Electricity market expert in an interview
“Long-term gas supply contracts are becoming a cost trap”
2/23/2023, 7:02 p.m
The turning away from Russian gas has led to a turning point in German energy policy – but not necessarily to an immediate acceleration of the energy transition, says Philipp Godron from Agora Energiewende. In an interview with ntv.de, the electricity market expert takes stock of the crisis year 2022.
ntv.de: At the beginning of the Russian war of aggression, Finance Minister Christian Lindner classified renewable energies as “freedom energies”. The expansion should be accelerated in order to become independent of Russian gas. Was this statement implemented by the traffic light government?
Philipp Godron: The energy transition has fallen behind in 2022. It was not a completely lost year, but it was also not a good year for the energy transition.
How come?
The government was faced with the task of having to replace the lost natural gas volumes from Russia very quickly. The focus of this short-term crisis strategy was to find fossil solutions to a fossil problem. For example, new liquid gas terminals could be built on the coast extremely quickly. With this new fossil infrastructure, there is a risk that long-term supply contracts for liquid gas will be concluded that are not compatible with our climate protection goals – and thus become a cost trap.
So didn’t this war and the subsequent move away from Russian gas have an impact on the energy transition?
The war made it clear how dangerous dependence on fossil energy imports is. As a result, public approval for the expansion of renewable energies has increased significantly. Solar and wind energy are no longer just the cheapest sources of electricity, they also contribute to security of supply: With renewable energies, we can structurally reduce our dependency on expensive fossil fuels. This knowledge makes a significant contribution to pushing ahead with the expansion of renewable energies.
In 2022, 46 percent of electricity consumption was covered by renewable energies. This is a record year. Did the Russian war of aggression and the move away from Russian gas play a role in this?
No. The move away from Russian gas had an impact on the electricity mix, but did not contribute to the record generation from renewables. The main reason for this was a very sunny and windy year. The same plants simply produced more electricity.
The share of natural gas in the electricity mix fell by 16 percent last year. If not by renewable energy, what replaced that share?
Natural gas was mainly replaced by other fossil fuels. For example, coal-fired power plants were taken out of reserve. As a result, coal-fired power generation increased by 11 percent. In addition, the savings made by private households and industry have contributed significantly to the fact that less electricity was used overall. However, the greatest consumption of natural gas occurs in heat supply and industry and not in electricity generation. When replacing Russian natural gas with natural gas from Norway or liquefied natural gas, for example from the USA, it was much more about securing the heat supply and industrial production.
War had just broken out and there was great concern about a shortage in winter. Didn’t you have to rely on gas to ensure security of supply in winter?
We have to be fair in our assessment – it was obvious to use short-term measures to replace the missing gas from Russia with other natural gas. However, this will not solve our fossil fuel crisis. But we could see what is possible when the political will is there and the administrative resources are used accordingly: LNG terminals were approved and built in a few months, which normally takes between three and five years. The government must now promote the expansion of renewable energies with the same determination.
Was there no increase in renewable energies at all last year?
Last year, seven gigawatts of photovoltaics and 2.3 gigawatts of new wind turbines were put into operation. This is far below what we need to meet the annual expansion targets.
How many gigawatts have to be built to achieve the climate targets?
Last year, the federal government set itself the goal of increasing the share of renewable energies in the electricity mix to 80 percent by 2030, and this was also enshrined in law. In order to achieve that, we need to achieve growth rates of 10 gigawatts of onshore wind power, 3 gigawatts of offshore wind power and 20 gigawatts of solar energy per year within the next two years. The government urgently needs to release the brakes on the energy transition in 2023. In order to end the structural dependence on fossil energy imports, we have to get out of fossil energies and consistently into renewable energies.
What concrete steps has the government taken to achieve this goal?
First, renewable energies have been identified as important for energy security, which has legal implications. The process leading to the construction of solar systems and wind turbines has become more and more detailed and lengthy in recent years. The new status is a lever to speed up the approval of such projects. To this end, the federal government has set the goal of dedicating an average of two percent of the state’s area to the expansion of renewable energies by 2032. This is important for project developers so that they have enough space to build on.
Have the high prices for fossil energy played a role in the switch to renewable energies?
There has been a veritable run on energy transition technologies. A significant part of the growth in solar energy has not come from the government through the big tenders, but from a large demand for photovoltaic systems on private roofs. In addition, 230,000 new heat pumps were installed. In order to be able to serve the increasing demand for these technologies, the capacities must now be strengthened from the manufacturer to the installation.
The high prices for gas and oil have now come down again, so will this effect wear off again?
No, because nobody expects electricity prices to fall back to pre-war levels so quickly. Because we are replacing the natural gas that is no longer available from Russia with more expensive liquefied natural gas. This also makes us dependent on the global market situation. If, for example, the economy in China picks up again as a result of the lifting of corona restrictions, prices for liquefied natural gas can skyrocket very quickly. Only if we structurally reduce natural gas consumption will prices fall permanently. We achieve this through greater energy efficiency and the expansion of renewables. That helps the climate and lowers prices.
Clara Suchy spoke to Philipp Godron