The Energiewende is proceeding ahead of schedule with high grid reliability, writes researcher Schalk Cloete. However, costs are much higher than originally planned, while CO2emissions are stagnating. According to Cloete, wind/solar market shares have now reached the point where large grid expansion projects become critical. One problem is that the net value of new wind/solar is approaching zero as market value declines and integration costs increase. It will be very interesting to see how Germany performs in this complex next phase of the Energiewende.
The German Energiewende has long been the world’s leading experiment in large-scale deployment of variable and non-dispatchable renewables. Data from this €200 billion (and counting) experiment is very important to quantify the practical and economic challenges of large-scale wind/solar power deployment.
The primary experiences from the Energiewende are well documented. On the positive side, Germany has been able to continue expanding its renewable electricity output at a very impressive rate. On the negative side, the costs of this transition have been higher than expected and CO2 emissions have barely budged since the 2008/2009 financial crisis.
Wind/solar shares and CO2 emissions under the Energiewende (source).
This article will delve a little deeper into these trends with the help of the Energiewende tracker from McKinsey & Co. But first, let’s take a brief look at perhaps the most important datapoint from this experiment: wind/solar market value.
Current wind/solar share and market value
Last year was a good year for German renewable electricity production, especially wind power. In total, 104 TWh of wind and 38 TWh of solar electricity was generated. Total German electricity production amounts to about 650 TWh, resulting in wind and solar shares of 16% and 6% respectively.
When considering practical integration of variable renewables, however, the effective market shares are about 25% lower given that Germany relies heavily on imports/exports to balance its wind/solar output (quantified earlier). A sample week in 2017 is shown below as an example of the clear correlation between wind/solar output and electricity exports.
This brings the effective wind and solar shares to 12% and 4% respectively. At these shares, the market values of wind and solar power are already down to 82% for wind and 92% for solar PV (below) – in line with data used in a previous article illustrating the perpetual subsidy dependence caused by this self-cannibalization effect of variable and non-dispachable renewables.
Market value of different electricity generating technologies relative to the system average in Germany for the year 2017 (source).
When we use the marginal value of new wind and solar capacity (see aforementioned article), correctly accounting for the fact that new capacity will lower the value of all existing capacity, the value factors of new wind and solar drop to 54% and 62% respectively. This is a critical insight from the Energiewende experiment: even at current modest market shares, new wind and solar energy is worth just over half the current wholesale price, about €18/MWh and €20/MWh respectively.
Energiewende performance measures
The McKinsey & Co report contains 13 performance trackers that will be briefly discussed below. In all the graphs, the target trajectory is indicated by the light blue line and the actual trajectory by the dark blue line.
Firstly, the well-known stagnation of CO2 emissions is shown. This is primarily the effect of displacing nuclear with renewables while coal remains relatively constant.
Annual equivalent CO2 emissions.
As mentioned earlier though, the rate at which Germany has expanded renewables is very impressive. The Energiewende has therefore successfully proven that renewable energy can be rapidly built out if subsidies are large enough. It should be mentioned though, that the German renewable energy buildout is about 2x slower than the French nuclear buildout of the 1980s.
Percentage of renewables in annual electricity consumption.
Next, we see that primary energy consumption and electricity consumption are remaining quite flat. Given that very high electricity prices provide a large incentive for increased efficiency, this result therefore appears to illustrate the limits of what can be achieved by energy efficiency measures.
Annual primary energy consumption.
Annual electricity consumption.
Next, we see that Germany has managed to maintain impressively high grid reliability, primarily by maintaining a large reserve margin.
Minutes of power supply failure per year.
Percent reserve margin maintained.
The costs of maintaining this good grid reliability are rising though. As shown below, network costs are increasing rapidly and are currently up to €13/MWh of wind/solar electricity. This is the cost associated with grid stabilization and reserve power plants. It is important to note that this cost is approaching the marginal value of new wind and solar, implying that the net value of new wind & solar capacity is already approaching zero.
Added grid costs from wind/solar power.
Part of the reason behind this rapid cost increase is that electricity networks are not being expanded rapidly enough. The two following graphs show that Germany is falling behind in terms of general grid expansion and interconnections with the broader European grid. The need for vast transmission system expansion, often across international borders, is one of the primary challenges of accommodating high wind/solar market shares.
Transmission expansion.
Interconnection capacity as percentage of generating capacity.
Next, we take a look at electricity prices. Firstly, the famous Energiewende surcharge on consumers is shown below. It has flattened out at about double the original target.
Renewable energy surcharge.
As a natural result, German households pay almost 50% more for electricity than the European average.
Percentage by which household electricity prices exceed the European average.
Industries are protected from this cost increase to a certain degree, although prices remain higher than the target.
Percentage by which industrial electricity prices exceed the European average.
Finally, a measure of the number of jobs in renewable energy is provided. It is clear that significant contraction has taken place in recent years following the great solar PV boom of 2010-2013.
Number of renewable energy jobs.
Discussion and conclusion
To date, the German Energiewende has clearly proven that renewables can be expanded rapidly if the population is willing to pay. Renewable energy expansion is proceeding ahead of schedule and grid reliability remains high, but this comes at a cost that is more than double original targets. Cost will continue to pose a significant challenge as the net value of wind and solar power approach zero due to falling market value and rising integration costs.
The Energiewende now enters the next stage of wind/solar integration where substantial grid expansion is required to balance variable renewables. Currently, Germany is falling behind with this task, leading to rapidly increasing grid stabilization costs.
This will be an interesting test for the Energiewende given the complexity and scale. Up to this point, the modular nature of wind/solar power made their expansion attractively simple. From this point onward, however, continued expansion will require large and complex national and international grid expansion projects.
Aside from this transmission buildout challenge, it will not be long before Germany will require significant expansions of energy storage. The current electricity mix already achieves occasional scenarios where wind/solar supply approach total demand, resulting in negative electricity prices. This will either require curtailment or energy storage, both of which are very costly.
The Energiewende therefore remains a fascinating large-scale energy experiment. As far as I’m concerned, the jury is still out on whether this will work or not. I will certainly continue to follow closely as Germany embarks on this next, much more complex, phase of wind/solar power expansion.
Editor’s Note
This article was first published on The Energy Collective and is republished here with permission.
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one.second says
Yes, storage, especially decentralised battery storage becomes ever more interesting and gladly cheaper by the month. Also there could be done a lot more concerning sector coupling.
Then of course the value of solar and wind goes up again. Sadly the current and last German governments have done pretty much everything they can to slow the Energiewende down and make it more expensive. Sigmar Gabriel for instance single-handedly doubled the EEG surcharge due to his “Ausgleichsmechanismus” in 2009 which also created the problem of decreasing net value for wind and solar while coal plants continued to run. He will be remembered as a very detrimental force for Germay’s energy system.
Bas Gresnigt says
The author considers progress of the Energiewende, regarding electricity. But ignores the continued significant emissions reductions per generated KWh which the Energiewende achieves (figures easily to find at the UBA site)!
The illogical jump to general emissions reinforce the impression that creating a negative impression about the Energiewende, is the main target of the article.
Schalk says
Energy sector emissions are actually moving quite closely in line with emissions from the general German economy (https://www.cleanenergywire.org/factsheets/germanys-greenhouse-gas-emissions-and-climate-targets). This is the disappointing issue, given that decarbonizing electricity is much easier than decarbonizing the rest of the economy.
As everyone knows, the main reason for this slow progress has been the displacement of nuclear with renewables. There remains about 12% of nuclear in the German grid that must be displaced before serious CO2 reductions can start.
This is a problem given that Germany is one of the largest historical emitters in the world. When distributing the global 2 deg C carbon budget equally between all global citizens as done in my previous article (https://www.energycentral.com/c/ec/fair-allocation-climate-change-costs-could-double-developed-world-debt), Germany has a CO2 debt of 800 tons/person – just a little better than the US at 900 tons/person and double the EU average of 400 tons/person.
Bas Gresnigt says
The old nuclear power plants are a far bigger problem as a disaster may cripple the whole of Germany. Just project the exclusion zone of Chernobyl or Fukushima (corrected for the wind which doesn’t blow 97% of the time to the ocean in Germany but often to population centers). History shows chance of ~1% on such disater. So they rightfully prioritize all nuclear out.
The Energiewende concerns electricity, not the Energiesector which covers near all CO2 emissions. You again try to broaden the scope of the Energiewende. Presumable in order to give it a negative aura.
Emissions/KWh produced in past 10years show very significant decreases and you know it.
Your calculation of a CO2 debt is to much simplified to be taken serious.
E.g.
Germany changed from net importer of electricity in ~2002 towards Europe’s biggest net exporter, exporting 8% of production. So the importing countries shift emissions away to Germany when they import more. Etc.
Schalk says
Let’s not go into a nuclear debate. That rarely goes anywhere…
The graph I was referring to gives emissions from “energy industries” – a bit less than 40% of total emissions. I’m pretty sure this is mostly electricity.
About the reduction in electricity CO2 intensity, this is achieved by almost all developed countries, especially those starting from a high base like Germany. What we need is a rapid reduction in actual emissions.
I should also point out that the Energiewende is not just about electricity. It would be surprising if you do not know that there are a range of official Energiewende targets for other energy sectors, climate, efficiency, etc.
The issue of nuclear vs. climate risk is a matter of opinion. You weigh the risk of a nuclear disaster very highly. Personally, from a developed nation point of view, I weigh the risk of climate refugees and developing nations exerting their rapidly growing economic and political power to claim compensation for damages caused by historical emissions much more highly. I guess we will not agree on this, but it is important to state where both of us are coming from.
Bas Gresnigt says
German electricity sector reached a CO2 intensity reduction compared to the Kyoto 1990 reference of >33%.
USA reached some CO2 intensity reductions in recent years regarding electricity.
Such that they are now at their 1990 level of CO2 emissions per KWh…
Rens says
Your first sentence: “The Energiewende is proceeding ahead of schedule with high grid reliability, writes researcher Schalk Cloete. However, costs are much higher than originally planned, while CO2emissions are stagnating.”
When I look at graph “Wind/solar shares and CO2 emissions under the Energiewende” I see an increase of ~16% market share of renewables on the left side and a decrease in CO2 emissoins of ~15% on the right side.
My conclusion would rather be that the energiewende is pretty effective, than that it’s stagnating. As far as this graph can tell though, for example: what is the trend of CO2 emissions of other countries? What is the trend of energy consumption over these years?
Your conclusion in the post is based on the “fact” that CO2 emissions are stagnating, but is that really the case? I’m not an expert, but this doesn’t seem like proper proof.
Karel Beckman says
There is no decrease of CO2 emissions of 15% in the graph, you are misreading it.
Bas Gresnigt says
It’s wrongly assumed that the costs of the Energiewende are higher than assumed.
The opposite is true as demonstrated by the fact that the speed of the energy transition is now with >2%/a, >30% higher than the 1.5%/a originally scheduled.
And that speed is scheduled to accelerate further (check the plans of the authorities). While they are already 3years ahead of schedule (35% by renewable was planned for 2020).
All thanks to the unexpected much stronger price decreases of wind, solar, storage.
Schalk says
All the McKinsey graphs in the article that have to do with cost are substantially higher than the target.
Bas Gresnigt says
In 2011 McKinsey predicted long major outages in Germany when Merkel closed 8 of the then still operating NPP’s. None happened. Earlier they predicted (as many UK/US consultants) that the Energiewende would fail.
They now state e.g. that Norway does better regarding the Energiewende than Germany, while Norway always generated ~97% of its electricity with hydro (Germany ~4%).
Norway did very little regarding an energy transition until recently when it started to promote EV’s.
So, it seems fair to conclude that their costs statistics are highly biased too.
And indeed the costs targets lines of McKinsey have little connection with reality or those of the Energiewende authories…
The lower than expected costs of the Energiewende is also demonstrated by the increasing support of the population for the Energiewende:
From 55% in 2003 towards 90% now!
Compare that with the 38% support of French population for nuclear found by a poll this winter.
Karel Beckman says
Bas, you keep changing the subject. You show that you have no real arguments. All of these comments are beside the point. You don’t reply to Schalk’s points at all. This is not serious debating. The editor.
Bas Gresnigt says
Thanks for your feedback!
I intent to show that the costs targets in those McKinsey graphs are made up, not based on reality. So have little value.
Helmut Frik says
They have to do with the costs being significatly higher than the level Mc Kinsey did choose as their prefered level. Not more, not less.
Due to the fact that EEG payments run for 20 years, the high costs created by the fast solar construction in 2009-2013 will keep to show up for another 14 years, but only relect history. The additional costs level out to zero now, and the expected contiuous costs after the payments for the years 2009-2013 have run out are below what was previously expected. (there have been a lot of projections for the years past 2015. The level value of McKinsey looks like it it is a non-procetion after this year).
The high costs for solar in 2009-2013 – along with investments in other countrys on the other hand brought solar power down to prices where it is now competitive in many markets.
About “market share” of solar and wind power:
It is not a fault, but a feature that wind and solar power are to some degree exported in times of high local production, and imported at times of low local production.
Nevertheless the statistics shows (see here: https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=3&cad=rja&uact=8&ved=2ahUKEwi6yMG7y-7cAhVHUhoKHZFrBK8QFjACegQICBAC&url=https%3A%2F%2Fwww.ise.fraunhofer.de%2Fcontent%2Fdam%2Fise%2Fde%2Fdocuments%2Fpublications%2Fstudies%2Fdaten-zu-erneuerbaren-energien%2FStromerzeugung_2017.pdf&usg=AOvVaw0VkJqSVhx2XAv5zDIsk20L page 24)
that there is a roughly continuous export of 6,5GW which is overlayed with a roughly randome deviation of +/-6 GW. So closing down about 6,5 GW baselode generation – or the equivalent of 7,5 GW nuclear power plants would bring the export to a neutral level, with the remaining roughly +/-6GW flows comming from wind and solar production and load variations.
This would result in some 30TWh export and 30 TWh import + some more TWh in Transit. (Most imports today in the statistic of overall imports and exports are accompanied by exports at other borders, so in transit flows).
Some of the flows come from the huge hydropower storages in the Alps, which have been built there to balance the german (and french) market in times of nuclear and partly coal power production, and which are now doing their job in balancing german wind and solar power production. There is no need to build them a second time just to do this inside germany, trade is allowed and always something positive. It is even allowed for electric power. It is even allowed for renewable power.
I have to say this expresively because many try to tell that renewable power generation does not work if it comes with cross border sales of electric power. While forgetting that almost all coal, nuclear, gas, oil power production would not work without cross border sales of coal, uranium, oil, gas.
The import shares of coal, uranium, oil and gas of germany are much higher than the shares of impoerted wind or solar power generation.
What is missing are stronger advances in grid expansions. The operators of the huge storages in the Alps complain a lot that they can not access the big wind power production at the north sea to generatemore profits from theis exisitng, but at the moment often ideling storage equipment. The missing grid extensions will bring them back into the game. (the connections to south germany, where the nuclear power plants they balaced perviously have been already exist, what is missing are the connectios to further north)