Renewable energy in Deutschland: an economic evaluation

Jan C. Bongaerts

1. Data about the current situation2. Prices and economic situation3. Value creation by local government4. Forecasts and wrong predictions5. Outlook

Worldwide data

Deutschland: total energy consumption and theshare or energy from renewable sources

Deutschland: total energy consumption and theshare or energy from renewable sources

Deutschland: jobs in the renewable energy sector

Deutschland: jobs in the renewable energy sector

500 000 jobs in 2020?

Deutschland: Investments in renewable energycapacity

Wind power plants in Deutschland: costscome down

Sachsen – 2009

ca. 1360 GWh6,8 % des Strombedarfs in Sachsen (SAENA)

Wind power plants in Deutschland: productivity goes up

Sachsen – 2009

ca. 1360 GWh6,8 % des Strombedarfs in Sachsen (SAENA)

Photovoltaics in Deutschland

Capacity per Inhabitantin W / EW for 2009

Deutschland : 119 Watt /EW

500 – 700

Photovoltaics in Deutschland

Watts per Inhabitantin W / EW for 2013

10 – 50

> 700

350 - 500

Photovoltaics in Deutschland Costs come down

Sachsen: 66 Watt /EWDeutschland : 119 Watt /EW

Photovoltaik in Deutschland Kostendegression und Einspeisevergütung (FITs)Cost index of production of equipment and feed-in tariff

Sachsen: 66 Watt /EWDeutschland : 119 Watt /EW

Photovoltaics in Deutschland Green = share of PV of electricity generationBlue = share of „EEG“ levy of price of electricity

Biogas in Deutschland Number of biogas plants and amount of installed capacity

Deutschland: export revenues fro the renewableenergy sector

1. Data about the current situation2. Prices and economic situation3. Value creation by local government4. Forecasts and wrong predictions5. Outlook

Deutschland: prices of electricty

EEG-Umlage = levies for electricity from renewable sourcesSteuern = TaxesBeschaffungskosten = production (inclusive and exclusive of grid connection costs) Steuern = taxes (for industry)Netzentgelt = grid connection costs (for industry)

Merit order

Merit order

Merit order

Merit order

Merit order

Merit order

Merit order

Shift of the merit curve lowers price ofelectricity

Without wind power

With wind power

Energy from renewable sources has a negative impact on spot market prices – Australia

Deutschland: does industry benefit or suffersfrom renewable electricity?

Deutschland: does industry benefit or suffersfrom renewable electricity?

Renewable electricity sold on the EEX power exchange has a dampening effect on theprice of electricity: about 0.5 ct per kWh(shown in green)

Industrial companies must pay a levy tofinance the feed-in tariff. Actual ratesdepend on energy consumption with„bonus“ reductions for energy intensive sectors

Deutschland: does industry benefit or suffersfrom renewable electricity?

Die Kunden profitieren

Der Preis, der an der Strombörse bezahlt werden muss, richtet sich nach dem jeweils teuersten Anbieter. Damit konnten die vier großen Kraftwerksbetreiber EnBW, Eon, RWE und Vattenfall hohe Gewinne machen, indem sie billigen Grundlaststrom zur Mittagszeit sehr teuer verkauften. Doch je preiswerter Solaranlagen und damit Solarstrom wird und je mehr Strom aus Photovoltaikanlagen ins Netz eingespeist wird, was in der Regel hauptsächlich zur Mittagszeit passiert, desto geringer wird der Preis an der Strombörse.

Die Profiteure dieser Entwicklung sind trotz Einspeisevergütung für Solarstrom und EEG-Umlage die Endkunden. „Vor allem stromintensive Unternehmen profitieren schon heute von niedrigen Börsenstrompreisen durch die erneuerbaren Energien“, sagt Björn Klusmann, Geschäftsführer des Bundesverbandes Erneuerbare Energien (BEE). „Im letzten Jahr betrug dieser Effekt immerhin rund drei Milliarden Euro.“

Deutschland: does industry benefit or suffersfrom renewable electricity?

Customers benefit

The electricity price charged at the power exchange is based on the most expensive bidder. In this way, the four largest operators of power stations, i.e. EnBW, Eon, RWE and Vattenfall make high profits by selling cheap base-load electricity at midday timesat very high prices. The lower the costs of solar plants, the lower the costs of PV electricity and the more PV electricity fed into the grid – which normally happens atmidday times – the lower the price of electricity at the power exchange.

Even with the „EEG“ levy for PV electricity, final customers benefit. „In particular, already today, energy intensive companies benefit from lower exchange pricesresulting from renewable energies“, says Björn Klusmann, Managing Director ofBundesverband Erneuerbare Energien (BEE). „Last year, this effect amounted toabout three billion Euro.“

PV Electricity generation and demandfor 24 hours in six months 2011 – Germany

Demand= load curve Left verticalaxis

Solar electricity generation corresponds to load curve

PV productionright vertical axis

Forward electricity prices – Germany

Spot market price on a sunny weekendin April 2013 – Germany

Correlation between wind power electricity and spot market price – Germany

Energy from renewable sources has a negative impact on spot market prices – Germany

AveragePriceof thespotmarket

April –September 2011

April-September 2013

Deutschland

Deutschland

Sales proceeds

Electricity from renewables is sold on the EEX power exchange. The net proceedsare used to partially cover the feed-in [EEG] payments (12.33 billion € in 2011). The difference is 8,24 billion € which is paid through a levy on all electricity users.

Deutschland: cut of government support leadsto avoided investments and loss of tax income

Renewable electric on 400 million €for heatsystems

reduced to19.5 million €

freezing of115 million €

844 million €investments not commissioned

300 million € loss oftax income

1. Data about the current situation2. Prices and economic situation3. Value creation by local government4. Forecasts and wrong predictions5. Outlook

Deutschland: value creation by localgovernment initiatives

Deutschland: value creation by localgovernment initiatives

Blue = rental incomeYellow = profit after taxes

Red = tax income of local governmentGreen = net income from employment

Deutschland: value creation by local governmentinitiatives: electricity, heat and vehicle fuels

Deutschland: value creation by localgovernment initiatives

1 = production of plant equipment and components2 = planning and construction3 = operation and maintenance4 = sales of electricity

Blue = taxesOrange = profitsGreen = income from employment

Deutschland: value creation by local governmentinitiatives

Deutschland: value creation by local governmentinitiatives

Local governmentas entrepreneur

sets up public utilitycompany (with orwithout partners)

company operatesas a business

local governmentoperates a grid

Local government asprovider ofinfrastructure

operates asshareholder

public-private utilitycompany

Construction ofinfrastructure byprivate partner

rental agreementabout use ofinfrastructure

Localgovernment asconcessionnaire

Local government as„concessionnaire“

By-laws aboutrevenues fromconcessions

Deutschland: ownership of renewable energyinstallations

Deutschland: ownership of renewable energyinstallations

Deutschland: renewables benefit everyone

1. Data about the current situation2. Prices and economic situation3. Value creation by local government4. Forecasts and wrong predictions5. Outlook

Deutschland: forecasts

Deutschland: forecasts

Deutschland: electricity mix in 2020

Deutschland: forecast of required capacity by 2020

Deutschland: so far, all forecasts were wrong

Deutschland: prominent but wrong forecasters

Deutschland: prominent but wrong forecasters

1976. Then Minister of Research Hans Matthöfer: „So far, serious experts have beeen considering that the generation of electricity withsolar energy in the Federal Republic is not yet possible from an ecological and economicpoint of view.“

2005. Dr. Angela Merkel, then head of the CDU/CSU opposition delegation ofGerman Bundestag: „It is poorly realistic to increase the share of renewableenergy of total electricity consumption to 20 %. I believe it is not realistic thatrenewable energy can close a gap which, for example, would open up due tothe premature closure of nuclear power plants.“

Europe: all forecasts below real development

1. Data about the current situation2. Prices and economic situation3. Value creation by local government4. Forecasts and wrong predictions5. Outlook

Deutschland as the leading country?

Electricity from renewable sources

Deutschland as the leading country? Six coreelements of German policy making

• Continue the expansion of electrcity from renewables, especially wind offshore and onshore

• Continue with the provision of security for investorsthrough the feed-in act („EEG“)

• Proceed with cost efficiency of equipment and lowerthe levy for the feed-in tariff system

• Prudent management of exemptions from the levy forselected electricity traders and industries

• Improve grid management with the increasing share ofelectricity from renewable sources through systemintegration

• Simplify and make legislation more transparent

Back-up slides

References • http://www.bio-kraftstoffe.info/• http://www.erneuerbare-

energien.de/files/pdfs/allgemein/application/pdf/eeg_erfahrungsbericht_2011_bf.pdf• http://www.unendlich-viel-energie.de/de/wirtschaft/aktuelle-daten-und-fakten.html• http://www.solarserver.de/service-tools/statistik-und-marktforschung.html• http://www.erneuerbareenergien.de/solarstrom-sorgt-fuer-preissenkungen/150/406/31555/

• Agentur für erneuerbare Energien: Stromversorgung 2020 - Wege in eine moderne Energiewirtschaft; Strom-Ausbauprognose der Erneuerbare-Energien-Branche, Berlin, Januar 2009

• Agentur für erneuerbare Energien: Vorhersage und Wirklichkeit – Vergleich von Prognosen und Szenarien mit der tatsächlichen Entwicklung Erneuerbarer Energien, Kurzgutachten, Berlin, Mai 2009

• Bernd Hirschl, Astrid Aretz et al.: Kommunale Wertschöpfung durch Erneuerbare Energien, Berlin, Schriftenreihe des IÖW 196/10, September 2010

• Bundesregiering: Erfahrungsbericht 2011 zum Erneuerbare-Energien-Gesetz (EEG-Erfahrungsbericht)

• IfnE, Ingenierbüro für erneuerbare Energien: Strom aus erneuerbare Energien bis zum Jahr 2020 –Kosten-Nutzen- ausgewählter Aspekte, Teltow, 2009