As decarbonisation takes centre stage following Germany‘s ‘climate election’ and with the world preparing for UN climate talks in Glasgow in November— the next few months will prove pivotal in helping to decide the country’s net zero future.
Polls in Germany showed that concern over global warming has become the most important issue for voters, more so than the pandemic, and the Greens are looking likely to be a part of the next government after its best-ever result.
Election winner Olaf Scholz has made expanding renewables his key climate policy ambition, saying that “the most important task for the new government right at the start of the next legislative period will be to increase renewables targets and enable faster approvals and grid extensions.”
Now that the votes have been counted and the dust has settled, one thing is clear: voters will hold the next coalition to account for delivering on these promises.
So how can Olaf Scholz decarbonise the country’s energy supply and drive the country forward to net zero?
As an early leader in the renewable energy transition, with renewables providing 45 percent of the energy mix, Germany is in a strong position to accelerate energy independence.
However, that transition is somewhat paradoxical. On one hand, the government’s progressive policies such as uk —which raised the share of solar and wind in Germany’s capacity mix—have enabled Germany to become one of the world’s earliest adopters of grid-scale renewable technologies.
While, at the opposite extreme, the country continues to operate Europe’s largest fleet of coal power stations, with an installed capacity of close to 40 GW.
In 2020, Germany struck an historic deal to provide €40 billion to help its coal-producing regions to phase-out coal-fired power by 2038. The country also brought its net zero target forward – from 2050 to 2045.
As the world’s sixth-largest polluter, Germany currently emits 739 million tonnes of CO2 annually, so is all of this enough?
At Wärtsilä, we have modelled Germany’s future 100% renewable energy system and found that not only is a net zero system essential for Germany to meet the ambitions of the climate agreement, but that it is affordable and achievable with existing technology.
It’s no longer a question of if we’ll make the journey, but when we’ll arrive at a decarbonised future.
In order to fully decarbonise, Germany must shift from having renewables providing a minority of energy generation to becoming baseload power.
We modelled two paths to net zero to reveal what this transition looks like. Both models prioritised the lowest cost renewable and flexible capacity technologies such as wind and solar, energy storage and thermal balancing power plants, in the energy mix:
1. The “Baseline 2045” net zero scenario modelled Germany’s plan to phase-out coal in 2038, adding up to 13.5 GW of renewables each year until the energy system is carbon neutral by 2045.
2. An alternative “Supercharged 2040” net zero scenario, with Germany phasing out coal by 2030 by building renewable energy capacity at an increased rate of up to 19.5 GW annually. This is in line with the G7 pledge in June 2021 for members to take the necessary steps to phase out coal by 2030 in advanced economies.
Our modelling shows that for Germany to achieve the Supercharged 2040 scenario, renewable energy, supported by flexibility, must expand by 80% by 2031, based on 2020 levels.
Despite this increase in renewables, we found that accelerating renewables does not add to the cost of electricity and can in fact reduce costs, compared to today.
In fact, the total cost of production is 8% lower in the accelerated scenario, when the full costs of maintaining fossil fuel power for longer are considered, including carbon pricing, rising coal costs and the need for energy imports. This means that by front-loading renewables now, Germany can reach net zero sooner and spend less in the long term.
Our modelling also shows that accelerating the shift to renewable baseload, coupled with flexibility, will help economies thrive. Front-loading now and phasing out coal completely within ten years will mean Germany can install clean renewables and unlock major benefits—from avoiding production and carbon costs, to promoting energy independence and electrifying heating.
Forecasted rises to the cost of carbon will also have a major impact on the levelised cost of energy production in both the Supercharged and Baseline scenarios. Based on the current carbon price, the cumulative carbon costs of phasing out coal by 2038, under the Baseline transition scenario, are €137 billion, compared with €114 billion if coal is phased out in 2030. It’s important to note that the above savings figure is conservative, given the carbon price in Germany has been forecast to grow from €55 per ton of CO2 to €62 by 2030.
What’s better than achieving net zero in 2045? Reaching it five years earlier.
Some commentators suggest that phasing-out coal and achieving net zero requires far more time and money. But our modelling shows it can be done sooner without costing more. In fact, if Germany can accelerate its coal phase-out to 2030 it will save 422 million tonnes of CO2 and could build a net zero power sector by 2040.
It sounds ambitious. It is.
Our message is clear: this is entirely possible and affordable. Germany has the technology available to front-load decarbonisation and this will not cost more for consumers.
At this pivotal moment for Germany, it is vital that leaders and power producers come together to front-load net zero this decade in order to secure a sustainable, clean energy future.
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