German energy transition – 2017 update (part 1)

Since September 2012, consultancy McKinsey has regularly published an analysis which, based on an assessment of fifteen parameters, clearly documents the progress of the energy transition.

I last introduced the “Energy Transition Index” to readers of my energy blog in a three-part mini-series a year ago (here, here, here). At the end of March, McKinsey published its regular update, including preliminary results for last year. I therefore present new data to those interested in developments in the energy sector of our western neighbours. As last time, it will be structured into three separate articles devoted to the individual areas assessed, in order to keep the length of the text tolerable for readers.

The document, through its assessment of fifteen parameters, makes it possible to gain a relatively quick and easy overview of how this complex and multi-layered process of the energy transition is being implemented, and to what extent the political, environmental, economic and technical targets defined by the federal government at its outset, with a time horizon to 2020, are realistic or otherwise.

Analysts grouped the fundamental targets of the energy transition into three areas, each of which is further structured using five measurable and assessable parameters:

Area (I): Environmental and climate protection

• CO2 emissions [MtCO2eq]
• Offshore wind power plant construction (WPP) [GW]
• Photovoltaic power plant construction (PV) [GW]
• Primary energy consumption [PJ]
• Electricity consumption [TWh]

Area (II): Security of energy supply

• Electricity supply interruptions [min./year]
• Costs of grid measures [eur/MWh]
• Capacity reserve provision [%]
• Transmission grid construction [km]
• Delays in connecting offshore WPPs [-]

Area (III): Economic efficiency

• Household electricity prices (deviation in % from the EU average)
• Industrial electricity prices (deviation in % from the EU average)
• Renewables surcharge [ct/kWh]
• Jobs in the renewables sector [-]
• Jobs in energy-intensive industry [-]

Having repeated the necessary introductory information, we can now move on to the updated assessment of the individual areas.

Assessment of area (I): Environmental and climate protection

The federal government tasked the energy transition with reducing emissions in 2020 by 40% compared with 1990, corresponding to a target of 750 million tonnes of CO2eq. In the assessed year of 2016, emissions were put at 916 Mt, whereas under the projected scenario they should have been only 812 Mt. Although the power sector’s share of CO2 production declined, the contribution from industry, heat generation and transport increased.

Worse weather compared with the preceding year and the good condition of the German economy are cited as causes of the rise in emissions. McKinsey analysts quantified progress towards the targets at 44%, and therefore assessed achievement of the target value in 2020 as “unrealistic” (U).

The construction of offshore wind power plants (WPPs) and the related technical infrastructure is currently proceeding according to plan. Installed capacity increased to 4,1 GW, 55% higher than had been planned for this stage. Analysts assessed the 2020 target of 6,5 GW as “realistic” (R).

Construction of photovoltaic power plants (PV) is in line with the slower trend of recent years. The increase in installed capacity was put at 1,5 GW, while installed capacity at the end of 2016 stood at 40,9 GW. Nevertheless, progress towards the targets was quantified at 110%, so achieving the target value of 51,8 GW in 2020 was assessed as “realistic” (R).

The 2020 target was defined as savings of 20% compared with 2008, corresponding to 11 454 PJ.

In the case of primary energy consumption, no new data are available compared with the edition of the publication issued in September 2016. Thus, as last year, it can be stated that progress towards the target does not correspond to the federal government’s long-term ambitious mandate, and achieving the target level for 2020 was assessed as “unrealistic” (U).

The 2020 target was defined as savings of 10% compared with 2008, corresponding to 553 TWh. Compared with 2015, electricity consumption fell by 1 TWh to 593 TWh, which does not correspond to the ambitious interim target of 574 TWh. For this reason, progress on the indicator was quantified at 54% and meeting the 2020 target was assessed as “unrealistic” (U).

Interim conclusion for area (I): Environmental and climate protection

The assessment of this sub-area has been possible to formulate in the same way for some time. That is, the “easier” quantitative targets are being met, i.e. the plans for construction of PV and offshore WPPs. The authors of the McKinsey report linked their successful delivery directly to the subsidy mechanisms in place (author’s note: this will be addressed under Area III, Economic efficiency).

A further conclusion is that the results achieved so far indicate that the fundamental qualitative targets for environmental and climate protection are highly likely not to be met, namely reducing CO2 emissions, primary energy consumption and electricity consumption.

To be continued in the following planned instalments:

Assessment of area (II): Security of energy supply

Assessment of area (III): Economic efficiency

(Written for the iDNES blog and Oenergetice.cz)

Petr Nejedlý