renewable production by a large number of decentralised small units is increasingly replacing the previous framework whereby production stemmed primarily from fewer, larger central power plants.

Rather than production following demand, as in the traditional energy system, demand now has to be managed according to fluctuating production from renewables.

Unfortunately, the German power grid was neither designed nor constructed to meet that requirement. Whilst a large share of wind energy is produced in the northern areas of Germany, significant industrial demand is located in the south of the country.

Exacerbating this is the fact that Germany is targeting the complete shut-down of nuclear power plants by 2022.

In short, it is a picture quite familiar to those engaged in the decarbonisation of the UK electricity system.

Intelligent and efficient use of the existing networks will contribute to the integration of renewables.

However, this will only take industry part of the way – a considerable expansion of the grid will also be required.

Congestion of the network further delays any proposed switch towards renewable energies and adversely impacts Germany’s prospects of meeting its climate-change objectives.

However, the cost is not merely an environmental one – it is also economic: in 2017, the cost of managing network congestion was €1.4 billion.

According to the German Regulatory Authority, this could rise to €4bn in 2020.

However necessary, the progress of grid expansion in the last few years can, at best, be described as somewhat sluggish.

Several laws aimed at accelerating grid development have been amended or enacted.

The results, however, are not encouraging. Out of the 7,700 kilometers of new or enhanced lines which are required, only 1,750 have been authorised and only 950 have been constructed to date.

The Federal Minister for Economic Affairs has declared rectifying this lack of progress a top priority.

This reinvigorated push to support Energiewende is underpinned by the mounting costs of the new energy policy and increasing pressure to render positive results.

Therefore, in October 2018, the minister tabled a “Draft Law on the Acceleration of Network Expansion” (the “Draft Law”).

It amends existing laws, most prominently the Energy Industry Act (“Energiewirtschaftsgesetz”) and the Act on the Acceleration of Network Development (“Netzausbaubeschleunigungsgesetz”).

The Draft Law focuses on lean and efficient planning and authorisation procedures. For numerous projects, federal planning procedures are to be waived – including for the expansion and replacement of existing networks.

It is hoped that the abolition of time-consuming procedural steps, such as the participation by the public and the authorities, will accelerate the planning process.

Further streamlining will be implemented through the use of notifications rather than planning procedures for minor modifications, such as the replacements of cables.

In these cases, the requirement to conduct environmental impact assessments will be waived.

In addition, to facilitate complex projects, construction may be started before final approval has been granted.

At later stages, advance planning will be supported by allowing for the inclusion of empty conduits in the original planning procedure in order to meet future demand. Finally, penalty payments may be imposed on network operators who delay authorisation procedures. Those penalties could amount to €10 million in each case.

Will the Draft Law deliver on its promises? Certainly, the proposed measures are likely to help accelerate aspects of the relevant planning and authorisation procedures. However, expectations on the positive impact of the proposed measures should not be set too highly.

The complex and time-consuming structure of the overall planning and authorisation procedures largely remains in place.

On this, however, we cannot point the finger solely at the German government. European requirements relevant to the planning process, such as those regarding the protection of man and the environment, must also be respected.

Come 2022, it should be possible to evaluate the accelerative effect of the Draft Law. In the meantime, we must wait and see how Energiewende unfolds.