2018: a milestone for the German energy transition, but a mixed year as a whole

In 2018, renewables accounted for 35.2 per cent of electricity generation in Germany – the same as hard coal and lignite combined. Furthermore, renewable sources accounted for an even higher 38.2 per cent of energy consumption. The difference between generation and consumption can be attributed to electricity exports, which remained high at 50 terawatt hours, despite falling slightly. The record figures were achieved on the back of high levels of sunshine and three gigawatts of photovoltaic construction (the first resurgence in PV since 2013). Wind generation also increased, though less than in previous years: growth was tempered by moderate wind levels and a 50 per cent reduction in new plant construction. These are just some of the findings presented in Agora Energiewende’s annual review, “The Energy Transition in the Electricity Sector: 2018.”

Following a sideward trend in 2017, Germany’s CO₂ emissions unexpectedly fell by more than 50 million tonnes – a decrease of more than 5.7 per cent. This brought the country’s greenhouse gas emissions levels to 31.7 per cent below 1990 levels. The federal government’s target was for a 40 per cent reduction by 2020. Primary energy consumption, meanwhile, fell by five per cent to its lowest level since the beginning of the 1970s.

These trends are nevertheless unlikely to last, since they can only be attributed in small part to climate protection efforts. In 2018, for example, hard coal electricity generation fell to its lowest level since records began in 1950. This was due to the reform of the European emissions trading system, which caused CO₂ prices to jump from around 5 euros in 2017 to 15 euros in 2018. As a result, hard coal generation became increasingly unviable, which led to an emissions reduction in the energy industry of around 10 million tonnes. 

The bulk of the emissions reductions, however, were due to the mild winter weather and the consequent low demand for heating energy. Other factors included slightly reduced production levels in certain energy intensive industries, temporary spikes in petrol and diesel prices, and heating oil inventory effects. As Agora Energiewende’s director, Dr. Patrick Graichen, notes: “At first sight, the emissions reductions seems to bring us within touching distance of the 2020 climate target, yet these positive developments could be undone by the next normal winter and small economic changes. What we need are sustainable climate measures, particularly for lignite and for the transport and building sectors. Otherwise, the 2020 and 2030 targets will remain out of reach.”

In contrast with hard coal, CO₂-intensive lignite usage only fell slightly in comparison with 2017. As Graichen remarks, “CO₂ prices will have no influence on lignite generation in the medium to long term, as its other costs are extremely low. It’s therefore up to the Coal Commission to set out proposals by the end of February for the gradual reduction of lignite usage.”

Electricity prices rose slightly on the back of the higher CO₂ prices. This enabled electricity suppliers to sign their first contracts for electricity from wind power plants without EEG subsidies. Since around four gigawatts of wind power capacity will be withdrawn from the EEG subsidy system by the end of 2020, we can assume that direct electricity supply from these older plants will increase in future. “Here we see how higher CO₂ prices can trigger positive climate effects on the market,” Graichen observes.

The 12.4 terawatt hour increase in renewable electricity production remained below the average for the last five years. Growth at this level will not suffice to meet the government’s target of supplying 65 per cent of electricity demand from wind, solar and other renewables by 2030. “The expansion of renewable energies therefore has to be speeded up,” Graichen stresses. “In particular, the federal government should facilitate further photovoltaic uptake, which is also the favoured solution among the public. To this end, it could release more land for photovoltaic solar parks, which would also reduce solar electricity costs by driving down real estate leasing costs.”

Furthermore, Graichen argues, the government should lift the photovoltaic subsidy cap, which was introduced before the Fukushima meltdown. This limits EEG subsidies for German solar power plants to 52 gigawatts of capacity. “We are already approaching this figure. Should the limit remain unchanged, solar energy expansion will come to a standstill by 2020.”

The Agora Energiewende review also looks ahead to 2019. “We assume that wind power expansion rates will remain low and that despite an upturn in photovoltaic construction, there will not be enough new installations to meet the 2030 energy transition target,” Graichen says. Further developments expected in 2019 include the decommissioning of the Philippsburg 2 nuclear power plant as part of the nuclear phase out agreed in 2011, the transfer of two lignite power plants to a reserve outside the electricity market, and the decommissioning of several hard coal power plants. Where energy policy is concerned, 2019 will be dominated by the planned Climate Protection Act and the Coal Commission report – both of which are key elements in the government’s plans to meet the 2020 and 2030 climate targets.

The review in German language is freely available to download below. A summary and slide deck are available in English as well. The review is based on the most recent energy data from a wide range of sources and contains numerous figures and graphs. The graphics can be downloaded in several standard formats and can be used by third parties thanks to a creative commons licence.