How The Energy System Is Structured
As one of Europe’s most populous states and dominant economic players, Germany’s energy demand is the largest in the region. It is also a net exporter of energy, mainly supplying energy to markets in Austria and the Netherlands. Energy policy is governed by the Federal Ministry of Economic Affairs and Energy, as well as the Federal Ministry for the Environment, Nature, Conservation, and Nuclear Safety. While the former includes two main bodies that manage the power sector, the latter leads climate and nuclear safety protection. Managing the power sector involves such things as regulating competition and overseeing energy networks, of which German states play a part as well.
Germany’s transmission system is owned and run by four companies—Amprion, Transet BW, TenneT, and 50Hertz Transmission—who, by European law, are required to separate their electricity transmitting, generating, distributing, and supplying activities. Transmission or distribution companies may be owned by the state, by a foreign state, by an institution, privately-owned, or joint-shared. Companies that generate and distribute energy are able to supply individuals on the basis of long-term contracts with respective German municipalities. German individuals have been able to choose their energy supplier as of 1998, many of which have been opting for smaller-scale competitors of major companies. While supply companies must pay one-time fees, the final costs of grid use are borne by end-consumers. As such, the costs of expanding renewable grids within German territories—including PV solar, on-shore wind, and biomass—will be highest for those living in small rural areas.
Sources of Energy
Germany’s energy was majorly comprised of non-renewables in 2015, with lignite consumption comprising 24% of all energy. However, renewables were responsible for 30% of energy consumption, with on and off-shore wind energy (17%) being a most popular source. Details can be found in the chart below:
Profiles of Leading Energy Companies
There are four major energy producers in Germany, jointly known as the “Big Four,” which control most electricity distribution, generation, and retail supply in the country. These companies are RWE, E.ON, EnBW, and Vattenfall, all of whom operate under a vertically integrated corporate structure, meaning they are directly responsible for the production and supply of energy through privately-owned plants and grids. These companies are also undergoing major restructuring following Germany’s Climate Action Programme 2020, which has an overall goal to reduce CO2 emissions by 2020 by 40% compared to 1990 levels. Additionally, Germany’s Energiewende, a comprehensive national energy plan designed to transition the state to a low-carbon and affordable energy consumer, is being taken into consideration. At the forefront of this plan is the transition out of nuclear energy, a decision that was driven by public outcry, first after the Chernobyl accident of 1986 and then again after the Fukushima failure in 2011. Following the Paris Agreements, these companies have also taken certain measures (detailed below) to reduce non-renewable activities. However, as Germany’s Minister for Economic Affairs and Energy has admitted, “exiting coal and nuclear power at the same time will not be possible.”
RWE is based in the north-western state of Rhineland-Westphalia, with a total of 6.8 million energy consumers in Germany and over 20 million across Europe. Its primary energy source is lignite, for which it operates 5 major power plants and 3 opencast mines in western Germany. The company produced a total of 213 billion kilowatts per hour (KWh) of energy across all operations in 2015, 132.1 billion of which were produced in Germany alone, which translates into some total gross CO2 emissions of 109, one million tons in the same year, putting RWE among the top three CO2 emitters in the EU ETS. RWE also recorded €48.6 billion (approx. USD 51.3 billion) in revenue. Many targets under the Energiewende were opposed by RWE, largely because it would have forced them to close 17 of their 20 lignite operations, with lignite being their largest source of energy. Therefore, RWE is primarily restructuring its operations under Germany’s 2020 Climate Action Programme, for which they are aiming to reduce their emissions by 0.62 million tons per megawatt per hour (MWh), or approximately 15% reduction from 2015 to 2020. During this time, RWE states that it is likely to expand its renewable energy production via wind and solar farms in countries such as Spain and Italy, although the company hasn’t detailed what this would mean.
E.ON, also based in Rhineland-Westphalia, is Germany’s largest operator of electricity and gas distribution networks, controlling four major grid companies in Europe. Their customer base includes over 6 million people in Germany and over 33 million throughout Europe, surmounting to a total revenue of €116 billion (USD 122.5 billion) in 2015. The total amount of energy produced was 215.2 billion KWh in 2015, of which 61.2 billion were produced in Germany. This equivocated 20.3 million tons of CO2 emitted in Germany and over 200 million across all operations. Since 2016 E.ON has decided to undergo major corporate restructuring, expanding renewables exclusively under the E.ON name and transferring all non-renewable activities to joint company Uniper. Nuclear operations are also being phased out under joint company Preussen Elektra. This restructuring will involve investing €7 billion into expanding three offshore wind parks over the next 5 years, with an overall CO2 emissions reduction of 20% by 2020, relative to 2015 levels. The closure of nuclear operations—E.ON’s largest energy source—is an ongoing and prioritized effort by E.ON, under Germany’s Energiewende, with one plant already shut down as of 2015 and 3 others expected to be closed by 2022.
EnWB is a state-owned company located in Baden-Wüttemberg, with energy services to over 5.5 million consumers in Germany and total revenues over €21.1 million (USD 22.2 million). As of 2013 EnBW has been restructured under an integrated business model, which aims to increase their output accounted for by renewable energies from 19 percent to over 40 percent in 2020, based on 2012 figures. It is now responsible for supplying renewable energy to over 35% of households in the region. In 2015 it produced a total amount of 250.8 billion KWh of energy, most of which was traded on energy markets. This translated to a total level of 35.9 million tons of CO2 emissions, the same year which EnBW expanded to 47% renewables. EnBW aims to reduce their emissions by 40% by 2030, based on 2012 levels. The company’s largest focus for renewable expansion is on off-shore wind farms in the Baltic Sea, which is projected to offset 167,000 tons of CO2. In the period between 2016 and 2018 EnBW will invest €1.6 billion (USD1.7 billion) in building new renewable energy projects, with a large focus on grid development.
Vattenfall Deutschland (VD)
Vattenfall, the parent company of VD, is Europe’s fifth largest energy producer, fully owned by the Swedish state, and among the top three CO2 emitters in the EU ETS. According to a 5-year study by ekopolitician, of the total 93 million tons of CO2 emitted in 2015 by Vattenfall, 99.5% were exclusively outside of Sweden. VD emitted 79 million tons in Germany alone, an increase from the previous year due to the controversial commissioning of a new power plant in Mooburg. The company is responsible for supplying energy to over three million consumers in Germany, 49% of which comes from non-renewable sources (primarily lignite). According to targets in the 2020 Climate Action Programme, the German lignite industry is supposed to cut emissions by 12.5 million tons of CO2, with lignite producers to be financially compensated for their loss of production. This will prove challenging for Vattenfall, which generated more than 56.2 terawatts per hour of electricity from its lignite-powered plants, from an annual total of 173.4 TWh. Seemingly more ambitious is their target of reducing emissions to 65 million tons of CO2 by 2020. In 2015 Vattenfall invested SEK 8.6 billion (USD 1 billion) in wind energy, focusing particularly on offshore development. VD is also preparing to sell many of its opencast mines. Although no buyers have been confirmed, amidst a failing market, only countries with lower environmental regulations set in place, such as in Eastern Europe, seem likely.
Renewable Energy Supply
In 2015, Germany produced a total of 237.5 TWh of renewable energy (wind, solar, biomass, and hydro), 46.25% of which was citizen-owned. This is largely possible due to energy collectives, comprised of citizens who collectively invest in or lease their own energy generators and grids, effectively decentralizing their energy consumption. In 2016, individuals being supplied renewable energy would pay 6.354 cents per kWh. Despite being the largest energy suppliers in Germany, the Big Four only operate around 6.5% of renewable energy production and supply. In 2014, Lower Saxony was the largest consumer of wind energy in Germany, while Bavaria was the largest consumer of solar energy.
Submitted by Climate Scorecard Country Manager Roland Selinger