Michael Pahle (PIK) 2nd AHEAD Workshop Berkeley, 2 October 2017 Decarbonizing Electric Grids and Electrifying Transportation: The German case Michael Pahle (PIK) 2nd AHEAD Workshop Berkeley, 2 October 2017

Energiewende in a nutshell: renewable power policy “success”… If you know anything about decarbonization in Germany, then it is renewables and Energiewende: here is what it means Long-term target of 80% in 2050 in the power sector… And a policy in place that so far delivers very well So by a large, renewable policy in the power sector a success Source: BDEW M. Pahle, Decarbonizing Electric Grids and Electrifying Transportation:Germany

…but economy-wide climate policy “failure” However, unfortunately there are not only stories of success to tell There are also economy-wide climate targets in place, -80% until 2050 in line with 2°C goal (that was “invented” at PIK) But there is yet no policy / policy mix in place to achieve it (high ambition needs to be acknowledge) Where and what are the challenges & options? Let’s go into the details… Source: UBA M. Pahle, Decarbonizing Electric Grids and Electrifying Transportation:Germany

Most emissions in energy & transport sector Majority of emissions (~1/3) in energy sector, including power and heating/cooling -> different in California, where sector with highest emissions is transport But transport is second in Germany, so it is also important for action In addition, it is the only sector in which emissions have even been rising in last years (trend in wrong direction) Source: UBA M. Pahle, Decarbonizing Electric Grids and Electrifying Transportation:Germany

Decarbonize power & electrify transport would be halfway to deep decarbonization technologies well known / mature effective (efficient?) policy options available Way forward: decarbonize power, electrify transport Of course nothing new, but it qualifies the scale of both endeavors and how far it would bring us in terms of deep carbonization Good news: By and large technologies and policies to decarbonize power (alone) are well known are beyond “proof of concept” Looking at technologies and policy options… M. Pahle, Decarbonizing Electric Grids and Electrifying Transportation:Germany

Electric vehicles (EV): technology on a good way  (early) pitfalls of emobility Now a very dynamic market i.a. thanks to Tesla (Tesla Fighter) and China (10% EV quota in 2019, VW sold ~4 mln. cars in 2016) All big automakers have announced (serious) new EV models & sales strategies, e.g. Volkswagen’s TRANSFORM 2025+ EVs still more expensive and less convenient (range, charging) than ICE, but “break even” seems to be a question of years Let’s start with technologies, obviously electric vehicles: In the technology lifecycle there might have been a time when the basic physics of electric engines were a challenge, but we are fairly well in control of Maxwell’s laws by law (in fact, when I was an undergraduate in Physics, I built such an engine) But by now situation very different: (points on slides) So a check on the technology side M. Pahle, Decarbonizing Electric Grids and Electrifying Transportation:Germany

Policy levers for decarbonizing transportation =Mt (CO2) Source: Gubman, Pahle, Steinbacher & Burtraw (2016), adopted from CPUC But certainly not the same on the policy side -> to understand the complexity, let’s look at this figure that identifies three categories of levers General idea is to use an identity: total emissions (MT) can be expressed as the product of three factors (describe them) Focus on specific electrification levers Total emissions can be expressed as product of three factors Focus on electrification aspects… M. Pahle, Decarbonizing Electric Grids and Electrifying Transportation:Germany

EVs not necessarily ZEVs, especially in Germany Induced/avoided emissions [MtCO2] incurred emissions (power) avoided emissions (transport) Source: Schill et al. (2014) Under business-as-usual (BAU ) assumptions, despite ambitious RE deployment, in 2030 emission balance would be negative Zero emissions only under accelerated RE deployment (RE+) Start with emission intensity and see to which extent electric vehicle are zero emission Important to consider incurred emissions in power sector (maybe a no-brainer, but a crucial factor in communication) (describe slides) Why is that the case? M. Pahle, Decarbonizing Electric Grids and Electrifying Transportation:Germany

Renewable support (as is) not enough While RE share increased, emission stagnated because no switch from coal to gas occurred Coal phase out is essential  price on carbon (EU ETS) and/or command & control similar to nuclear phase out Source: BMWi (T11) Closer look at power mix reveals that coal remains in the system, reasons: Nuclear phase out: RE do not displace coal Very low allowance price (-> Christian’s talk), no fuel switch But easier said as done: for political & economic reasons of course (newly built coal plants, stranded assets!), but also because of electrification itself… M. Pahle, Decarbonizing Electric Grids and Electrifying Transportation:Germany

All the more in face of increasing power demand emobility power demand [TWh] heat losses conv. demand Source: BMWi Climate Policy Scenarios (2017) Demand for electricity decreases until 2030 (under optimistic efficiency assumption), but then increases again Just about the time where new coal mining decisions are due Yet another problem that invites sequencing thinking! These are the results of a recent study that developed scenarios to achieve the long-term climate targets (describe points) Sequencing means -> no solution yet, but anticipation of (upcoming) barriers to transportation electrification What could be suitable policies? M. Pahle, Decarbonizing Electric Grids and Electrifying Transportation:Germany

But temporal variation (VRE) also important load renewable generation “clean” “dirty” But this not yet everything: also temporal variation is important (~25% of power consumption, total RE share: 33%) (show charging layer) Implication: charging behavior can make a big difference, especially in terms of “daily routines” Likely very considerable social benefits from “right” charging, requires proper price incentives… load renewable generation Source: BDEW M. Pahle, Decarbonizing Electric Grids and Electrifying Transportation:Germany

Price incentives essential, but suppressed 2-fold 1) No real-time pricing (RTP) Typical EV driver (household) is flat priced  no response Households / drivers very reluctant to adopt RTP 2) Wholesale price only ~20% of retail price Very high absolute price level, mostly fixed components Under typical short-term price elasticity (-1%), little response even with RTP 29,23 ct/kWh* RE support levy grid fees Straight forward slide wholesale price *average household price Source: BDEW M. Pahle, Decarbonizing Electric Grids and Electrifying Transportation:Germany

Impacts of increasing EVs & cleaner power 1) Increasing number of EVs [-] expansion of (distribution) grid due to charging increases grid fees [+] using EV batteries as flexibility option (V2G, prosumage) might reduce grid fees Use of batteries in both directions? 2) Power sector decarbonization price effect depending on policy: [-] support scheme, [+] carbon price [+] additional incentives from policy induced negative prices, but currently a concern (§51 EEG) Implication for power decarbonization policy? 29,23 ct/kWh* RE support - + - + grid fees Straight forward too wholesale price *average household price Source: BDEW M. Pahle, Decarbonizing Electric Grids and Electrifying Transportation:Germany

How to bring – and “price” – it all together? activate demand varying hourly intensity flexibility / VGI & V2G price effects of decarb. policies increasing power demand Now the big question is how to bring this all together? Throw it all in the big policy pot and stir it well… Smart RPS? integrated pricing? policy pot dynamize fixed components? M. Pahle, Decarbonizing Electric Grids and Electrifying Transportation:Germany

Contact Dr. Michael Pahle Head of working group "Energy Strategies Europe & Germany" Potsdam Institute for Climate Impact Research (PIK) Research Domain III (Sustainable Solutions) PO Box 60 12 03 14412 Potsdam Germany Tel: +49 331 288 2465 Fax: +49 331 288 2570 michael.pahle@pik-potsdam.de M. Pahle, Decarbonizing Electric Grids and Electrifying Transportation:Germany

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High temporal variation of emission intensity 15 May 2016 GW PV wind on. wind off. hydro 12:00 24:00 biomass 17 Sep 2017 GW nuclear 12:00 24:00 M. Pahle, Decarbonizing Electric Grids and Electrifying Transportation:Germany

Power Sector: A very different picture Considerable increase of renewables in power consumption over last 15 years From 6% in 2000 up to 33% in 2015, 27 percentage points Major driver: RE feed-in tariff (EEG) implemented in 2000 Source: BMWi (T20) M. Pahle, Decarbonizing Electric Grids and Electrifying Transportation:Germany

Costs of renewable support Source: BDEW (2016) Annual costs of support has risen to more than 23 bil. € (>60 €/MWh) ~50% for solar pv (~20% of all RE power production)  surge in 2010-2012 Expected decline after 2025 when old installations stop receiving subsidies M. Pahle, Decarbonizing Electric Grids and Electrifying Transportation:Germany