Final report of dena lead study published
Berlin, 7 October 2021. Today, the German Energy Agency (dena) published the final report for the dena pilot study Towards Climate Neutrality (Aufbruch Klimaneutralität) after 17 months of intensive work with a wide range of stakeholders. Ten scientific institutes have contributed their expertise and more than 70 companies as well as a 45-member advisory board with high-ranking experts from science, politics and society have given their industry experience and market assessments. Jointly, they have investigated the technology paths that are realistic from today’s vantage point and the framework conditions that are needed to implement them in an integrated climate-neutral energy system in Germany by 2045. Concrete solutions and pathways for individual sectors (construction, transport, industry, energy production, LULUCF) to reduce their CO2 emissions were identified and analysed.
‘The dena pilot study provides the next German government with a practical perspective on achieving climate neutrality by 2045. In addition to comprehensive and differentiated analysis, a total of 84 tasks were identified in ten central fields of action, which have one thing in common: Every single task is feasible. But it will be a huge challenge to orchestrate all these tasks in parallel as is necessary. Germany must gain new momentum in energy and climate policy and a new dynamic of change must be initiated. Continuing as we are is not an option. The energy transition and climate policy must be better organised, the small-scale ‘tinkering’ we have seen in the past needs to be overhauled. We need a fundamental change in how we approach this task of the century. If we succeed in moving ‘towards climate neutrality’, we will be able to achieve the legally binding goals for 2030. Climate neutrality in 2045 can then also be an achievable prospect,’ explains Andreas Kuhlmann, dena CEO. ‘However, the concrete sector-specific annual targets for the years immediately ahead will almost certainly not be met. Too much has been left undone in recent years, and the next government should be aware of that. The current legal regulations stand in the way of goal-oriented, efficient action, thus preventing the necessary momentum,’ Kuhlmann continues.
Based on a central scenario (Climate Neutrality 100, or CN100), the dena pilot study shows how the sector targets can be achieved in 2030 and climate neutrality in 2045, which energy sources and technologies are needed for this and in what quantities, as well as the necessary transformational changes that will also be required. At various points, the study also deals with conflicting goals and trends that need to be reversed. It also specifically looks at the role that the various stakeholders have to play in this process. The study also examines ways of achieving the targets in four different paths, such as a higher share of direct electric use versus a higher share of gaseous or liquid energy sources, or the effects of increased versus limited efforts to increase energy efficiency.
A four-pillar strategy is required from a technological point of view to achieve climate neutrality: The increase in energy efficiency is an essential measure in all consumption sectors, especially in industry and the buildings sector. In addition to energy efficiency improvements, a basic prerequisite in many application areas for the comprehensive direct use of renewable energies is a broad and significantly accelerated electrification. Renewable gaseous and liquid energy sources and raw materials will also be needed, in addition to electricity. And as a fourth pillar, there is a need for technical and natural CO2 sinks. ‘We will not be able to avoid all emissions, especially in agriculture and industry. Therefore, the next German government must quickly develop a strategy for the expansion of existing and the development of new natural and technical sinks,’ states Kuhlmann. These four pillars have different timelines. However, they all have in common the need for considerable efforts to set up the corresponding infrastructures. This applies to electricity, gas, hydrogen, heating grids and CO2 in the same way as it does to transport infrastructure, digitalisation and even administrative infrastructure, which is currently one of the main impediments to building up new momentum.
Tremendous efforts in all sectors
Energy supply is currently the largest producer of CO2 emissions. Reductions need to be most significant and fastest here, according to the study (from 308 million tonnes of CO2 eq. in 2018 to 104 million tonnes of CO2 eq. in 2030, and to -8 million tonnes of CO2 eq. in 2045). Here, the central point is that renewable electricity capacities will more than double by 2030. The installed capacity of solar energy will increase from 45 GW to 131 GW and onshore wind from 52 GW to 92 GW, for example. While coal generation will hardly play a market-driven role in 2030, the use of natural gas in power generation will increase by 2030. This fuel switch alone contributes considerably to the reduction of emissions in the energy industry by 2030. Hydrogen and powerfuels will play only a minor role until 2030. However, it is essential that the corresponding infrastructure and markets be developed, because reconversion of green hydrogen into electricity will become the third most important source of electricity generation after wind power and photovoltaics in 2045. Blue hydrogen will play a role by 2035, albeit a minor one, after which it will gradually disappear from the market according to current forecasts based on the modelling in the dena pilot study.
‘Market-based expansion of renewable energies needs to be accelerated by standardising and streamlining approval procedures and making more land available in order to achieve climate neutrality in the energy supply. At the same time, efficient markets and infrastructures for powerfuels must be created by 2030. Above all, it is important to actively support the early phaseout of coal-fired power generation. A number of technological requirements, which are presented in detail in a separate section in the study, need to be taken into account. These include: Security of supply in the transformation requires a new concept, with the addition of secured capacity and incentives for flexibilities. This will not be possible without a corresponding mechanism for securing new capacity. There are also immense challenges in expanding the electricity grids and securing the heat supply, which require a number of safeguarding mechanisms,’ explains Kuhlmann.
Industry follows with the second highest emissions. In this area, emissions must drop by around 36 per cent by 2030. After relative stagnation of GHG emissions over the past two decades, an average reduction of about eight million tonnes of CO2 per year is now required to achieve the GHG reduction targets in the current decade. Almost 70 per cent of that reduction is attributable to energy emissions. By 2030, the most significant changes will be particularly in the steel and chemical sectors. ‘In order to achieve climate neutrality in industry, we need a transparent greenhouse gas balance across the entire value chain, a consistent circular economy, a financial steering effect via CO2 pricing and the creation of new lead markets and the rapid ramp-up of low-emission technologies and production processes. The restructuring of levies and surcharges, in particular the immediate reduction of the EEG surcharge to zero, are also essential foundations for the prospect of success,’ Kuhlmann continues. Industry is the largest consumer of hydrogen for energy and material use until 2045, and it will remain so in the long term. In this respect, the necessary preconditions for the conversion of process technologies as well as for the development of the required infrastructures must be met in order to ensure the transformation and supply security for industry.
Currently, the transportation sector ranks third in terms of emissions and has the greatest reduction task of all the sectors examined. Emissions need to be reduced by around 48 per cent (from around 164 to 85 million tonnes of CO2 eq.) by 2030. The greatest reduction must be made in private transport, followed by lorry traffic. In passenger transport, a ramp-up of electromobility to 9.1 million fully electric vehicles (or 14 million vehicles including hybrids) by 2030 is considered necessary; hydrogen will hardly play a role until 2030. ‘In order to achieve climate neutrality in the transportation sector, it is necessary to promote electromobility in private transport, to make extensive use of hydrogen and powerfuels in heavy goods transport, to intensify the expansion of local public transport and to improve connections to other mobility services, as well as to give local authorities greater planning freedom. However, it is critical to note that funding instruments that are essentially geared towards cementing individual mobility tend to stand in the way of the necessary transformational changes in the transport sector,’ explains Kuhlmann when examining the challenges in the transportation sector.
CO2 emissions in the buildings sector also need to be reduced by around 44 per cent (from around 120 to 67 million tonnes of CO2 eq.) by 2030. The majority of that reduction (46.5 million tonnes of CO2 eq.) is attributable to measures concerning the building envelope and technical installations. The use of heat pumps and the expansion of connections to heating grids must be significantly promoted. In the KN100 scenario, 4.1 million buildings are already supplied with heat pumps in 2030, and the study sees 9 million heat pumps in 2045. In 2030, 1.3 million more homes (compared to 2019) will be supplied by heat grids, and in 2045 the figure will be 2.7 million. Still, the use of climate-neutral fuels must also more than triple by 2030 – from 9 TWh (currently) to 32 TWh. By 2045, a further quadrupling to 120 TWh will take place. A climate-neutral building stock is inconceivable without hydrogen and climate-neutral gases from today’s perspective due to the complexity of the buildings sector with its very specific challenges. This is a particular challenge, which is certainly still underexposed in the current debate, also in terms of the conversion of the necessary infrastructure. ‘Achieving climate neutrality in the building stock requires profound changes at high speed. Buildings of the worst standard must be tackled first, renovation procedures standardised, greatly intensified and the heat supply quickly decarbonised,’ states Kuhlmann.
Targeted energy market design and more innovations
‘However, it is not enough to follow transformation paths in one field of action or one sector. We need to link measures in different clusters of fields of action,’ Kuhlmann continues. The dena pilot study shows the need for a target-oriented energy market design that accelerates the transformation and triggers investments in climate-neutral technologies and infrastructures as effectively as possible. A CO2 price with a greater steering effect, the alignment of government-induced price components and the development of integrated infrastructure planning play a central role here. ‘The basis for success will be to keep the different technology paths open and not to make any early predeterminations that unnecessarily limit options for achieving the climate goals. All options to identify, support and scale innovative technologies must be significantly advanced. However, innovations should also be strengthened on the demand side to achieve climate neutrality, for example, through public procurement based on climate-neutral and innovative technologies. Increasing research and development are equally necessary,’ says Kuhlmann.
Germany must become a pioneer of the European Green Deal
The European level is also of great importance in terms of achieving climate neutrality, as it sets decisive overarching legal framework conditions. ‘The study makes it clear that the energy transition must be thought of in European and international terms to a greater extent. Germany should become a pioneer in implementing the ‘Fit for 55’ package. National energy policy should model itself after the European Green Deal. Corresponding initiatives such as the ‘Klimaclub’ (Climate Club) should be pushed further, European integrated infrastructure development should be advanced and international energy partnerships should be expanded, especially in the area of hydrogen,’ adds Kuhlmann. ‘The radical change in energy imports alone and a look at the related geopolitical challenges of our partner countries make it clear that climate policy must also be a central task for the next foreign minister.’
Climate neutrality needs to be anchored broadly in society
However, the enormous transformation process can only work together with the general public and must be designed in a socially just manner. ‘Acceptance of the transformation increases when the general public participates in and benefits from the energy transition. The promotion of energy communities also plays a central role. In this manner, it is easier to change social patterns of behaviour and consumption. The role of people as prosumers should also be further expanded,’ claims a confident Kuhlmann. In this context, measures such as the binding participation of municipalities in revenues from renewable energy projects or the abolition of climate-damaging subsidies can promote acceptance, and approaches such as a per capita energy fee can improve the social design of the energy transition. ‘However, in addition to an effective energy and climate policy, we require an overall consistent policy concept that empowers the different social groups to help shape the transformational changes, avoids social upheavals and at the same time makes use of the economic opportunities of the energy transition.’
Every single one of the tasks of this enormous transformation process can be shaped. The next few years will show whether we will succeed in orchestrating all of these tasks simultaneously. There is no doubt that the 2020s will be a decade of very special significance for moving towards climate neutrality in this country. In this context, the dena pilot study can provide a solid basis for the government’s work in the coming years, Kuhlmann concludes.
dena pilot study – Towards Climate Neutrality (Aufbruch Klimaneutralität)
Similar to the first dena pilot study from 2018, the dena pilot study Towards Climate Neutrality pursues an integrated approach in a systemic manner. A new feature in Towards Climate Neutrality is the inclusion of cross-sectional issues. The experts involved in the project discuss additional cross-sectoral contents in three joint cross-sectional modules in an attempt to develop integrated solutions: Energy Market Design, Transformation, Economy & Europe.
Similar to the first dena pilot study, a substantial part of the analyses takes place in four sector modules, looking at the trends for the energy industry as well as for buildings, industry and transport. The key focal points are the discussion of specific options for achieving climate neutrality in 2045 and the appropriate parameter setting for the quantification of the sector-specific transformation paths within the framework of energy system modelling.