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The energy mix of the future

Address given by Federal Minister of Economics and Labour, Wolfgang Clement, at the “Energy mix of the future” event organised jointly by the Friedrich Ebert Foundation and the German Energy Agency

Minister Wolfgang Clement

Datum: 21.4.2005/Venue: Düsseldorf

 

Address,

I.  Framework conditions/natural resources

Today’s theme is “the energy mix of the future”.

This is a topical and indeed a politically charged issue – for energy supply is central to our national infrastructure and therefore has a decisive influence on the success of our efforts to achieve greater growth and employment.

You are now expecting me to present a general strategy for Germany, knowing well that the energy mix is of course ultimately the result of management decisions. But naturally Government has an influence here too, and a substantial one at that, in that it lays down the regulatory conditions for energy supply. The actual energy itself, however, has to be provided by the business sector. We try to make this easier, for example by permitting access to resources. For when it comes to natural resources, which is the basic stuff of the economy, Germany is unfortunately well down the order. Yet we are still ambitious and our foreign economic policy is increasingly being applied to the service of raw-materials provision.

Here in Hanover Chancellor Schröder and President Putin have now given fresh impetus to the German-Russian energy partnership. Our close cooperation with Russia on oil and gas deliveries began some forty years ago and has proved to be an efficient and reliable tradition. Russia has become our biggest energy supplier and now provides about 18% of our primary energy needs – a huge contribution. What is more, we are Russia’s biggest customer. Yet there is still huge potential for Russo-German cooperation in many other areas, although the energy sector is the most important. We have organised a German-Russian energy summit for 11th and 12th October 2005 with a view to developing cooperation between Russian and German companies.

II.  Fossil-based energies/the NRW power station programme

Of course the subject of energy mix involves more than just raw materials.

This is why the Federal Government has also set a new course for our fuel make-up. The decision has been taken to phase-out nuclear power. I would recommend that we stick to it. We have now embarked with some vigour on the renewables route. By 2010 they should be making a 12.5% contribution to our electricity production, and this is to rise to as much as 20% by 2020.

The “remainder” therefore has to be supplied by coal and gas – and in the years ahead these fuels will play an even bigger role than they do today. In view of this fact I fail to understand those who declare that coal is finished. Where are they living? Certainly not in the present.

Against such a background the declarations of the CDU and F.D.P., who want to cut financial aid to the coal industry by 50% or even abolish it altogether, are both without objectivity and untenable.

Coal is experiencing a revival all over the world. It has by far the greatest life-span of all the fossil fuels. What coal needs is a reasonable and reliable regulatory framework. And we have done this.

When last year we had to transpose the emissions trading scheme into German legislation we were very careful to ensure that coal was not surreptitiously banished from the energy mix. No question here of sawing through the branch on which we are sitting. The message has got through and recent announcements of major investment in fossil-fuel power stations right here in North Rhine-Westphalia have been extremely encouraging.

Not only for the security of our future electricity supplies but encouraging too for climate protection. For the new generation of coal and gas fired installations will be about 30% more efficient that current technology in reducing harmful gas emissions. We can only wish the companies involved every success in exporting this state-of-the-art power station technology. For that is the kind of climate protection that I wish to see – and is something that will also be of benefit to our economy.

The power station programme in North Rhine-Westphalia also impressively demonstrates that responsibility for supplying energy to our business community is being taken seriously.

There have been loud complaints that German profits are being invested abroad – but in this case they will primarily be put to good use in the German energy industry.

That is what I call a good investment.

III.  The Energy Industry Act amendment

This shows that our policy to establish a stable and predictable regulatory framework for the energy supply industry is paying off.

Companies are beginning to free-up the investment backlog and plans have already been laid to invest nearly € 20 bn in power stations and transmission systems by 2010. This is the largest investment programme I currently know of anywhere in Germany. And that is just the beginning.

Just last week the chief executives of RWE and EnBW, Harry Roels and Professor Claassen, spoke in a gratifyingly clear manner of Germany’s excellence as a production base and went on to announce billions of euros in additional investment. The new Energy Industry Act will give real impetus to our programme for modernising German power stations and transmission systems. For this sends an all-important signal to the energy suppliers:

“Here you will find a competition-friendly environment with fair and non-discriminatory access to the supply grid – and here too you will find a regulatory body that knows we are relying on your investment in power stations and transmission lines.”

And electricity and gas customers, especially the energy-intensive industries, should also know: “In Germany you too are in good hands.” For the new Energy Industry Act will improve the conditions for greater competition in the electricity and gas markets. Network price rises are controlled in advance and any cost reduction potential in the network payments is identified by a system of strict control of abusive practices.

In the medium term, however, we want to get away from state-managed unit price controls, as this will ultimately lead to the regulation of development.

We want to see more price-cutting actions coming into play and to this effect we are placing our hopes on a system of incentives regulation:

 At the heart of this regulatory system is the provision that companies are set targets for their network prices and must have achieved these by the end of a certain period. Those that exceed their target, are more efficient and drive down their costs even further will earn more. In this way companies acquire a healthy self-interest in achieving efficiency.

But to put it plainly, regulation is no pass-key to price cutting. For one thing, regulation targets the network prices and not the retail prices, which are ultimately determined by the market. And for another, our interest in low network prices has to end at the point where all our concerns for security of supply begin. Only companies that can make profits invest. That is my understanding of the current energy situation in Germany: efficient businesses, not regulated to death but capable of investing in power stations and in transmission systems.

Now the Energy Industry Act is just waiting for the starter’s gun. We trust we do not have long to wait – and to this extent I am very much hoping for a constructive approach by all those engaged in the mediation process.

IV.  Energy Research Programme

Germany’s appeal as an industrial base can of course be attributed not just to its stable regulatory conditions but also to its national approach to risk management.

For what we have today in the way of technology is by no means the end of the road. We must on all energy policy fronts have the technical options for improvement. We need modern power-station technologies based on coal and gas, including facilities for CO₂ capture and storage. We need efficient technology in the area of photovoltaics and wind power, especially in the offshore sector. And we need to research future options such as fuel cells and hydrogen. Our new Energy Research Programme will therefore also focus on these key areas. 

Our objective must be to increase the cost effectiveness of renewable energies and improve further in the area of energy efficiency. Just think for example of the potential savings that can be made in building design and in the transport sector: the importance of energy efficiency cannot be overstated – and our research efforts must naturally aim at providing coal and lignite users with the technology required to meet our climate protection targets.

One of the most important measures in this respect is the “Modern power-station technologies” programme, or COORETEC in short.

This is key that will hopefully unlock the future of the low-emission coal fired power station, and looking further ahead perhaps also the zero-emissions coal plant.

V.  The Dena Supply-grid Study

 

Address,

As I have already said,

it is not just coal that needs to be made more climate friendly – renewable energies too need greater drive towards competitiveness. 

They need to grow up, for only fuels that are really competitive can make a proper contribution to our electricity supply.

It is to the Renewable Energies Act that they owe their increased share of the generation market, with wind power leading the way.

We are placing great hopes on expanding our wind generation capacity offshore.

For wind naturally lacks those very ingredients that the energy supply industry is seeking from our regulatory framework, namely constancy and predictability. This is already causing problems for grid reliability, especially on windy days. And as more and more wind power is fed into the mains we will find problems of this type also arising during normal operating conditions – unless we do something about it.

But we have already begun to tackle this issue.

The Dena Study now shows, for the period leading up to 2015 at least, how – as we extend our wind generation capacity, especially offshore – we can successfully integrate wind generated electricity into our interlinked system and at the same time keep grid reliability at its customary high level. 

The first phase of this programme involves the retrofitting of out-of-date installations and – what is especially important – the accelerated expansion of our supply networks.

In a Government statement in March the Chancellor called for measures to promote the pace of investment in power supply infrastructure.

And we are making all haste to bring this about. Yet in spite of this, the new supply networks will not spring up overnight and this is why we need supporting measures. Generation management is part of this process, which means that wind-power infeed is temporarily reined back when security of supply dictates. And we will need infeed management for wind power plant well into the future too so that overall system stability can be guaranteed.

As you see, the task is a challenging one, but it can be achieved.

That is the stated view of the Dena Study.

 What we now need is for all involved to work together: equipment manufacturers, plant operators, network operators and Government – all have to play their part.

Government’s role will be in framing legislation, which also means adapting the Renewable Energies Act as required.

Another important consideration is that we must take seriously the complaints voiced by neighbouring countries concerning the negative impact of our wind-power input on their supply grids. Generation management and the retrofitting of outdated wind power installations are the first steps towards remedying this situation quickly. Longer-term solutions to the problems caused by our extended wind-power generating capacity, and its impact on other countries’ supply networks, will be investigated as part of a second Dena Study.

VI. Summing-up

I think we can sum things up as follows:

the energy mix of tomorrow needs two things – first: highly efficient, environmentally sustainable fossil-based energies, and second: technologically advanced renewables that can be employed as part of a rational overall strategy.

Wind power in particular requires a lot of standby capacity and will for this reason be heavily reliant on fossil fuels.

An energy mix in the truest sense of the word – as based on increased levels of energy efficiency, intensive research efforts and an attractive framework for energy investment – this is the kind of provision we need to make to ensure a reliable and cost-effective supply.

It will also make our industrial base more attractive, so that jobs are not lost but gained.

This has become a matter of real concern for me at times like these.

Thank you for your attention.

Quelle:
Press statement from the Federal Ministry of Economics and Labour:
http://www.bmwa.bund.de/Navigation/Presse/pressemitteilungen.html