Forerunners or scaremongers? Germany to abandon nuclear power. OSW Commentary No. 58, 2011-07-21

The German government’s final decision to abandon nuclear power as of 2022 has been expected for months. However, instead of calming the waters, providing solutions and answering the question ‘What next?’, it has only fanned the flames. Even the adoption of legal amendments enforcing the government’s decision by the German parliament (both the Bundestag and the Bundesrat) in late June and early July has not calmed the situation. It is more than apparent that these decisions have been made under emotional pressure: there was not enough time for accurate calculations to be made and consideration to be given to the consequences of Germany abandoning nuclear power. Chancellor Angela Merkel has so far been unable to fully convince the public that the ‘energy shift is a huge opportunity’ and that this process will be carried out on condition that ‘the supplies remain secure, the climate protected and the whole process economically efficient’1. German economic associations have warned against a politically motivated, ill-judged and irreversible abandonment of nuclear energy. They are anxious about an increase in electricity prices, the instability of supplies and environmental damage. The government believes, however, that green technologies will become a new driving force for the German economy and its main export commodity. Before that happens the industry will have to increase its use of electricity produced from fossil fuels, mainly natural gas imported from Russia. This may be exploited by Gazprom which will try to strengthen its position on the German market, and thus in the entire EU.

The expensive energy revolution in Germany. The implementation of the Energiewende is behind schedule. OSW Commentary No. 77, 2012-05-10

One year after the events of Fukushima the implementation of the new German energy strategy adopted in the summer of 2011 is being verified. Business circles, experts and publicists are sounding the alarm. The tempo at which the German economy is being rearranged in order that it uses renewable energy sources is so that it has turned out to be an extremely difficult and expensive task. The implementation of the key guidelines of the new strategy, such as the development of the transmission networks and the construction of new conventional power plants, is meeting increasing resistance in the form of economic and legal difficulties. The development of the green technologies sector is also posing problems. The solar energy industry, for example, is excessively subsidised, whereas the subsidies for the construction of maritime wind farms are too low. At present, only those guidelines of the strategy which are evaluated as economically feasible by investors or which receive adequate financial support from the state have a chance of being carried through. The strategy may also turn out to be unsuccessful due to the lack of a comprehensive coordination of its implementation and the financial burden its introduction entails for both the public and the economy. In the immediate future, the German government will make efforts not only to revise its internal regulations in order to enable the realisation of the energy transformation; it is also likely to undertake a number of measures at the EU forum which will facilitate this realisation. One should expect that the German government will actively support the financing of both the development of the energy networks in EU member states and the development of renewable energy sources in the energy sector.

Energy Transition in Europe’s Power House. Alleingang, avant-garde or blackout? IES Policy Brief Issue 2012/03/October 2012

Summary. The transformation of Germany’s energy sector will further exacerbate current network fluctuations and intensify the need for modifications in Europe’s power system. Cross-border power transfers will have to increase in order to overcome national limitations for absorbing large volumes of intermittent renewables like wind and solar power. In order to establish such an infrastructure on a European scale, the energy transition needs to be guided by an economic approach designed to prevent further fractures in the Internal Electricity Market. Moreover, constructive negotiations with neighbouring countries on market designs and price signals will be important preconditions for a successful energy transition in Europe.

Gas demand for power generation peaked as early as 2010. CEPS Commentary, 12 February 2016

The outlook for natural gas demand is often considered bright, especially for gas used to generate electricity. This is because gas is the cleanest of all fossil fuels. The carbon intensity of modern gas-fired power stations is less than 50% that of modern coal plants. Moreover, gas-fired units are well-suited to follow rapid swings in supply and demand due to their flexibility. In the future, these balancing tasks will become more and more important given the intermittent character of the supply of wind and solar power. Gas seems to hold out the promise of being a key pillar of the energy transition and the perfect partner of renewables. Given the EU’s long-term climate policy goals, however, there is strong evidence that demand for gas for purposes of power generation peaked as early as 2010.

The EU power sector needs long-term price signals. CEPS Special Report No. 135/April 2016

By 2030, half of the EU’s electricity demand will be covered by renewables and will need to be accompanied by flexible conventional back-up resources. Due to the high upfront costs inherent to renewables and the progressively lower running times associated with back-up capacity, the cost of capital will have a proportionately greater impact on total costs than today. This report examines how electricity markets can be designed to provide long-term price signals, thereby reducing the cost of capital for these technologies and allowing for a more efficient transition. It finds that current market arrangements are unable to provide long-term price signals. To address this issue, we argue that a system for long-term contracts with a regulated counterparty could be implemented. A centralised system where capacity or energy or a combination of both is contracted, could be introduced for conventional and renewable capacity, based on a regional adequacy assessment and with a competitive bidding system in place to ensure cost-effectiveness. Member states face a number of legislative barriers while implementing these types of systems, however, which could be reduced by merging legislation and setting EU framework rules for the design of these contractual agreements.