Our first insight is: Germany's Energiewende is all about wind and solar! They're the cheapest renewable energy technologies and have the most potential. Their priority in Germany's energy mix will fundamentally transform the current system and the country's energy market. Firstly, in the near future, fossil power plants, electricity demand, and electricity storage will have to be aligned with weather-dependent electricity production, namely from wind and solar sources. Secondly, the electricity market will have to be transformed into a market determined by the investment costs of clean energy systems.
With "12 Insights on Germany's Energiewende" Agora is making a contribution to the strategic thinking about the energy transition. We're taking a look at the electricity market of the next 10 to 20 years and identifying the main challenges.
The first thesis is: Focus on wind and solar!
Why? All other renewable energy technologies are either significantly more expensive or only have limited potential for expansion. Moreover, in recent years wind and solar production has experienced an enormous drop in cost. By 2015, wind power and photovoltaic power plants will produce electricity at the cost of seven to ten (euro) cents per kilowatt hour. A power system based on wind, solar, and conventional backup capacity will thus be in the same price range as a system based on new gas and coal-fired plants.
Wind power and photovoltaic technologies are thus by far the two most important pillars of the energy revolution. Their share of renewable energy electricity production in 2020 will be around 70 percent, and will according to all relevant studies continue to grow to constitute 80 to 90 percent of Germany's renewable electricity supply.
This will fundamentally change Germany's electric power system and electricity market. This is because wind and solar are essentially different from our previous energy sources: their energy production depends on the weather; they have high investment costs, but bear almost no operating costs; and their production fluctuates rapidly.
The other insights on the Energiewende emanate from the first one, namely the future dominance of wind and solar in Germany's energy mix. They are as follows:
- "Baseload" power plants disappear altogether, and natural gas and coal operate only part-time;
- There's plenty of flexibility – but so far it has no value;
- Grids are cheaper than storage facilities;
- Securing supply in times of peak load does not cost much;
- Integration of the heat sector makes sense;
- Today's electricity market is about trading kilowatt hours – it does not guarantee system reliability;
- Wind and PV cannot be principally refinanced via marginal-cost-based markets;
- A new Energiewende market is required;
- The Energiewende market must actively engage the demand-side;
- The Energiewende market must be considered in the European context;
- Efficiency: A saved kilowatt hour is the most cost-effective kilowatt hour.
The "12 Insights on the Energiewende" is a contribution to the ongoing discourse. We're interested in hearing your comments and critique: firstname.lastname@example.org