After presentation of the climate package: What do utilities need to do now?

29.10.2019

The climate package is currently being intensively discussed by associations, business and science, and in some cases sharply criticised.

The climate package is currently being intensively discussed by associations, business and science, and in some cases sharply criticised. At the same time, many points of the package still need to be translated into concrete laws and regulations. Irrespective of this, energy suppliers are advised to take a detailed look at the package already now. It defines many measures that the energy industry should prepare for at an early stage. A climate package with laws and agenda On 9 October 2019, the German government adopted the climate package. The combination of the Climate Protection Act and the Climate Protection Program is intended to ensure that Germany meets its climate targets in future. To this end, the Climate Protection Act provides for binding climate protection targets and emission quantities for each CO2-emitting sector and each year between 2020 and 2030. If individual sectors fail to comply with the prescribed quantities, a corrective mechanism is activated, which obliges the responsible ministries to take countermeasures. At the same time, the law explicitly sets the goal of greenhouse gas savings by 2030 of minus 55 % compared to 1990 and for the first time sets the goal of greenhouse neutrality in Germany by 2050. The climate protection program also defines concrete measures, broken down by individual sectors, to ensure that the climate targets for 2030 are achieved. In addition to the introduction of a CO2 pricing system in the heating and transport sector, measures in the "energy industry", "buildings" and "transport" sectors are particularly relevant for energy suppliers. Numerous measures are associated with a significant expansion of the funding base. For example, the Energy and Climate Fund (EKF) and other measures are expected to provide funds in the three-digit billion range by 2030. Adjustments of the market framework by entering the CO2 pricing As a first step towards CO2 pricing for the heating and transport sector, a national emissions trading system is to be set up from 2021 onwards, beyond the European certificate trading system, to cover emissions from the combustion of fossil fuels. To this end, a fixed-price system is to be introduced, whereby certificates are sold at the upstream trading level to the companies that place the heating and motor fuels on the market. At the same time, a trading platform will be set up to enable auctioning of the certificates and trading. Initially, the fixed price will be set at 10 euros per tonne of CO2, which will then gradually increase to 35 euros per tonne by 2025. Starting in 2026, an annually decreasing maximum emission quantity will be set and certificates will be auctioned in a corridor of 35 euros to a maximum of 60 euros per tonne of CO2. The maximum corridor limit may rise further in subsequent years. The revenues from the new CO2 pricing mechanism are to be used to reduce the price of electricity. To this end, a reduction in the EEG levy from 2021 by 0.25 cents per kilowatt hour, rising to 0.625 cents by 2023, is announced. Critics of the CO2 pricing criticise above all the low entry price, which has no short-term incentive effect. Moreover, the marginal relief from the EEG levy means that a comprehensive reform of levies and charges to reduce the price of electricity is missed. Nevertheless, energy suppliers and consumers must now adapt to the new CO2 price path when making longer-term investments, e.g. in new heating systems, and factor in significantly higher CO2 costs from the middle of the next decade. This can also have repercussions on the advice and heat supply of municipal utilities. For example, the planned increased promotion of heating system replacement could prompt a significant increase in customer demand for new heating systems (e.g. heat pumps). Public utilities could respond to this with additional energy consulting services and, in the case of the heat pump, for example, with their own installation premiums and their own heat pump tariff. Commitment to coal exit The package of measures in the energy part of the climate programme starts with a clear commitment to the coal phase-out and the corresponding recommendations of the Commission on Growth, Structural Change and Employment (WSB). Thus, lignite and hard coal capacities are to be reduced to a total of 17 gigawatts by 2030 and the phase-out is to be completed by 2038 at the latest. While the decommissioning of lignite-fired power plants is based on negotiations with the power plant operators that are as consensual as possible, in the case of hard-coal-fired power plants, compensation is to be awarded through tenders, which will be degressive. With regard to legal implementation, in addition to the structural strengthening law already presented, the legal regulations on the phase-out of coal-fired power generation and other outstanding measures from the recommendations of the WSB Commission are to be adopted in cabinet by the end of November 2019, and the legislation is to be completed by the end of 2019 if possible. With regard to the question of possible capacity markets, the statements of the climate protection programme also remain extremely reserved. Thus, in addition to the explicit reference to the existing reserve mechanisms, an external expert report commissioned by the Federal Government is cited, which currently states that the European electricity system has overcapacities of 80-90 gigawatts. New impetus for renewable energies and CHP In line with the gradual phase-out of coal-fired power generation, the climate protection programme assesses the expansion of renewable energies as a key element in achieving the climate targets. In this sense, new impulses are to be given here, but their promotion must be questioned in part. In principle, a better regional distribution should be achieved and further acceptance measures, such as better conditions for tenant electricity, should be examined. In terms of the individual energy sources, the 52 GW cap is to be dropped for PV and the expansion target for offshore wind energy is to be raised from 15 GW to 20 GW in 2030, subject to binding agreements with the coastal countries concerned. The measures for onshore wind energy, in particular, are to be assessed ambivalently. On the one hand, planning and approval hurdles are to be simplified, the participation of local authorities and citizens strengthened, and a regionalisation bonus introduced. On the other hand, the planned establishment of a minimum distance of 1,000 metres to pure and general residential areas creates new restrictions and massive uncertainty. This also applies with regard to the question of which federal states and also municipalities will use the possibility of a granted opening clause in the coming months to set lower minimum distances. In addition to renewable energies, efficient generation in CHP plants is to be increased. In this way, the promotion of CHP is to be further developed in the public supply sector as well and extended until 2030. A key objective is to achieve a switch from coal-fired to gas-fired cogeneration at current locations with new power plants. The necessary legal steps will be taken in connection with the implementation of the Coal Exit Act. In addition, based on the pilot programme "Heating Network Systems 4.0", which has already been launched, additional incentives for the transformation of existing heating networks are to be realised in this legislative period by means of an extended budget-based support programme. More funding for efficient buildings In the building and mobility sector, a significant expansion of funding is planned. In addition to tax incentives for the energy-efficient renovation of buildings and additional subsidies for the replacement of old oil-fired heating systems, the newly conceived Federal Subsidy for Efficient Buildings (BEG) is worthy of particular mention. From 2020 onwards, this is intended to bundle the existing funding programmes into a single comprehensive offer and optimise their content. In addition, the programme "Energetic Urban Renewal", which promotes measures for the energy efficiency of buildings and the supply infrastructure (heating/cooling/water/wastewater), is to be further developed. Among other things, the corresponding loan programme provides for a doubling of the repayment subsidy as early as the 4th quarter of 2019. Municipal utilities should take a close look at the planned expansion of support programmes. Together with the strengthening of cogeneration solutions, heating networks and increased support for energy consulting services, this opens up new opportunities here, for example, to build up an offering in the field of "efficient neighbourhood development" or to strengthen existing involvement in this area. Extended support for new mobility solutions New measures are also defined very specifically in the field of mobility. For example, according to the target of seven to ten million electric vehicles in Germany by 2030, the purchase premium for cars with electric, hybrid and fuel cell drive is to be extended from 2021 and increased for cars under 40,000 euros. Likewise, the reduced company car tax of 0.5 percent, extended until 2030, is to be reduced to 0.25 percent for pure electric vehicles up to a purchase price of 40,000 euros. In addition to these points, the motor vehicle tax exemption for electric vehicles will also be extended until 2025 and the tax as a whole will be geared more closely to the CO2 emissions of a vehicle. For the acquisition of new, purely electrically powered delivery vehicles with a maximum weight of 7.5 tonnes, a special depreciation option of a one-off 50 percent of the acquisition sum in the year of acquisition is to be defined for the period from 2020 to the end of 2030. The use of e-buses in public transport is also to be promoted more strongly. Parallel to the ramp-up of e-mobility, the goal of establishing one million charging points in Germany by 2030 is being issued. To this end, the expansion of public charging points will be supported by 2025 with appropriate subsidy programmes. These measures also create new opportunities for energy suppliers. For example, the range of e-mobility services offered to commercial customers can be expanded and linked to offers of comprehensive energy management. On the other hand, however, there is also the option of acting as a role model for the further conversion of the company's own vehicle fleet, including the charging station infrastructure. This is combined with the opportunity to underscore the expertise in the area of new mobility solutions in external corporate communications and to make new attractive offers to employees within the company. Ultimately, the energy system transformation as a major project will only succeed if everyone in their area of responsibility makes the best possible use of the available options for action. How can con|energy support? We at con|energy unternehmensberatung would be pleased to present the contents of the climate package in detail and to consider the opportunities and risks of the new framework conditions for individual business areas. In doing so, we also take into account the ongoing legislative procedures at federal level, with which the measures of the climate package are currently being implemented.

After presentation of the climate package: What do utilities need to do now?