What will the Energiewende cost?

Researchers from Fraunhofer ISE have published a new report investigating the net cost of Germany’s energy transition. The good news is that the German government’s current goals are likely to be affordable. The bad news is that 100 percent renewable energy is less so.

Cost calculation

In terms of cost, there is a huge difference between an 85% and a 100% renewable energy system.


Germany has a goal of at least 60 percent renewable energy in all sectors (heat, transport, and electricity) by 2050. The goal for power alone is at least 80 percent. In formulating that target, policymakers may have had the Pareto principle in mind. It states that 80 percent of effects come from 20 percent of causes. For the goal of 100 percent renewable electricity, which most German renewable energy campaigners have, closing that last fifth means costs will skyrocket.

GET_en__2A1_long_term_targetsNow, Fraunhofer ISE has put a finer point on the matter. The study, which has not yet been released in English (PDF in German), first investigates the official German target of an 80-95 percent carbon emission reduction in the energy sector, which makes up around 85 percent of German greenhouse gas emissions.

Below, you see our translation of the main chart. Two scenarios were investigated for cost. The first one has no carbon price and assumes that fossil fuel prices will remain stable. The second assumes a carbon price of 100 euros per ton of CO2 by 2030, with fossil fuel prices rising by two percent per annum. (After 2030, no further price increases for carbon or fossil fuels is assumed). In the first (and unlikely) case, the transition remains more expensive, but in the latter the transition is eight percent less expensive than the reference case.

The cost of a 85% carbon reduction in GermanyThe 85 percent target is the middle range in the spectrum from 80 to 90 percent investigated. In other words, reaching only an 80 percent carbon reduction would be even less expensive. Below, I simplify one of the charts showing how much wind (offshore and on) and PV would be needed:

Installed renewable capacity needed in 2050

The study actually has seven scenarios for 80 percent; above, I have taken the one with the lowest installed capacity in order to stress a difference. The amount of installed capacity rises from around 290 GW to around 540 GW. In other words, we need to nearly double installed capacity in order to rise a mere 10 percentage points from 80 to 90 – and even then, we are not at 100 percent renewable energy.

The seven scenarios for the 80 percent reduction investigate things like synthetic fuels from renewable electricity, such as green hydrogen and methane. The installed capacity of such facilities rises from 80 GW to 180 GW, more than doubling for the 10 percentage point increase.

Otherwise, the scenario for 85 percent lower carbon emissions assumes that 157 GW of solar thermal will be used for low-temperature heat in buildings and industry. The efficiency for the production of green hydrogen is assumed to be 50 percent, meaning that half of the energy is lost in the process. Surprisingly, very little electricity would be curtailed at only two percent. Interestingly, biomass is not emphasized much in the text (a sign of how bioenergy growth is being deemphasized in the German debate), though it would still make up around 14 percent of total energy supply in this scenario. Finally, roughly two times more natural gas and oil would be used than raw biomass, but no coal at all would be consumed. Without a coal phase-out, “a more than 80 percent reduction will be very hard to reach,” the study finds.

There are far more assumptions and findings here than I can do justice to in this small space. Let’s hope that Fraunhofer publishes the full study in English.

My main takeaway is that a focus on 80 percent renewables rather than 100 percent changes the debate considerably. At a recent conference in Morocco, researchers focused on the weak points in the 100 percent target, such as: is green hydrogen really feasible when half of the energy is lost? I recommended that they focus on what needs to be done now and address those issues when they actually arise. If we double the share of renewables by 2030, for instance, we deal mainly with political and finance issues, not technical ones. For instance, we concentrate on the early retirement of existing conventional facilities. If we want zero coal consumption by 2050, we cannot build any further plants, and we have to close the ones recently built early. These issues need addressing now.

Craig Morris (@PPchef) is the lead author of German Energy Transition. He directs Petite Planète and writes every workday for Renewables International.

by

Craig Morris

Craig Morris (@PPchef) is the lead author of Global Energy Transition. He is co-author of Energy Democracy, the first history of Germany’s Energiewende, and is currently Senior Fellow at the IASS.

8 Comments

  1. ioconnor says

    This is another of those crazy studies based on something nobody would actually do.

    Nobody would put up enough solar panels and wind turbines to get 90% even in the middle of winter with no wind blowing! They would buy storage instead at a fraction of the cost!

    What’s next? A price study on how expensive it would be to ring the world with HV-DC lines so everybody could get 24×7 solar power?

    • editor
      editor says

      Storage was of course part of the scientists scenarios. They already take those options into account. Best, Alexander

  2. S. Herb says

    You are certainly right about the present focus, and it is already a marvelous result that current technology (plus a bit) could take us to 85% in 2050. On the other hand, the recent Greenpeace Tome claims that 100% by 2050 is cost effective (although this study is undoubtedly much less detailed, and is aggregated for Europe as a whole so that numbers can’t be directly compared). Hard to say at a glance where the differences lie, but:

    A practical path to greater than 80% CO2 reduction will almost certainly require dropping the ‘Island Germany’ assumption of the Fraunhofer report, both for electricity (the report has an alternative scenario for high connectivity) and for hydrogen/syngas/fuel. I can imagine that by 2050 fuel produced in sunny windy deserts will be internationally traded in some form.

  3. Jouni Valkonen says

    Actually, after we get to about 40 % of renewables, then things happen by themselves as coal, nuclear and natural gas powerplants and their operators are heading into bankruptcy.

    It is easy to understand why baseload generators are heading into unprofitability as solar and wind are reducing the need of peak load generators and hence price of electricity approaches the marginal cost of wind and solar, i.e. zero.

    But this same mechanism also threatens peak load generators and load following hard coal power plants. Especially batteries are disasterous for the economics of traditional power plants, as they are operating behind the meter and people and companies are investing on batteries for solar storage, back-up power or for electric car use. This means that these batteries when not in use for their primary purpose, can do grid demand management on their spare time. This makes it impossible for traditional peak load generators and load following coal plants to compete. The annual capacity factor of fossil fuel generators shrinks and average price of electricity keeps falling.

    Therefore the economics are impossible for all fossil fuel generators. All baseload power plants, intermediate load following power plants and peak electricity generators are threatened by unprofitability. And of course the harder it makes for fossil fuel generators, the beter are the economics for battery storage and wind power and especially roof-top and facade solar power.

    Therefore, I stand in my prediction that by 2035 Germany has gone into 100% renewable energy. And of course Volkswagen, RWE & CO. are in deep bankruptcy. The change will be almost instant when we reach certain tipping point. It takes less than a decade.

    ps. there is small uncertainty, that I also predict that the price of oil will fall into 10 dollars per barrel by around 2020. This makes it difficult to go all the way to 100 %, but perhaps we can accept 95 % renewable energy as close enough.

  4. Ulenspiegel says

    For me the increase in needed capacity from 85% to 90% RE share only indicates that we have to think out-side the Germany box.

    My bet, with 100 TWh (re)import we could achieve a much cheaper solution for the 90% scenario, i.e. we only have to connect Germany to Scandinavia with 20-30 GW transmission capacity. Substitution of demand there is the cheapest way to store energy, then comes pumping, then local batteries or syn gas.

  5. heinbloed says

    The European grid is working, Germany’s grid and power consumption can’t be seen from an islander’s perspective.
    Fraunhofer has noted that fact

    https://www.ise.fraunhofer.de/en/downloads-englisch/pdf-files-englisch/data-nivc-/power-generation-from-renewable-energy-in-germany-assessment-of-first-half-of-2015.pdf

    On page 5/16 it is reported that electricity from Germany is reaching already the UK – despite that there is no direct interconnector.

    ———————–

    Today we’ve learned that France is a net-importer for electricity.The interconnectors from France to the UK are delivering to the UK, very likely this is German RE-power they deliver:

    http://www.platts.com/latest-news/electric-power/london/german-november-flow-based-market-coupling-power-26282751

    Today was the inauguration of the coal power plant “Moorburg” in Northern Germany:

    http://news.vattenfall.com/en/article/moorburg-officially-inaugurated

    The machine delivers zero – output at the moment, nothing. It is wrecked mechanically (some turbines broke and had been returned to France) and the actual power price would not allow any market participation anyhow.
    Vattenfall, the owner, runs this machine at the moment with cheap RE-power ….wouldn’t there be cheap wind power available the company would be hit by even worse losses.

    The value of this brand new plant had been downgraded from € 3 billion (the cost to build it) to € 2 billion only this year.
    € 1 billion losses in the first year, thanks to cheap REs they don’t have to pay for the coal as well ….;)

    So there is simply no need for a view fixed on an island system, the international RE-connections serve the European market very well.
    And more are being build, so many that the string pullers intervene to have less interconnectors!
    Protectionism that is, Spain doesn’t want to connect to Portugal, France not to Portugal, the UK puts down more interconnectors to Ireland and so on.

    The shortest strings in the grid are the cheapest and fastest, these would finish the old system straight away.
    So very long threads are being spun like UK-Iceland, UK-Norway, Germany – Sahara and so on.
    The longer it takes to build these interconnectors the more profitable the old system can be.

  6. Henk Daalder Pak de Wind says

    What if coal plants with CCS are part of the equation?
    Power from these coal plants will be more expensive, but comparable to offshore wind power.
    So stimulation for offshore wind power, could be replaced with competition between these offshore wind power prices and the elevated fossil with CCS power price.

    Some countries will have to adjust their regulations, to allow power users, to own a piece of a shared wind farm and have their power at cost price, 2 to 3 cents EUR.
    Because of the low power pice, a piece of a shared wind farms will be a mass consumer product, and half the cost of the energy transition (for the on land wind power part)
    Some countries will need to make the paradigm shift to the grid as a real shared resource.
    Everyne has to make the shift from buying power to buying generatriong power, as lots of people do already with solar panels.
    Windpower is still cheaper and needsmuch less space, so lets lower the cost of energy with shared wind farm.

    http://bit.ly/become-a-proud-windfarm-owner

  7. Nishioka Yoshio says

    Great! Germany! I appear!
    Arigatou! Germany Government! The great change policys are Nuclear, Coal to Renewable Energy!
    At the next, considering sustainable policys, and peoples be glad and work!
    The repairing minds and actions are key! Arigatou! Now, President Obama directly send WHouse news! So we can talk with Climate Change issues inside!
    Badman Nishioka/rainforest action group/HUTAN Group/Osaka

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