The energy transition in the power sector: State of affairs 2016 A review of the major developments in Germany and an outlook for 2017 Patrick Graichen, Mara Marthe Kleiner, Christoph Podewils BERLIN, 5 JANUARY 2017

Key messages

Key Findings

1

Natural gas was the winner in 2016, silently initiating a coal phase-out. Thanks to sinking natural gas prices, power production from natural gas rose considerably. By contrast, coal-fired power production declined for the third year running, and a number of coal power stations are slated for closure in 2017. Should the 2016 trend continue, coal-fired power production in Germany will be eliminated by 2038.

2

Renewable energy production and energy efficiency rose only slightly. 2016 was a poor year in terms of weather for wind and sun, leading to a decline in power production from PV installations and onshore wind farms. But this decline was more than made up for by a sizeable increase in offshore wind power. Overall power demand dropped just somewhat, making it ever more unlikely that 2020 efficiency targets will be met.

3

Harmful greenhouse gas emissions continued to rise. The main reasons were strong economic performance and winter temperatures, which were somewhat colder than usual. The overall picture was not uniform, however. While emissions in the industrial, heating, and transportation sectors rose, they declined slightly in the electricity sector thanks to a drop in coal-fired power generation for the third consecutive year.

4

Energy in all forms is cheap these days – save for household electricity. 2016 saw sharp drops in the prices of coal, oil, and natural gas, even on spot markets. With an average of 26.6 euros per megawatt hour, energy hit a 10-year low. What is more, solar power went for 5.38 cents per kilowatt hour at the most recent PV auction, showing how inexpensive solar power can be. Yet low prices for natural gas, heating oil, gasoline, and diesel have not translated into more affordable household electricity, which remains elevated due to environmental levies and surcharges. In 2017, mains power is projected to rise to more than 30 cents per kilowatt hour

3

10 points on the 2016 power market 1. Renewables: In 2016, power production from green energy rose slightly, from 187 terawatt hours to 191.4. Its share in total energy demand increased 0.8 percentage points, to 32.3 per cent. Given the hefty influx of new green energy facilities (especially in the wind sector), the increase in renewable power would have been greater were it not for 2016 being a below-average year for wind and solar power. 2. Electricity consumption: German electricity use declined by 2.4 terawatt hours, from 595.1 to 592.7 terawatt hours, or 0.4 per cent. During the same year, the economy grew by 1.8 per cent, continuing its happy decoupling from electricity demand. Yet the process continues to be too slow. To reach the 2020 efficiency targets set by the German government – a 10-per cent reduction of electricity use relative to 2008 levels – eight fewer terawatt hours would have had to be consumed in 2016.

4

10 points on the 2016 power market 3. Conventional energy: Conventional power plants produced 429.2 terawatt hours – three terawatt hours, or 0.7 per cent, less than in 2015. Hard coal power plants lost the most (7.7 terawatt hours, or 6.5 per cent), followed by nuclear power plants (6.9 terawatt hours, or 7.5 per cent), and lignite power plants (4.5 terawatt hours, or 2.9 per cent). By contrast, electricity production from gas-fired power plants increased by 16.5 terawatt hours, or 26.6 per cent. 4. Climate protection: While total greenhouse gas emissions in Germany increased from 908 to 916 million tons (a 0.9-per cent bump), CO2 emissions in the electricity sector dropped 5 million tonnes, or 1.6 per cent, to 306 million tonnes. This marks the third consecutive year that CO2 emissions in this sector have fallen. By contrast, there is scarce evidence of climate protection in the industrial, heating, and transportation sectors. 5. Electricity trading: In 2016, German electricity exports hit a new record: 55.5 terawatt hours, or 8.6 per cent of power production, were sold abroad. The main importing countries for German electricity were Austria, Switzerland, France, and the Netherlands.

5

10 points on the 2016 power market 6. Electricity prices: Electricity prices for future deliveries in 2017 dropped from 31 euros to 26.60 euros per megawatt hour. Next-day electricity prices on the spot market averaged 28.81 euros (versus 31.91 euros in 2015). By contrast, household electricity prices increased to 30 cents per kilowatt hour on account of higher levies and surcharges. 7. Flexibility: Negative electricity prices on the German power market decreased, but were still lower than the previous year’s. This indicates that participants in the energy market were able to respond more flexibly on the whole yet the number of conventional must-run power plants connected to the grid remained too many.

6

10 points on the 2016 power market 8. Record days: On 8 May 2016 at 1 pm, 86.3 per cent of electricity demand was met by renewable energy, a greater share than ever before. Likewise, the lowest feed-in level of coal-powered electricity ever recorded – 7.6 gigawatts – occurred during the early morning hours of 27 March. 9. Mood: Germans are firmly behind the transition to green energy. 93 per cent believe that it is “very important” or “important,” with the share of the former group rising from 50 per cent in 2015 to 57 per cent in 2016. Germany’s Energiewende hasn’t been this popular since 2012. 10. Outlook for 2017: Several conventional power plants with a total output of four gigawatts will be shut down in 2017, reducing the excess capacity in Germany’s power plant fleet. The share of coal and nuclear energy in power generation will decline slightly while renewables are projected to keep rising. Due to the introduction of auctions for wind and biomass, the cost of adding renewables is expected to continue to fall.

7

Power generation in Q1 2016: Year begins with high demand and winter storms

Biomass

Hydro

Onshore Wind

Offshore Wind

PV

Conv.

31. Mar

28. Mar

25. Mar

22. Mar

19. Mar

16. Mar

13. Mar

10. Mar

7. Mar

4. Mar

1. Mar

27. Feb

24. Feb

21. Feb

18. Feb

15. Feb

12. Feb

09. Feb

06. Feb

03. Feb

31. Jan

28. Jan

25. Jan

22. Jan

19. Jan

16. Jan

13. Jan

10. Jan

07. Jan

04. Jan

90 80 70 60 50 40 30 20 10 0

01. Jan

GW

Power generation and demand in Q1 2016 (daily average)

Load

Agora Energiewende 2017 8

Power generation in Q2 2016: Wind yield and power demand decline; solar power generation increases

Biomass

Hydro

Onshore Wind

Offshore Wind

PV

Conv.

30. Jun

27. Jun

24. Jun

21. Jun

18. Jun

15. Jun

12. Jun

09. Jun

06. Jun

03. Jun

31. May

28. May

25. May

22. May

19. May

16. May

13. May

10. May

7. May

4. May

1. May

28. Apr

25. Apr

22. Apr

19. Apr

16. Apr

13. Apr

10. Apr

07. Apr

04. Apr

90 80 70 60 50 40 30 20 10 0

01. Apr

GW

Power generation and demand in Q2 2016 (daily average)

Load

Agora Energiewende 2017 9

Biomass Hydro Onshore Wind Offshore Wind PV Conv.

29. Sep

26. Sep

23. Sep

20. Sep

17. Sep

14. Sep

11. Sep

08. Sep

05. Sep

02. Sep

30. Aug

27. Aug

24. Aug

21. Aug

18. Aug

15. Aug

12. Aug

09. Aug

06. Aug

03. Aug

31. Jul

28. Jul

25. Jul

22. Jul

19. Jul

16. Jul

13. Jul

10. Jul

07. Jul

04. Jul

01. Jul

GW

Power generation in Q3 2016: Summer brings much sun but little wind Power generation and demand in Q3 2016 (daily average) 90 80 70 60 50 40 30 20 10 0

Load

Agora Energiewende 2017 10

Power generation in Q4 2016: Autumn sees little power from renewables – wind strong only over Christmas

Biomass

Hydro

Onshore Wind

Offshore Wind

PV

Conv.

30. Dec

27. Dec

24. Dec

21. Dec

18. Dec

15. Dec

12. Dec

9. Dec

6. Dec

3. Dec

30. Nov

27. Nov

24. Nov

21. Nov

18. Nov

15. Nov

12. Nov

09. Nov

06. Nov

03. Nov

31. Oct

28. Oct

25. Oct

22. Oct

19. Oct

16. Oct

13. Oct

10. Oct

7. Oct

4. Oct

90 80 70 60 50 40 30 20 10 0

1. Oct

GW

Power generation and demand in Q4 2016 (daily average)

Load

Agora Energiewende 2017 11

Electricity production and demand 2016

Power mix 2016: Renewables make up largest share; gas is the biggest winner, hard coal is the biggest loser 2016 power mix (2015 values in brackets)

Gas: 12.1% (9.6%) Nuclear: 13.1% (14.2%)

Oil and other: 5.1% (5.2%)

Wind onshore: 10.3% (11.0%)

Renewables: 29.5% (29.0%) Hard coal: 17.0% (18.2%)

Biomass (incl. biogenic waste): 8.0% (7.8%)

Photovoltaics: 5.9% (6.0%) Hydro: 3.3% (2.9%)

Lignite: 23.1% (23.9%)

Wind offshore: 2.0% (1.3%)

AG Energiebilanzen 2016a 13

Power production, 2000-2016: Renewables quintuple; nuclear power falls by half; the sum of fossil fuel energy sources (coal, gas) remain constant Power production, 1990-2016

Electricity production (TWh)

700 600 500

400

549.9 35.9 170.9

632.5

72.7

89.3

148.3

154.1

145.9

143.1

134.1

117.0

41.1

142.6

147.1

49.2

0

152.5 19.7

Renewables

154.1 25.1

Nuclear

78.5

150.0 110.0 84.9

200 100

648.1

576.6 536.8

300 140.8

622.5

169.6

191.4 104.2

62.5

37.9

Hard coal

140.6

163.0

Lignite

Gas

Oil

Other

AG Energiebilanzen 2016a 14

Changes from 2015 to 2016: Increases in renewables, but primarily in natural gas; decreases in coal, nuclear power and demand Changes in electricity volumes, 2015–2016 20

Change to previous year (TWh)

16.5 15 10 5

4.0

4

0

-2.4

-5

-4.5 -6.9

-7.7

-10 Renewables

Nuclear

Lignite

Hard coal

Gas

Net flows to/from foreign countries

Consumption

AG Energiebilanzen 2016a 15

Power production soars to new heights while consumption declines: 8.6% of electricity in 2016 goes to neighbouring countries; exported electricity primarily from hard coal

648.2 Net flows to/from foreign countries

540

556

592.7

595.1

603.9

55,5

646.9

626.7

637.7

628.6 605.6

612.1 605.8

591.1

581.3

614.7

618.2

595.6

632.4

640.7

640.6 621.5

619.8

622.6 614.1

617.5 610.2

608.8

586.7 587.4

560

586.4

580

585.1

600

576.6

620

600.7

640

579.6

Gross electricity production and gross electricity consumption (TWh)

660

639.6

Electricity production and demand, 2000–2016, together with 2020 efficiency target

520

Target 2020: -10 percent vs. 2008

500 2000

2005 Gross electricity production

2010

2015 2016*

2020

Gross electricity consumption

AG Energiebilanzen 2016a 16

Growth decouples from energy consumption in 2016: Economic growth at 1.8 per cent, electricity use falls slightly – yet meeting the 2020 efficiency target increasingly unlikely Gross domestic product, primary energy consumption and electricity production, 1990–2016 (indexed, 1990=100) 160 146

150 140

133

1990=100

130

122

120

125 112

111

112

105

110

108

98

100 90

97

96

98

101

Target 2020: -10 percent vs. 2008

95 90

80

80

70

Target 2020: -20 percent vs. 1990

60 1990

1995

2000

Gross domestic product

2005

2010

Primary energy consumption

2016

2020

Gross electricity consumption

AG Energiebilanzen 2016a; Statistisches Bundesamt, own calculations 17

Renewables in the electricity sector 2016

Renewables cover 32.3 per cent of electricity use – share grows slightly relative to the previous year Share of renewables in gross energy consumption, 2000–2016, together with 2025 and 2035 targets Target 2035: 55-60%

70%

31.5%

27.3%

25.1%

20.3%

16.9%

16.3%

15.1%

11.6%

10.2%

9.3%

7.6%

10%

7.8%

20%

6.7%

30%

14.2%

40%

23.5%

50%

32.3%

Target 2025: 40-45 %

6.5%

RES share (%)

60%

2016: 32.3 %

0%

RES share on gross electricity consumption

Upper target

Lower target

AG Energiebilanzen 2016a 19

Poor year for wind and sun results in decreased solar power (-0.4 TWh) and onshore wind power (-4.1 TWh); growth in offshore wind (+4.7 TWh), hydropower (+1.5 TWh) and biomass (+1 TWh) Electricity production from renewables, 1990–2016

Electricity production (TWh)

250

191.3

200

38.3 104.1

150 62.5

100 25.1 50 0

19.7

19.7

Hydro

1.5 2.0 21.6

Biomass incl. biogenic waste

37.8

1.3

9.5 3.4 24.9

27.2 14.4 19.6

Wind onshore

13.0

11.7

66.8

37.8 51.7

33.6

21.5

21.0

Wind offshore

Photovoltaics

AG Energiebilanzen 2016a 20

Six gigawatts of new capacity introduced in 2016: More onshore wind farms but PV expansion considerably below targets Renewable capacity in 2015 and 2016

Increases in 2016 (estimated) Wind onshore: 4.3 gigawatts

120

installed capacity (GW)

100 80

98 3.4

104 4.1

Wind onshore

Solar: 1 gigawatt Wind offshore

41.2

Wind offshore: 0.7 gigawatts

45.5

Biomass: 40 megawatts

Solar

60

Expansion corridor defined by EEG 2014

40

39.3

40.3

20 0

7.0 5.6

7.1 5.6

2015

2016*

Biomass

Wind onshore: 2.5 gigawatts per year

Hydro

Wind offshore: approx. 0.7–0.8 gigawatts per year

Other

Solar: 2.5 gigawatts per year

Biomass: 100 megawatts per year BNetzA 2016a, *on basis of BNetzA 2016b, FA Wind 2016 and BWE 2016 21

Wind power 2016: Offshore wind energy now makes up 2 per cent of power production (+4.7 TWh), offsetting onshore wind energy (-4.1 TWh)

Electricity production (TWh)

Power production from onshore and offshore wind turbines, 2000-2016

90 80 70 60 50 40 30 20 10 0

79.2

8.3 57.3 51.7

1.4

79.8 13.0

0.9

70.9 66.8

9.5

10.5

15.8

18.7

25.5

27.2

30.7

39.7

40.6

48.9 38.6

50.7

50.8

55.9

37.8

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016* Wind onshore

Wind offshore

AG Energiebilanzen 2016a 22

Solar power production 2016: Below average year for sun reduces solar generated electricity (-0.4 TWh)

Electricity production (TWh)

Power production from PV installations, 2004-2016

45 40 35 30 25 20 15 10 5 0

26.4

36.1

38.7

38.3

2014

2015

2016*

31.0

19.6 11.7 0.6

1.3

2.2

3.1

4.4

6.6

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

Photovoltaics

AG Energiebilanzen 2016a 23

Nuclear, coal and gas 2016

Nuclear energy 2016: Only half as much electricity from nuclear power as in 2000 (due to closure of Grafenrheinfeld in 2015 and to tax-based fuel switching shifts after 2017) Power production from nuclear power plants, 1990-2016

Electricity production (TWh)

180 160 140 120 100 80

1990 152.5

60

40

1995 154.1

2000 169.6

2005 163.0

2010 140.6 2015 2016* 91.8 84.9

20

0

AG Energiebilanzen 2016a 25

Power generation from hard coal is biggest loser in power mix 2016 (-7.7 TWh, -6.5 per cent) Power production from hard coal power plants, 1990-2016

Electricity production (TWh)

180 160 140 120 100 80 60

1990 140.8

40

1995 147.1

2000 143.1

2005 134.1

2010 117.0

2015 2016* 117.7 110.0

20

0

AG Energiebilanzen 2016a 26

Power generation from lignite gradually declines from its high level in 2016 (-4.5 TWh, -2.9 per cent) Power production from lignite power plants, 1990-2016

Electricity production (TWh)

180 160 140 120 100 80

1990 170.9

60

1995 142.6

2000 148.3

2005 154.1

2010 145.9

2015 2016* 154.5 150.0

40 20 0

AG Energiebilanzen 2016a 27

Power generation from coal has declined since 2014 – should the 2016 trend (-12.2 TWh) continue, coal plants will no longer produce electricity by 2038 Changes in coal-fired power production relative to previous year, 2000-2016

Changes to previous year (TWh)

20 14.6

15 10

11.1

9.4

5 0

-5

-2.2

-0.4

-10 -15

-12.2

-13.8

-20 2010

2011

2012

2013

Lignite

2014

2015

2016*

Hard coal

AG Energiebilanzen 2016a 28

Power generation from natural gas in 2016: A steep rise (+16.5 TWh) at the expense of coal and nuclear power on account of low gas prices

Electricity production (TWh)

Power production from natural gas power plants, 1990–2016 100 90 80 70 60 50 40 30 20 10 0

2005 72.7 1990 35.9

1995 41.1

2000 49.2

2010 89.3

2016* 2015 78.5 62.0

AG Energiebilanzen 2016a 29

Natural gas consumption 2016: 10 per cent rise due especially to rising power generation from natural gas Primary energy consumption of natural gas, 1990-2016

Gas usage (PJ)

4000 3000 2000 1000 0

Electricity production

Other usage

AG Energiebilanzen 2016b; *own calculations on basis of AG Energiebilanzen 2016a 30

Power trading 2016

Germany hits another electricity export record in 2016 – the day-ahead power trade falls below the flow of physical electricity for first time Physical trade, 2012–2016

Power trade balance, 2012–2016

85.4

80

60

67.3 23.1

72.2

74.5

80

33.8

44.2 38.4

30

35.6

51.8

38.9

55.4

81.4

71.3 63.3

60

25.1

38.9

26.6

10

40.3

57.7

50 40

46.1

47.5 43.0

30

33.6

20

41.1

40.1

20 10

0

15.8

0

2012 Net flows

81.9

70

50 40

90

82.0

Trade (TWh)

Physical flows (TWh)

90

70

97.8

100

100

2013

2014

Flows from foreign countries

AG Energiebilanzen 2016a

2015

2016

Flows to foreign countries

2012 Net Exports

2013

2014

2015

Imports

2016 Exports

Own calculations on basis of ENTSO-E 2016 32

In 2016, Germany exported electricity primarily to Austria, France, Switzerland and the Netherlands

Exports: 63.3 TWh (2015: 97.8 TWh) Imports: 15.8 TWh (2015: 36.9 TWh) Balance: 47.5 TWh (2015: 60.9 TWh) Traded electricity in TWh

33

European electricity prices in comparison, end of 2016: High spot market prices in the UK, FR, BE, ESP, PT, IT, CH Low spot market prices in DE/AT, PL, NL, Nordics Spot market prices 2016 (Day-ahead base) in European comparison

Power price - monthly mean (EUR/MWh)

80

IT 70

CH

60

ES PT

50

UK

40

BE

30

FR NL

20

PL

10

DE-AT

Nordpool

0 Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

EEX 2017, Nordpool 2017, Belpex 2017, OMEL 2017, Mercato Elettrico 2017, APX 2017, POLPX 2017 34

Electricity prices 2016

Spot market prices hit 12-year low – 29 euros per megawatt hour – in 2016; prices to rise again by year’s end Spot market prices in day-ahead trading 2016 80 60 40 ​ ​ ​ ​ ​ ​ ​ 29.0 ​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​

​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 27.2 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 27.2 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 30.5 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​24.2 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 22.5 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 27.7 ​ ​ ​ ​ ​ ​ ​ 22.0 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​​ ​ ​ ​ ​ ​ ​ ​ 24.3

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 37.5 ​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 37.1 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 38.2

EUR/MWh

20 0 -20 -40 -60 -80

Price

Monthly average

EPEX 2016 36

Electricity futures 2016: power purchases for the coming year at 26.6 euros per megawatt hour, once again 14 per cent under 2015 levels Rolling year-ahead futures, 2007-2016

120 100 80

69.9 55.9

60

56.0

49.9

49.2

49.2 39.1

40

35.1

31.0

26.6

Baseload

2011

Peakload

Nov

Jul

Sep

Mai

Jan

Mär

Nov

Jul

2015

Sep

Mai

Jan

Mär

Nov

Jul

2014

Sep

Mai

Jan

Mär

Nov

Jul

2013

Sep

Mai

Jan

Mär

Nov

Jul

2012

Sep

Mai

Jan

Mär

Nov

Jul

Sep

Mai

Jan

Mär

Nov

Jul

2010

Sep

Mai

Jan

Mär

Nov

Jul

2009

Sep

Mai

Jan

Mär

Nov

Jul

2008

Sep

Mai

Jan

Mär

Nov

Jul

2007

Sep

Mai

0

Jan

20 Mär

Power exchange price (EUR/MWh)

140

2016

Mean Baseload

EEX 2017 37

Power exchange price (EUR/MWh) 15

2017 Trading day 2018 2019

30.12.2016

16.12.2016

02.12.2016

18.11.2016

04.11.2016

21.10.2016

07.10.2016

23.09.2016

09.09.2016

26.08.2016

12.08.2016

29.07.2016

15.07.2016

01.07.2016

17.06.2016

03.06.2016

20.05.2016

06.05.2016

22.04.2016

08.04.2016

25.03.2016

11.03.2016

26.02.2016

12.02.2016

29.01.2016

15.01.2016

01.01.2016

Electricity supply contracts, 2018–2020: Even in the future, traders do not expect prices to exceed 30 euros per megawatt hour Future prices in trading year 2016 for 2017–2020 40

35

30

25

20

2020

EEX 2017 38

Flexibility 2016: Fewer hours with negative prices than in 2015, yet prices are lower during these times Hours with negative electricity prices – median negative price and lowest price – 2012-2016 126 h 97 h 56 h

64 h

64 h 2012

2012

2013

2014

2015

2016

2013

2014

2015

2016

-14.17

-15.55

-9.00

-17.81

2012

2013

2014

-65.03

-70.19

2015

2016

-79.94

-100.03 -130.09

-221.99 Amount of hours with neg. prices

Average neg price in EUR/MWh

Lowest price in EUR/MWh

EPEX 2016 39

Power procurement costs 2017: Increase of EEG surcharge (+0.53 ct/kWh) exceeds decline of power procurement costs (-0.16 ct/kWh) Power procurement costs (70% one-year-ahead future (base), 30% one-year-ahead future (peak)) and the EEG surcharge, 2011-2016 12 10.55 10

ct/kWh

9.96

8.92

8 6

10.46

9.58

5.27 5.43

9.52

3.01

4.22

3.79

3.17

6.24

6.17

6.35

6.88

2014

2015

2016

2017

5.99

4 5.28 2

9.89

3.49

3.59

2011

2012

0 2013 EEG surcharge

Procurement

EEX 2016, netztransparenz.de 40

Household power prices in 2016 to exceed the 30-cent mark for the first time due to increased feed-in tariffs, increased EEG surcharge and high sales margins Average electricity prices for a 4-person household (3500 KWh annual use), 2007-2017 35.0 30.0 25.0

ct/kWh

20.1 20.0 15.0 10.0

1.0 1.3 6.3 5.3

5.0

21.4 1.1 1.5 5.9 5.5

25.5

26.1 3.6 1.7

29.2

29.5

29.1

29.8

30.3

5.3

6.2

6.2

6.4

6.9

1.7

1.6

1.6

1.7

1.7

22.8

23.4

1.2 1.5

2.1 1.5

3.5 1.7

5.8

5.8

5.8

6.0

6.5

6.5

6.6

6.8

7.4

5.7

5.8

6.1

6.2

6.7

6.8

6.7

6.8

6.9

5.9

7.2

8.4

8.1

8.4

8.4

8.3

7.9

7.6

7.4

6.7

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017*

0.0

Procurement, distribution, margin

Taxes

Grid charges

Concession fee

EEG surcharge

KWKG surcharge

Other surcharges

BNetzA 2016, *own estimates 41

Costs for energy commodities and renewables 2016

Prices for energy commodities 2016: Coal, oil and gas reach lowest levels, CO2 certificates at second lowest point since 2008

Corss border price or CO2 certicficate price (EUR/MWh_th or EUR/t CO2)

Border-crossing prices for natural gas, hard coal and mineral oil as well as certificate prices for CO2 60

55.3

52.6

51.0

47.7

50 41.6 38.3

40 30

26.8

20.9 20 10

22.3

29.0

27.9

13.1

13.8 9.7

25.7

13.1

2009

Hard coal (EUR/MWh_th)

23.8 20.6 14.9

11.4

9.7

9.0

8.3

5.9

7.6

4.4 2013

2014

2015

7.3

13.1

10.5

7.3

0 2008

23.5

20.6 14.3

30.6

27.6

2010

2011

Gas (EUR/MWh_th)

2012

Oil (EUR/MWh_th)

5.3 2016*

CO2-Preis (EUR/t CO2)

BAFA 2016a, BAFA 2016b, BAFA 2016c, EEA 2015, DEHSt 2016, own calculations 43

Power generation costs 2016: For the first time since 2011, new gas-fired power stations are competitive with pre-existing hard-coal power plants Marginal costs for new natural gas and for old lignite and hard-coal power plants (efficiency factor in parentheses)

Grenzkosten (EUR/MWh_el)

70 60

60.8 50

40

43.7

54.0

40.5

33.5

40.3

30 21.9

50.1

52.6

49.0 42.6 38.1

48.8 40.5 23.5

39.7

20

27.6 32.0

22.5 15.1

11.3

31.3 13.3

31.1 15.4

26.0 12.4

2015

2016*

10 0 2008

2009

Braunkohle (alt, 31%)

2010

2011

2012

Steinkohle (alt, 35%)

2013

2014

Erdgas (GuD) (neu, 58%)

BAFA 2016a, BAFA 2016b, DEHSt 2016, EEA 2015, Lazard 2015, Statistisches Bundesamt 2015, UBA 2015, own calculations 44

Costs for renewables continue to sink – compensation for solar in Germany decreases from 9.2 ct per kWh to 5.4 ct per kWh in December 2016 in DE/DK auction

Average awared prices (ct/kWh)

Results of the first German PV auctions nationally and cross-border with Denmark 10 9 8 7 6 5 4 3 2 1 0

9.17

8.49

8

7.41

7.25

6.9 5.38

Apr 15

Aug 15

Dez 15

Apr 16

National auctions

Aug 16

Dez 16

Dez 16 Cross-border auction DK

BNetzA 2016 45

Global costs for renewables in 2016: Wind offshore, wind onshore and solar energy constantly outdo each other with better offers Denmark Netherlands 55 €/MWh

Germany/ Denmark 53.8 €/MWh

49.9 €/MWh

Jordan 54.5 €/MWh

UAE United States

26.7 €/MWh

42.0 €/MWh

Marocco 26.8 €/MWh

Mexico

United States

31.7 €/MWh

58.0 €/MWh

India 57.7 €/MWh

South Africa 45.5 €/MWh

South Africa 58.0 €/MWh

Australia 61.6 €/MWh

Peru

Wind Offshore

33.1 €/MWh

Wind Onshore

42.9 €/MWh

Solar Photovoltaics

Peru

Chile 26.0 €/MWh

Brazil 43.8 €/MWh

Fortum 2016; Sources: announcements by the investing companies and IEA report ”Renewable Energy Medium-Term Market Report 2015” for US, Brazil, South Africa, Australia and Jordan. Values reported in nominal EUR, 1 EUR = 1,12 USD, 1 EUR = 75,3 INR, 1 EUR = 9.48 SEK. United States values calculated excluding tax credits. Typical contract lengths are 15-25 years. The prices indicate levels with which investors have been willing to invest, however, they may not describe the actual comparable costs as the bid prices may be reduced by preferential land prices, site exploration cost, targeted low-cost loans etc. The price level at which investors can hedge their renewable production for the next 4 years: average of 2017-2020 electricity (LUL) + elcertificate futures with 29.8.2016 closing prices. This low price levels still result in continuation of investments in onshore wind in Sweden.

Climate protection and public sentiment 2016

Greenhouse gas emissions rise again in 2016 (+8 mio. t CO2 equ.); to reach the 2020 target, 41 mio. t CO2-equ. must be saved annually

Target 2020: min. -40%

750

916

908

902

945

926

922

974

941

1000

972

999

992

1017

1033

1036

1058

1043

2016: -27%

906

800

Target 2030: min. -55%

563

Mio. t CO2-equ.

1200

1120

1400

1248

Greenhouse gas emissions by sector, 1990–2016, together with reduction targets for 2020 and 2030

600 400 200

Energy industry

Housing

Transport

Industry

2030

2020

2016**

2015*

2010

2005

2000

1995

1990

0

Agriculture

Other

UBA 2016, eigene Schätzungen 48

CO2 emissions from the power sector 2016: Emissions decline by 5 mio. t, mostly due to coal-gas switch; lignite and hard coal remain major emitters CO2 emissions in the power sector by energy source, 2000-2016 500

CO2 emissions (Mio. T)

450

-1,6 % compared to 2015

400 350

326

335

2000

2001

339

339

334

334

340

351

315

314

325

331

301

2009

2010

2011

2012

2013

330

314

311

306

300 250 200

150 100 50 0

2002

2003

Lignite

2004

2005

2006

2007

Hard coal

2008 Gas

Oil

2014* 2015** 2016***

Other

UBA 2016a (*preliminary, **Estimate UBA), ***own calculations 49

The significance of the energy transition reaches a high level: Popular sentiment towards the energy transition, 2012-2016 N=1013

N=1013

The Energiewende is...

The Energiewende proceeds...

2012

2012

2013

2013

2014

2014

2015

2015

2016

2016 0%

20%

very important

important

40%

60%

less important

80% not important

100% undecided

Forschungsgruppe Wahlen, commissioned by BDEW 2016

0% very well

20% well

40%

60%

not well

not all at all

80%

100%

undecided

Forschungsgruppe Wahlen, commissioned by BDEW 2016 50

Special days in 2016

Highest and lowest renewable energy shares in 2016: At 1 pm on 8 May, renewables at 86.3 per cent; at 5 pm on 21 January, renewables at 11.0 per cent Power generation and use on 21 January 2016

100

100

90

90

80

80

70

70

60

60

GW

GW

Power generation and use on 8 May 2016

50

50

40

40

30

30

20

20

10

10

0

0 1

2

3

4

5

6

7

8

Agora Energiewende 2017

9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

1

2

3

4

5

6

7

8

9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

Agora Energiewende 2017 52

Maximum feed-in from wind power on 8 February at 9 pm, 33.745 gigawatts; maximum PV feed-in at 1 pm on 6 May, 28.885 gigawatts Power generation and use, 6 May 2016

100

100

90

90

80

80

70

70

60

60

GW

GW

Power generation and use, 8 February 2016

50

50

40

40

30

30

20

20

10

10

0

0 1

2

3

4

5

6

7

8

Agora Energiewende 2017

9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

1

2

3

4

5

6

7

8

9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

Agora Energiewende 2017 53

Highest load on 30 November at 12 pm, 82.613 gigawatts; Lowest electricity feed-in from coal-fired plant on 27 March at 3 pm, 7.6 gigawatts Power generation and use, 27 March 2016

100

100

90

90

80

80

70

70

60

60

GW

GW

Power generation and use, 30 November 2016

50

50

40

40

30

30

20

20

10

10

0

0 1

2

3

4

5

6

7

8

Agora Energiewende 2017

9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

1

2

3

4

5

6

7

8

9 10 11 12 13 14 15 16 17 18 19 20 21 22 23

Agora Energiewende 2017 54

A record-breaking Christmas: Renewables continually covered more than 50 per cent of power use, reaching as high as 76 per cent; hard coal averaged only 6.3 per cent Power generation and use over Christmas 2016 80

Power (GW)

70 60 50

40 30 20 10 0 1

3

5

7

9

11 13 15 17 19 21 23

1

3

5

7

9

24. Dec

Biomass

Hydro

Agora Energiewende 2017

Onshore

11 13 15 17 19 21 23

1

3

25. Dec

Offshore

PV

Nuclear

Lignite

5

7

9

11 13 15 17 19 21 23 26. Dec

Hard coal

Gas

Pump storage

Other

Load

Outlook 2017

Outlook for 2017 Further growth of wind capacity expected: transitional regulations apply in 2017; many project developers will build facilities based on EEG 2014; multiple offshore wind parks under construction Solar power generation for self-consumption will become more attractive: increased tariff for installations smaller than 750 kW Power plants totalling 4 GW will be shut down in the conventional energy sector: • Nuclear power plant Gundremmingen B to shut down by the end of December • On October 1, the lignite blocks Frimmersdorf P and Q will become reserve power plants • Five hard-coal power plants with 2 GW of capacity from STEAG slated for closure EEG 2017 will come into effect, with tenders as the main remuneration instrument; first tender results for wind offshore and wind onshore, as well as first reliable information about realisation results for solar auctions Bundestag elections 2017: Important decisions must be made after the elections concerning coal consensus, climate protection, renewable energy expansion and levies and surcharges 57

Agora Energiewende Anna-Louisa-Karsch-Str. 2 10178 Berlin

T +49 (0)30 700 1435 - 000 F +49 (0)30 700 1435 - 129 @ [email protected]

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