Soaring energy prices bring pain to Germany's energy transition

The energy crisis characterized by supply shortages and rising prices is fermenting in Europe, and Germany has also been affected. According to local media reports, Germany’s wholesale electricity prices have recently hit a 10-year high; German Rheinland Power and Gas Company has suddenly cancelled energy supply contracts with hundreds of users... Under the general expectation that electricity and natural gas prices will continue to rise this winter, German Energy Transformation is facing challenges and has once again become the focus of attention from the outside world.

The energy transition focuses on both ends of supply and demand

As Europe’s largest economy, Germany’s energy transition started early, focusing on both supply and demand, vigorously developing renewable energy, focusing on improving energy efficiency, and has made significant progress.

On the supply side, the German government has made a clear transition to renewable energy based on wind, solar, and biofuels, and has made increasing the proportion of renewable energy one of the core policy goals of the energy transition. According to statistics from the German government, in the five years ending in 2020, the amount of coal-fired power generation in Germany has been reduced by half. At the same time, the proportion of renewable energy power generation in Germany has risen from 6% in 2000 to 46% in 2020, and has set a goal of increasing to 65% by 2030.

Among them, wind power plays a leading role in Germany's renewable energy, and the proportion of wind power generation has reached 24%. The German government stated that it will continue to expand the installed capacity of wind power, especially offshore wind power, and has developed a promotion plan for this.

On the demand side, Germany has adopted multiple measures to reduce energy consumption, especially building energy consumption, and improve energy efficiency through technological innovation and policy measures. From 2008 to 2017, Germany's primary energy consumption was reduced by 5.5%. The German government believes that only on the basis of a strong energy efficiency strategy can the energy transition achieve positive economic, environmental, and social security implications.

The German Federal Ministry of Economics and Energy pointed out that Germany's energy supply is undergoing a fundamental shift-away from nuclear fuels and fossil fuels, to renewable energy and focus on improving energy efficiency.

Supply gap intensifies transformation pains

Despite the ambitious energy transition in Germany, as a long-term strategy, the phased challenges and contradictions it faces are more prominent.

On the one hand, under the constraints of shutting down all nuclear power plants in 2022, phasing out coal power in 2038, and achieving carbon neutrality in 2045, it is even more urgent for Germany to expand the supply of renewable energy.

Raymond Neugebauer, head of the Fraunhofer Association, a German institute of applied scientific research, believes: "The expansion of wind power will soon reach its limit, and Germany needs to maintain energy independence through the hydrogen economy." June 2020 In December, the German government adopted the National Hydrogen Energy Strategy with the goal of supporting "green hydrogen energy" to expand the market.

On the other hand, the supply of renewable energy such as wind and solar energy is insufficient, and the potential supply gap continues to affect the stability and security of energy supply in Germany. Recently, the European energy market has sounded a supply alarm. After the cold winter of last year and the intense heat of this year, European energy reserves have fallen to historical lows, natural gas and coal are in short supply, and energy prices have risen sharply. Analysts believe that as Europe accelerates its transition to green energy, energy supply resilience has declined.

Germany has withstood the pressure of the United States to ensure the completion of the "Beixi-2" natural gas pipeline project, reflecting that it will continue to rely on fossil fuels for a considerable period of time.

The German government stated that problems such as over-dispersion of power input into the grid, insufficient power supply and consumption flexibility, and low level of digitization of energy management are real challenges that need to be resolved in the supply of renewable energy.