Climate check, expansion paths, instruments for defossilisation - Jan Rispens provides the first assessment of the effects for the renewable energies sector.
The new German government was elected on 26 September 2021 and assumed power on 8 December 2021.
Dear Mr Rispens, what is your first impression of the coalition agreement? What was the biggest surprise?
It is evident that we have finally understood not only the challenge but also the opportunities arising from the transformation of the energy system. Now we will all tackle this transformation with a clever mix of instruments. This provides the chance for Germany to be at the forefront on decarbonisation and subsequently to establish export markets.
I was surprised by the hydrogen sector – the new expansion target for ten gigawatts domestic electrolysis capacity by 2030 reveals a significant shift of priorities: away from the strong focus on imports to local production. I think that is a good thing, as it makes sense to primarily gain experience on a national level with the hydrogen supply chain.
The second surprise: The quotas for green hydrogen in public-sector procurement. This can be an extremely effective instrument for increasing demand and greatly helps to get the market up and running. It is uncertain which public sectors are meant, it leaves room for interpretation. In my opinion it will first and foremost affect transport services, communal energy suppliers and public utility companies. But we should not forget that the majority of the market for hydrogen will realistically be in industry, therefore the leverage effect of the quota is possibly not as immense as we had hoped. It is a bold instrument, which has already been successfully used in the electricity sector in Great Britain, but much larger order quantities are expected in the private sector.
The expansion target for electricity from renewable energies of 80 percent by 2030 – does that make you euphoric or critical?
Not euphoric but it is in line with the Paris climate objectives. It was overdue, the adjustment would have been the responsibility of the last federal government. The electricity sector has a forerunner function which has to have an impact on the higher green electricity quota.
Are there other sectors which make you sceptical, such as the speeding up of processes for onshore wind for example?
I would not call it scepticism but it is painstaking work that is also to a great extent the responsibility of the federal states. However the approach is honourable, as is the regulation to allocate two percent of the national territory for the expansion of wind energy. Germany's federal and state governments have to now agree on a mechanism so it will be implemented. I do not view the approval procedure as the core problem but that the projects to date have been able to be bewailed through all instances in a time-consuming procedure. In this case a higher authority, such as the higher regional court, has to provide access to ensure that they can then specialise in these cases. And the courts then have to have sufficient staff to speed up the procedure.
Climate protection as a new stipulation for all political decisions is a new element also beyond the core sectors of the climate and environment ministry (referred to as „climate check“) – do you associate concrete hopes in other political/social sectors with this?
Definitely, to date the federal chancellery and the ministry of finance had supremacy. Now a second mechanism is being introduced that also quantifies and checks climate impact in the other sectors such as transport, family and even fiscal policy. This will hopefully create more committment.
Let’s go into detail: Which tools and measures do you welcome?
We can recognise that the coalition gives CO2 pricing a high level of significance and that it enjoys the highest priority. The revenue should replace the Renewable Energy Act apportionment on 1.1.2023 – that is a very good thing we have been waiting for for some time. I personally regard the social components as important, as the added burden is removed from the low income households. That also helps to create acceptance. I also think that the combination of the CO2 price as a central controlling element with the Carbon Contracts for Difference (CCfD) makes sense, therefore the funding of differential costs when green instead of fossil energy is used in production processes. This measure is important to take along the energy consumer and to minimise the price difference for a transition period. That provides companies with an incentive to invest now to have lower abatement costs at a later stage. That is an elegant mechanism which can develop a huge effect if implemented properly.
What do the objectives mean for the different divisions of the renewable energies industry?
The objective for the solar industry of 200 gigawatt by 2030 is ambitious but not excessive. The solar duty on new commerical buildings is a good, overdue point. It continues the boom of the last two to three years. If we want to reach the expansion targets the district solutions, home consumption and tenant electricity concepts that were only mentioned marginally in the coalition concept also have to work.
In the case of wind energy there will be no incredible acceleration overnight in the onshore sector, but it will recover noticably. In the case of onshore developers the allocation of new areas and simplified repowering are a clear committment to the consolidation of the sector.
The signal for offshore is in total absolutely positive. The early expansion target of 40 gigawatts by 2035 carries great force – to date this expasion was planned for 2040. That is a good sign and we can also welcome the high targets of 30 gigawatts by 2030 instead of the previous target of 20. However it is questionable whether there is enough time to establish the network connection by then. The later political target by 2035 should be assessed as highly positive, but I consider it to be very, very ambitious to attain the closer target. The decisive factor will be how quickly the electricity grid infrastructure can be developed. The current grid expansion plans for offshore wind have to be changed immediately. That means a lot of pressure for the approval authorities and grid operators.
The chapter heat has only relatively little presence. Notified climate-neutral heat generation from renewable energies of 50 percent by 2030 is a quantum leap from 15 percent at present, but unfortunately it is not backed pu by measures. For example no bans on the new installation of gas and oil-fired heating systems is mentioned. I assume that this will be part of the amended climate protection law. Detailled exact specifications must and will presumably ensue.
The vision of Germany named by the old federal government as „Leading market for hydrogen technologies by 2030“ seems to be continuing. Are the targets enough to help to get the hydrogen economy up and running? What else has to happen?
Hydrogen is mentioned 28 times, not only in the energy chapter but also in the industry chapter. The industrial policy approach to decarbonisation emerges as the clear objective from the agreement. In my opinion this is a paradigm shift because the current federal goverment has planned only half as much electrolyser power in the national hydrogen strategy – i.e. five instead of ten gigawatts. The focus used to be on 80 to 90 percent import of hydrogen by 2030. I couldn’t understand that, as the countries with better renewable electricty production conditions also had to initially establish the hydrogen technology. Now there is a recognisable major priority to develop and use hydrogen technology in Germany. Ergo we want to build the complete technology and supply chain in this decade here, to test it and to make it exportable. The prioritised implementation of the IPCEI projects also speaks for the recognition of open regulatory construction sites. It is obviously not a foregone conclusion. However we should not forget that the second largest construction site for the hydrogen economy remains the EU with the delegated act which is currently much too restrictive in the drafts and prevents the market from getting up and running rather than making it possible.
Where do you think the targets still do not go far enough despite everything?
The importance and the weighting of the climate aspects is clear and positive. You can criticise the lack of detail in the supply of heat, as it accounts for one third of the national CO2 emmissions. This part has to be developed to a higher level with measures.