Germany’s Rush on Renewables

Germany has updated their ambitions for a renewable energy transition – aiming to fulfil all electricity needs from renewable sources by 2035. This contrasts against their previously rather vague target of being fossil fuel-free “well before 2040”.

There has been increasing pressure for European countries to move away from Russia supplied gas specifically, which has received increased attention recently with the UK gas supply crisis and the current Russia-Ukraine conflict. On average, the EU relies on Russia for 35% of its natural gas supply yet transitioning away from the fuel source presents numerous challenges.

As outlined by German economy minister, Robert Habeck, a key element of the transition is greatly increasing the capacity for renewable energy. This is complicated with the move by Germany to decommission its remaining nuclear power plants by the end of 2022 – with them representing 6% of Germany’s energy mix in 2022. Resultantly, there remains no realistic possibility of increasing nuclear energy production to help with the transition from fossil fuels and therefore leaves open the chance that coal power in Germany will continue beyond the target to phase it out by 2030.

A further motive for an expedited transition from fossil fuel comes with Germany halting the development of Nord Stream 2 – an export gas pipeline running from Russia to Europe – following Russia’s involvement in the ongoing Russia-Ukraine conflict. Russia has since responded with warnings that they will reduce gas supply to Europe, noting specifically that Europe simply can’t cope if Russia doesn’t send any gas at all to Europe. While it isn’t expected that Russia will take such a drastic step, Putin’s recent aggression means that it is becoming an increasing possibility and highlights the fragile geopolitics that underlies energy supply across Europe itself.

Moves have already been made to secure a greater amount of renewable energy within Germany’s energy mix. Notably, Germany implemented a “solar acceleration package”, making it mandatory for new commercial builds to have solar panels and a “wind-on-land law” which will ensure at least 2% of Germany’s territory is reserved for wind energy. Beyond this, a revision of the energy laws for buildings is also set to see new home heating systems run on at least 65% renewables from 2025 – with the surcharge for renewable energy being covered by the federal budget rather than households themselves.

There are backup plans in place in case the supply from renewables doesn’t cover demand. This includes increasing gas-fired power plants initially, with the aim to begin a transition away from gas to hydrogen from 2030 – which will result in Germany’s capacity for green hydrogen production doubling. While the targets for renewable energy are ambitious, Germany has massively increased renewable energy production in recent years, with renewable energy-producing more electricity in 2020 than fossil fuels, with wind energy being crucial to this rapid increase in production.

Beyond wind energy, Germany has also significantly pushed for an increase in solar power production, accounting for 8.2% of the country’s energy production in 2019. With falling prices for solar cells alongside the revision of building laws, solar energy is expected to become a huge component of Germany’s energy mix, seconded only to onshore wind energy generation. The benefit of solar energy over onshore wind however is the relative ease of its implementation. As noted before, new buildings are suitable for solar panels implementation, as are the majority of existing buildings as well – which navigates around the key drawback to onshore wind – that being the requirement of the identification and construction of additional sites. Solar power can largely mesh with existing infrastructure which explains to a degree why it’s being championed by Germany.

Overall, Germany’s revised targets for renewable energy production is ambitious yet supported by historic increases in production rates. It also serves as a valuable study regarding the interrelation that exists between geopolitics and energy production and the flexible and desirable nature of energy production independence – especially for European countries at present.

Analyst: Matthew Ball

Sector Head: Archit Lal

Posted in