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12 January 2022

Germany poised for huge acceleration in renewables targets

Germany faces a ‘drastic backlog’ and will likely miss its own climate targets for 2022 and 2023, according to new Climate Minister Robert Habeck. As part of the country’s new ‘traffic light coalition’ government, which takes over from the 16-year reign of Angela Merkel’s CDU, new legislative packages are already in the pipeline to boost wind and solar output ahead of 2030 targets.

The new focus will be on doubling the share of renewables in the country’s energy mix to 80% by 2030, at which point Germany has pledge to have reduced emissions by 65% from 1990 levels.

Having missed its climate targets for 2021, “the task is big. It’s gigantic,” said Habeck. “We managed to cut emissions by 15 million tons from 2010 to 2020, and from 2022 to 2030 we have to cut them by 40 million tons a year on average.”

At the current rate of decarbonization, Germany would achieve a mere 50% reduction in emissions by 2030. “That would mean emitting 200 million tons of CO2 more” than the country’s target, said Habeck. The country has already cut its emissions by 40% from 1990 levels. To reach 65% by 2030, Germany needs to triple its rate of decarbonization.

With the Green party joining the pro-business FDP to form a coalition with Social Democrats, a new level of urgency has been injected into German climate policy. Climate change was ranked at the top of voters priorities throughout the election, putting the Greens in a fantastic position to push through some progressive policies over the coming year.

Two new legislative packages are in the works, one for release in April and the other for some time in summer, which should come into effect from 2023. Revisions to the country’s ‘renewable energy law’ will aim to increase the amount of wind and solar capacity made available at the country’s auctions in the name of “overriding public interest.”

A solar acceleration package will mandate all new commercial buildings to have rooftop solar incorporated, while a “wind-on-land law” will dedicate 2% of the country’s landmass to wind energy projects – up from around 0.5% today.

For onshore wind, which saw 1.4 GW of capacity installed in Germany in 2020, the Greens hope to quadruple the rate of installations. The new legislation will reduce minimum distances to military infrastructure, immediately opening up opportunities for between 7 GW and 9 GW of capacity.

For solar power, of which there is currently 59.4 GW of capacity installed in Germany, the Green party’s manifesto detailed an immediate target of between 10 GW and 12 GW of annual expansion, increasing to between 18 GW and 20 GW by the end of the decade. The new solar acceleration package will make some early inroads towards this.

The Green Party’s manifesto also outlined an increased target for offshore wind to 35 GW by 2035, a phase out of new fossil-fuel-powered vehicles by 2030, and a national minimum carbon price of €60 per ton within the EU’s emission trading system, although these measures have not been outlined in these first policies.

New provisions will also be focused on providing 50% of the country’s heating using climate-neutral technologies, supplemented by a building energy law that will require new home heating systems to run on at least 65% renewable technologies from 2025 onwards.

The additional cost to the consumer from these technologies will also be taken on by the federal government by removing the country’s renewable energy surcharge from electricity bills.

For businesses, protection will also be provided. A legal framework will be proposed for ‘carbon contracts for difference,’ which will guarantee a pre-specified carbon price for businesses, allowing for low carbon technologies to compete and providing a financial incentive for investments in corporate decarbonization. To boost the use of electric cars, Habeck said Germany would need to install 100,000 charging points annually by 2030.

The Greens have also been hoping to bring forward Germany’s Climate neutrality target from 2045 to 2040, with a switch to 100% renewable power by 2035. It also aims to cut greenhouse gas emissions by 70% by 2030, by which time it hopes to phase out coal power completely.

The new German government has already had some success in pulling forward the country’s coal exit from 2038, with a date of 2030 currently penciled in.

Along with this accelerated coal phase-out, half of the country’s nuclear plants are being closed in December ahead of a full phaseout at the end of the year. Because of this, Habeck has said that it is “completely indisputable” that Germany will need gas-fired power plants for power in the short-term. To mitigate the risk of stranded assets, and to ensure that the natural gas steppingstone is only used briefly, the government intends for all gas plants to be hydrogen-ready, with a switch to the clean fuel from 2030.

As part of the new legislation, the government will also revise its hydrogen strategy – which was only announced last year – doubling its plans for domestic production.

Germany last week also managed to push its $1 billion Berlin H2Global initiative through the European Commission, which aims to subsidize the production of green hydrogen projects in non-EU countries for import. Many expect that it will be cheaper for Germany to source hydrogen this way than through using its stretched domestic renewables resources, with the funding set to kickstart around 500 MW of electrolyzer projects. The country has already signed partnerships with Canada, Chile, Japan, Morocco, Saudi Arabia, the United Arab Emirates to co-operate on green hydrogen.