Germany: Renewable Energy - An Overview
Germany strives to be the worldwide leader by 2050 in all market segments of renewable energies. This can only be achieved if half of primary energy consumption is derived from renewable resources. For international investors, this scenario translates into short-, medium- and long-term investment possibilities in a booming sector. Companies such as First Solar, Vestas, and Nanosolar have already recognized the growing opportunities by investing in Germany.
The main driver for success of renewable energy technologies is the German Renewable Energy Sources Act (EEG), which provides guaranteed and fixed, albeit slowly depreciating, feed-in tariffs making investment in installations run by renewables interesting for private as well as commercial end users.
The environmental protection movement has a longer tradition in Germany than in other European countries. Already in the early 1970s, activists called for the use of renewable energies and citizens developed a very high awareness for "the green way of life." This topic has been an issue in Germany for almost 40 years, which is one of the reasons why it now leads the global renewable energy market.
Germany is also home for several leading international trade fairs in the renewables’ sectors: Intersolar for PV and solar thermal technologies, Husum Wind for wind energy, and Hanover Fair for various power generation technologies. The U.S. Commercial Service in Germany strongly recommends American exporters consider participating in trade fairs in Germany, as they are an important vehicle to enter the German as well as other European markets. The U.S. Commercial Service often partners with fair organizers to offer attractive exhibitor packages or provides no cost services for U.S. manufacturers at selected events (see "Trade Promotion Opportunities" section).
Germany - World Leader in Renewables
In 2006, sales in the German renewable energy sector reached € 22.9 billion, of which more than € 8 billion came from exports. Investment has surpassed € 9 billion, and the industry employs more than 235,000 people. Germany is number one worldwide in photovoltaics and wind energy in both market size and sales and is Europe’s leader in the use of biofuel. Germany aims to lead the market in all renewables by 2020, and it is building on its current leadership to secure its renewable energy market for the future.
The renewables sectors are thriving not only because of strong political conditions but also because of Germany’s highly qualified workforce, R&D carried out in universities and scientific institutes, the country’s location in the center of an expanding European Union (EU), the well-respected "Made in Germany" label and a number of legal and investment incentives.
The Renewable Energies Act
Germany offers outstanding conditions for investment in renewable energies. One major reason for this is the country’s Renewable Energies Act (EEG, in German). The act requires energy companies to purchase power generated from renewable sources at an above-market price. For example, photovoltaic facilities coming into service in 2007 receive a so-called "feed-in tariff" of 0.38-0.54 € /kWh for 20 years. Wind energy installations coming into service in 2007 receive a 20-year-long feed-in tariff of 5.17 to 9.1€cent/kWh, depending on location and reference yield.
Furthermore, legislation now requires transmission system operators to provide grid connections to offshore farms. As of 2009, the EEG is likely to be adjusted to offer even more attractive wind energy tariffs, especially for repowering and offshore installations. These fixed tariffs exceed regular market prices. The law has spawned major interest in the purchase of renewable energy products for private as well as commercial end users.
Germany is the world leader in PV energy. In 2006, 1,150 MWp of new capacity were installed in Germany giving the country 55% of the world’s installed PV capacity. In total, Germany has 3,060 MWp of installed PV capacity. This power production has not only made a contribution to the power grid, but has also been financially profitable for PV investors. PV accounted for € 3.8 in sales in 2006 and is expected to gain investments of € 15 billion by 2012. Again, the legal framework is a major motivation for international PV companies to come to Germany.
Based on the EEG regulations, PV Installations currently obtain a feed-in tariff of 38 to 54 €ct/kWh (based on installation sizes) guaranteed for 20 years. Aside from its own market, Germany offers easy access to all other rapidly growing European markets along the entire value chain, such as Spain, Italy and France.
Germany has a dense network of producers, suppliers, and R&D. Close cooperation with numerous PV research institutes (e.g. Fraunhofer) and equipment manufacturers within short distances allows for rapid advances in production technologies and processes in order to facilitate further cost reduction. Due to the extensive experience of engineering companies and local authorities in PV, quick implementation of PV projects is possible.
Local production furthermore ensures faster time to market, avoids high long-term transport inventories, and reduces exchange rate risk. Local producers also benefit from "Made in Germany" quality and reputation. Germany offers an excellent pool of skilled and flexible workers, state-of-the-art infrastructure, a reliable investment environment, and investment incentives.
Some of the world’s leading companies (including Q-Cells, Solarworld, Conergy, Schott Solar and First Solar) have already established major facilities in Germany.
Germany’s wind energy market is the largest worldwide with 20,661 MW of total installed capacity and sales of €5.6 billion in 2006. Substantial further growth is expected starting in 2008, when offshore installations in the North Sea and Baltic Sea will become the next frontier for development. Until 2030, offshore projects with a capacity of 25,000 MW are anticipated that would account for most of the predicted investments of €45 billion in the German wind energy sector.
The EEG provides for wind energy installations in 2007 to receive a 20 year-long feed-in tariff of 5.17 to 9.1 €cent/kWh depending on location and reference yield. Furthermore, legislation now requires transmission system operators to provide grid connections for offshore farms. As of 2009, the EEG is likely to be adjusted to offer even more attractive wind energy tariffs, especially for repowering and offshore installations.
Including Enercon, Nordex, Repower and Fuhrländer, some of the world’s leading wind turbine manufacturers are headquartered in Germany. Aside from this, international companies such as Vestas and General Electric also produce in Germany. Wind energy companies from all over the world encounter significant opportunities for investments in Germany along the entire value chain, especially in offshore technologies.
Close R&D cooperation with Germany’s research institutes (e.g. Fraunhofer, ISET Kassel) ensures advances in technologies and operation of wind turbines. The new government-funded offshore test field will soon supply findings for the planning of future offshore farms.
Germany is also the world leader in biodiesel production and Europe’s number 1 bioethanol market. In 2006, biodiesel capacities reached 4.4 m t while biofuels in total held a 4.7% share of the German fuels market (EU average 1%).
Biodiesel generated €2.5 billion in sales in 2006. This trend is fueled by the Biofuels Quota Act, introduced in 2007, which promotes biofuels with a mandatory requirement for their blending into diesel and gasoline, according to annually rising quotas. Thus, the government will secure a market share for biofuels until at least 2015. Furthermore, E85 and second-generation biofuels will be tax exempt until the same year.
Another promising sector is bioplastics and bio-based chemicals. The chemical industry is switching many products from fossil-based raw materials to bio-based materials, and bioplastics in particular are expected to have a bright future in Germany.
Other growth factors include an abundant feedstock reserve and a state-of-the-art infrastructure including sites with tri-modal access, thus ensuring complete value chains. Close cooperation of producers with refineries, with a network of chemical parks, and with research institutes sets the foundation for successful innovative biofuel projects in Germany.
While the CUTEC Institute, the TU Freiberg, and the Research Center Karlsruhe are leading in production development of BtL (Biomass-to-Liquid), the Universities of Frankfurt (Main), Hohenheim, and Munich are active in lignocellulosic bioethanol research. Likewise, Germany has strong academic clusters in enzymatic and energy crop sciences. In addition, the Institute for Energy and Environment Leipzig, the Institute for Applied Ecology, and the Wuppertal Institute provide technological, economical, and environmental studies.
Reputable technology providers including Lurgi, MAN Ferrostaal, ADM, and Verbio (the German market leader in 1st generation biofuels) have already invested in biofuels in Germany. The eastern German company CHOREN is a pioneer for the production of BtL. In the long run, this creates further opportunities for firms like Siemens, Uhde, and Lurgi to establish themselves as major players in engineering and plant building.
The importance of geothermal energy in Germany’s heat and electricity market is growing. Shallow geothermal energy installations, in particular, had a growth rate of over 100% in 2006, and in 2007 saw high double-digit growth. The current feed-in compensation of 0.15€/kWh for deep geothermal energy, secured by the Renewable Energies Act, has helped generate a number of installations in 2007. The German government’s plans to increase the compensation, which will further boost the industry’s growth rate.
Federal Ministry for the Environment, Environmental Protection and Nuclear Power Safety, http://www.bmu.de/
Extracts from Germany: Renewable Energy - An Overview, US Commercial Service, December, 2007