Team

CO2 Pricing in the Building Sector and Necessary Additional Instruments

CO₂ pricing provides incentives for investments in climate-friendly heating technologies and energy-efficient renovation. But a tax on greenhouse gases or an emission trading system alone will hardly be enough to make them economically attractive. Additional policy instruments are needed to do justice to the special features of the building sector. These are the key findings of a study conducted jointly by the Institute of Energy Economics at the University of Cologne (EWI) and the Institute for Public Economics at the University of Cologne (FiFo) on behalf of the Zentraler Immobilien Ausschuss e.V. (German Property Federation) (ZIA).

Impulse for the current climate policy debate: Assessments based on the dena lead study Integrated Energy Transition

Together with the German Energy Agency (dena), EWI has examined developments in power generation and the end-consumer sectors of buildings, industry and transport since the publication of the “dena Lead Study Integrated Energy Transition “. The analysis compares the changes between 2015, the base year of the dena study Integrated Energy Transition, and today with the transformation paths and model results in 2030. The EWI figures show: The efficiency improvements in the sectors assumed in the dena study cannot be observed. Regarding the expansion of renewable energies, particularly in wind energy, a significant decline is expected. Various indicators show that there are currently no incentives for a rapid and cross-sectoral reduction of greenhouse gas emissions. Based on the analysis of the key figures by the EWI, dena develops comprehensive recommendations for action so that Germany can still achieve the its climate target in 2030.

Effects of the phase-out of coal-fired power generation by 2038 on the electricity market, CO2 emissions and selected industries

At the end of January, the Coal Commission presented its final report. The EWI examined the effects of that report on behalf of MWIDE NRW (Ministry of Economic Affairs, Innovation, Digitalisation and Energy of North Rhine-Westphalia). The European electricity market model DIMENSION+ was used to compare the developments of a reference scenario with those of the phase-out scenario. Based on this analysis and further investigation, an international comparison of electricity prices for selected power-intensive industries was made.

In the scenario analysis, the EWI reaches the following key results: The recommended exit path makes it possible to achieve the 2030 climate target for the energy sector even with a moderate increase in demand for electricity. Whereas this target is clearly missed in the reference scenario. However, in the coal phase-out scenario, an ambitious expansion of the number of peak-load power plants by 2025 is necessary in order to ensure security of supply. Electricity prices will rise significantly in both scenarios due to rising prices for CO₂ certificates. For the German industrial companies considered, electricity prices are rising relatively strongly in both scenarios compared with foreign prices. Aid payments to compensate indirect CO₂ costs (so-called electricity price compensation) can reduce the increase in electricity prices.

Energy market scenarios and future energy and commodity procurement options

On behalf of INEOS in Cologne, EWI analysed the potential development of gas demand – in case the current level of ambition concerning the expansion of renewable energies and the decrease of reduction of energy consumption cannot be accelerated. First, three key mechanisms for achieving climate targets are identified: Decreasing energy consumption, electrification of the final energy consumption and increasing the share of renewable energies. Unfortunately, barriers like rebound effects, slow technology adaption rates and acceptance issues are often neglected. Energy demand could thus be underestimated. One possible outcome is a rising demand for natural gas and an increasing import share. A theoretical alternative to gas imports would be the exploration of unconventional gas sources (“fracking”) in Germany. However, the study concludes that the exploration of unconventional gas sources is unlikely due to environmental risks, public concerns and Germany’s geographical location close to cheap and abundant gas reserves.

Study comparison sector coupling

In April 2018 ewi ER&S published the study “Kosteneffiziente Umsetzung der Sektorenkopplung” on behalf of the Ministry of Economics, Innovation, Digitisation and Energy of North Rhine-Westphalia. In June 2018, the “dena-Leitstudie Integrierte Energiewende” was published with ewi ER&S as the principal scientific assessor. Both studies analyse cross-sector strategies for achieving climate targets in the medium and long term. Within the framework of the “Studienvergleich Sektorenkopplung “, similarities and differences in the design of the study are pointed out transparently and the differences in the results are presented in detail.

dena-Leitstudie Integrierte Energiewende (dena Study on Integrated Energy Transition)

The dena-Leitstudie Integrierte Energiewende develops and compares transformation pathes for the energy system in Germany with the objective to attain the climate-political goals by 2050. It pursues an innovative cross-sector scenario approach. At the same time, it is based on the branch knowledge of more than 60 partners from all relevant sectors and on the continuuos exchange with important actors from politics, society and science. The objective is to give impulses for designing the energy system by 2050. ewi ER&S is the main scientific advisor to the study. The central results of the study say that Germany will be able to attain its goals to reduce greenhouse gas emissions by 80 as well as by 95 % up to the year 2050 if the strains in all sectors are increased. Therefore, the roll-out and system integration of renewable energy sources must be forced, the end energy consumption has to be reduced by extensive energy efficiency efforts, and synthetic regenerative energy sources must be used on a big scale. A broad mix of technologies and energy sources makes the transformation of the energy system more cost-efficient than a fortified use of electricity-based applications.

Cost-efficient realization of sector coupling

The study examines options for a medium-term and long-term attainment of German goals for the reduction of greenhouse gases by 2050. The focus lies on finding cost-optimal development pathes in the energy consumption sectors of buildings, transportation, industry and in the energy sector. The study finds that a technology-open approach is to be preferred to an extensive electrification of the consumption sectors. In addition, the German climate goals are classified into the European context, incentive structures are analyzed from stakeholders’ pespectives, and recommendations for a further development of legal frame conditions are yielded. The study was commissioned by the Ministry of Economy, Innovation, Digitalization and Energy of the state of North Rhine-Westphalia (MWIDE). The ef.Ruhr GmbH is the cooperation partner for examining the implications on the electricity networks.

[Study (in German, short version)] [Study (in German, long version)]