Energy transition in Germany: a case study on a policy-driven structural change of the energy system

The German energy transition (“Energiewende”), i.e., shifting the basis of the energy system from fossil and nuclear fuels to renewable energy constitutes a policy-driven structural change of the energy systems. The fundamental political decisions on nuclear phase-out and the deep decarbonisation of the energy system were based on specific risk considerations in German society, formed by political and learning processes over more than two decades, including the experiences made with the roll-out of renewable energies from 1990 to 2010 that created significant technology optimism in this field. The major challenges for the energy transition do not arise from technological issues or the system costs of a renewables-based system if the once-only investments in innovation are taken into account (that contributed significantly to the massive cost decrease of wind and solar energy at global level). Structural challenges arise first from the dominance of variable renewable energies, which changes generation patterns and shifts cost structures to high shares of capital and low or even zero marginal costs. This triggers the need for restructured power market design that enables price-based system coordination as well as the payback of investments in a low marginal cost environment and re-adjusts the cost allocation among the different consumer groups. Second, the increasing diversity in the power system brings in a broad range of new players and new economic appraisals (self-generation, etc.) that also requires—beyond new dimensions of coordination—structural changes in the regulatory framework. Third, the spatial patterns of the electricity system necessitate large-scale structural changes in the network infrastructures, which demand a sensitive reflection of public acceptance and network regulation approaches. A successful energy transition beyond its present stage requires stringent and holistic policy approaches that are based on four pillars: paving the way for clean energy, designing the exit game for the high-carbon assets, triggering the network infrastructures and making innovation work in time.