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EU approves 6.5bn euro German carbon leakage scheme

960 640 Stuart O'Brien

The European Commission has approved, under EU State aid rules, a €6.5 billion German scheme to partially compensate energy-intensive companies to address the risk of carbon leakage from higher fuel prices resulting from the German fuel emission trading system (‘German fuel ETS’).

Germany notified the Commission of its plan to support energy-intensive companies exposed to international competition by covering part of the higher fuel prices resulting from the German fuel ETS. The scheme will cover costs incurred between 2021 and 2030. The support measure is aimed at reducing the risk of ‘carbon leakage’, where companies relocate their production to countries with less stringent emission rules, resulting in increased greenhouse gas emissions globally.

The measure will benefit companies active in sectors and sub-sectors listed the EU ETS Carbon Leakage List. Those sectors face significant emission costs and are particularly exposed to international competition.

The compensation will be granted to eligible companies through a partial refund of the additional costs incurred in the previous year, with the final payment to be made in 2031. The level of compensation is between 65% and 95% of the costs, depending on the emission intensity of the beneficiaries.

In order to maintain incentives for beneficiaries to switch to less polluting fuels, the aid amount is calculated based on fuel and heat benchmarks. The beneficiaries bear a certain share of the additional costs resulting from the German fuel ETS, corresponding to 150 tCO2 per year, for which no aid will be granted.

In order to qualify for compensation, beneficiaries will have to invest at least 50% (as of 2025 at least 80%) of the aid amount in (i) measures identified in their ‘energy management system’, setting out energy efficiency objectives and a strategy to achieve them; or (ii) the decarbonisation of their production processes.

The Commission assessed the measure under EU State aid rules, in particular Article 107(3)(c) of the Treaty on the Functioning of the European Union (‘TFEU’) which enables Member States to support the development of certain economic activities subject to certain conditions.

The Commission found that the scheme is necessary and appropriate to support energy-intensive companies to cope with higher fuel costs resulting from the German fuel ETS in order to reduce the risk of carbon leakage.

Moreover, the Commission considers that by making the aid conditional upon energy efficiency and decarbonisation efforts, the measure contributes to the objective of maximising the incentives for a cost-effective decarbonisation of the economy. It therefore supports the EU’s climate and environmental objectives and the goals set in the European Green Deal. Furthermore, the Commission concluded that the aid granted is limited to the minimum necessary and will not have undue negative effects on competition and trade in the EU.

On this basis, the Commission approved the German scheme under EU State aid rules.

Image by NakNakNak from Pixabay

Germany to have ‘highest LNG consumption in Europe’

960 640 Stuart O'Brien

Germany’s reliance on Russian gas and the need to find alternate supplies given the current geopolitical situation between the two countries has set Germany on a course to the highest liquefied natural gas (LNG) consumption in Europe.

The country, which previously relied on pipelines from Russia to meet its natural gas needs, is now looking at LNG as an alternative post Ukraine war. Germany is therefore set to register the highest LNG regasification capacity additions in Europe between 2022 and 2026, and will account for about 36% of the region’s total capacity additions by 2026, says GlobalData, a leading data and analytics company.

According to GlobalData’s latest report, “LNG Industry Capacity and CAPEX Forecast by Region and Countries, 2022-2026”,Germany is expected to achieve a total LNG regasification capacity addition of 2.1 trillion cubic feet (tcf) by 2026. Of this, 84% (1.8 tcf) is expected to come from newly built regasification terminals, while the remaining 16% will come from the expansion of existing terminals.

Himani Pant Pandey, Oil and Gas Analyst at GlobalData, comments: “Germany currently doesn’t have active regasification terminals. It is now mainly focusing on the development of offshore regasification terminals as they can be constructed more rapidly and economically when compared to onshore terminals. The country even passed an LNG acceleration law, which is aimed at accelerating approvals required for the development of regasification terminals.”

The planned Lubmin Floating terminal, to be operated by Deutsche ReGas, will be the largest contributor to the LNG regasification capacity additions in Germany. The terminal is expected to start operations in 2022 with its initial capacity of 159 billion cubic feet (bcf), increasing to 477 bcf by 2026.”

The second largest contributor among the upcoming projects in Germany is the Stade LNG terminal, which will be operated by Hanseatic Energy Hub and is likely to add a capacity of 469 bcf by 2026.

With a capacity of 353 bcf, Brunsbuttel LNG terminal, which will be operated by Nederlandse Gasunie is the third ranked project by highest capacity additions and  is expected to come online by 2023.

E.ON and Tree Energy Solutions partner to import green hydrogen to Germany

960 640 Stuart O'Brien

E.ON and Tree EnergySolutions (TES) haver agreed on a strategic partnership to import green hydrogen at scale into Germany, including the investigation of potential joint engagements along the entire hydrogen value chain to build a source for secure, long-term green hydrogen supply.

TES is developing a green energy hub in the German port of Wilhelmshaven. The energy hub will feature a receiving terminal, storage facilities and a clean, zero-emissions oxy-fuel combustion power plant.

In addition, TES is developing the production of green hydrogen in solar belt countries and investing in the supply chain and relevant infrastructure. TES will efficiently transport green hydrogen produced from solar electricity, in the form of fossil-free green gas (CH4) to Europe where it is investing in infrastructure to recycle the CO2.

Patrick Lammers, COO at E.ON, said: “The ramp-up of a functioning hydrogen economy must have top priority in Germany and Europe. The partnership with TES is an important step on the way to a sustainable energy landscape while ensuring security of supply. It moves us a step closer to net-zero; without the use of green gases such as hydrogen, it will be impossible to completely avoid CO2 emissions.”

“This is an exciting long-term partnership that will allow us to combine relevant experience to accelerate the decarbonisation of the energy chain,” saidPaul van Poecke, Founder and Managing Director at TES. “Our ambition is to build the Wilhelmshaven location into a hub for international hydrogen trading and upgrade the infrastructure accordingly. Through this hub TES will supply a mix of green and clean energyto economically lead Europe to reach it net-zero ambitions. We are excited to partner with E.ON to reach net-zero in the German market and support E.ON in its decarbonisation strategy.”

Germany ‘goes aggressive’ on renewables

960 640 Stuart O'Brien

The more rigid targets brought around by the latest revision to Germany’s renewable energy act (EEG) in June aims for the country to achieve 65%, instead of the originally targeted 50%, of its electricity consumption comes from renewable sources by 2030.

Such stricter targets would mean that, during 2021-2030, the country’s solar photovoltaic (PV) and onshore wind would need over 2GW and 3GW of annual installations, respectively – a highly optimistic target in such an uncertain scenario.

Making the targets more stringent may be in line with the broader EU green deal agenda and sustainability objectives, but such a call – made a year before elections – may be fuelled by a political motivation rather than be an achievable goal, says GlobalData, a leading data and analytics company. 

Somik Das, Senior Power Analyst at GlobalData, said: “For all of the nation’s renewable sectors to be GHG neutral by 2050, the electricity industry needs to evolve at a much faster pace than has been seen in recent years. Solar PV is now aimed to see a deployment of 18.8GW of capacity from 2021 to 2028, with planned capacity at increments of 1.9-2.8GW. However, with respect to the country’s capacity mix in 2019, Germany would need to add around 4.6GW annually to meet the target. In reality, the average solar PV annual installations are likely be around 1.4-1.5GW, according to GlobalData estimations.”

While annual solar PV installations in Germany have picked up in the last few years, onshore wind installations seemed to be on the back foot and so the faster pace required is even more questionable. 

Das added: “In order to achieve the new target, 16.7GW of onshore wind capacity is planned to be auctioned by 2025. Therefore, to meet the 2025 target, the country would need to conduct more than 4GW of annual onshore wind installations. This is a considerable stretch, as it would mean that the already slumped segment would need to install more than the 3.1GW average seen annually during 2015-19.

“Overall, GlobalData expects, with the current endeavors, generation from renewable energy (RE) is set to shape up to around 50-60% of the overall generation by the conclusion of the decade.”