The German Ministry for Economic Affairs and Climate Action (BMWK) has listed enabling access to finance, hedging instruments, and promotion of innovation as the 3 priority measures that it believes need to be implemented for the country to strengthen its renewable energy and power grid production capacity as it aims for successful energy transition.
"We have to strengthen the production capacities for renewable energies and power grids in Germany and Europe. This is important for the success of the energy transition and to secure jobs and added value in Germany and Europe," explained German Economy Minister Robert Habeck. "That is why we have identified three priority measures today, which we will press ahead with in a targeted and rapid manner together with all stakeholders."
Energy crisis unleashed by the Russian aggression in Ukraine has altered geopolitical landscape of Europe, prompting the EU to take urgent measures to become energy self-sufficient which the ministry said is guiding its move to support renewable energy proliferation.
Additionally, Europe needs to fight the challenge of other large economies like the US and India attracting investment in the transformative technologies as solar PV and wind energy among others. While the European Commission works out the details of its own incentive support program for clean energy technologies, the Green Deal Industrial Plan, Germany said it is taking action on the following priority measures to accelerate the move.
Habeck said the country's renewable electricity sector needs both investment cost subsidies and temporary operating cost subsidies, meaning Capex and Opex support. Existing investment cost support instruments will need to be adapted or newer ones introduced to enable development and expansion of PV, wind and electricity grid value chains.
"In order to reduce the production costs per unit, to strengthen the competitiveness of European manufacturers and thus provide a further incentive for the expansion of local production capacities, we also want to work actively on suitable instruments for promoting operating costs," said the minister.
The federal government plans to draw up a concept for transformation fund within industry-specific needs and EU state aid requirements.
BMWK will also work in collaboration with various stakeholders to prepare a proposal for 'suitable protection instrument' to provide hedge manufacturers of wind energy and electricity grid expansion from special risks on temporary basis.
Starting from March 2023, the government will start preparing a feasibility study to bring back solar PV manufacturing industry to Germany to promote innovation as key to energy transition. "We are examining participation in a joint European project – so-called IPCEI – PV – and hope for a push from other EU countries, such as Spain, which initiated the project," added Habeck.
Recently, McKinsey published a report saying that European solar PV manufacturers can hope to become cost competitive only when they grow fast to achieve scale, get early-mover advantage for new technologies and customers are willing to pay a premium for Made-in-Europe panels, as their costs at scale for full value chain will be at a 20% to 25% disadvantage against current lowest cost levels (see Can European PV Manufacturing Be Cost Competitive At Scale?). In Davos in January 2023, European Commission President Ursula Von der Leyen announced to create a Net-Zero Industry Act to boost clean energy technology in the EU as a response to the very attractive US Inflation Reduction Act (see EU Promises Green Deal Industrial Plan For Clean Technology).
Germany seems to push ahead as it targets to expand the share of renewable energies in its total energy mix from 49.6% in 2022 to at least 80% by 2030. To get there it will need to add 57 GW onshore wind, 150 GW solar PV and 22 GW offshore wind (see German Government Agrees On Higher 2030 Solar Goal Of 215 GW).
Welcoming the federal government's move to establish a climate-neutral electricity system, local solar energy association BSW General manager Carsten Körnig urged the government to 'keep an eye on the variety of refinancing models for renewable energies in the intended reform of the electricity market design—from self-consumption modules to the sliding market premium and power purchase agreements (PPA).