Germany’s deepening reliance on fluctuating renewables raises the urgency of cutting power consumption – until now the area where Europe’s 20-20-20 efforts look set for their greatest failure.

Piers Evans, Contributing Editor

The Das Haus travelling pavilion in Atlanta, US, where it is showcasing German energy saving home technology to international markets Source: German American Chamber of Commerce

Germany’s nuclear phase-out was a rare issue on which both lawmakers and the international power generation industry agreed. Unfortunately, while German politicians solidly backed the new policy, power professionals were uniformly sceptical.

The scale of the challenge that Germany may have set itself was underscored at POWER-GEN Europe in Milan this July. In response to a request from a speaker for a show of hands, almost his entire audience at the trade show’s conference raised their arms in disapproval of Angela Merkel’s decision to scrap her nuclear reprieve.

At year-end, uncertainty still lingers over how Germany will close the gap in its power generation while meeting its ambitious goals for renewables – targeted to provide 80 per cent of capacity by 2050. Chancellor Angela Merkel’s abrupt turnaround to pull out of nuclear generation has already taken 8 GW out of national capacity. An additional 13.5 GW hole will open by 2022, when the remaining nine nuclear plants will come off line.

The cost of electricity already reflects the nuclear phase-out. From being a net exporter of power Germany has already shifted into a slight reliance on imports. In 2010 Germany exported 6 per cent of its power. Since this spring, when it took its oldest nuclear plants offline, it has relied on imports to meet 2 per cent of its demand.

Wholesale power prices for 2012 are also already reflecting the new context. After a 10 per cent surge in March and April, they were still 4.2 per cent above pre-Fukushima levels in October this year. Yet for Dr Wolfgang Eichhammer, deputy head of the Fraunhofer Institute’s Competence Centre Energy Policy and Energy Systems, the sector’s key challenge could be cutting demand as much as replacing lost capacity with environment-friendly alternatives.

“Our conclusion is that a very important factor is the reduction of electricity demand,” he says. “When demand is reduced, dispatchable renewables become a bigger share of consumption and you get much more flexibility and more chance to control renewables.”

With generation from fluctuating renewables such as solar and wind set to comfortably outweigh output from dispatchable feedstocks such as biomass, bringing down consumption is vital to Germany’s power system, he argues. “From my perspective it’s about consumption – although many people would say the grid,” he says.

Germany’s capacity outlook

How great is the challenge for Germany’s power sector? Views on the scale and impact of the nuclear withdrawal differ but the country is on a pioneering path – as, indeed, Germany’s leaders acknowledge. The accelerated switch to renewables “could be an interesting example for other countries”, says Environment Minister Norbert Röttgen.

Dr Matthias von Bechtolsheim, Head of Energy Practice Central Europe for Arthur D Little, sees Germany as now fated to demand on imports. “We expect Germany to become dependent on imported power,” he says. “German baseload capacity will be short since operators cannot expect full-load hours and prices due to the significant increase of mostly volatile renewables. This might change if a capacity market for electric power were created – a discussion around this is going on currently – but this option is not favoured by the regulator.”

In a slightly bleak assessment of Germany’s abandonment of nuclear power – in which he considers that “no real benefits exist” – he forecasts nuclear-generated power most likely from France will be essential for balancing renewables on the German grid.

“The long-term nuclear phase-out is generally seen as positive by the majority of the public and political opinion but also in industry. However, energy-intensive industries fear a negative impact through rising power prices. In the short term, fears exist about grid brownouts and even blackouts in wintertime due to grid bottlenecks and shutdown nuclear power plants. In such an event, public opinion might change significantly.”

While categorising Germany’s power outlook as “not too bad”, Jonathan Powell, Senior Consultant for Energy, Environment & Building Technologies at Frost & Sullivan, sees challenges in the growing reliance on renewables. “Our studies suggested that there are solutions. The findings were that Germany has options. It can import from its neighbours like France and the Czech Republic. And there is Nord Pool. It’s just there’ll be a cost attached,” he says.

Frost & Sullivan forecasts that by 2020 Germany’s capacity will have grown from 153 GW to 179 GW while its annual generation slips from 625 TWh to 590 TWh. The figures could also suggest a shift in consumption with some unwelcome aspects.

Outlook for German industry

“Part of the reduction could be that they are losing manufacturing,” says Powell. “Costs will go up. A few prominent German chemical companies have talked about refocusing investments. Electricity is such a big element of costs for certain markets.”

The first rank of potential victims of German’s rapid switch towards renewables includes chemical manufacturers, he adds. “They are very intensive users and global companies, which are investing in Asia and in the Middle East, where they find very good terms, are threatening to go elsewhere,” says Robinson.

Discontent at the new energy mix is already being vigorously expressed by VIK, the body that represents Germany’s main power consumers. Its members’ power bills will climb by an average of 9 per cent next year, says the organisation. In a press conference on 19 October, VIK’s chairman Volker Schwich warned that the nuclear pullout is presenting industrial buyers with a double threat: significant price hikes along with inadequate power quality.

Network frequency changes exacerbated by the nuclear withdrawal hit sensitive industrial production and are unacceptable for an export nation, he added. “It’s not about a candle-lit dinner but complex production processes whose stability, long before a publicly noticeable network black-out, can be threatened,” he says. The damage that can arise from what VIK considers insufficient power quality will be gathered for a report, he says.

VIK claims to speak for consumers of 80 per cent of the 243 billion kWh of German power that is destined for industry, out of a total 530 billion kWh produced in 2010. Its electricity-hungry members include aluminium, chemicals, glass, paper, steel and cement makers.

Germany’s response to safeguarding capacity and power quality involves a series of investments – in high-voltage transmission lines to feed electricity from northern Germany’s wind farms to industry in the south; in pumped storage facilities to even out energy supplies; and, of course, in new solar capacity. But another response to the complaints of Germany’s largest power consumers is “well, tough”.

For Dr Eichhammer, at least, the accelerated shift to renewables justifies a few casualties in the country’s industrial sector. “Industries have always been coming and going down,” he says. “Japan used to produce 1 million tonnes of primary aluminium. After the oil price shock, this fell to 10,000 tonnes in a few years.”

In his view, industries with heavy power demands are not always making an equivalent contribution to the economy. “We will never have low energy prices like Brazil or Australia. If we talk about energy-intensive industries, their value added is a few percent,” he says. “We have a view on the industrial development of renewable technologies – they will be our car industry in the years to come. This is not a bet on the future. Wind technology is already a net contributor to the economy, although that is not the case with solar.”

Energy-efficiency policy

Such discussions of sacrificing industry to decarbonisation reflect a strong popular environmental commitment that already drives energy efficiency policy. In August this year the Federal Cabinet agreed a second national Energy Efficiency Action Plan that confirms that Germany will meet savings laid down in the EU directive on energy end-use efficiency and energy services. Germany’s target under the directive is to achieve energy savings totalling 9 per cent by 2016 (measured against average annual energy consumption for the period 2001–05).

Germany’s ambitions in its NREAP were already the highest of all EU Member States and – at 14 per cent – near its potential of 17 per cent under a High Policy Intensity (HPI) scenario, according to the Roadmap 2050 initiative. In the building sector, the refurbishment rate is to double from 1 per cent to 2 per cent, with a goal of nearly carbon neutral building stock by 2050.

Across Europe, an EU target of cutting primary energy consumption by 20 per cent by 2020 currently looks unattainable. In its Power Perspectives 2030, the Roadmap 2050 initiative predicts that the EU27’s primary energy consumption will total 1678 Mtoe by 2020 – down from a 2007 forecast of 1842 Mtoe but still above the 1474 Mtoe target.

But Germany’s commitment to cutting its power demand is credible, according to Pedro Guertler, chief researcher of the UK’s Association for the Conservation of Energy. “Unlike the UK, which looks at supply and demand separately in terms of engineering limits, Germany has an integrated least cost assessment – not an exploratory piece but energy policy,” he says.

By 2050, Germany aims to cut its per-capita energy consumption by 36 per cent. By contrast, the UK’s target is a 26 per cent drop. The German goal involves a 43 per cent cut in energy consumption and a 25 per cent reduction in electricity demand. By way of contrast, the UK’s energy plans envisage a doubling in electricity use by the same date. “Germany is banking on the significant electrification of heat and transport,” says Guertler. “Many changes are envisaged such as insulation for buildings and investment into areas such as distributed energy and district heating.”

A per-capita energy consumption of 3893 kg of oil equivalent in 2009 already makes Germany far more energy efficient than the US, for instance, where per-capita consumption was 7075 kg, according to World Bank figures.

But Dr Eichhammer sees potential for considerable further savings in both industrial and household energy consumption. While industries can exploit savings in process technologies as well as in systems such as pumps and motors, consumers should be guided towards more efficient homes and devices. “We now have B- or A-labelled devices. We have to push for A++ and A+++,” he says. “The potential is there. The difference between A and A+++ is a factor of two. Case studies show reductions of up to 50 per cent.”

A prominent symbol of Germany’s drive towards cutting energy consumption is the Passivhaus – or Passive House – concept. About 25,000 of these ultra low-energy homes have now been built, mainly in Germany, bringing hope that the 40 per cent of energy that is consumed in buildings could offer substantial further cuts.The Fraunhofer Institute sees an opportunity for a strong reduction in demand from passive house standards, which would enable homes to use only a tenth of the energy required by the average home today, says Dr Eichhammer.

“In transport I expect electric vehicles to make up half or a third of traffic on the roads,” he adds.

“Energy efficiency is also already rising substantially with conventional cars. Today they consume 7–10 litres/100 km but Volkswagen has already produced a prototype that runs on 1 litre/100 km.”

Further tools for trimming Germany’s energy demand include load management and Smart Grid devices. “The Smart Grid could be an important factor but there are limits to how much you can shift – and whether electricity suppliers will be able to switch off devices in their customers’ homes,” says Dr Eichhammer.

Public attitudes

The encouraging political backdrop for bringing down German energy use is underscored by the findings of a recent survey from the consultants KEMA. Its interviews with German consumers found that 84 per cent are eager to become more energy efficient to save money.

“A lot of people, by far the majority, would like greater energy efficiency if it could save money,” says Frits Verheij, KEMA’s director of smart energy. “Another thing – also fairly positive – is that not only money but the climate debate provides a motive.”

In fact, almost a third of the survey’s respondents – 33 per cent – says they would like to reduce energy consumption to help the environment.

But the survey showed that Germans, while eager to cut their energy use, are unsure of how to do it. “Not just in Germany but across Europe, the most challenging of the 20-20-20 targets is cutting energy use,” says Verheij. “Germans are willing to change but don’t know how to. About two thirds expect utilities to educate them in energy efficiency measures – although you can doubt the utilities’ motivation for doing this.”

About 64 per cent of respondents felt it was the responsibility of utility companies to educate consumers on energy efficiency, while 51 per cent believed they should take responsibility for themselves. About 42 per cent consider it is the job of the government.

For Frits Verheij, this should serve as a reminder for power retail companies. “Industry should accept the role of educating – as two thirds of correspondents thought,” he says.

“Other than in Europe, in the US it is common that a certain reduction in energy consumption is mandatory,” says KEMA’s German spokesperson Stefanie Kesting.

“More specifically, a part of the energy price is reserved for measures to increase energy efficiency. We have experienced that well-executed energy saving programmes are successful. In Europe, the current discussion seems to go away from mandatory targets.”

For Verheij, household consumption could also offer Germany substantial energy savings. “Consumption by households may have more potential to come down because industry already regards electricity as a cost,” he says. “Households are currently thinking less in terms of euros.”

For Germany, energy efficiency has an added urgency in the planning morass that seems to engulf all attempts to build new capacity to replace nuclear power plants. The many potential casualties of indiscriminate public opposition to power projects include a pumped storage power plant at Atdorf – REW and EnBW might have expected a warmer welcome from its opponents such as Green Party officials.

But even if Germany can overcome such wholesale hostility to new infrastructure, cutting power use remains the most attractive option in Dr Eichhammer’s opinion.

“Our modelling is for both high and low demand scenarios,” he says. “High demand involves storage, connection with North Africa, storage in electric cars, more uncertainty and greater technical challenges. You need more interconnections between countries to cope with fluctuations.”

Reducing demand could unquestionably bring down the alarming scale of Germany’s looming power supply challenges.

“I don’t want to give the impression that we don’t need new lines, but every megawatt-hour saved reduces the need,” says Dr Eichhammer.

How can Germany cut power demand?

While already highly ranked for its energy efficiency, Germany still has options for further trimming its consumption, says Pedro Guertler of the UK Association for Conservation of Energy.

“The biggest opportunity lies in building stock,” he says. “Quite ambitious schemes are already in place but a lot of energy is still to be saved.” The key federal scheme for making buildings more energy efficient is the CO2 Building Rehabilitation Programme run by the Federal Ministry of Transport, Building and Urban Development, which provides funds through the KfW Bankengruppe.

Guertler sees the scheme as an instance of effective yet affordable intervention. Public authorities collect four to five euros in revenue for each euro spent in the scheme, found a study by the Julich Research Centre. In 2010 KfW issued promotional loans totalling €9.9 billion for building or converting houses and flats. Loans through the scheme are available at rates as low as 1 per cent and real estate owners can also gain repayment bonuses of up to 12.5 per cent of their investment. This triggered an investment of €21.5 billion, which in turn prompted contributions and taxes of €5.4 billion along with other economic benefits.

For energy consumption the gains are also substantial, says Guertler. “The scheme targets the mass of buildings built before 1980 and bringing these up to new build standards halves their energy consumption,” he says.

Savings can also be found in the third of energy consumption that goes to transport. In any case, Guertler sees Germany’s recent power generation shift as a clear opportunity for his field to raise its profile. “You cannot switch off nuclear power without reducing demand,” he says. “Energy efficiency has been made a heck of a lot easier by turning off nuclear plants. There’s less of a distraction.”

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