Germany's energy transformation: difficult beginnings. OSW Report, March 2013

Initiated in May 2011, several months after the Fukushima nuclear disaster, Germany’s energy transformation (Energiewende) has been presented as an irrevocable plan, and – due to the speed of change required – it represents a new quality in Germany’s energy strategy. Its main objectives include: nuclear energy being phased out by 2022, the development of renewable energy sources (OZE), the expansion of transmission networks, the construction of new conventional power plants and an improvement in energy efficiency.The cornerstone of the strategy is the development of renewable energy. Under Germany's amended renewable energy law, the proportion of renewable energy in electricity generation is supposed to increase steadily from the current level of around 20% to approximately 38% in 2020. In 2030, renewable energy is expected to account for 50% of electricity generation. This is expected to increase to 65% in 2040 and to as much as 80% in 2050. The impact of the Energiewende is not limited to the sphere of energy supplies. In the medium and long term, it will change not only to the way the German economy operates, but also the functioning of German society and the state. Facing difficulties with the expansion of transmission networks, the excessive cost of building wind farms, and problems with the stability of electricity supplies, especially during particularly cold winters, the federal government has so far tended to centralise power and limit the independence of the German federal states with regard to their respective energy policies, justifying this with the need for greater co-ordination. The Energiewende may also become the beginning of a "third industrial revolution", i.e. a transition to a green economy and a society based on sustainable development. This will require a new "social contract" that will redefine the relations between the state, society and the economy. Negotiating such a contract will be one of the greatest challenges for German policy in the coming years.

Consensus, contradiction, and conciliation of interests: the geo-economics of the Energy Union. EPC Policy Brief, 8 July 2015

European Union energy policy calls for nothing less than a profound transformation of the EU's energy system: by 2050 decarbonised electricity generation with 80-95% fewer greenhouse gas emissions, increased use of renewables, more energy efficiency, a functioning energy market and increased security of supply are to be achieved. Different EU policies (e.g., EU climate and energy package for 2020) are intended to create the political and regulatory framework for this transformation. The sectorial dynamics resulting from these EU policies already affect the systems of electricity generation, transportation and storage in Europe, and the more effective the implementation of new measures the more the structure of Europe's power system will change in the years to come. Recent initiatives such as the 2030 climate/energy package and the Energy Union are supposed to keep this dynamic up. Setting new EU targets, however, is not necessarily the same as meeting them. The impact of EU energy policy is likely to have considerable geo-economic implications for individual member states: with increasing market integration come new competitors; coal and gas power plants face new renewable challengers domestically and abroad; and diversification towards new suppliers will result in new trade routes, entry points and infrastructure. Where these implications are at odds with powerful national interests, any member state may point to Article 194, 2 of the Lisbon Treaty and argue that the EU's energy policy agenda interferes with its given right to determine the conditions for exploiting its energy resources, the choice between different energy sources and the general structure of its energy supply. The implementation of new policy initiatives therefore involves intense negotiations to conciliate contradicting interests, something that traditionally has been far from easy to achieve. In areas where this process runs into difficulties, the transfer of sovereignty to the European level is usually to be found amongst the suggested solutions. Pooling sovereignty on a new level, however, does not automatically result in a consensus, i.e., conciliate contradicting interests. Rather than focussing on the right level of decision making, European policy makers need to face the (inconvenient truth of) geo-economical frictions within the Union that make it difficult to come to an arrangement. The reminder of this text explains these latter, more structural and sector-related challenges for European energy policy in more detail, and develops some concrete steps towards a political and regulatory framework necessary to overcome them.

System Costs of Variable Renewable Energy in the European Union. Bruges European Economic Policy (BEEP) Briefings 37/2015

To shift to a low-carbon economy, the EU has been encouraging the deployment of variable renewable energy sources (VRE). However, VRE lack of competitiveness and their technical specificities have substantially raised the cost of the transition. Economic evaluations show that VRE life-cycle costs of electricity generation are still today higher than those of conventional thermal power plants. Member States have consequently adopted dedicated policies to support them. In addition, Ueckerdt et al. (2013) show that when integrated to the power system, VRE induce supplementary not-accounted-for costs. This paper first exposes the rationale of EU renewables goals, the EU targets and current deployment. It then explains why the LCOE metric is not appropriate to compute VRE costs by describing integration costs, their magnitude and their implications. Finally, it analyses the consequences for the power system and policy options. The paper shows that the EU has greatly underestimated VRE direct and indirect costs and that policymakers have failed to take into account the burden caused by renewable energy and the return of State support policies. Indeed, induced market distortions have been shattering the whole power system and have undermined competition in the Internal Energy Market. EU policymakers can nonetheless take full account of this negative trend and reverse it by relying on competition rules, setting-up a framework to collect robust EU-wide data, redesigning the architecture of the electricity system and relying on EU regulators.