In the end| Germany's goal of abandoning carbon neutrality is unrealistic, but the "green pioneer" is in a dilemma under the crisis

The Surging News reporter Yang Yang

The shortage of natural gas has sounded an economic alarm, and Germany's "traffic light" ruling coalition has made major adjustments to energy strategies and climate goals. In response to the intensifying energy crisis, Germany recently approved the largest renewable energy expansion in the country's history, while allowing coal-fired power plants to be reactivated by March 31, 2024. This is a compromise and softening of Germany's energy policy in the context of the Russian-Ukrainian conflict, on the one hand, hoping to develop renewable energy with greater efforts to get rid of Russia's energy dependence as soon as possible, and on the other hand, through the coal power backup plan, it has left a retreat for the extreme situation of gas outage.

For many years, Germany has been the main force in promoting the green process in Europe. The "Green Pioneer" restarted coal power, setting off a fierce controversy inside and outside Germany. Recently, a Chinese news that "Germany cancels the 2035 carbon neutrality target" circulated on the Internet, which was confirmed by the surging news that this statement was not correct. Germany's previously stated goal of achieving climate neutrality by 2045 has not changed. The reality is that Germany's newest energy package of legislative amendments abandons the goal of "100% renewable energy by 2035" in the draft submitted a few months ago, but does not address carbon neutrality or climate neutrality. There is a significant difference between the former, which refers only to the cleaning of the power supply side, while carbon neutrality covers a wider range of areas, including industry, transportation, heating, construction and other fields in addition to energy systems.

Germany's goal of abandoning carbon neutrality is unrealistic, but the energy choices of Europe's number one economy are indeed caught in a dilemma. Given the real challenges of its ambitious renewable expansion plans and the looming risk of gas outages, Germany's efforts to accelerate the energy transition in the short term are likely to be unavoidable.

Easter Package: In or Out?

Restoring the beginning, end and specific content of the German energy package of legal amendments, it is convenient for us to understand where the misreading of "Germany abandons the carbon neutrality target" comes from, and the surging news has sorted out this.

The German Renewable Energy Act was introduced in 2000 and has undergone six revisions (EEG 2004, EEG2009, EEG2012, EEG2014, EEG2017 and EEG2021). From 2005 to 2021, the four federal governments under Merkel's leadership have amended the Renewable Energy Law five times, and the proportion of renewable energy generation has been continuously increased. EEG2012 for the first time wrote the long-term target of renewable electricity into a legal document, proposing to achieve 80% renewable energy supply by 2050. By EEG2021, long-term targets include "achieving 65% of electricity from renewable sources by 2030".

The "traffic light" government's claims for energy transition are more radical.

In November 2021, Germany's Social Democrats, Greens and Liberal Democrats announced the completion of negotiations on a joint cabinet formation agreement, ending Merkel's 16-year government. The new ruling coalition unveiled a 177-page agreement on the formation of a cabinet, and energy transition and climate change are among the most important contents. The agreement stipulates that by 2030, 80% of Germany's electricity will come from renewable sources, further from the Merkel-era target of 65%. Before the agreement was announced, the three parties also agreed to raise the deadline for shutting down coal power in Germany from 2038 to 2030.

In April, the German Federal Cabinet passed a series of draft legislation aimed at accelerating the development of clean energy, focusing on amendments to several energy bills and setting two-phase targets: 80% renewable energy by 2030 and 100% renewable energy by 2035. This series of draft legislation was submitted to the Bundestag on April 6 and entered into the corresponding legislative process. Previous renewable energy law revisions have often been separated by three years or more, and this new revision has only been more than a year apart from EEG2021, and its determination and strength have increased significantly.

On 7 July, the German Bundestag (The Lower House) passed nearly 600 pages of the so-called "Easter Package" on the eve of the summer recess, including the amendment of the Renewable Energy Act (EEG 2023), the decision to accelerate the expansion of renewable energy and the amendment of the Federal Nature Protection Act. In germany's largest energy policy bill revision in decades, the development of renewable energy has been given the highest priority, confirming for the first time from a legislative perspective that the development of renewable energy is in the "overriding public interest", takes precedence over other issues, and serves national security.

Due to opposition from the pro-business Liberal Democratic Party in coalition rule, the draft goal of "achieving 100% renewable electricity supply by 2035" was eventually deleted, but the requirement that "renewable energy generation account for at least 80% of total electricity demand by 2030" was retained. Some people believe that the goal of 80% in 2030 is still there, so it does not hurt to delete the unrealistic node goal of 100% in 2035. According to a more representative view, this change marks a major setback in Germany's energy and environmental protection policy under the severe impact on energy security.

In the first half of 2022, renewables provided nearly half (49%) of Germany's electricity. In the view of the German government, accelerating the expansion of renewable energy is a quick-acting medicine to get the country out of the dilemma of energy constraints. Habeck, from the Green Party and now Deputy Federal Chancellor and Economy Minister, bluntly said: "Germany is in a difficult situation, and if we had implemented this plan a decade ago, we would be in a very different situation now." ”

In order to achieve the above goals, the development rate of renewable energy will be tripled, according to the revised series of bills: by 2030, Germany's installed onshore wind capacity will be doubled to 115 GW; Offshore wind will quadruple, reaching at least 30GW by 2030, 40GW by 2035 and 70GW by 2045; In less than a decade, solar PV capacity will have to more than triple, from the current 62GW to 215GW; More space for photovoltaic and wind installations (by 2032 at the latest, 2% of Germany's land will be earmarked for onshore wind).

"Energy policy is not just a matter of price," German Chancellor Schoerz said at a recent event, "energy policy is also a security policy." If we want to keep energy prices affordable in the long term, if we want to balance supply security and climate protection, this can only be achieved by relying on renewable energy. That's why we now need to push the expansion of renewable energy to a high speed. ”

The renewable expansion plan underscores Germany's strong determination to break away from its dependence on Russia's fossil fuels, but it is not easy to achieve and land.

Analysts at Allianz, one of the world's largest insurance and asset management groups, commented on the April draft legislation, saying, "Germany's green ambitions are shifting to speeding." Ambitious plans could overwhelm the German bureaucracy, and the current backdrop of rising price pressures and input and labor shortages will mean Germany may not be able to meet its near-term targets. ”

As inflation continues to rise in Europe, soaring raw material costs, high logistics and transportation costs and the risk of supply chain disruption are weighing on the renewable energy sector, with prices of photovoltaic products and wind turbines soaring. At the same time, under the shadow of geopolitics, the price volatility of the electricity market has become larger, spot prices have risen, the PPA agreements that have been signed and a large number of preparatory projects have not been fulfilled, and the activity of the European PPA market has plummeted by 55% in May. Germany's latest solar tender last month received a lukewarm response, with 1.126GW of tenders, but only 714MW of bids were submitted. Germany's Federal Network Agency said that due to the increase in the price of photovoltaic modules, the time required for the completion of the project is uncertain, and large companies are turning to ppe agreement projects outside the renewable energy law tender projects.

Restarting coal power is a short-term backup option that Germany has to force, and increasing the pace of decarbonization of the energy system also faces many practical obstacles.

Relax restrictions on coal-fired power generation and maintain the decision to abandon nuclear weapons

Although Germany is one of the most affected economies in Europe by the Russian-Ukrainian conflict, the intensification of Germany's homegrown energy crisis is not caused by a single factor in the Russian-Ukrainian conflict.

An analytical article by the Deutsche Gesellschaft für des Gesellschaftschaftschilles et des Gesellschaftsenges et des études gérations in China argues that excessive dependence on imported natural gas is the main cause of Germany's current energy crisis, while the shortage of nuclear energy due to the shutdown of half of France's nuclear power units is the second factor contributing to the rise in According to a report by the European Transmission System Operators Network Organisation (ENTSO-E), the unexpected widespread shutdown of thermal power plants has also exacerbated Europe's energy supply crisis. Thermal power plants, which often rely on rivers to transport fuel and pump cooling water, are vulnerable to rising water temperatures due to climate change and power outages caused by droughts.

Over the past few weeks, the amount of gas russia sends to Germany via nord Stream 1 has been reduced to 40 percent of its previous normal amount. As a result, the European gas market has tightened further, and gas prices have soared by more than 70% at one point. On July 11, Nord Stream 1 began a 10-day routine overhaul and suspended gas transmission. Berlin is already preparing for the worst, that is, the gas supply will not be restored after the overhaul period.

Hubbeck said not long ago that reducing gas supplies is part of Russia's blow to the German economy, "which is a new dimension." This strategy cannot be allowed to succeed".

The German government said on the 19th that in response to Russia's significant reduction in natural gas supply, Germany will take a series of emergency measures, including restricting the use of natural gas for power generation, increasing coal use and introducing a natural gas "auction" mechanism to give priority to increasing gas storage for winter heating.

The revised bill stipulates that Germany's electricity supply greenhouse gas neutralization target should be completed "after the complete withdrawal of coal", while the coal withdrawal schedule is still in 2038.

The revised Alternative Power Plant Reserve Law, which guides the restart of coal-fired power plants, stipulates that lignite power plants will temporarily become new supply reserves, while relaxing coal-fired power generation restrictions, and extending the time limit for participation in the electricity market after the alarm level is announced from a maximum of 6 months to 9 months (before March 31, 2024). This means that in addition to participating in the electricity market, power plants must also be prepared to meet the requirements of transmission system operators, stockpiling part of the coal. The amendments to the Energy Security Act stipulate that in response to the further deterioration of the natural gas market situation, as long as coal-fired power generation has been retained in the reserve power supply, it will not be affected by the prohibition of coal burning under Article 51 of the Coal Power Generation Termination Act, and there is no time to ban coal burning for the time being.

Germany remains committed to achieving total denuclearization by 2022. The country's main opposition party has repeatedly called for the country's three remaining nuclear reactors to continue functioning after the end of the year. But Harbek said on July 12 that nuclear energy would do little to help Germany's current gas shortage. Germany is currently facing heating problems and industrial problems caused by natural gas shortages, while nuclear energy is mainly to solve the problem of electricity.

CICC believes that Germany, the largest economy in the euro area, has been sluggish in the post-epidemic recovery, dragging its feet. The German economy is dominated by manufacturing, and the dominant industries include industries with long supply chains such as machinery and electronics, automobiles, and chemicals, and the shortage of raw materials and supply chain bottlenecks have a great negative impact on these industries. Germany's dependence on Russia's energy supply is high, the Russian-Ukrainian incident has exacerbated the shortage of natural gas, German gas and electricity prices have risen sharply, and PPI inflation has exceeded 30%, dragging down the recovery.

Editor-in-Charge: Li Yuequn

Proofreader: Shi Gong