Frost & Sullivan: 36 percent of Electricity in Germany to be Generated from Renewables by 2020


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The energy market in Germany will see dramatic changes during the next few years. With the nuclear energy capacity halved, the landscape to 2020 will look very different with renewable energy to account for 36 percent of electricity generated.
Frost & Sullivan Energy Consultant Jonathan Robinson says: “Germany is already a leading European renewables market, but it will go beyond its EU obligations with significant further investment in the next 8 years. However, the growth in renewables poses serious challenges and will require substantial investment in upgrading the existing power transmission infrastructure.”

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Frost & Sullivan: 36 percent of Electricity in Germany to be Generated from Renewables by 2020

  1. 1. Overview of the German Power & Energy Market Jonathan Robinson, Senior Consultant Frost & Sullivan 10th February 2012
  2. 2. Germany – Power Generation in 2010 Installed Base: 153 GW Electricity Generation: 625 TWh Lignite Oil Lignite Oil 14.7% 3.4% 23.2% Gas 1.3% 15.1%Hard Coal Hard Coal Gas 19.0% 18.8% 13.4% NuclearOther 14.1% Other3.7% 8.7% Solar PV Nuclear Hydro 6.5% 22.5% 6.8% Solar PV Wind 1.9% Wind Hydro 16.8% 5.8% 4.3% Source: Frost & Sullivan  Coal is the key baseload power technology (34% of capacity, 42% of generation)  Limited historical role for natural gas  Strong presence of renewable energy (34% of capacity, 21% of generation)  Wind power expansion slowed but dramatic growth in solar PV in recent years  Solid contribution from nuclear power
  3. 3. The Aftermath of Fukushima 7 Nuclear Power Plants were switched off post-Fukushima. They (plus the problematic Krümmel plant) will be permanently shut down One of the 8 plants could have been used as reserve capacity until 2013 (but German Energy Agency DENA decided against this on 31 August 2011) Leaves 9 plants still in operation currently Three further plants to be closed before 2020: Grafenrheinfeld (2015), Grundremmingen B (2017) and Philippsburg II Six remaining plants to be shut down in 2021 and 2022  Higher utilisation of coal plants and delayed decommissionings  Greater expansion of renewable energy  Accelerated expansion of gas plants  Greater electricity imports Source: Der Spiegel
  4. 4. Germany – Capacity Growth to 2020 2010 2020 Hard Coal 29.0 26.1 Lignite 22.4 17.7 Oil 5.2 2.7 Gas 23.1 26.7 Nuclear 21.5 9.5 Hydro 10.3 10.7 Wind 25.8 45.8 Solar PV 9.9 33.0 Other 5.7 7.1 0 5 10 15 20 25 30 35 40 45 50 Installed Capacity GW Source: Frost & Sullivan Installed capacity to rise from 153 GW to 179 GW in 2020 Remaining nuclear capacity less than half the 2010 level Decline in coal and lignite capacities due to retirement of ageing and uneconomical plants Wind to grow by average of 2GW per year, solar PV capacity to treble
  5. 5. Germany – The 2020 Fuel Mix Installed Base: 179 GW Electricity Generation: 590 TWh (23.2%) Oil Gas Lignite (14.7%) (14.1%) Oil 1.5% 14.9% 19.7% Lignite Nuclear 0.7% 9.8% Gas 5.3% Hydro Hard Coal 14.7%Hard Coal 6.0% 18.2% 14.6% Nuclear 10.6% (22.5%) Hydro Other Other 4.8% 4.0% 11.1% Wind Solar PV 25.5% Solar PV Wind 18.4% (16.8%) 12.9% 7.4% (6.5%) (1.9%) (5.8%) green = increased share from 2010, red = decreased share from 2010 Source: Frost & Sullivan  Overall electricity generation to decline from 625 TWh in 2010 to 590 TWh in 2020, due to energy efficiency and greater imports  Coal remains leading fuel (37% of generation) but decline in lignite-fired output as older power stations are decommissioned  Increase in share of gas through accelerated development programme – though greater shares anticipated post-2020  Massive change for solar in particular - renewable energy to account for 36% of electricity generation by 2020 (aim of EEG is to raise renewables share to at least 35% of gross power consumption by 2020)
  6. 6. Germany – T&D Network Germany has 4 transmission system operators (TSOs) and about 850 distribution system operators (DSOs) German Transmission Grid Operators The German transmission system is owned by four principal transmission system operators: Transpower (formerly E.ON Netz), Amprion (formerly RWE Transportnetz Strom), EnBW Transportnetze and 50hertz (formerly Vattenfall Europe Transmission). Transpower was acquired by Dutch TSO TenneT in late 2009 50hertz was acquired by Belgian TSO Elia and Australia-based Industry Funds Management (IFM) in 2010 Amprion (75%) was acquired by investors (insurance companies, Commerzbank) in 2011 EnBW also planning sale of minority stake to infrastructure fund Electricity distribution (DSO) is mainly in the hands of municipal utilities (Stadtwerke) There is a growing need to invest in DSO grids due to the connection of renewable energy sources to the distribution grids Distribution utilities have strong links with local suppliers Source: Wikipedia
  7. 7. Grid Investments Investment in the German Electricity Expected Additional Investments in German Grid due Industry to Renewables Expansion, 2010-2020 BMU Reference Scenario, 2020 HV HV/MV MV MV/LV LV Source: BMU, E-Bridge Consulting GmbH, 2011 Source: BDEW, 2011 Grid investment needs boosted by greater penetration of renewables Several initiatives were adopted in the aftermath of Fukushima Germany plans to adopt a Grid Expansion Acceleration Act (Netzausbau-beschleunigungsgesetz, NABEG) At least 3,600 km of new extra high-voltage transmission lines to be built by 2020 Planning times to be reduced from 10 years to 4 years – e.g. connection of offshore wind farms to be made easier by allowing cluster connections instead of costly individual connections Planning acceleration partly to be achieved by bringing state-level competencies to the federal level – Federal Grid Agency (Bundesnetzagentur) to be responsible for planning and approval procedure for long-distance lines
  8. 8. Key Legislative & Regulatory Framework Mandates that new buildings or major renovations must have Energy Act (EnWG) electricity meters installed Renewable Energy Law that has created the feed-in tariff system for renewable energy Sources Act (EEG) and has been adopted in similar forms in over 50 countries Energy Efficiency Act Sets target to reduce energy consumption by 9% in comparison to (EnEfG) 2001-2005 consumption Renewable Energies Renewable energy for heating target of 14% set for 2020, major Heating Act (EEWärmeG) boost for combined heat and power Metering Access 80% of households to be fitted with smart meters by 2020 Ordinance Extra High Voltage Grid 24 priority projects outlined; limited impact so far Extension Acceleration Act
  9. 9. Key EPC plant opportunities in Germany for the next decade Bioenergy Solar & Wind Gas Plant Germany is a leading player in bioenergy  Strong growth potential for solar and  The gradual closure of nuclear (waste-to-energy, biomass and biogas) wind – massive installed base power plants and the addition of Generous incentives have caused rapid required to meet electricity intermittent renewables will lead growth in the biogas market, close to 20% generation targets, due to low to an increase in gas-fired plant year-on-year in Germany in the past capacity availability construction decade. Frost & Sullivan base case  Both will require substantial  Replacement of aging gas-fired forecast of 8% a year for Europe, 23% investment in T&D infrastructure to plants will also increase during the optimistic – revenues reaching €1.0 support development, particularly decade billion to €2.5 billion by 2016 – 75% with expansion of offshore wind in  Different plant set ups will be Germany the North and Baltic Seas. However required – base load, fully flexible Germany’s grid is well connected by and peaking plants. In some cases, European standards and this can project work will be focused on improve the balancing situation upgrades/conversion projects
  10. 10. Power Plant EPC Landscape in Germany Major utilities have project development entities that handle both internal and external projects Major equipment suppliers also have extensive project development capabilities Major engineering companies are also active in the power market – mix of large civil players and power specialists Large number of small regional players that have project REGIONAL/LOCAL PLAYERS development capabilities
  11. 11. Key T&D opportunities in Germany for the next decade Grid Upgrades HVDC Smart Meter The movement towards smart grids and  There are a number of HVDC  The Metering Access Ordinance is the increase in renewable generation projects ongoing in Germany, Germany’s effort to comply with the warrants the need for grid upgrades especially with the expansion of requirement that all member states need According to the base case German offshore wind in the North and Baltic to have 80% smart meter penetration by Energy Agency Grid Study (Netzstudie Seas 2020 II), 3,600km of extra high voltage  There is also a need for HVDC cabling  No mandatory roll-out is currently planned cables, costing €10 billion, will be the to transport the electricity from the but pilot projects are ongoing. minimum that will need to be installed north of the country to the south,  According to the German Energy Act, smart in the German electricity grid by 2020. Given that, at times, the North Sea meters must be installed in new buildings Growing integration of distributed region has an excess of supply, the and buildings that are undergoing major generation implies modernising the ability to transport long distances is refurbishment from the beginning of 2010 distribution networks requiring an important for utility revenues  High smart meter growth is forecasts post- investment of around €25 billion by 2013. Frost & Sullivan expects smart meter 2030 unit shipments to grow by 80% between 2010 and 2017
  12. 12. T&D EPC Landscape in Germany Not only supply products such as cables, converter stations, etc but can provide a complete turnkey solution including engineering and design, completion of civil works and installation and commissioning Leading utilities have additional consultancy business that handle transmission and distribution projects Engineering and consultancy companies that undertake complete T&D projects
  13. 13. Grid Reliability – The T&D Challenge Grid Reliability  The quality of Eastern European power grids generally falls far below those of Western European countries.  Decades of under-investment often results in an inability to transmit power even moderate distances without substantial power losses.  Grid investment has never been a priority, as countries focus investment capital on upgrading plants or building new ones.  Transmission losses in Turkey are approximately 3 times higher than those of Germany.  Reliability is also an issue, with power outages occurring much more frequently and lasting longer.  Substantial investment is also required to link the various national grids, as part of an ultimate goal of a unified European grid. 250 + 150 100 50 0 SAIDI (min) SAIDI = System Average Interruption Duration Index
  14. 14. Openness of Major Utilities to Outsourcing European Power Plant Services: In-House Capability Vs Outsourcing High In-house capability Low Tendency to outsource services High Source: Frost & Sullivan.
  15. 15. German Power Plant Maintenance – Mix of Key Players OEMs ISPs In-house  Mix of large ISPs that operate in  Utilities retain differing Major equipment suppliers link multiple geographies and service a service to supply contracts percentages of work in-house. wide range of products to localised  Most have separate divisions that where possible. small-scale service providers. Mix of one product supplier also offer services to other  Bilfinger Berger major player, owning utilities/IPPs. (Doosan Babcock – boilers) and a range of companies, including multiple equipment suppliers Babcock Borsig Steinmuller (Alstom, Siemens)