Heiko Staubitz, energy markets expert at Germany Trade & Invest (GTAI), shares some insights into the German Energiewende.
Germany has targeted a complete phase-out of nuclear power by the end of 2022 and in recent years has ramped up renewable energy production. Three new laws concerning renewable energy were passed in the summer of 2016, generating significant business
Christina Würthner, chief executive of the Swiss software company Enersis, expects nothing short of a revolution as Germany transforms its energy policy, radically changing the way power is generated, distributed and consumed. To take advantage of these reforms, the firm set up a German subsidiary, based in Berlin.
“The approaching phase of the changeover offers huge potential for us as a company,” says Würthner.
She spent much of 2016 traveling around Germany and meeting energy providers to promote her company, which designs software that allows businesses to measure and control their electricity consumption. “We are helping these companies to develop new digital business areas related to the changeover,” she says. Demand for the Swiss firm’s expertise is clear. Enersis already employs as many people in Berlin as it does in its head office in Bern.
Auspiciously, Enersis’s German expansion coincided with the passing of three important energy laws by the federal government: the digitisation of the Energy Transition Act, the Renewable Energy Act 2017, and the Electricity Market Act.
Germany has already set the target of phasing out nuclear power by 2022. It has also significantly expanded its renewable energy sector in recent years, particularly wind farms and solar energy plants. But the new legislation finally provides a common framework for these reforms.
These elements include a range of renewable energy sources, the electricity The introduction of smart meters will provide a surge in demand for industry.
Experts estimate that several million devices will be required in Germany in the next few years. Furthermore, the data from the meters needs to be collated and processed and it is likely that the data itself will give rise to new business models.
“The market is still in the early stages of development,” says Heiko Staubitz, energy markets expert at Germany Trade & Invest (GTAI), which offers support to foreign companies that want to invest in Germany. “The opportunities for foreign companies to position themselves here are correspondingly large.”
GTAI helped Enersis to get established in Germany. The company is optimistic that the country’s energy reforms will provide scope to expand its operations.
“Many energy suppliers in Germany are open for new concepts and engaging in new business areas,” says Würthner. With their software tools for saving energy, combined with the potential to develop completely new value-added services, the company sees the benefits of increased competition in the energy sector. “We are currently experiencing a kind of disruption in the market which can act like a springboard for companies that are strong in innovation.”
Digitisation and the advancing progress of the transition in Germany also provide new incentives for companies to invest in energy efficiency measures.
Thanks to innovations in technology, saving electricity and heat has become significantly easier over the past few years and market observers predict this trend will increase further. There is also potential for foreign firms that provide energy efficient technology to profit from this growing market.
The Renewable Energy Act 2017
The second important act concerning renewable energy brings about fundamental changes in the market for electricity produced from solar and wind.
It is slowly bringing to an end the current system whereby the federal government sets a new fixed price each year at which renewable energy can be remunerated on the market. In future, electricity will be remunerated through a tender procedure.
market, energy efficiency measures, the electricity grids and digitisation.
A new industry is born
This transformation also offers new business opportunities for entrepreneurs and foreign companies. In the next few years 1.6 million energy producers of all sizes and major consumers will need to be intelligently networked together, creating a multi-billion-euro market opportunity. The federal government in Germany spent €4 billion in 2017 alone to support the changeover.
The digitisation of the Energy Transition Act
The first of the three new laws is helping enable the creation of a smart grid in Germany – an intelligent electricity grid that can be controlled in a decentralised way. As a first step, in 2017 all major energy consumers, including companies with an electricity consumption of more than 10,000 kilowatt hours per year, were instructed to install smart meters. Private households, which use significantly less electricity, will follow suit in a few years’ time.
Smart meters continuously measure current electricity consumption and transmit this data to the grid operators and electricity supply companies – a prerequisite of a decentralised electricity network. It will only be possible to operate a grid in a stable way and moderate fluctuating levels of electricity production if electricity suppliers, grid operators and consumers are networked and can exchange data. The idea is that electricity should be consumed at those times when the quantity generated is greatest.
Incentives will be offered to companies and members of the public to consume the bulk of the electricity they need during these peak generation times. The federal government is also supporting the restructuring of the electricity grid with funding programmes such as SINTEG and Kopernikus.
competitive prices, it presents a significant advantage. Moreover, investors will now have greater incentives to build more new wind farms, photovoltaic plants and power plants in economically viable areas.
The Electricity Market Act
The third law which was passed last summer is intended to maintain a stable balance between supply and demand on the electricity market. This will become increasingly important as the proportion of electricity obtained from weather dependent sources becomes greater. The act makes it compulsory for electricity traders only to sell electricity that they are feeding into the grid at the same time. This new regulation will lead to investment in new infrastructure over the next few years – electricity generating plants that have a high level of customer demand will be the main winners. In this way, market forces will drive further expansion of renewable power plants in Germany.
The background to the current comprehensive changes in the law is the success encountered in the changeover in energy policy so far. In 2017, 36% of the electricity produced in Germany came from renewable energy sources, making the country a global pioneer in this field.
Wind energy, including both onshore and offshore, supplies the greatest share of the market (16.1%). Germany’s first offshore wind farm Alpha Ventus started running six years ago and represents a significant milestone. Wind energy will continue to play a decisive role in the Energiewende (energy transition). By 2050, the aim is to have 80% of electricity consumption coming from renewables State funding programmes will also provide an important incentive for future development.
Until then, producers and network operators will still need to make some fine adjustments in order to be able to guarantee supply at any time with the growing proportion of renewable energies.
Experts consider that, in the long term, it will be the seasonal rather than the daily fluctuations in renewable energy production that will bring the biggest challenge. In autumn and winter, it is dark for a longer period and, if there is also no wind, electricity production will drop noticeably. At such times, conventional electricity suppliers would have to step in as they are in a position to generate flexibly and efficiently. That is often not achievable with traditional large power plants, but there are possible alternatives, such as modular-driven gas power plants which work with many small engines rather than one large turbine. This represents another emerging niche in the market and an attractive investment opportunity.