Online energy news agency Clean Energy Wire has reported the findings of consulting firm McKinsey concerning Germany’s energy transition. According to McKinsey the build-out of Germany’s renewable power capacity is a ‘herculean task’ that will likely take longer than planned, and therefore make an early end to gas and coal-fired power production very difficult to achieve. This is the conclusion the consultant has come to in its 2022 Energy Transition Index for the country.
“Germany will continue to depend on natural gas,” the consultancy said, adding that coal-fired power production will also continue to play a key role beyond 2030, the year by which Germany’s government said it “ideally” wants to exit the fossil fuel. Russia’s war on Ukraine had “dramatically altered” the situation for renewables in the country, the company said, and the Europe-wide decision to scrap Russian gas imports would have an impact on the power sector as well, where flexible gas-fired plants are currently used to cushion short-term grid fluctuations due to intermittent renewable power production.
While the share of renewables jumped from 41 to 49 % of power demand in the country in the first half of this year, the energy transition would face “the greatest test in its history,” according to the consultancy. As gas continues to play a role in all scenarios, the focus should be put on diversifying supply and substituting natural gas with green hydrogen, McKinsey partner Thomas Vahlenkamp said. In order to make progress on the ambitious target of sourcing 80 % of electricity consumption from renewables by 2030, the entire production and supply chain would have to be strengthened by investing in production capacity and staff, as well as by easing regulation on infrastructure construction. The country would have to install 18 GW of solar panels and commission 1800 new onshore wind power turbines per year, while offshore wind would have to quadruple.
While the continued use of natural gas has long been considered a bridge technology for Germany on its path to an energy system fully based on renewables, the supply crisis has fanned calls for a faster transition away from the fossil fuel. Germany plans to end its use of coal-fired power production no later than 2038 but the government has promised to arrive at zero significantly earlier, but owing to the gas supply crisis, it has re-activated some already decommissioned coal plants.
Third German energy relief package
With its third energy cost relief package since the start of Russia’s war on Ukraine, the German government hopes to alleviate concerns over skyrocketing prices for heating and electricity in the coming winter. The large package worth some €65 billion includes one-off payments to households, a price brake for electricity, postponing the scheduled rise of the national CO2 price, and suggestions for a nationwide reduced fare public transport ticket. While government members say supporting poorer members of society in the crisis is key, businesses complain the package does not contain enough measures to safeguard economic stability and jobs that are at risk due to high energy costs. The energy industry warned that a tax on windfall profits generated during the crisis could hamper much-needed investments in clean energy infrastructure.