“Energiewende” in Germany and Australia

Similar to many highly industrialised countries, Australia and Germany are standing at the crossroads of their energy future. Whereas Germany’s Government, led by Angela Merkel, decided to pursue a phase out of nuclear and coal power and to follow an energy transition, or “Energiewende”, after the tragic incident of Fukushima, Australia has experienced a decade of uncertainty in its energy and climate policy. 

Rising energy costs and carbon emissions, and ensuring energy supply reliability are issues in both countries, demanding constructive, long-term solutions with bi-partisan support. In this context, the authors would like to explore a creative approach to energy and climate issues which creates lasting value. It is time to map out a path for Australia’s energy transition, which addresses the opportunity for simultaneously achieving energy security, reliability and affordability as well as low carbon outcomes.  Australia could learn from the German experiences, both good and bad, to help master this transition. 

So, let’s have a look at the concept of the German Energiewende:

The initial focus of Energiewende was the Renewable Energy Act (Energie-Effizienz-Gesetz) (EEG). This law was adopted in 2000, ensures access of renewable energy to the grid and provides operators with fixed remuneration for 20 years. The feed-in payments are funded by a charge paid for by all electricity consumers. For new power plants, remuneration is reduced every year, initially by 5%. Another important feature is that renewable energy is given priority over conventional electricity. 

Consequences for electricity prices

The large growth in electricity generation from renewable energy to a share now of 40% has, however, had consequences: The capacities required to fund renewable energy has risen significantly and, as a result, electricity prices have escalated. The proportion of taxes payable on electricity prices meanwhile amounts to over 50%. 

Introducing the second pillar: energy efficiency

To address high electricity prices, policy makers in Germany developed a second pillar, namely to increase energy efficiency in all sectors. In order to promote energy efficient products and services and to create a level playing field for energy efficiency measures, the federal government in Germany created a National Action Plan on Energy Efficiency Plan (NAPE) in late 2014. After an intensive dialogue process during which stakeholders such as the German Business Initiative for Energy Efficiency (Deutsche Unternehmensinitiative Energieeffizienz) (DENEFF) proposed a variety of options, a package of cost effective measures was developed. This plan became the foundation of the German energy efficiency policy. The plan provides for various measures and initiatives to increase energy efficiency in Germany, including in the building and industry sector, and to kick-off investments in energy efficiency services via contracting. The total amount of public money spent on energy efficiency will increase from €40bn to €60bn by 2030 according to the latest update of the national energy efficiency strategy.

How may this experience be applied to Australia:

Borrowing from the German concept of Energiewende, we propose a model for the Australian energy transition. We suggest to use a unifying name, ‘Enliten’, to signify a brighter, more positive approach to benefit from harnessing and directing inevitable change. A significant advantage of the Enliten concept compared with other proposals is the strategic focus on energy productivity: gaining more value from every unit of energy deployed. Higher Energy productivity may reduce gross energy demand, and thus greenhouse gas emissions, throughout the year. It may also be used to reduce peak energy demand at any given moment (increase usage when electricity is very inexpensive, and so may enhance electricity system reliability and reduce energy costs. Even though energy productivity improvements tick all the boxes, they have to date not been adequately implemented in Australia. Investment in our Commonwealth energy efficiency programs amounts to about a thousandth of that in Germany (and the economy is 1/3 the size). There is no reason why Australia could not have it all – reliable, affordable and clean energy (RACE). To achieve all three, Australia needs an integrated energy transition strategy based on the following main instruments:

Energy productivity on energy user sites (factories, offices and homes) is the key, from improving energy efficiency of buildings, processes and equipment; distributed generation; demand control to match volatile energy supply (including use of storage – thermal storage such as hot or cold water, material storage, or batteries), applying energy to enable greater value (e.g. digitalisation of industry – industry 4.0); and replacing fossil fuel heating with electricity technologies (e.g. heat pumps) or renewable fuels (e.g. biogas from waste digestion).

Large scale renewable generation of electricity using solar or wind, together with investments to reduce supply volatility such as batteries, pumped hydro or fast ramp gas fired generation (noting that end user demand management should come first, as it is lower in cost and commercial risk).

Energy for transport: Sourced from using renewable energy to generate hydrogen (including using low cost excess renewables as a form of storage), electrification of land transport, and/or production of bio-fuels from waste or other organic sources, which is needed particularly to decarbonise air transport and shipping.

Key element: improving energy competitiveness 

Improving energy productivity is the glue that allows Enliten deliver RACE. It allows carbon mitigation and accelerated renewables to be achieved economically. Every alternative model fails without energy efficiency at its centre. Germany found this out from experience, and refocussed its policy by making energy efficiency the centrepiece so as to deliver the promise of transition. In Australia, central support for an energy transition was largely neglected at Commonwealth level. This is particularly unfortunate given Australia’s existing poor energy productivity. There is an economic imperative to boost energy productivity given that Australia generates less value with each unit of energy deployed than other developed countries. Combined with the rapid increase in energy prices in the last decade, Australia now faces a competitive disadvantage in energy costs. 

In sum, Australia must establish a national energy productivity innovation programme to accelerate the development, application and technology transfer of the technologies needed to achieve its goals. A national strategy is also required to ensure that there is a chance for the Australian economy to benefit from leading in at least some niche aspects of the transition, and to ensure that, as the transition takes place, Australia is not just a tech-taker of imported technology and business solutions.


Biography

Jonathan Jutsen has been a leader in energy and carbon management for 35 years. Jon is the CEO of The Australian Alliance for Energy Productivity. The focus of the Alliance is to double Australia’s energy productivity by 2030 (2XEP) a2ep.org.au

Jon is also the CEO designate for a bid to the Commonwealth Government to establish a co-operative research centre (CRC): www.RACEfor2030.net.au

He is a Chemical Engineer with a Masters in Energy Technology. He was selected as one of the ‘100 Most Influential Engineers in Australia’ and is a Fellow of the Academy of Technological Science and Engineering. He has been named as Engineer of the Year and received Millenium Medal for his contributions to the field, was named in the Crikey list of top carbon cutters, and the WME Leaders list for ‘Energy and Carbon’. He was awarded Energy Efficiency Champion 2018 by the EEC in November.

He was also a member of the Board of ARENA (Australian Renewable Energy Agency) until mid-2018.

Biography

Carsten Mueller is a member of the German Bundestag. A lawyer and banker by degree, he is a member of the Committee on Economic Affairs and Energy, the Committee on Legal Affairs and Consumer Protection and the Committee on Scrutiny of Elections, Immunity and the Rules of Procedure. Carsten Mueller is honorary chairman of the German business initiative for energy efficiency (DENEFF) as well as Chairman of the Parliamentary Club on Energy Efficiency. He has been a great advocate of energy efficiency for years.

Biography

Christoph von Spesshardt serves as a Director Public Affairs and Strategy Knauf Group and is temporarily delegated to the Asia-Pacific region, heading regional Public Affairs for Knauf Insulation out of Australia. He holds a MSc in Policy and Communications and can trust on 20 years of experience in public and external affairs. Christoph is passionate about energy efficiency and an active advocate for its enormous potential in businesses and societies. Consequently he co-founded the German business initiative for energy efficiency (DENEFF) in 2010 with now more than 180 company members, which he since serves as vice chair. He also is a non-executive director of the Australian Alliance for Energy Productivity and chairs the German-Australian governmental taskforce for energy efficiency.

Introduction

Analysis

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Conclusion