See part 1 here.
Part 2 - revolution costs
Revolutionising an energy system does not come cheap, as Kemfert says, and this is piling on the political pressure even more. A doubling of renewable energy's share in the German production mix will demand investments of around €122bn in the next ten years, according to the German Federal Environment Ministry.
On top of this, the Federal Network Agency estimates that up to €25bn will be needed for grid expansions in the next 15 years, while €15bn will be required for new gas-fired power stations. At least a further €3.5bn in subsidies will be needed for the energy-efficient renovation of buildings.
Overall, estimates put the investment bill for Germany's energy revolution at €200bn ($290bn) over the next decade. And while there is no guarantee that these costs will not rise, DIW Berlin believes they can be met “with only a partial subsidy” from government. The bulk of the money would come from private firms and a “slight” increase in electricity prices.
Professor Dr. Claudia Kemfert, Head of the Department of Energy, Transportation and Environment at the German Institute for Economic Research (DIW Berlin) acknowledges that the debate over potential electricity price increases dominates public debate and is heating up in German. The country's renewables market has been driven by generous support subsidies, principally via the feed-in tariff (FIT) system, which guarantees minimum prices for electricity from renewables, with a levy (of 3.5%/kWh) added to consumer electricity bills to help pay the costs.
“The public debate is very much on electricity prices right now because of this feed-in tariff system,” she says. “There are studies showing this [levy] will increase by €0.05 /kWh.” There will be a debate whether this increase in price is the right indicator for changing the FIT system, she adds.
She also points out that the costs of expanding the grid, which will be essential, will also increase overall electricity prices, although this will be fairly limited. However, there are also as many price-lowering factors as well as price-raising ones in the move towards more renewables, she says. “The exploitation of renewable energies will bring down overall electricity prices, since, as a function of how they are calculated, FITs will decrease when the wholesale price of electricity increases.”
But including all elements of the energy plan, and including costs associated with coal carbon pricing: “In the end, electricity prices will rise slightly, in the range of 1.4 to 1.6 cents per kilowatthour,” DIW Berlin says.
Delays to the country's plans for offshore wind power, most notably in northwest Germany, have not helped ease pricing fears. “There was an over-estimation of the technical potential of offshore wind by the companies, an under-estimation of the risks by the companies, and obviously there was an under-estimation of the financial contribution by one grid company in northwest Germany with the result being there was a delay,” Kemfert explains.
“It's not clear who is responsible for this, who should pay the additional financial contribution.”
In the north-west seas off Germany's borders, much of the area is protected as a UNESCO world heritage zone. To meet all the environmental standards relating to this, off the east coast offshore developers have been forced to build projects further out to sea in German waters than originally planned.
“This costs a lot of money, and causes a lot of technical problems that obviously were under estimated,” Kemfert says. “This is an example case we have to learn from but the companies are still ready to invest. The question is about risk. Who's paying for the risk?”
Another key issue for Germany and its bid for 80% electricity supply from renewables is that it requires “vastly expanded electrical grids and more energy storage facilities”, Kemfert notes. Work on this is underway, with R&D activity on energy storage rampant across Germany. A programme to boost energy storage applications also demands “a rebuilding of infrastructure” to allow “smart” electricity distribution via smart grids.
Part 3 will be published shortly...
About: Gail Rajgor is Managing Editor of Renewable Energy Focus.