Taking stock of German energy policy in a European context

In face of the Ukrainian crisis, the security of supply of natural gas has moved to the center of the debate on European energy policy. This sometimes blinds to the fact that there are further challenges in European energy policy need to be addressed. For Germany, due to its energy transition, there are three problems that can only be solved on the European level:

1. In spite of the energy transition, CO2 emissions in Germany are rising.
This is a result of a surplus of emission certificates within the Emissions Trading System (ETS), which is mainly caused by the falling production after the economic crisis in 2009. Thus the CO2 price has declined, and electricity generation from black and brown coal has been rising, while climate-friendly gas power plants throughout Germany have generated less and less electricity or have even been completely decommissioned. CO2 emissions in Germany will only be lowered by a European approach, through a modification of the ETS.

2. In spite of the rise in electricity generation from coal, electricity costs in Germany are high.
This is partly due to the EEG apportionment which has been raised to 6.24 cents per kilowatt hour in 2014. While the industry and private households in Germany are facing higher costs in order to reduce emissions, the spared CO2 emissions in Germany are emitted elsewhere in Europe, because CO2 certificates are cheap. The Intergovernmental Panel on Climate Change (IPCC) says that ideally, emissions should only be limited by the trading of emissions rights. Additional promotion schemes for renewable energies on the national level would only increase costs, but have no effect on climate change mitigation. This proposal is not without reason, but is unlikely to be implemented. Another more cost-efficient way could be the European harmonization of promotion schemes.

3. Germany is in risk of shortages of electricity supply during peak times, when the sun and wind cannot generate enough energy.
At the same time the operation of natural gas power plants, which could fill these gaps, is currently not economically feasible for energy suppliers. Shortages of supply could be prevented by electricity imports from the European neighbour countries, which would require the creation of a transnational transmission grid. German utility providers prefer the creation of a Europe-wide supply capacity market in which the state pays power plant operators for the provision of electricity generation capacities even if they are not used.

This Policy paper is also available in German.