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Germany launches full-scale renewable power transition in Easter Package

14 April 2022 Cristina Brooks

Germany advanced plans to source "almost all" of the electricity supplied in the country from renewable sources by 2035, up from more than 42% currently, amid energy market and wartime pressures.

On 6 April, Germany's Cabinet said planned revisions to several energy laws, including the Renewable Energy Sources Act (EEG), had been sent to parliament in a legislative "Easter Package."

Germany's EEG was launched 22 years ago and has supported onshore wind, solar PV, and biogas through tariff subsidies. It was Europe's first feed-in-tariff scheme and has served as a model for similar laws in 80 countries, according to the think tank World Policy Council.

The scheme has been revised to include more auctions while tariffs are being phased out, potentially by 2027, as renewables become an increasing commercial presence in the market. The latest revision foresees higher annual renewable auction volumes and faster planning approval processes.

The larger annual renewable auctions and targets for renewables in the power mix were announced last year by the incoming ruling coalition that included the environmentalist Green Party, but this package moves certain dates forward.

Through the coalition's treaty published in December, the ruling government has pledged stronger decarbonization targets. The target of nearly-100% renewable power by 2035, advancing the prior 2050 goal, was announced by the economy and climate ministry on 28 February.

Other countries with deadlines to reach 100% renewable power include Denmark (2027) and Austria (2030). Many US states and the UK (2035) have similar targets that include low-carbon power sources.

But in Germany's Easter Package, a principle that classes the use of renewable energy as in the "overriding public interest" should aid developers with blocked permits.

Renewables vs. Russian gas imports

As well as pursuing green ambitions, Germany's cabinet is seeking to reduce the country's dependency on Russian natural gas exports, for which it is the world's biggest consumer, according to the US Energy Information Administration.

The cabinet called Germany's fossil fuel dependency "a key factor against the backdrop of the Russian war of aggression in Ukraine."

Prices of fossil fuels in Europe rose in 2021 and the rise is being exacerbated by the war in Ukraine, but increasing renewable energy consumption can curb demand for such commodities while moving the nation towards meeting Paris Agreement commitments, said President of German renewable energy association BEE Simone Peter in a recent statement.

Think tank E3G called the German package "bold and ambitious" in its efforts to cut out gas as a power source.

Not just Germany, but also the UK and EU have announced policy packages aiming to use renewables to counteract the impacts of Russia's invasion of Ukraine and the knock-on impacts on fuel prices.

The UK is focusing on offshore wind and hydrogen in particular, and the EU as a whole is upping planned targets for renewable energy and banning Russian coal imports, the bloc's executive announced.

High power and gas prices have affected consumers in Germany and much of Europe, and pushed German generators to increase their reliance on polluting coal-fired power. The revisions will ease the burden of the EEG on consumers and companies by financing it from the federal purse.

Offshore and onshore wind

The EEG revisions could quadruple wind power additions within three years, German wind turbine manufacturer Enercon said.

Under these revisions, Germany will raise its 2030 target of 55-65% renewable power to an 80% share, in alignment with the 1.5 degrees Celsius pathway of the Paris Agreement. A 2021 version of the EEG had targeted at least 80% by 2050 and a January proposal 80% by 2030.

As a means to achieving this, Germany is ramping up both offshore and onshore wind targets. The moves were hailed by Enercon as a "wind energy renaissance" supportive of a bigger manufacturing base in the country.

Increased offshore wind auction volumes were already being targeted in a December coalition treaty. It set a goal of at least 30 GW by 2030, compared with the current target of 20 GW laid out in the 2020 offshore wind law. It also brought forward a target, with 40 GW of offshore wind capacity to be in place by 2035 rather than 2040. It added a target of at least 70 GW of offshore wind by 2045.

The 70-GW target would represent a nearly nine-fold increase in Germany's installed offshore wind fleet, which in 2021 was 7.8 GW, according to S&P Global Commodity Insights.

Germany's onshore wind fleet, which reached 56.1 GW in 2021, could double in size. The coalition's December treaty sought to auction of leases 10 GW annually, but the revised rules will raise this to "up to" 12 GW, aiming to reach 115 GW nationwide by 2030.

In May, the government plans to release a separate "Summer Package," including a strategy to repower (increase the capacity of) existing wind turbines, reform permitting, and potentially reserve 2% of Germany's territory for wind power.

However, the government foresees supply chain disruptions, rising international prices for raw materials, and component shortages as roadblocks in the way of reaching its wind power aims.

German wind energy association BWE said that its lobbying efforts had played a role in changes to a March draft of the EEG revision. This included the concept that the use of renewable energy is an overriding public interest.

"The Easter Package decided by the cabinet today is also influenced by the Russian attack on Ukraine. It shows that, under energy security pressures, there is a great will to advance wind energy quickly," said BWE President Hermann Albers.

European association WindEurope praised the wind auction plans as exemplary. "The Easter Package is an outstanding package of measures that will drive the expansion of wind energy, both onshore and offshore. Big auction volumes. A clear long-term auction schedule," said CEO Giles Dickson.

But both Dickson and Albers warned that without the Summer Package's planned changes to permitting, which can now take up to six years, planned wind auction volumes would be useless.

Major solar auctions seen as wanting

Even more ambitious than either the offshore or the onshore wind auction volumes, auctions for solar power are set to reach 22 GW annually in 2026 in the current draft policies.

This should put the country on track for 215 GW of installed solar capacity by 2030, more than tripling its 60 GW of installed capacity as of December 2021.

Again, auctions are not enough for trade associations. "The EEG cabinet draft sets ambitious solar targets but falls short when it comes to the instruments for implementation," said BEE's Peter.

She explained that, much like the wind targets, solar targets are attainable only if further revisions are passed, for example, making self-supply and direct supply with solar power more attractive and space for PV installation available.

Peter said the EU's ban on coal imports put the pressure on Germany to use all forms of renewables. "Bioenergy is indispensable as a stabilizing element in the energy mix, but there are still no connection prospects here. The EEG means a reduction in domestic, renewable gas. Opportunities to leverage potential in the short term are missed here. In the case of hydropower, the cabinet draft is de facto worse off ... The potential of geothermal energy is completely ignored," said Peter.

The revised EEG foresees renewable energy being increasingly used for the electrification of automotive, industrial, and heating sectors, according to French research company Enerdata.

Posted 14 April 2022 by Cristina Brooks, Senior Journalist, Climate and Sustainability

This article was published by S&P Global Commodity Insights and not by S&P Global Ratings, which is a separately managed division of S&P Global.


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