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Germany

Brief description:

General policy and overall situation

 

Energy and Climate 

At the heart of Germany’s energy policy, just as in many other European countries, is the need to create a frame for the development of a future energy sector that will meet the emerging challenges of energy security, competitiveness and climate change. Germany, being Europe’s largest emitter of greenhouse gas (GHGs) emissions is meeting its Kyoto target within the overall European target of 8% and committed itself under the Burden Sharing Agreement to cut CO2 emissions by 21% in the period 2008-2012 on the basis of 1990 levels. Germany’s self imposed mid term goal is however more ambitious, to cut CO2 emissions by up to 40% of their 1990 level by 2020. In July 2009 Germany also agreed with G8 leaders to cut emissions by 80 % by 2050 in order to limit global temperature rise to two degrees.

In September 2010, the German Government launched the “Energy concept”, a comprehensive document which describes the future energy policy strategies until 2050. According to this concept, GHGs shall decrease steadily from 40% in 2020 to 80-95% in 2050. The share of renewable energies in the primary energy supply will be 60% in 2050. In order to reach the aim of 50 % reduction in primary energy consumption within 2050 compared to 2008, energy efficiency will have to increase by 2 % per year.

In Germany, these targets pose a remarkable challenge, since the German energy supply is characterized by the special dominance of coal and lignite. Hard coal and lignite together represented almost 45% of the fuel basis for the gross electricity production in 2009. Gas accounted for 13 %, nuclear 22 %, 16 % came from renewable energy sources, with the dominant renewable energy source being wind. Whilst the expansion of gas fuelled power generation is currently questionable due to high gas prices, import dependencies and supply insecurities, coal and lignite are believed to play a major role in the medium term future energy mix of Germany, since they offer a cost effective source of secure energy due to indigenous resources and large worldwide reserves. In 2010, there are 22 coal or lignite based power plants currently under construction or in detailed planning in Germany, due to start up in the period 2010 -2015. These plants will have a combined capacity of 24,800 MW and emit almost 150 Million tonnes CO2 per year. Clearly, the extensive use of coal stands in contrast to Germany’s ambitious climate targets.  If lignite and coal fired power stations are to remain in the energy mix until 2050, the development of power stations with high efficiencies and CCS technologies seem inevitable.

In the Energy Concept, German authorities also launched the extension of the operating time of the German nuclear power plants. This abruptly set the enactment of 2001 to end all nuclear power production in Germany within 2020 out of function. With the new law, the plants are allowed to run for 8-14 years longer than originally decided. According to the energy concept, the last nuclear plant is supposed to be shut down in 2034. The line of the Government is that nuclear power serves as a “bridging technology”, which shall bridge the gap between actual energy demand and renewable energy production, until the renewables are able to deliver 100% of required supply.  

Deployment of CCS also plays a role in the energy concept, although the concrete CCS strategy remains somewhat vague. In 2007, the government released its Integrated Energy and Climate Programme. Action 3 of its 29 actions focused on CCS, with the government giving its backing to a strategy for CCS and its commercial deployment by 2020.

The Government states that two of the twelve EU-wide CCS demonstration projects eligible for funding (under NER300, see below) are expected to be built in Germany by 2020. A storage project for industrial CO2 emissions is also planned. The demonstration stage will be evaluated (presumably in 2018) to aid decisions about the potential for commercial use of CCS in Germany.

One important prerequisite for the deployment of CCS in Germany is the availability of storage capacities. Among the different options available for geological storage of CO2 in Germany, deep saline aquifers currently provide most of the storage potential. Other storage possibilities such as depleted gas fields and the storage in deep unminable coal seems, e.g. in the Ruhr district, are available but seem currently less attractive in Germany. The recently updated (in 2010) estimates of the storage capacity from the Federal Institute for Geosciences and Natural Resources (BGR), assessed that Germany has the potential to store 9,3 billion tons in saline aquifers and 2,75 billion tons in depleted gas fields. These estimates are based on the exploration of 75% of the German underground. According to the BGR-geologists, the potential of the salinary aquifers alone would be enough to store the emissions from the large point sources from fossil power production for several decades.

Under the Energy Concept, the country aimed for a legal basis for testing the safe storage of CO2. The government adopted the Energy Package in mid-2011, which complemented the Concept, and gave strong support for CCS projects. 

Political Framework

German climate policy and hence the political framework for the development of CCS is embedded in European energy and climate policies. The European energy and climate package, which was first presented in January 2007 and passed by the European Parliament and Council in December 2008, focuses on three major policy areas: greenhouse gas emissions, renewable energy and energy efficiency. Correspondingly the package contains quantative targets for renewable energy (20% by 2020), energy efficiency ( 20% increase by 2020) and the reduction of GHGs ( 20% by 2020).
CCS entered the European Commission’s portfolio of climate mitigation options as part of the Energy and Climate Package, in January 2007. In April 2009, the European Parliament adopted the CCS Directive, which enables CCS technologies in the EU. A legal framework to manage possible environmental risks and liability issues and economic incentives for CCS as well as a network of demonstration plants are at the heart of the CCS framework directive. In October 2008, the EP’s Environmental Committee voted in favour of an Emissions Performance Standard legislation which limits emissions for all new coal plants built in the EU after 2015. The limit of annual CO2 emissions to a maximum of 500 g/KWh essentially rules out traditional coal plant technologies and mandates the use of CCS.

The Committee also adopted an amendment to support the financing of 12 large-scale commercial CCS demonstration projects. This funding mechanism, called NER300, contains the provision to set aside 300 million carbon allowances from the ETS new entry reserve to co-finance the construction of CCS demonstration plants and subsidise installations of innovative renewable energy technology.. The value of this support depends on the price of allowances and could be as much as 4.5 bn EUR if each allowance is sold for 15 EUR. Power plants with an output of more than 300 Megawatts are required to assess whether storage sites and transport facilities are available and if it is technically and economically feasible to retrofit the power station for carbon capture.

Furthermore, the European Commission has approved 15 energy projects which will significantly contribute to the economic recovery of the EU. This supporting mechanism is called the European Economy Recovery Plan and grants €1 billion to six CO2 capture and storage projects and €565 million to nine offshore wind energy projects.

The German government is implementing the fundamental European energy policy decisions at a national level by means of the German energy and climate protection package, which was decided in Meseberg in August 2007, called the Integrated Energy and Climate Program. The implementation of the energy and climate program will ensure that Germany’s climate targets are achieved in a continuous process by 2020 and the requisite measures are organised cost effectively. Proving the feasibility of CCS is one important pillar of the climate package.

EU member states were obliged to bring into force the laws, regulations and administrative provisions necessary to comply with the EU Directive on CCS by 25 June 2011. In June 2012, Germany's parliamentary mediation committee approved a compromise to its pending CCS law, which had been rejected in 2011 yet still required under the 2009 Directive. The compromise allowed for CO2 storage of no more than 1.3 million tonnes every year, and a maximum storage capacity of 4 million tonnes in the country, with individual states able to reject any capture projects in their region. The amended law was going through the final steps of the legislative process in July 2012 and was expected to come into force soon after. But because the country has not yet transposed the EU's CCS Directive, it is currently involved in an EU infringement case. 

Challenges

The implementation of national CCS legislation in Germany is not without obstacles. There is widespread opposition, above all against carbon storage, throughout large parts of the population. Nevertheless, in 2008 the concept increasingly became a key component of a national “Clean Fossil Fuel Strategy” and the German Government has decided to take on a “No regret” policy regarding CCS. To prove the feasibility of CCS, increased R&D efforts have been funded and initiated in 2007 . Taking into consideration the results of relevant R&D projects, the German Government has in this context stated that it would consider proposals for a “capture ready” standard for future fossil fuel power plants.

The development of CCS demonstration plants furthermore postulates the development of a suitable legal framework for CCS in Germany. Currently, the mining and environmental law provide a basis for the conduct of CCS research projects. In 2008 the German government announced that it intended to be the first European country with a national legal framework for the deployment of CCS and has since been working on a suitable legal framework for underground storage on an industrial scale (including the planned demonstration power stations), transport and capture in parallel to and on the basis of the European legal framework. After 6 months of intense negotiations between the two involved ministries, the Federal Ministry of Economics and Technology and the Federal Ministry of the Environment, the legislation should have been passed by the Parliament in June 2009. However, regional political dispute, public protest against storage projects in Schleswig Holstein and the upcoming elections brought the process to a halt. The law, which by then was already finished on the expert level, was never brought into Bundestag (The German Parliament).

In July 2010, the Government presented a new version of the CCS law. It was heavily criticised by the some of the German environmental NGOs, which to a large degree are against the deployment of CCS as such. Also industrial actors and potential deployers of CCS objected to the regulations proposed in the law. For deployers, the claim of paying an unspecified fee to land owners in advance, as a security guarantee in case of damage of property, is one of the main problems. But also the foreseen three-step right to sue, which could possibly delay the deployment process with up to 12 years, is for deployers inacceptable.

The amended version law was supposed to be presented by the Government during autumn 2010, but was delayed several times. In December 2010, the law was postponed again until early 2011. The crucial question for the moment is whether the law is adopted soon enough, so that deployers will be able to apply for support from the EU mechanisms in time.

As has been observed in the case of the legislation for CCS, the ultimate risk in Germany remains how an electorate with a negative view of nuclear waste storage responds to the concept of CO2 storage. Pubic acceptance will be decisive for the implementation of CCS in Germany. A r study undertaken by the Wuppertal Institute, which covers social and acceptability issues and analyses the potentials of public risk- perception as well as the perception of CCS, finds that currently CCS is not broadly discussed in Germany and that the NIMBY Effect (not in my back yard) is likely to trigger a strong reaction, particularly regarding storage in Germany, once projects are getting started. The concerns are wide ranging and include the negative effects on tourism and the devaluation of land, as well as safety for human health and drinking water.

Further acceptance problems result from a strong movement against coal which is growing in Germany. Public concern not only results from the negative climate impact associated with coal, but also from land degradation and loss of local communities resulting from lignite exploration in Germany. Public protest has inhibited several coal projects, including Ensdorf, Ingelheim, Lubmin, Dörpen, Kiel and Moorburg and projects such as the IGCC CCS in Hürth meet first negative reactions from local action groups. From many CCS-opposisoners point of view, CCSis perceived as just another possibility for power generation companies to pursue their large-scale power plant, i.e. coal strategies, in order to maintain their control over the electricity market.

Therefore, NGOs are likely to play an important role in the public discussion. However, just as in the rest of Europe, “green groups” split over CCS. Whilst CCS is seen by some environmental groups as just another end of pipe solution (“False Hope” study by Greenpeace) with the aim to continue to invest in coal on the expenses of climate targets, others such as the WWF Deutschland and Germanwatch see CCS above all as a technology that should be applied in industry sectors like steel, cement, lime and chemical production, where alternatives to handle these emissions do not exist yet.   Raising public awareness and providing sufficient information will be pivotal in the coming years if CCS is to be implemented in Germany.

Private sector engagement

There is generally agreement between the political and business communities that climate protection is a central element of environmental policy and an integral part of economic and energy policy. German businesses have a self imposed objective of making a special effort, on a voluntary basis to reduce specific CO2 emissions by 35% by 2012. Additionally, major players in the energy sector are signing up to the 3C – Combat Climate Change – initiative of business leaders with the commitment to draw a road map to a low emitting society and develop carbon strategies, such as Vattenfall that has the aim to reduce emissions by 50% by 2030.

German electricity producers are examining the potential of low emission power stations in the view of these commitments and due to their obligation to reduce emissions under the EU-ETS and the associated changes in the energy sector. Especially for companies like RWE, which are heavily invested in lignite and coal fired power plants (65% in 2006), CCS could prove a viable technology under stricter climate regulation in the long-term. In the short term however utilities are asset heavy with the lion share of valuation vested in assets in the ground, making them particularly vulnerable to risk, whilst deciding on long-lived investments that exceed the current climate policy planning. Current techno – economic prerequisites, including the rise in cost of power plant construction due to high demand and rising commodity prices, render therefore the operation of CCS power plants not profitable. Clearly, CCS technologies will only be realised with the perception of long –term high price expectations, both of electricity and carbon prices and if the EU regulatory framework provides the appropriate incentives and security for these investments. The probably most challenging aspect in this context will be the high degree of uncertainty regarding future political development, also beyond 2012, for companies that are facing upcoming investment decisions. Not surprisingly several power plant projects have been put on hold until a concrete framework is in place in Germany.

The sentiment between German industry and government is therefore mixed. A clear governmental commitment regarding the legal framework for CCS might not only yield a more favourable investment environment but also could increase public acceptance in Germany, which today provides another decisive investment risk for power companies.

Unfavourable economics and politics or not, seizing opportunities and pursuing innovative technologies have benefits in terms of reputation and shareholder value. CCS clearly provides a valuable opportunity for Germany’s large power generators that are currently in an image crisis, to improve their reputation and three of the large power companies are embracing CCS with several pilot and demonstration projects having been announced. RWE furthermore opened an “Innovation Centre Coal” at its power plant Niederaussem and called for reliable climate policies after 2012 to ensure that power plant investments in Europe guarantee security of supply in future. Companies involved in the development of CCS projects such as Alstom Germany, Babcock Borsig, EnBW, E.ON, RWE and Vattenfall Europe furthermore try to accelerate the pace of the development of a national legal framework for CCS in Germany.

R&D activities from utilities, technology companies and trading companies in Germany are not solely orientated for the European market. Power plants “made in Germany” stand for highest standards and are an internationally demanded product. Germany is the second largest exporter in the power generation plant sector. CCS technologies might become an interesting export commodity especially when considering emerging markets such as China as a possible, coal dependent trading partner. In September 2005 Chinese-European collaboration was initiated for the development of clean coal technologies. Another research study funded by the German Government explores the possibilites for CCS in China, India and South Africa. It is conducted by German research institutes (Wuppertal and GTZ) over a two years time frame from 2009 to 2011. Until 2020 low emission power plants are planned in China, whereby technologies will be provided by European power plant builders.

Public CCS funding initiatives and partnerships

R&D is the key to establish a reliable, economic and environmentally compatible energy supply. The first R&D program for energy research was initiated in 1974. Today, German R&D efforts in energy research are governed by the 5th energy research program “Innovation and New Technologies”, which became effective on 1 January 2006, and its amendment the “High Tech Strategy”. Main topics include energy efficiency, renewable energies, fuel cells and hydrogen and fossil fuel power plants and CCS.

Increased national interest in CCS as a possible technology to mitigate climate change, and the ambition to demonstrate the technology in Germany, postulates an increased level of activity in research and development in this area. Currently, the BMWi and the BMBF are working in cooperation with the Federal Ministry for the Environment, Nature Conservation and Nuclear Safety (BMU) on a detailed roadmap for CO2 capture (BMWi/BMU) and storage (BMBF/BMU) as part of the development of an Integrated Energy and Climate Program for Germany. Consequently, CCS research and development activities can expect increased funds in the coming years.

Regarding CCS, the majority of public funding to fundamental research and demonstration projects originates from two Ministries, the Federal Ministry of Economics and Technology BMWi and the Federal Ministry for Education and Research BMBF.

Sources:

The German Government (BMU, BMWi, BMBF)
BGR
Innovation Norway/Gassnova: CCS report 02/2010

Zero's arguments for CCS deployment in Germany

In this PDF-document, you will find the main arguments which serves as the basis for ZERO's work on CCS in Germany.

 

 


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