How can Germany’s voracious appetite for electricity be satisfied? How can this country in the heart of Europe meet the growing demand of industry and private households alike? What’s more, how can the high-voltage grid be expanded to cope with the upcoming large-scale development of electricity generation capacities? The answer is to build, build and then build some more.
Do these questions sound familiar? They are not quoted from a 2022 article in Börsen-Zeitung. Rather, they were the headlines in German daily newspapers in 1952, the year Börsen-Zeitung was born. The questions were similar, but the answers are now rather different to those from 70 years ago. In 1952, many upstream facilities were added onto existing coal-fired power stations to quickly respond to the growing demand that came with the post-war years. New coal-fired power stations were also built and these were connected to the grid as early as the mid-50s. This gives us pause for thought in the present. Extensive approval procedures are now the greatest barrier to a sustainable energy supply. We need to step things up a gear in the approval of new wind farms, solar plants and gas-fired power plants, as well as in the construction of the necessary power lines if we are to achieve net-zero carbon emissions in the next 24 years. In other words, we need to build, build and then build some more.
Germany experienced its economic miracle in the 1950s. Back then, the speed of change was key. Now, building a wind farm in just three years would provide much-needed impetus to all those involved in the project, enabling them to turn huge ambitions into huge achievements. They are essential if we are to move towards the 1.5 degree target of the Paris Agreement, which the global community has committed to and was recently reaffirmed in Glasgow.
No lack of willpower
The 2020s will be the pivotal decade on the road to net-zero emissions. There are a number of indicators showing that there is no lack of willpower. Companies that have recognised the opportunities that the energy transition offers are very much open to change. Then there is the drive from Fridays for Future, although things can’t move fast enough for them. We need enthusiasm, optimism and the willingness of society as a whole to tackle the challenge in a concerted effort. We also need to have the courage to resolve existing conflicts and the strength to prioritise the common good over individual interests once more.
Investments in the future, benefiting the community as a whole, must be made a priority again. This was put into practice between 1952 and 1960, when investment in Germany increased by 120 percent. The automotive industry alone saw its production increase fivefold in just 10 years. It also benefited from excellent underlying conditions. Such rates of growth are now deemed desirable for the expansion of renewable energies and the development of the hydrogen economy. The necessary financial resources are not lacking. To name just one example, RWE alone plans to invest a gross amount of up to €15 billion in Germany in the years to come. Many other companies are approaching their next major investment cycle. But as was the case back then, we need the right underlying conditions today. Otherwise investments will be made elsewhere, which will result in production being relocated and jobs being lost. This creeping deindustrialisation must be countered with pragmatism and speed.
The target has been set
The target for the coming decade has been set: to reduce carbon emissions by 65 percent by 2030. The key to this lies in massively increasing the number of wind and solar power plants; we need to more than double what we currently have. To put that into numbers, our current annual production of around 240 terawatt hours from renewables will have to increase to 550 terawatt hours and, depending on the scenario, this figure may need to rise. We need to build, build and then build some more.
Demand for storage facilities and secured power is rising as we switch to increasingly volatile wind and solar power. Simply put, we urgently need to find solutions to secure the green energy supply. Batteries are just one part of the solution, as they can only keep the power supply stable for short periods. For longer periods of time, backup capacities are needed that are available whenever electricity can not be accessed elsewhere. The simultaneous phase-out of coal and nuclear energy has made it essential to build modern gas plants with a capacity of well over 20 gigawatts, many of them by 2030. Neighbouring countries Belgium and the Netherlands will also see more than 6,000 megawatts of secured capacity being taken off the grid in the next few years.
They will have to run on natural gas until sufficient green fuel is available. Diversifying the supply of natural gas should prevent excessive dependence on individual suppliers. Having dedicated LNG terminals can help to achieve this. Germany, Europe’s largest economy, ought to finally get around to creating a direct connection for liquefied gas, if nothing else as an insurance policy for difficult times.
The transition to a decarbonised energy supply will require interventions in many areas of our existing infrastructure. We have the financial and technological means to do so. The willpower is there as the transition offers up great opportunities. Decommissioning is easy. But when it comes to commissioning, we will face the troubles of the plains which will require a concerted effort on the part of policymakers, businesses and society as a whole. This calls for a pragmatic approach to policy decisions and official regulations, and the resolve to stand firm in the face of headwinds. Only then can we turn willpower into action in a way that keeps our industry competitive. This will guarantee our prosperity.
We need a pragmatic approach
Nowadays, policymakers and capital markets hope to use binding targets to chart a course towards net-zero carbon emissions. This is understandable. Yet, pragmatism should be the guard rail when it comes to key issues such as EU taxonomy or regulations on green hydrogen. There is much room for improvement in this regard. Fancy-looking regulation appears to be more important than facilitation, which is astonishing given that the EU has set itself extremely ambitious climate targets. They cannot be achieved without interim action and compromise. To take one example from the discussion on green power criteria, there are plans to determine what kind of renewable electricity may be used to produce green hydrogen. The EU intends to only allow electricity from new, unsubsidised wind and solar power plants. In practical terms, it will be years before these new wind and solar power plants are connected to the grid. Today, no steel producer will convert its blast furnace from coke and no refinery will move from gas to green hydrogen on this basis. Companies need certainty that the supply of green energy will be reliable and sufficient. These sorts of proposals do not support the system as a whole, but bog it down. They entail serious consequences. Delaying the start of the hydrogen economy would add to the uncertainty companies are facing and investments that are currently pending would be made elsewhere. There can and must be a better solution. Germany should lead the way in these efforts.
Policymakers and businesses also have a lot of work ahead of them. It is the past that will determine the future. In 1952, electricity generation increased by ‘just’ 8 percent. By 1960, electricity demand had doubled within a decade. Green power generation could continue on this track in the 2020s. Not only would this be good news for RWE, it would be especially positive for the energy transition – and certainly worthy of a headline in Börsen-Zeitung’s 80th anniversary issue.
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