1. GERMAN ENERGY TRANSITION - ENERGIEWENDE 15 1. GERMAN ENERGY TRANSITION -ENERGIEWENDE This chapter provides the detailed information needed to understand the energy transformation in Germany. Energiewende (EW)1 is not simply an evolutionary change which partially impacts particular energy sources and their use, but a complete reconstruction of a modern industrial country's energy sector which is incomparable in Europe. Energiewende is also an important test case for countries inside and outside of the European Union. The success of this concept would mean a significant reformation of other national power industries, and would thereby challenge the traditional view of the energy mix, management, and organization. The failure of Energiewende would strengthen the persisting skepticism toward the possibility of more significant replacement of fossil and nuclear resources with renewable technologies. A debate on Energiewende can be seen in the meeting of the World Energy Council, where 35 national experts (20 from European countries, 15 from countries outside of Europe) assessed the possibility of extending EW outside of Germany. One third of the participants identified this policy as a possible model for implementation, but half of the respondents completely rejected the idea. The high financial costs of EW were identified as the biggest problem and the abandonment of the nuclear power system 1 Even though the term Energiewende has been specifically associated with Germany over the last two decades, its origins are significantly older. The term was used for the first time in 1980 in the Öko-institute Energy transition study: Growth and prosperity without oil and uranium. (Energiewende: Wachstum und Wohlstand ohne Erdoel und Uran) (Buchan D., 2012, p. 4) 1 6 ENERGIEWENDE: CURRENT STATE, FUTURE DEVELOPMENT AND THE CONSEQUENCES FOR THE CZECH REPUBLIC 1. GERMAN ENERGY TRANSITION - ENERGIEWENDE 17 was thought to be too fast. The most important output of the meeting was that three-fourths of the experts perceive EW as a threat to European energy security. (Energy Post, 2015) The structure of this chapter is as follows: First, we analyze Energiewende itself - its structure, the active governmental policy which governs it, as well as its development, fundamental regulatory instruments, and stakeholders. Next we explain the impacts of EW on the energy sector of the Federal Republic of Germany from several perspectives, specifically, the source mix transformation, the import and export of electric power, and network stability. Then we focus on the financial aspects of EW, and its costs and influence on electricity prices. We have also added a chapter dealing with public opinion, as this issue is fundamental to the continuation of EW. 1.1 Origins and development of Energiewende Energiewende stands on two basic pillars: nuclear power phase-out and climate protection measures, both of which are strongly interconnected and mutually reinforcing in German politics. Nuclear energy was an important element in the building of the power sector in post-war (western) Germany. Together with domestic coal, nuclear resources were meant to provide a sufficient amount of safe (in terms of fuel import) and cheap energy. Given the financial demands of nuclear technology, however, German companies were skeptical of the investments needed. Thus the government began to subsidize nuclear development. By 1967 they had invested a total of 5.3 billion Deutsche marks, and by 1972 they had added almost 6.7 billion marks more. This meant that by the 1970s, Germany already had 17,000 MW of nuclear capacity. (Hake, 2015) There was a broad consensus in the country on the necessity for nuclear power; these resources were seen as the key economic element in both energy security and the reliability of the power supply. The situation began to change at the end of the 1960s with the formation of the political movement referred to as the Ex- tra-parliamentary Opposition (Ausserparlamentarische Opposition). This movement consisted of leftist students who were disappointed by the persistence of the great coalition of the SPD and CDU, and the Vietnam War, and they promoted socialist topics. Environmental issues gradually permeated into their rhetoric, eventually crystallizing into resistance against nuclear energy. These issues then began to be adopted by both governmental and non-governmental parties. The planned nuclear power plant in the town of Wahl near the border with France played an interesting role in the formation of the German anti-nuclear movement. Its construction was announced in 1973, and was followed by increasing numbers of organized protests by students from nearby Freiburg. Local farmers also joined these protests (the proposed site was in a wine region), as did some scientists. The growing pressure led to a withdrawal of the construction plan in 1983. In addition to strengthening the anti-nuclear sentiment of some non-governmental groups, the discussed power plant also played a considerable role in the formation of the Green Party. (Morris & Pehnt, 2014, p. 53) Thus the original consensus on the necessity for and benefits of nuclear energy was progressively disrupted. The accident at the Three Mile Island nuclear power plant in 1979 and the difficult negotiations over the nuclear waste depository in Gorleben also contributed to the situation. The first studies on a possible nuclear-free Germany emerged (e.g. Future of Nuclear Energy Policy from 1980, initiated by Bundestag) and the strongly anti-nuclear Greens entered parliament in 1983. Their role was nevertheless marginal in comparison with the anti-nuclear CDU/CSU, SPD and FDP.2 In April 1986, the Chernobyl disaster occurred. This accident had a dramatic impact on the situation in Germany. Surveys of 2 Christian Democratic Union of Germany, Christlich Demokratische Union Deutschland; Christian Social Union in Bavaria, Christlich-Soziale Union in Bayern e.V.; Social Democratic Party of Germany, Sozialdemokratische Partei Deutschlands; Free Democratic Party, Freie Demokratische Partei. 1 8 ENERGIEWENDE: CURRENT STATE, FUTURE DEVELOPMENT AND THE CONSEQUENCES FOR THE CZECH REPUBLIC 1. GERMAN ENERGY TRANSITION - ENERGIEWENDE 19 public opinion carried out during the following weeks showed the significant dominance of proponents for the shutdown of nuclear sources (86%), and 17% of respondents demanded the immediate shutdown of these sources. (Hake, 2015, p. 536) Also, the attitude of the main political parties changed when the SPD came out in favor of the anti-nuclear camp. The 1980s thus saw the beginning of the deterioration of German confidence in the future of nuclear technology. In light of the evolution of Energiewende, another aspect of the nuclear industry is also interesting. From the very beginning, resistance against the industry served as a unifying force for all of the possible environmental and climatic movements in German society. In the 1970s, growing anti-nuclear sentiment and environmental consciousness raised the issue of renewable energy sources (RES). This was stimulated by the oil crises, specifically, the problems with the oil supply from the Middle East in 1973/1974 and 19793- In 1974, the first RES governmental subsidy program was launched in the amount of 10 million marks. It focused above all else on photovoltaic systems. In 1977, a system of subsidies was introduced which provided investors with 25% of the costs of solar panels and heat pumps. By the end of 1982, 150 million marks had been invested from the public budget into RES. The 1980s and '90s saw a period of a growing pressure to deal with climate issues, including many inner-German and international commitments for the reduction of carbon dioxide emissions. It is interesting that the strongly environmentally active German society did not associate these issues with (low-carbon) nuclear technology. Only the political parties, above all the CDU/CSU and FDP, typically followed this line of reasoning. Thus the defining features of these years were the growing 3 Of course, the link between the oil crises and RES support was not and is not immediate. Renewables are today used primarily as sources of electric power, and their use in transportation is limited. However, the oil crises did draw attention to the general problem of society's dependence on limited and imported fossil fuels and in that way emphasized the need for RES. distrust of nuclear energy and the intensive effort made in the development of renewables. In 1990, the distrust culminated in the adoption of the Act on the Supply of Electricity from Renewable Energy Sources into the Grid. (Stromeinspeisungsgesetz, StrEG) The Act imposed the obligation to accept power from RES on network operators, and energy companies4 had to pay producers a certain minimum purchase price which was derived from the market price of electricity. (Hake, 2015, p. 8) The year 1998 saw a significant step forward in the evolution of Energiewende when the Greens were, for the first time, part of the government coalition (with the dominant SPD). Their programme was actually based to a great extent on radical anti-nuclear rhetoric. The Greens' discussion with the governing SPD resulted in the acceptance of a compromise road map which determined both the rules and schedule of Germany's gradual withdrawal from the atom. The road map was introduced in 2000 and adopted in 2002. It contained the following rules: the life span of existing nuclear power plants was limited to 32 years; the amount of energy the nuclear plants were allowed to produce was defined (approximately 2.6 million GWh of combined production over the entire period), and under this policy, the companies were not compensated for the decommissioned nuclear plants. (Hake, 2015, p. 9) Parallel activities were carried out which focused on strengthening the role of RES. StrEG had proved to be an important, yet insufficient, tool for the development of these technologies. The problem was that the amount of aid was derived from the market price of electricity which was falling in relation to the German liberalization. Therefore the Act on Granting Priority to Renewable Energy (Gesetz fur den Ausbau Erneuerbarer Ener-gien, EEG) which calculated the price based on the price of the RES technologies was introduced. 4 In the 1990s, the separation (unbundling) of the electricity producers and the transmission and distribution grid operators was yet not applied. In most cases it was one and the same company. 20 ENERGIEWENDE: CURRENT STATE, FUTURE DEVELOPMENT AND THE CONSEQUENCES FOR THE CZECH REPUBLIC 1. GERMAN ENERGYTRANSITION - ENERGIEWENDE 21 The arrival of Angela Merkel's great coalition in 2005 (CDU/ CSU and SPD) brought other changes to the German energy policy. During her first term, ambitious plans for climate related issues which later transformed into specific domestic objectives were typical for the Chancellor. The pressure for more RES in the energy mix rose, and both reduction in consumption and energy efficiency were discussed more intensely. All important political party actors supported the German climate goals and environmental policy. The camp of proponents for nuclear energy practically ceased to exist. Parties supported either a faster (SPD, Greens, leftist party Die Linke) or a more gradual withdrawal (CDU/CSU, FDP) from this technology and allowed for the use of nuclear energy as a transitive source on the road toward a system based solely on RES. The key concept paper of Chancellor Merkel's government was the Energy Concept for an Environmentally Sound, Reliable and Affordable Energy Supply (Energiekonzept für eine umweltschonende, zuverlässige und bezahlbare Energieversorgung). It was publicly introduced in 2010. The concept in fact defined the basic environmental-energy goals which EW is currently striving to reach. (Hake, 2015, p. 10) There were still several important shifts to come for the nuclear policy, however. In October 2010, the Atomic Energy Act was amended. Production limits for the amount of electricity produced by nuclear power plants increased, and plant lifespan was extended. But soon after, in March 2011, the power plant accident in Fukushima, Japan occurred. This united both the German public and the political elites in their resistance to nuclear technology and the controversial decision was negated. In the same month, a nuclear energy moratorium was announced and the seven oldest nuclear power plants were shut down. In June 2011, a decision was made to shut down the remaining plants by 2022. 1.2 Goals of Energiewende As previously mentioned, in 2010, the German government defined its basic energy transition objectives in the document Energiekonzept. It was later amended with the request to abandon nuclear energy by 2022. 1 Tab. 1: The Principal EW Targets 2020 2030 2040 2050 Greenhouse gas emissions (compared to 1990) -40% -55% -70% -80 to -95% Primary energy consumption (compared to 2008) -20% - - -50% Electricity demand (compared to 2008) -10% - -25% Residential sector heat consumption -20% - .:. - V " » RES share of electricity consumption More than 35% More than 50% More than 65% More than 80% RES share in the final energy consumption 18% 30% 45% 60% Source: (Agora Energiewende, 2014, p. 1) These basic objectives in Energiekonzept are accompanied by a wide range of partial objectives, commitments and limits. The key question, thus, is to what extent they are binding. In the long-term, it is (in our opinion) necessary to consider them as important indicators which make the formation of specific policies and laws possible, rather than as unalterable dogma. As German society is almost completely unified on EW issues, a well-reasoned adjustment of these objectives, when necessary, would not be a significant complication nor would it be a reason for major political discord. 22 ENERGIEWENDE: CURRENT STATE, FUTURE DEVELOPMENT AND THE CONSEQUENCES FOR THE CZECH REPUBLIC What is more, the target numbers must primarily be perceived as a well formulated tool that will facilitate the fulfillment of the broader ideological intentions of Energiewende. As laid out in the Energiekonzept, the aim of the transformation is to provide an environmentally acceptable, reliable and affordable energy supply. This shows that EW is not focused merely on climate protection. The document states that "...the world's rising demand for energy will lead in the long term to a pronounced increase in energy prices. Our country's dependence on energy imports would also continue to increase...". (BMWi and BMU, 2010, p. 3) In the context of this and other statements in the Energiekonzept, RES can be seen as a means to ensure both reliable (in the terms of independence from other producer countries) and affordable supply (based on the assumptions that fossil fuel prices will continue to rise and that RES prices will continue to fall thanks to technological innovation). It is possible to find hints of other motivations for Energiewende in the document. While not included in the official objectives of Energiewende, the vision of export opportunities for German industry is clearly apparent. On its web pages, the Federal Ministry for Economic Affairs and Energy (BMWi, 2015a) states, "New global markets have arisen in the wake of the expansion of renewable energy sources and efficient use of energy...", and that the investments related to the Energiewende "...will reinforce the leading position of German companies in the field of environmental and energy technologies...". (BMWi and BMU, 2010, p. 5) The Renewable Energies Export Initiative was even established in order to support the industry abroad. (BMWi, 2015c) The search for new opportunities for the German industry is also linked to the general desire for sustainable economic growth. Energiewende stimulates investment, technological advancement and therefore economic growth as well. Unlike many other processes, Energiewende achieves that growth while respecting the environment and acknowledging the finite nature of some natural resources. In the words of Norbert Röttgen (CDU), former Federal Minister of the Environment, "Thanks 1. GERMAN ENERGY TRANSITION - ENERGIEWENDE 23 to Energiewende, the conflict between ecology and economy has finally been resolved...". (Bosman, 2012, p. 3) Generally speaking, environmental motives and nuclear energy concerns were the main triggers of Energiewende. There were, however, other security and economic motives that were also outlined in the document which may have played an important role in the decision-making of the political elite. 1.3 Regulatory environment of Energiewende The German energy transition is an extremely complex project which greatly exceeds the boundaries of the national energy sector in terms of the structure of the individual policies, laws and regulations used in its implementation. Although the assessment of these would exceed the scope of this text, it is very well summarized in a BMWi study.5 In the following section we introduce the basic pillar of the policy - the Act on Granting Priority to Renewable Energy (EEG), and its 2014 reform. The EEG was adopted in 2000 and its goal was to cover the costs of development of selected technologies. The document defined the two main tools to support RES. The first was financial subsidy. This took the form of feed-in tariffs (FiT) in which purchase prices were guaranteed for 20 years,6 or alternatively, a renewable energy producer could directly trade the electricity and receive a bonus which was calculated in advance (system of 5 BMWi: Overview of legislation governing Germany's energy supply system. http://www.bmwi.de/English/Redaktion/Pdf/gesetzeskarte,property=pdf, bereich=bmwi20i2,sprache=en,rwb=true.pdf 6 More simply, the feed-in tariff purchase price calculation mechanism means that the responsible authority (regulator) derives the basic price per kWh by dividing the costs of the selected technology by the number of kWhs expected from a similar source during its lifespan (here 20 years). In the end, the amount of profit resulting from the preference of the particular country is added (usually in units per cent). The guaranteed prices for the new sources change (are reduced) in the defined time periods (annually, quarterly) according to the varying costs of the given technology. 24 ENERGIEWENDE: CURRENT STATE, FUTURE DEVELOPMENT AND THE CONSEQUENCES FOR THE CZECH REPUBLIC market premium). Secondly, network operators were obligated to preferentially purchase electricity from RES. On l April 2014, the fundamental reform of the EEG was adopted. The reform was predominantly motivated by the three factors. The first factor was the increase in expenditures needed to subsidize RES. The RES subsidies and other related costs gradually increased the price of electricity for German end users to one of the highest levels in Europe, and the government was compelled to respond. The second motive for reform was the desire to bring more renewables to the market. The above-described mechanism for setting purchase prices was, de facto, separating RES from the market. This was because the producers of these sources did not need to respond to any current or long-term shortage or surplus of electric power, price, or the complications (and costs) which were associated with the less predictable production of alternative sources of energy. The reform was intended to prompt RES electricity producers to consider these market signals more seriously. The third reason for the reform was the rising demand placed on a grid which was historically constructed for operation based primarily on traditional (dispatchable) sources. Decentralized RES began to require large investments into the construction of new lines and, moreover, RES market volatility increased both the cost of network regulation and the cost of maintaining the source balance disrupted by the multiplying imbalances. The reform entered into force on 1 August 2014 and the following changes were introduced: 1) Adjustment of the RES subsidy. The general declared target remained set at 40-45% of RES in gross electricity consumption by 2025, 55-60% by 2035 and 80% by 2050. In order to stabilize the pace of construction that would be necessary to meet the new target capacities, corridors determining the desired capacities of the new facilities for each year and each source were established. In the event of over or underproduction of capacity, the amount of subsidy is adjusted in a way which sends a positive signal to investors. This was intended 1. GERMAN ENERGY TRANSITION - ENERGIEWENDE 25 to lead to a more moderate and, above all, more predictable growth in the RES share of the energy mix. Tab. 2: Projected capacity of proposed RES facilities (for comparison, the total installed capacity in 2014 is in brackets) Onshore wind farms 2.5 GW per year (34.6 GW onshore and offshore farms together). The calculation also includes old sources that were shut down during the respective year. Offshore wind farms To reach 6.5 GW of the total installed capacity by 2020, 15 GW by 2030 (34.6 GW onshore and offshore farms) Photovoltaic power 2.5 GW per year (37.5 GW). plants Biomass 100MWperyear(6.4GW). No targets for the geothermal and water energy industries Source: (The Regulatory Assistance Project, 2015, p. 13) (BMWi, 2015b, p. 7) A system of gradual reduction (monthly, quarterly) of the subsidy, regardless of installed capacity, was also introduced. The trend to support less expensive technologies (PVE and onshore farms) at the expense of the more costly technologies (offshore wind farms) is obvious here. 2) Gradual change in the way RES electricity is traded. First, fixed purchase prices for the new sources (with the exception of small scale production facilities7) were eliminated and replaced with a system of market premiums. This was a significant change for producers. In terms of fixed purchase prices, their strategy has become clear: to use a source when weather and technical conditions permit. Market price is not important for them; these producers also want to sell when there is a surplus of electricity. 7 This is the case of the power plants built before 1 January 2016 with an installed capacity lower than 500 kW and, additionally, power plants with an installed capacity of 100 kWthat were put into operation after 31 December 2015. (Lang & Lang, 2015, p. 137) 26 ENERGIEWENDE: CURRENT STATE, FUTURE DEVELOPMENT AND THE CONSEQUENCES FOR THE CZECH REPUBLIC The switch from fixed purchase prices to market premiums meant, however, that producers would only receive a bonus for electricity they sold on the market themselves. Potential consumers, of course, buy electricity during periods of higher prices8 (periods of relative shortage) under the assumption that producers will absorb the difference in price between the contracted amount of electricity and the actual supplied electricity. The expectation is that producers will attempt to better manage production and also utilize more short term trades (on power exchange) to adjust for the discrepancy. The energy system as a whole then experiences more stability and lower exposure to the fluctuation of RES.9 3) The cancellation of FiT for the new sources is only one part of the RES financing reform, however. EEG reform also introduced auctions as a new mechanism for determining the RES subsidy. This was intended to lower prices, to strengthen RES integration into the electricity market, and to reach a greater compliance with the new EU strategy.10 In 2015, this model was tested on free standing (e.g. not rooftop) solar power stations. This process is regulated by the Ordinance for Competitive Bidding for Financial Support of Freestanding Installations (Verordnung zur Einführung von Ausschreibungen der finanziellen Förderung der erneuerbaren Energien, FFAV) and is as follows: Auctions for the total installed capacity of 500 MW were to be held in 2015, for 400 MW in 2016 and for 300 MW in 2017. Individual bids 8 EEG reform also directly deals with the problem of the negative prices of < electricity. In the event that the price of electricity for the German-Austrian commercial zone is negative on the spot market of EPEX Spot SE in Paris for six consecutive hours, the support will be restricted until the prices reach positive values. (BMWi, 2015, p. 18) 9 Variable in the terms of substantial dependence on the weather cycles. This means, above all, wind sources and photovoltaic. 10 The Guidelines on State Aid for Environmental Protection and Energy 2014-2020 lay down the new framework rules for the RES subsidy across the EU. According to these guidelines, beginning in 2017 the RES subsidy should be determined using the auctions. 1. GERMAN ENERGY TRANSITION - ENERGIEWENDE 27 can vary between lokW and 10MW. The use of agricultural land for new construction was restricted. Two specific financing models were tested. At the beginning of 2015, the first model was applied to the first auction, and each successful participant received the requested amount of financial support. The second model was applied to the second auction. The amount of aid was uniform and was determined by the highest accepted bid (Lang & Lang, The 2014 German Renewable Energy Sources Act revision - from feed-in tariffs to direct marketing to competitive bidding, 2015, p. 138). The experience from these auctions should serve as the basis for determining the support structure for all RES. As previously mentioned, this system should be put in place beginning in 2017. 4) The redistribution of the costs of the RES subsidies has been controversial for some time. The substantial portion of these costs is borne by households. Through the Special Equalization Scheme (Besondere Ausgleichsregelung), Germany, an industrial pro-export country, provided an exemption from the EEG fee to certain enterprises (energy companies, firms involved in international trade, and railway companies). In 2014, the total amount of these exemptions was approximately €5.1 billion. The resulting relatively low electricity prices for German companies, when compared with the rest of Europe, has led to disputes with the rest of the EU, and there have been discussions regarding the unfairness of the state aid. The exemption also raises the kWh price by 1.35 cents for the consumers for whom it does not apply (households, smaller firms). (Dinkloh, 2014) The European Commission launched an investigation into the public aid of the exempt companies. The EEG reform adjusts this scheme, inter alia in accordance with EU requirements for limiting state aid. The financial support will continue for companies which are significantly threatened by electricity prices and which consume at least lGWh of the electricity that is subject to EEG. The fee is calculated in the following way: the first GWh is paid 28 ENERGIEWENDE: CURRENT STATE, FUTURE DEVELOPMENT AND THE CONSEQUENCES FOR THE CZECH REPUBLIC at the full fee amount, and for each additional GWh the fee is reduced. Specific conditions are also applied for railways. Furthermore, the implementation of the system is gradual, giving the companies time to adapt to the EEG reform. (Lang & Lang, n.d.) In 2014, the total number of subsidized companies increased to 2452, compared to 2388 one year earlier. This increase was especially seen in the railway sector (123 applications for fee reduction). Total company savings were expected to be approximately €5.1 billion. 5) The rules governing the use of RES electricity consumption by the producers for their own needs were also tightened. Producers (large producers, in particular) must now also pay the RES subsidy fee, however not at the full rate. On the other hand, EEG reform leaves all of the basic principles of Energiewende unchanged, or with only slight adjustments. RES remain favorable because the subsidy raises the price to a level which is above the market price. This financial aid is guaranteed for a period of 20 years, plus one year for bringing the operation online. For new power plants, the subsidy is dependent on the date of installation and is gradually reduced to reflect technological progress and the price reduction of technologies. Grid operators have to pay the EEG fee for the renewable electricity they receive and they are obligated to connect the RES sources to the grid. The burden of EEG financial support remains on consumers. (Lang & Lang, The 2014 German Renewable Energy Sources Act revision -from feed-in tariffs to direct marketing to competitive bidding, 2015, p. 134) As for the development of further legislation, another revision of the EEG should be carried out in 2016. It will address the preparation of the above described auction system. 1. GERMAN ENERGY TRANSITION - ENERGIEWENDE 29 1.4 Energiewende actors and attitudes regarding the transformation Energiewende influences and is influenced by many various actors and the interests of these actors have a significant impact on the shape and direction of the entire process. The following sub-chapter therefore introduces the most important actors in the field of German politics and their attitudes towards EW. 1.4.1 Political parties The basic features of the energy policy are determined at the constitutional level. Here the attitudes of the main political parties meet and these we are now going to describe. CDU/CSU As previously stated, during the first post-war decades there was a wide consensus in Germany regarding the necessity for nuclear energy. The positions of all the established political parties (CDU/CSU, SPD and FDP) were based on this consensus and remained unchanged into the 1970s and the first half of the 1980s when the unity of public opinion regarding this issue started to fall apart. (Hake et al., 2015, p. 4-5) The conservative CDU/CSU were among the strongest supporters of the atom. At the same time, both they and the industry remained skeptical of the vision of the strengthening environmental circles who saw the future of energy in renewable resources. Helmut Kohl entered office in 1982, and his government halved the expenditures for RES as a part of austerity measures. (Hake et al., 2015, p. 6) The means for RES development were again increased after the Chernobyl accident in April, 1986. In reaction to the change in the social climate, the coalition government of the CDU/CSU and FDP established the Federal Ministry for the Environment, Nature Conservation and Nuclear Safety (BMU). Previously dispersed competences were brought together under 30 ENERGIEWENDE: CURRENT STATE, FUTURE DEVELOPMENT AND THE CONSEQUENCES FOR THE CZECH REPUBLIC this new ministry. Nevertheless, despite clear public resistance and the about-face of the SPD opposition, the governing parties did not question the necessity for nuclear energy.11 (Hake et al., 2015, p. 5) While in the 1990s the Christian Democrats' underlying belief in nuclear energy remained, their approach towards renew-ables gradually changed. In 1987, Helmut Kohl spoke of the "...serious threat of climate change resulting from the greenhouse effect..." (German Energy Transition, 2015). A group of conservative deputies began to work with the Greens on a new legislative tool to support RES. This was partially due to the influence of the new ministry (BMU) and lobby groups. The result was the aforementioned 1991 Act on the Supply of Electricity from Renewable Energy Sources into the Grid (StrEG). (Hake et al., 2015, p. 8) The support of RES became a unifying element in the politics of the energy industry. (Kemfert & Home, 2013, p. 1) The conflict before the 1998 elections therefore formed around the nuclear energy issue. The elections resulted in a government of the SPD and the Greens which focused its energy policy on EEG law and plans to phase out nuclear power plants by 2022. The CDU/CSU and FDP opposition criticized both actions, partly because the EEG diverted the RES support from the principles of market economy which were preferred by these parties. Before the 2005 elections, the CDU/CSU changed their rhetoric. Instead of abolition of the EEG, they began demanding that its tools be improved. In spite of the fact that the conservatives subsequently created a coalition with the SPD who supported both the EEG and the nuclear phase-out, policies in this domain remained untouched. Chancellor Merkel focused on the area where there was a congruence with their coalition partner, i.e. A certain concession to public opinion was made when the government decided not to build new nuclear power plants until the opinion of the public changed (Hake et al., 2015, p. 6). The government was not willing to shut down the existing facilities, however. 1. GERMAN ENERGY TRANSITION - ENERGIEWENDE 31 on laying out and implementing climate policies. (Hake et al., 2015, p. 9) In 2009, the government of the CDU/CSU and the (also pro-nuclear) FDP replaced the great coalition. This freed the hands of the conservatives to change the nuclear policy. Chancellor Merkel's cabinet delayed the definitive shut down of the nuclear power plants by 14 years. In this phase, the CDU/CSU acknowledged the vision of a nuclear phase-out but cited the atom as a safe, affordable and environmentally friendly "bridge" into the RES age. It was precisely the development of the alternative sources which the government had supported in the Energiekonzept. (Hake et al., 2015, p. 10) After the accident in Fukushima in March 2011, public support for nuclear energy dropped to 20%. The government came under pressure from the opposition, the public and the media. Public opinion on this issue began to impact the popularity of CDU/CSU. One survey (successfully) predicted that the third most populated German state and long-term bastion of conservatives, Baden-Württemberg, would be dominated by the anti-nuclear Greens12 in the upcoming elections. (Beveridge & Kern, The Energiewende in Germany: background, developments and future challenges, 2013, p. 7-8) Under these circumstances, the government changed its nuclear policy, shut down the seven oldest nuclear power plants and later restored the red/green coalition plan to disconnect the rest of the facilities from the network by 2022. (Beveridge & Kern, 2013, p. 8) It is questionable to what extent the Christian Democrats identified with the decision they had long resisted and which was probably made only in the face of public opinion. According to Kemer and Home (2013, p. 5), a part of the CDU/CSU has continued to support the original energy system. 12 There were several reasons for the decline of the CDU in the regional elections (discontent with the solution of the Euro crisis, resistance of the public against the big railway development project Stuttgart 21 etc.), but the issue of the atom was undoubtedly one of them. (Beveridge & Kern, 2013, pp. 7-8) 32 ENERGIEWENDE: CURRENT STATE, FUTURE DEVELOPMENT AND THE CONSEQUENCES FOR THE CZECH REPUBLIC 1. GERMAN ENERGY TRANSITION - ENERGIEWENDE 33 However, because of the social climate13 we cannot expect a change in the official party attitude unless a dramatic change of conditions occurs. Thus a political and social consensus regarding the new energy system was established. There did remain certain differences in opinion on the form of its implementation, however, for example the role of industry and the way Energiewende is financed. Specifically however, the CDU/CSU had a relatively vaguely worded platform for the energy sector during the 2013 federal elections. The plan mentioned the integration of RES electricity into the domestic market and the creation of a common European energy market, but the specific policies remained unclear. The reason for this was most probably the intention to leave an opening for all potential coalition partners. (Kemfert & Home, 2013, p. 11) In this respect the CDU/CSU succeeded. The above described EEG reform, approved by the coalition of CDU/CSU and SPD, shows the ability of the two biggest parties to reach a common solution in spite of the fact that the conservatives are more likely closer in their views to the FDP, whereas the SPD is closer to the Greens. FDP The liberal, center-right FDP is a smaller party, which traditionally supplements one of the main parties (CDU/CSU and SPD) as a coalition partner. While their views on nuclear phase-out and RES development have evolved in relative accordance with the conservative party attitude, their pro-nuclear position has generally been even a bit more conservative. Above all, the FDP has tried to keep RES subsidies within market boundaries. Before the 2005 elections, the FDP was the only party that still rejected the EEG implemented by the SPD and the Greens. The party finally accepted the EEG reform just before the 2009 elec- tions. This resulted in a German political consensus on the ambitious climatic objectives and support of RES using the EEG. (Hake et al., 2015) In the 2013 federal elections, the liberals called for a faster integration of RES into the market and for certain measures14 which align with the interests of the traditional centralized energy sector. Because of their call for reform, Kemfer and Home (2013, p. 5) refer to the FDP as informal opponents of Energiewende. The party failed in the elections (for the first time in history they did not get into parliament), however, and thus do not have such an important influence on the current situation. The Greens The German Green party was established in 1980. The anti-nuclear movement, environmental organizations and much of the peace movement played an important role in the process of party formation. The party got into parliament as early as 1983. One of their main political objectives was the immediate shutdown of all nuclear power plants in Germany. RES development went hand-in-hand with this goal. (Hake et al., 2015, p. 5) The Greens, thus, were the first party to strive for the implementation of Energiewende. The German Greens became one of the most successful green parties in the world. This can be partially explained by the growing support for the party by the anti-nuclear movement. (Beve-ridge & Kern 2013, p. 5) Until the Chernobyl accident, however, when the anti-nuclear camp was joined by the social democrats, the party stood in isolation in the parliament. (Hake et al., 2015, p. 5) The first significant mark made by the Greens on the German energy policy was in collaboration with some representatives Rural areas, which represent the traditional electoral base of the CDU/CSU and which are significantly involved in the building of the RES installations, also support the withdrawal from the atom and its replacement by RES. 14 E.g. advocating for a European quota model instead of the national EEG or entitlement of the Federal Network Agency to temporarily stop the feed-in priority of renewables. (Kemfer and Home, 2013, p. 11) 34 ENERGIEWENDE: CURRENT STATE, FUTURE DEVELOPMENT AND THE CONSEQUENCES FOR THE CZECH REPUBLIC of the CDU/CSU on the draft law for support of RES (StrEG). The party gained a wider field for maneuvering in 1998 when it appeared as a potential coalition partner in the government with the SPD. The Greens conditioned their participation in the government on the fastest possible shut-down of the nuclear power plants. The resulting compromise plan was a success for the party, albeit a partial one. It was approved in 2000 and it fixed 2022 as the year for the shut-down of the last nuclear power plant. (Hake et al, 2015, p. 8) This was, in conjunction with pushing through the EEG, the step which completely changed the German energy policy and de facto initiated the present Energiewende. The Greens sharply criticized the temporary reversal of the decision on nuclear phase out made by the conservative-liberal government. In reaction, they joined forces with the leftist party Die Linke, environmental organizations and unions. Together they organized industrial protest actions with tens of thousands participants. (Hake et al., 2015, p. 11) In the 2013 election campaign, the Greens presented themselves as the advocates for the current shape of Energiewende. They advocated for the establishment of the special Federal Ministry for Energy and Environmental Affairs and called for the intermediate steps which would make the transformation more socially inclusive. (Kemfert & Home, 2013, p. 12) SPD The Social Democrats were the first of the established parties to take the side of the anti-nuclear camp. As early as the second half of the 1970s when public opinion on nuclear energy started to take a negative turn, there were critical voices inside the SPD which disrupted the party consensus. (Hake et al., 2015, p. 5) A change in party attitude was brought about by the Chernobyl accident, after which the SDP converged toward a vision of an atom-free Germany. (Beveridge & Kern, The Energiewende in Germany: background, developments and future challenges, 2013, p. 5) 1, GERMAN ENERGY TRANSITION - ENERGIEWENDE 35 In 1998, when the Social Democrats came to power after 16 years of a CDU/CSU and FDP government, they enforced, in conjunction with the Greens, the EEG and the plan for the shutdown of the nuclear power plants. The postponement to 2022 was pushed through by the SPD alone, as the party was afraid of an increase in electricity prices and job losses in the nuclear industry. (Hake et al., 2015, p. 8) The SPD also participated in the climatic initiatives of Angela Merkel's first cabinet. However, they were replaced by the FDP in the second coalition government. The Social Democrats' energy programme in the latest federal elections was close to that of the Greens. Despite the party's historical links to the coal industry, the SPD presents itself as a categorical advocate of the transition to an energy system in which RES plays a primary role. The SPD approved of the current shape of Energiewende, but strove for the improvement of its management through the establishment of the Federal Ministry for Energy and the German Energy Council. (Kemfert & Home, 2013, p. 11) Furthermore, the SPD strongly advocated for the electricity tax reduction and the adoption of legislation regulating the prices for end users. (Mason, Energiewende: Electricity bills and Germany's election, 2013) Within the framework of the great coalition that resulted from the elections, the SPD participated in the above described EEG reform. Although the reform did not reflect the party's energy election plan, it would indirectly contribute to their goal of reducing the transformation costs for consumers. Die Linke In 2007, two parties, each with a regionally limited sphere of influence, merged and created the national far-left party Die Linke. This party has thus far not played a significant role in the formation of the German energy policy. Nevertheless, the party, much like the SPD and the Greens, favours the intensive implementation of Energiewende. Unlike the SPD and the Greens, however, they advocate for a total socialization of 36 ENERGIEWENDE: CURRENT STATE, FUTURE DEVELOPMENT AND THE CONSEQUENCES FOR THE CZECH REPUBLIC 1. GERMAN ENERGY TRANSITION - ENERGIEWENDE 37 electricity producers and the transmission grid. (Kemfert & Home, 2013, p. 12) 1.4.2 Competence structure and its risks While difficult to achieve, effective coordination is crucial for the implementation of a project as complex as Energiewende. On the following pages we briefly outline the competence structure of Energiewende and the risks posed by that structure. The most important actor in the practical implementation of Energiewende is the Federal Ministry for Economic Affairs and Energy (Bundesministerium für Wirtschaft und Energie, BMWi). The ministry was established in 2013 and was transformed from the former Federal Ministry of Economics and Technology. It consolidated the majority of the competences related to the energy industry. Previously, these competences had been distributed among several ministries and had, in some places, overlapped. Besides the BMWi, specific aspects of Energiewende fall under the administration of 5 other ministries, at least 11 federal agencies or offices, 3 municipal associations and many regional institutions. The structure of Energiewende management suffers from certain problems. As was seen in the election platforms of the last federal elections (see above), there was discussion regarding the intersection of the competences at the ministerial level. This was not resolved by establishing a separate ministry, as the SPD and the Greens had hoped, but by consolidating the key energy competences under one ministry. However there are also other problematic areas of EW management. We outline three of them which we consider to be the most important. Interests and the influence of the federal states. Within the federal organization of Germany, the federal states (so called Länder) play an important and powerful role and are therefore able to limit the federal government in the implementation of its decisions. This happens, inter alia, through the Federal Council (Bundesrat) which is comprised of the representatives of the federal states and which is similar to the Upper Chamber of Parliament in the other countries. The representatives are able to restrict the maneuvering area of the government; in particular, in the cases when there are different political parties in power at the state level than at the federal level. (Kemfert & Home, 2013, p. 11) Within Energiewende, the power of the Länder is seen most in the process of the expansion of the new transmission grid. This expansion often stops on the border of the federal states which, in conjunction with the municipalities, are responsible for a great part of the approval procedures for the extension of the network. (IEA, 2013, p. 32) As is shown in chapter 5.1.1, Germany takes steps to improve and facilitate this process. Nevertheless there is a persistent failure to construct the network according to the plans, primarily because of local opposition. According to Kemfert & Home, (2013, p. 6) this is also because of the half-hearted attitudes of the transmission grid operators. The federal states are able to act not only against the federal government but also against each other. The second point of friction in Energiewende in regard to the German federal organization is conflict among the particular Länder about the placement of large RES installations. While southern states want to massively build solar or biogas power plants on their territories, the northern part of Germany is lobbying for a larger area to exploit its wind potential. If the requirements of both parties were to be fulfilled, an excessive amount of production capacities would be built. But Germany already took steps to overcome this obstacle when in 2013 the federal states agreed on more cooperation and on moving certain competences to the federal level. (Kemfert & Home, 2013, p. 6) Changes in administration Energiewende has been a project for at least 40 years but the administration which implements it changes every few years. Kemfert & Home (2013, p. 11) perceive the uncertainly over 38 ENERGIEWENDE: CURRENT STATE, FUTURE DEVELOPMENT AND THE CONSEQUENCES FOR THE CZECH REPUBLIC the future management of the governmental institution as an unknown which influences the effectiveness of the project implementation. This is undoubtedly true, but at the same time it is necessary to add that as long as Energiewende is supported by the overwhelming majority of the public (see chapter 1.7), the formation of a government striving to fundamentally jeopardize or reverse the transformation is not probable. Potential deviations in Energiewende implementation can be limited, as So-pher (2015, p. 3) suggests, by transferring more competences to governing bodies (various federal authorities and offices) whose staff does not change according to the electoral cycle. European Union Restrictions As we show in detail in the chapter 6, the German energy policy exists within the confines of the European energy policy. So when these policies are incompatible, the implementation of Energiewende can become more complicated. For example, Pegels & Liitkenhorst (2014, p. 532) worry that a potential common European energy policy on RES support could be based on the least common denominator of member state interests and therefore could endanger the more ambitious German Energiewende. This maybe one of the reasons why Germany refuses the harmonization of the support schemes (more in the subchapter 6.2.2) 1.4.3 Private actors In addition to public institutions, a whole range of private actors participate in the planning process and implementation of the Energiewende. These are energy producers, transmission grid operators, industrial enterprises (mainly energy-intensive sectors), lobby groups, citizens associations, NGOs and so on. Private actors played a significant role in advancing the Energiewende concept into German public discourse. Bosman (2012, p. 2) sees the cause of Energiewende "in the success of an influential coalition of renewable energy supporters, who have I 1. GERMAN ENERGY TRANSITION - ENERGIEWENDE 39 I managed to convince a majority of the public and the political classes that an energy system based on decentralised, renewable energy sources is feasible and indeed in many ways beneficial to the environment as well as to the economy". As is clear from the data in the chapter 1.7, the overwhelming majority of the public support Energiewende. It is generally thought that Germans are unified on this issue and this publication is based on this presupposition. However it is also obvious that not everyone in Germany agrees with the transformation. Therefore, in the limited space of this subchapter we are not going to deal with the private actors who support Energiewende, but rather with those who at least partially disrupt the social consensus. It should be noted that these are "opponents" in a very specific and, for Germany, characteristic sense of the word, i.e. actors whose objective is not to question the whole policy or to attack it, but those who draw attention to its weak points and the difficulties of implementation. Nevertheless their position also gradually softens and adjusts to the society-wide consensus. The Big Four Most of the production facilities in the country are owned by the "Big four" companies: E.ON, RWE, En.BW and Vattenfall. The sudden decision to quickly leave the atom after the Fuku-shima power plant accident in 2011 resulted in large financial losses for these companies. Based on the previous agreement, the companies actually counted on prolonging the lifetime of these power plants. Not only did this not happen, but pressure to shut down the German nuclear sources even increased. Thus, in 2012, Vattenfall took Germany to the court of arbitration in Washington (ISCID), asking for €4.7 billion in compensation. (Spiegel Online, 2014) E.ON and RWE responded similarly as well, and in summer 2012 they lodged a complaint with the constitutional court. At the same time they also approached the financial court in Hamburg over the implementation of the fuel cells tax which they considered to be in conflict with the state 40 ENERGIEWENDE; CURRENT STATE, FUTURE DEVELOPMENT AND THE CONSEQUENCES FOR THE CZECH REPUBLIC competences defined in both the constitution and in EU law. (Frankfurter Allgemeine, 2012) At the beginning of 2014, E.ON received compensation from the German state in the amount of €380 million for shutting down the power plants Unterwesser and Isar 1. This was followed by RWE's compensation claim of €235 million for the Biblis power plant. (Spiegel Online, 2014) Fig. 1: Owners of RES capacities in 2012 5% 1% 35% ■ Private persons ■ Self-empolyed persons Project developers sqyic bic nass. biogas including biometriam, sewage gas. landfill gas and the bbgeric fraction of waste; also including sewage sludge as of 2013 Source: (BMWi, 2014, p. 10) was a result of the purchase price reduction and of the more stringent restrictions on connecting photovoltaics to the grid. (Statistisches Bundesamt, 2014) Germany also has one of the highest shares of wind power in the energy mix among EU countries. For example, in 2013, investments in both onshore and offshore farms increased by €3.16 billion over the previous year. (O'Sullivan, Edler, Bickel, Lehr, Peter, & Sakowski, 2014, p. 4) The construction of the biggest offshore wind farm in Germany, BARD 1, was also completed. (Fraunhofer I WES, p. 7) 1.5.2 Conventional sources In view of the climate goals, the increase in the share of both hard coal (from 117 TWh in 2010 to 121.7 TWh in 2013) and lignite (from 145.9 TWh in 2010 to 160.9 TWh in 2013) in the production of electric energy is, to certain extent, paradoxical. This fact is often associated with the need to replace the offline nuclear sources with other power plants. However the situation 48 ENERGIEWENDE: CURRENT STATE, FUTURE DEVELOPMENT AND THE CONSEQUENCES FOR THE CZECH REPUBLIC 1. GERMAN ENERGY TRANSITION - ENERGIEWENDE 49 is more complicated. With respect to the annual aggregate data, it is evident that the decrease in nuclear production is more than compensated for by the production of the renewables. This applies less to short term production, though, when a momentary drop in RES production is actually augmented by an increase in fossil source production. In this situation, coal sources (mainly hard coal) provide flexibility. But this is not the only reason why coal remains important. The currently low coal prices on the European market thus result in the cheap electricity produced in the German coal-fired power plants. Coal, in combination with the volatile RES, also contributes to the continuously growing German export of the electricity. Fig. 7: Production capacities in GW, 2009-2014 45 40 35 30 25 20 15 10 5 0 v.__ ____________ — Hard coal • - Lignite Fuel Oil = Gas »«" Nuclear — Hydropower ••• Wind Solar Geothermal • -Biomass Other 2009 2010 2011 2012 2013 2014 Source: BMWi, 2014f, p. 22 The share of nuclear energy in the consumption of electricity decreased in 2010-2013 from 10.8% to 7.7%. The remainder of the power plants will be shut down by 2022. (BMWi, 20i4f, p. 4) Because of the social consensus, a change in this decision is not expected. According the latest data from July 2014, 6,558 MW of new thermal power stations were under construction with an expected completion date of 2016, while 11,251 MW of production capacity will be shut down by 2018. (The Regulatory Assistance Project, 2015, p. 15) 1.5.3 Electricity consumption and energy efficiency One of Germany's distinctive objectives is the increase in energy efficiency and the reduction in primary energy consumption by 20% by 2020 and by 50% by 2050, both in reference to the year 2008. At the same time, Germany has targeted a reduction in gross electricity consumption by 10% by 2020 and by 25% by 2050. These goals are supported at the EU level by the Energy Efficiency Directive 2012/27/EU, and at the national level by the National Energy Efficiency Action Plan (Nationaler Aktion-splan Energieeffizienz). Fig. 8: Energy productivity in Germany, 1990-2013 — Gross national product (Indexed, 1990 = 100) Gross electricity consumption (Indexed, 1990=100) Source: (The Regulatory Assistance Project, 2015, p. 33) As is clear from the graph, German electricity consumption has stabilized during the last decade (for energy consumption 50 ENERGIEWENDE: CURRENT STATE, FUTURE DEVELOPMENT AND THE CONSEQUENCES FOR THE CZECH REPUBLIC see the graph). Even though the values are not sufficient to fulfill the goals set out in EW, and the German authorities continue to plead for a more intensive advancement, it still reflects a significant improvement. Germany is a large and highly industrialized country, and the separation of economic growth from electricity consumption is unique in comparison with similar states. At the same time, it is evident that the stable rates of electricity consumption are not a result of the economic crisis; the German GDP is growing and the economy is one of the best in Europe. The savings are clearly due to the active effort of the society and not a consequence of external factors. Fig. 9: Development of primary energy consumption by energy source (adjusted figures in petajoules) .....illlllllllllllllHl 4 # jt 0 4 & 4 4 # f ^ # # # # ^ 4 4 f # # 4 $ 4 4 4 4 Otter*"* [I] Total I ! **rEft Source (BMWi, 2014) 1.5.4 Import and export of electricity Germany has long been distinctive among European electricity exporters, both in terms of total export and ratio of domestic production to the total trade balance. This has been disrupted by two factors in the last decade: first by the decrease in demand for electricity resulting from the 2008 economic crisis, and second, because of the shut-down of some of the nuclear power plants 1, GERMAN ENERGY TRANSITION - ENERGIEWENDE 51 in 2011. Nevertheless, as the following graph shows, German net export has continued to show steady growth over the last few years. Fig. 10: Net export of electricity, physical flows lOOOO sooo 0 IUI üttliit ■03 04 OS OS 07 08 09 10 Tl *K 13 14 Source: (The Regulatory Assistance Project, 2015, p. 17) Fig. 11: Net electricity import from CRto Germany (in GWh, physical flows) HnHHniik -8000 ■10000 •12000 •14000 --r——"■'"(•'■'-r—-1----1- 2004 2005 2086 2007 2008 2009 imi'i 2011 2012 2013 2014 Source: (ENTSO-E, 2015) The graph summarizes the trade balance between the Czech Republic and Germany. It is clear that the CR exports significant 52 ENERGIEWENDE: CURRENT STATE, FUTURE DEVELOPMENT AND THE CONSEQUENCES FOR THE CZECH REPUBLIC volumes of electricity to Germany but this trend has significantly weakened in recent years. Nevertheless both of the graphs above work only with the physical flows of electricity.15 The graph below summarizes the total balance of Germany (purple curve) and its position in relation to the Czech Republic (green curve), and provides an overview of the trade flows for the last three years. Fig. 12: Power imports/exports 1.U MIS ' ' C»eh Republic — Balance Source (Agora Energiewende, 2015) 1.5.5 Greenhouse gas emissions The volume of greenhouse gases produced in Germany is currently stagnate or shows only slight growth. The biggest greenhouse gas producer is the energy sector. (BMWi, 2014I1, p. 24) This is caused by the continued strong position of coal-fired power plants which are, due to the low price of coal, very profitable. As shown in the graph, the data for the year 2014 projected a decrease in emissions. Although in terms of physical nature of this commodity, the physical flows do not have to necessarily correspond with the contractual ones. In Germany this is an especially sensitive issue which we will deal with, for the sake of more clarity, in chapter 5.1.1. 1 1. GERMAN ENERGY TRANSITION - ENERGIEWENDE 53 Fig. 13: Greenhouse gas emissions, Germany (in millions of tons of C02 Equivalent) 1100 1050 1000 950 900 850 800 1046 1M91ÖSW IBs S3-: K 974 .........525 ^1 912 910 rö* rS> # rf? ^ <& t£ 0> S$ S> i? TP i? TP t>> t? 1? 1? 0? 1? 1? t,0 jjP Source: (Umwelt Bundesamt, 2015) 1.5.6 Grid stability and security of supply Non-dispatchable RES (photovoltaic and wind farms) as well as nuclear power plant shut-downs pose an increased problem for the stability of the transmission grid. Nevertheless the available data show that the German network is dealing with this issue adequately. This is confirmed by the following analysis. The extent of RES development in Germany is currently possible because of the traditionally high endurance of a German grid which was constructed to have very high capacity reserves. The grid is therefore able to incorporate a tens of per cents share of RES, which, until recently, was unimaginable. With the exception of the thirty or so major wind and solar power plants, all of the renewables facilities (ca. 840 with more than 10 MW capacity) are connected to the generally highly stable German distribution network (up to 110 kV). The SAIDI Index (System Average Interruption Duration Index) indicates the system average interruption duration of an electricity supply 54 ENERGIEWENDE: CURRENT STATE, FUTURE DEVELOPMENT AND THE CONSEQUENCES FOR THE CZECH REPUBLIC and is an important indicator of distribution grid reliability. In 2013, the SAIDI Index value in Germany was 15.32 minutes. This was less than the previous year (15.91 minutes in 2012), approximately the same level as in 2011 (15.31 minutes), and significantly less than in 2006-2011 (average 17.09 minutes). The German Bundesnetzagentur notes that Energiewende and the related decentralization of electricity production have had no influence on the quality of the electricity supply. (Bundesnetzagentur, 2015, pages 51, 53) Fig. 14: SAIDI - unplanned outages, emergency situations not included (minutes lost/per consumer) 900 80.0 70 0 60.0 50.0 40.0 30.0 ?o 0 UK France Austria Netherlands Germany Denmark $ff> tfP ^jt>» ^ fft> ^tf tffi jjffl ^Jft ^» Source: (The Regulatory Assistance Project, 2015, p. 35) When electricity production from RES exceeds the capacity of the distribution network, it is not possible to utilize the electricity produced even when applying the balance measures. The excess electricity is transformed to a higher voltage (220 or 380 kV) and fed into the transmission network where it becomes the part of German-wide or cross-border flows. If an imbalance occurs at the transmission network level, the TSO may connect the reserve output capacities which provide the network with the reserve energy. This can be both positive (supplied in the case of shortage) and negative (reduced in the case of surplus). T 1 1. GERMAN ENERGY TRANSITION - ENERGIEWENDE 55 It is possible, then, to monitor network stability using the three indicators: the number of times reserves are activated, the amount of contracted reserve capacity16 and the total consumption of the reserve capacity. As a general rule, the fewer the activations there are and the less energy is contracted and used for balancing the network, the more stable the network is. This is because market participants comply with their commitments without production or consumption deviations. Also, with fewer activations and a lower amount of contracted energy, less reserve capacity is necessary to maintain readiness and fewer expenses are necessary for network operation. As for the influence of RES on transmission network stability, the reserve capacity in the form of so-called minute reserves,17 mainly used for the balancing of RES, is particularly important. Fig. 15: Frequency of use of minute reserve (number of dispatch instructions) ■ 12481 2004 200S 2006 2007 2008 2009 2010 2011 2012 2013 Source: (Bundesnetzagentur, 2015, p. 88) 16 In the German system, particular TSOs project the amount of reserve energy needed in a given period and contract the reserve capacity suppliers accordingly. These services (reserve capacity available) are added into the costs of the network operator and therefore are passed on to the end consumer. The regulatory energy itself which is finally requested by the TSOs from the providers is then payed for in arrears to the originator of the deviation. 17 The reserve capacity is divided according to the source of the primary control reserve (0-30 seconds), secondary control reserve (30 and more seconds) and the minute reserve (5,15, 30 minutes). 56 ENERGIEWENDE: CURRENT STATE, FUTURE DEVELOPMENT AND THE CONSEQUENCES FOR THE CZECH REPUBLIC 1, GERMAN ENERGY TRANSITION - ENERGIEWENDE 57 The number of minute reserve activations does not follow any clear trend. Whereas in the period 2006-2012 there was, on average, a dramatic increase in requests which can be attributed to a large extent to the connection of non-regulated RES, in 2013 there was a sudden year-on-year drop of about 38% from the 2004 values, or alternatively, to the average of the years 2008 and 2009. This drop can be explained by the great changes in the balancing management. In 2010, a scheme for grid control cooperation between all four German TSOs was completed. It had the following purpose (Bundesnetzagentur, 2015, p. 84): - Sharing of the secondary and minute reserve capacities for all of Germany - Creation of a common German market with the secondary and minute reserves - Compensation for the imbalances between the particular control areas and for the connection of the reserve capacity made only for the total (final) imbalances across the system In addition, the German Federal Network Agency for Electricity, Gas, Telecommunications, Post and Railway (Bundesnetzagentur) significantly simplified market access for the reserve capacity, thereby resulting in an increase in competition and a decrease in reserve capacity prices. Specifically, this measure reduced the minimal capacity offered, shortened the contract duration and introduced the opportunity for a single investment body to participate on the market with primary, secondary and minute reserves. (Bundesnetzagentur, 2015, p. 84) Furthermore, a significant increase in intra-day market trading also influences the total need for the reserve capacity. This, together with international trade, is the cheapest balancing tool.18 Between the years 2011 and 2012, the completed intra-day transactions increased from 363,000 to almost 677,000; in 2013, it was nearly as high as 1,287,000. (Bundesnetzagentur, 2015, p. 94) Another significant increase can be expected after the introduction of the 15 minute products on the intra-day market on 9 December 2014. The deliveries for such a short interval are an ideal tool for the balancing of the non-dispatchable sources. These measures significantly influenced the indicators which directly affect end prices, namely, total reserve capacity contracted and total reserve capacity consumed. Whereas the contracted secondary reserve shows a falling long-term trend, in recent years the amount of the contracted minute reserve has been characterized instead by volatility. This volatility is, according to the Bundesnetzagentur, a direct consequence of the greater implementation of RES in electricity production. Fig. 16: Contracted secondary reserve, in MW ■ ■ ■■ . ■ . ' ..... Grid control cooperation u. heme iouirded comprising :>GHeitz. DiBW and TenrwT 3,311 ;lntegi»tior of Amprion ;• control KM sn ^ heme i 2,902 I >—i£__u --»"'ST« 1.S8S * \ 2,064 Jan May Sep Jan May Sep Jin May Sep Jan May Sep Jan May Sep Jan May Sep 08 OS 08 09 09 09 10 10 10 11 11 11 12 12 12 13 13 13 --Positive secondly control reserve Negate swondaiy control lesefv* ——-Annual average of positive secondary *.ontrot reserve -..—Annual avetage of nt-g^rivr wondary control reserve Source: (Bundesnetzagentur, 2015, p. 85) Instead of failing to produce/consume and subsequently to pay a deviation fee the missing/excess electricity is purchased/sold on the short term market to a counterpart having an opposite problem. In a sufficiently large and interconnected market, this way of the network balancing significantly reduces the need for secondary control and reserve. 58 ENERGIEWENDE: CURRENT STATE, FUTURE DEVELOPMENT AND THE CONSEQUENCES FOR THE CZECH REPUBLIC 1. GERMAN ENERGY TRANSITION - ENERGIEWENDE 59 Fig. 17: Contracted minute reserve, in MW Grid control cooperation scheme founded i Initiation of Ampuon '. control area in scheme Jas* May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep 08 OS 08 09 09 09 10 10 10 11 11 11 12 12 12 13 13 13 Positive minute reserve —T-Anrwat average g$ pg&fcs minute reserv* -Negative minute jeser ve —Annuat average of negative minute leserve Source: (Bundesnetzagentur, 2015, p. 86) Fig. 18: Average balancing energy used, in 4?C OiUl. ontioJ taopnifc* wbrm* ffKji>l*d Inbtiition olAinptmn . ■ .ri ■.: *»• in . :,. n • M A NJ 172 2*3 K A. I I :s« aa 188 > \ / \ 21S (yu........ T~ Tr \ V m** 1S1 1 ro 2 6 2 £ IS -2 ° c Source: (BMW/, 20756, p. 787J Fig. 24: EU electricity prices for industrial consumers, second half of 2013, ct/kWh ..... 30 Source: BMWi, 2015b, p. 186) 1. GERMAN ENERGY TRANSITION - ENERGIEWENDE 65 1.6.2 RES financial subsidy schemes On the previous pages we repeatedly touched on the issue of financial support for RES. It is a crucial tool for the development of these sources. At the same time this support is the object of both praise and criticism. Therefore we must analyze the entire policy in more detail. Germany has subsidized RES through the Act on the Supply of Electricity from Renewable Energy Sources into the Grid (StrEG) since 1991. The act introduced the fixed feed-in tariffs targeted mainly at onshore wind farms. In April 2000, this act was replaced by the previously mentioned EEG. (BMWi, 2014, p. 28) The graph below shows the gradual redistribution of the financial support within the particular schemes. Fig. 25: Electricity generation from renewable energy sources with and without remuneration under the StrEG and the EEG (TWh). 160 143 120 100 ro 60 40 20 »4 » a m u * x it « *' * . _ * * a =?> off 6 <** $ # £ #N j& & j& <& # & S- «•> & ■ StromEinipO F EEC- it RES without succc - I!' I Source: BMWi 66 ENERGIEWENDE: CURRENT STATE, FUTURE DEVELOPMENT AND THE CONSEQUENCES FOR THE CZECH REPUBLIC The EEG provides electricity producers with fixed purchase prices. Since 2009, this system has been supplemented with the option of market premiums in which the producer sells the electricity according to market conditions (without the buy-up obligation or fixed purchase price) and receives a certain financial bonus in addition to the market price. In 2013, this system was already prevalent and accounted for 54% of all electricity included in the EEG. Tab. 4: Electricity quantities and payments under the EEG 2000 2002 2004 2006 2008 2010 2012 2013 Hydropower GWh 4,115 6,579 4,616 4,924 4,982 5,665 5,417 6,265 Gases GWh - - 2,589 2,789 2,208 1,963 1,769 1,776 Biomass GWh 586 2,442 5,241 10,902 18,947 25,155 34,321 36,258 Geothermal energy GWh - - 0 0 18 28 25 80 Onshore wind energy GWh 5,662 15,786 25,509 30,710 40,574 37,619 49,948 50,802 Offshore wind energy GWh - - - - - 174 722 905 Photovoltaic power plants GWh 29 162 557 2,220 4,420 11,729 26,128 29,606 Total amount of electricity within the GWh 10,391 24,970 38,511 51,545 71,148 82,331 118,330 125,693 EEG Of which: electricity with fixed purchase price GWh 10,391 24,970 38,511 51,545 71,148 80,745 67,168 56,750 Of which: directly traded electricity GWh - - - - - 1,586 51,163 68,943 Gross electricity production GWh 36,036 45,120 56,632 71,638 93,247 104,810 143,463 150,878 from RES 1. GERMAN ENERGY TRANSITION - ENERGIEWENDE 67 i 0 '*-> ro