Promoting sustainable energy under the framework of the German “Energiewende” The role of KfW 1.) THANK YOU & DhC 2.) TITLE “The German “Energiewende”

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1 Promoting sustainable energy under the framework of the German “Energiewende” The role of KfW
1.) THANK YOU & DhC 2.) TITLE “The German “Energiewende” and the role of the KfW” 3.) DEFINITION, what is the “German Energy Transition” (“Energiewende”) ?  not simply the nuclear power phase-out decided by the German Bundestag on 30th June 2011 after the Fukushima accident shut down of the last nuclear power plant in 2022  rather the foundations were laid by the German Energy Concept (September 2010) with very ambitious goals… reduction of GHG emissions by 40 % until and 80 to 95 % until 2050 (compared to 1990, as of 2009: -29%) share of RE in final energy consumption up to 18% in and 60% in 2050 (as of %) share of RE for (electric) power generation up to 35% in and 80% in 2050 (as of %)

2 KfW – Bank aus Verantwortung
Tiflis Jerewan Damaskus Amman Kampala Windhoek Pretoria Lusaka Skopje Ankara Kiew Belgrad Priština Sarajevo Tirana Berlin Frankfurt Istanbul London Brüssel Köln Podgorica Bonn Juba Kairo Al-Bireh Addis Abeba Kigali Rabat Dakar Accra Ouagadougou Jaunde Bamako Cotonou Kinshasa Niamey Manila Baku Beijing Jakarta Kabul Islamabad Ulan Bator Hanoi Dhaka Bishkek Taschkent Dushanbe Bangkok Phnom Phen Kathmandu Neu-Delhi Mumbai Moskau Lima La Paz Brasilia Managua Tegucigalpa Mexiko-Stadt São Paulo Quito Bogotá Guatemala-Stadt New York Sanaa Maputo Daressalam Antananarivo Lilongwe Abu Dhabi Johannesburg Nairobi San Salvador Singapur Employees GIZ Pressereise - KfW in Ruanda

3 Energiewende in Germany: Demanding objectives
On track Too fast Too slow Mit dem Energiekonzept der Bundesregierung vom September 2010 und dem Beschluss zum beschleunigten Ausstieg aus der Kernenergie im Juni 2011 hat die Bundesregierung die Energiewende eingeleitet. Ziel: Realisierung einer nachhaltigen Energieversorgung in den Bereichen Strom, Wärme und Mobilität durch den Einsatz Erneuerbarer Energien (EE) und die Reduktion des Energieverbrauchs über deutliche Effizienzsteigerungen in den Sektoren Industrie & Kommerz, Transport und Gebäude. Geplante weitgehende Dekarbonisierung wird nicht nur die Energiewirtschaft in Deutschland grundlegend verändern, sondern auch in weiten Bereichen von Wirtschaft und Gesellschaft strukturelle Veränderungen auslösen. Steigerung der Energieeffizienz kommt eine bedeutende Rolle: Voraussetzung zur Erreichung hoher EE-Anteile an der Energieversorgung und zur Ermöglichung der von der Bundesregierung angestrebten Treibhausgasminderung bis 2050. Kompensation von Energiepreissteigerungen und Kostenbelastungen, die mit dem Umbau des Energiesystems einhergehen. Beitrag zur Versorgungssicherheit: Reduktion der Energieimporte. Zukunftsmarkt: Vorteile für Wettbewerbsfähigkeit und Innovation, Chancen für Spitzentechnologie. Energiewende / 2 3

4 Expanding the use of renewable energies
Ambitious goals until 2050: Increasing the share of renewables in gross final energy consumption up to 60 % (2013: 12.3%) Increasing the share of renewables in the gross electricity consumption up to 80 % (2013: 25,4%) Considerable investment needs (approx. EUR 12.4 bn p.a. for RE in the electricity sector in Germany up to 2020): So far, European emissions trading only with weak incentive effects: adjustment required Early inclusion of affected citizens and municipalities required Legal framework: the Renewable Energy Act. 1. Ambitious goals  expansion primarily of wind- and solar energy  investment needs of EUR 135 bn. until 2020 potential of biomass limited due to competitive land use (i.e. food production) potential of hydro power limited due to topological reasons potential of geothermics limited due to high risks 2. EU-emission trading & KfW/ZEW-CO2-Barometer (response corresponds 42 % of emissions) 63 % have implemented carbon reduction measures since introduction of EU-ETS, for 95 % of companies carbon reduction only side-effect 2/3 have not yet systematically evaluated their CO2 abatement options  Cap needs to be adjusted 3. Protest of citizens: perception of individual and social “welfare” not exclusively based on economic growth KfW-Research: KfW Sustainability Indicator, „alternative welfare measures“ (Centre for applied economic research Münster). 4. Critical raw materials  IZT-Study Considerable investment needs (approx. EUR 135 bn. up to 2020): Massive expansion of renewable energy supply in the medium and long run (esp. solar- und wind energy) Short-/medium-term construction of additional fossil power plant capacity (primarily combined cycle plants, cogeneration) Securing supply of „critical raw materials“ for construction of renewable energy infrastructure: Rare earths (neodymium, dysprosium, praseodymium): wind energy Gallium, germanium, indium: thin-layer photovoltaic Expected construction of conventional power plants with capacity>5 MW (Q1/2012 – 2015) – Source: Bundesnetzagentur03/2012 conventional power plants under construction: 12 coal power stations, net nominal capacity 10,7 GW, 9 gas power stations, MW Approved conventional power plants not yet under construction: 3 natural gas power stations, completion earliest 2013, total capacity: 1,3 GW Existing power plants forming cold reserve >10MW (Source: Federal Network Agency (Bundesnetzagentur) 03/2012): total roughly 650 MW, 6 predominantly fossil power plants Energiewende / 4

5 transmission system operator
Functioning of EEG € transmission system operator electricity market (EPEX Spot) kWh marketing revenues EEG charge guaranteed payment EEG plant operators usually receive technology-based guaranteed payments for electricity from the transmission system operator for the next 20 years (injection priority) Transmission system operators bring the EEG electricity to the market (Day-Ahead or Intraday) Difference between revenue and costs (injection interest rates, merchandising, balancing deviations) is allocated to electricity consumers A national EEG-charge per kWh is computed EEG (Erneuerbare-Energien-Gesetz; Englisch: Renewable Energy Sources Act) ist das wichtigste Instrument zur Förderung der Erneuerbaren Energien und zur Umsetzung der Energiewende in Deutschland. Inkrafttreten des EEG im Jahr 2000, danach mehrfache Novellierungen. EEG sieht regelmäßige Absenkung der Vergütungssätze (Degression) für Neuanlagen vor (i.d.R. jährlich; Ausnahme PV: Anpassung Vergütungssatz im Drei-Monats-Rhythmus in Abhängigkeit vom Kapazitätszubau). Befreiung von EEG-Umlage: Rund 30 % des gesamten deutschen Stromverbrauchs ist mittlerweile weitgehend oder ganz von der EEG-Umlage befreit (stromintensive Unternehmen, Eigenstromnutzung). Mit EEG-Novelle vom 1. Januar 2012 wurde Kreis der „stromintensiven“ Unternehmen, die eine weitgehende Befreiung der EEG-Umlage beantragen können, deutlich erweitert. Anzahl der priviligierten Unternehmen steigt von 700 im Jahr 2012 auf im Jahr 2013. Der Effekt: EEG-Umlage wird auf weniger Schultern verteilt und erhöht sich dadurch. Privathaushalte und kleine und mittlere Unternehmen werden dadurch zusätzlich belastet. Energiewende / 5

6 KfW’s contribution to Domestic Promotion of Renewable Energies

7 KfW-Action Plan Energy Turnaround
Innovation Renewable Energy 2013: 4.8 bn € Energy Efficiency 2013: 16.7 bn € ERP-Innovation Programme KfW-Offshore Wind Programme KfW-Energy Efficiency Programme KfW Programmes Energy-Efficient Construction and Refurbishment of Buildings KfW-Programme Municipal Energy Provisioning (Power and Heat) KfW-Programme Generation and Storage of Renewable Electricity KfW-Programme Energy-Efficient Urban Lighting KfW-Programme for Renewable Production of Heat Concepts for and Management of Energy Refurbishment in Urban Areas Usually as a refinancing loan with onlending trough commercial banks Manifold offer of promotion well adapted to fields of action and innovation phases Lack of promotion for mobility Some programs not contained, e.g. deep geothermal energy or HTGF0 Others not explained in the presentation, e.g. direct loans for larger Private corporates or Ipex project financing Direct Loans for Larger Private Corporates („Finanzierungsinitiative Energiewende“) KfW IPEX-Bank (Direct Loans and Project Finance for Corporates) Grids Windenergy (On- and Offshore) Solar Energy (Photovoltaic und Solarthermal) Energy-Efficient Power Plants Energiewende / 7

8 KfW Renewable Energies Programme “Standard“ Promotion of electricity from renewable energies
For whom? German and non-German enterprises, self-employed professionals Enterprises in which municipal authorities, churches or charities hold an interest Private individuals and non-profit organisations which feed the generated electricity into the grid or which sell the generated heat For what? Electricity from solar energy (photovoltaic), biomass, hydropower, onshore wind power plants Investments in low-voltage and medium-voltage power grids Electricity and heat generated in combined heat and power stations How? Loan amount of up to EUR 25m Financing of up to 100 % Loan term of up to 20 years, up to 3 years repayment-free Risk-based interest rate Energiewende / 8

9 KfW Renewable Energies Programme “Premium“ Promotion of large plants in which heat is generated from renewable energies For whom? SMEs (EU-Definition) and self-employed professionals Non-profit organisations, municipal authorities and companies in which municipal authorities hold an interest of more than 25% Private individuals which use the generated heat exclusively for their own needs For what? Construction and expansion of large solar collector systems Biomass plants for combustion of solid biomass for thermal utilization Heating networks which are supplied from renewable energies Systems for development and utilization of deep geothermal energy How? Loan amount of usually up to EUR 10m. Loan term of up to 20 years, up to 3 years repayment-free Risk-based interest rate 2011 wuchs die Förderung im Programm „Erneuerbare Energien – Premium“ auf 0,5 Mrd. EUR. Customers benefit from attractive repayment bonuses financed by Federal Ministry for the Environment, Nature Conservation and Nuclear Safety. Particularly favourable conditions for small enterprises (EU definition). Energiewende / 9

10 KfW Renewable Energies Programme “Storage“ Promotion of storage battery systems
For whom? German and non-German enterprises, self-employed professionals Enterprises in which municipal authorities, churches or charities hold an interest Private individuals and non-profit organisations which feed the electricity generated by a solar collector system into the grid For what? Financing of stationary storage battery systems in combination with a solar collector system Prompt integration of small and medium sized solar collector systems into the grid How? No maximum amount, financing of up to 100 % Loan term of up to 20 years, up to 3 years repayment-free Repayment bonus from BMU of up to 30 % of financeable costs Customers benefit from attractive repayment bonuses financed by Federal Ministry for the Environment, Nature Conservation and Nuclear Safety. Energiewende / 10

11 KfW Offshore Wind Energy Programme Establishment of wind farms off the German coast
For whom? Project companies For what? High loan volumes to establish wind farms in the North and Baltic Sea How? A) Direct loan under banking consortia, pari-passu-condition, loan amount of up to EUR 400m B) Financing package composed of an on-lent loan through a bank and a direct loan from KfW, loan amount of up to EUR 700m C) Direct loan under banking consortia to finance unforeseen cost overruns (“cost overrun facility”), pari-passu-condition, loan amount of up to EUR 100m Financing of up to 50 % of total debt capital requirements Loan term of up to 20 years, up to 3 years repayment-free Offshore-Förderung: 2012 wurde ein mit 5 Mrd. EUR ausgestattetes Programm zur Förderung von Offshore-Windparks aufgelegt. Energiewende / 11

12 Conclusion and perspectives
8 KfW’s contribution Conclusion and perspectives Pillars of a comprehensive decarbonisation strategy: Incentive instruments in order to induce behavioral changes in firms and households Securing long-term funding Promotion of innovations 1. Demanding challenges for policymakers, financiers and enterprises … putting the right incentives in place provide funding encourage innovation 2. … but also substantial chances climate protection and reduced air pollution growth and employment stimuli for technologies for the future cut expenses for the state, enterprises and households for imported fossil energy sources reduced political dependence of fossil fuel exporting countries increased credibility in international environment and climate protection negotiations EU-Study (FAZ ) states that the income share spend on energy will rise from 7 to 8 % today up to 15 % till 2030 and 16% till electricity price will rise by 50 % adjusted by inflation till 2030 Energiewende /