21 st Annual German Norwegian Energy Forum ELECTION SHOCK AND COALITION OPTIONS DISRUPTING MARKETS YET AGAIN? Dr. Arndt von Schemde, Dr. Theodor Borsche,
THE DIFFERENT PARTIES HAVE DIFFERENT PRIORITIES ON THEIR AGENDA FDP Liberals Used to be focused on civil rights and liberal economy Turned neo-liberal and lost voters Bounced back after not entering parliament in 2013 CDU/CSU Christian Democrats Largest party in Germany Center-right, used to be conservative and focus on Christian values Traditionally seen as closer to industry and elites AfD Alternative für Deutschland Founded by Eurosceptics in the wake of the Greek debt crisis Nowadays right-wing populists/ nationalist party Die Grünen Green party Origin in environmental protest in the 70s and 80s Proponent of the Energiewende Sometimes seen as a party for the rich SPD Social Democrats Volkspartei, Center-left Traditionally closely connected to unions, workers and industry, and hence to coal mining Implemented hard social reforms under Schröder, since then struggling to regain support from voters Die Linke - Left party Socialist party Combines remnants of DDR party and former leftwing members of SPD Against capitalism, puts environment above industry 2
ENERGY POLICY WAS LOW ON THE POLITICAL AGENDA Where to find energy policy in the party program? Party Chapter name Chapter number Number of subchapters The German political debate is dominated by other themes CDU/CSU Arbeit 1 1/12 SPD Gesundheit/Zukunft 8 1/5 Grüne Umwelt 1 2/4 FDP Rechenschaft/Wirtscha ftlichkeit 5 1/7 Mensch & Natur 14 2/19 Source: THEMA, http://www.presseportal.de/pm/80428/3717871 (from GfK Stuy "Challenges of Nations 2017 ; RuV Study Die Ängste der Deutschen ; https://www.ruv.de/presse/aengste-der-deutschen/aengste-der-deutschen-langzeitvergleich 3
VARYING FOCUS IN ENERGY POLICIES AND SOMETIMES VAGUE AT BEST FDP Liberals Strong market and costs efficiency focus Die Grünen Green party Coal phase-out Energiewende 2.0 Carbon price CDU/CSU Christian Democrats Increased cost focus No inner German price zones SPD Social Democrats Carbon price AfD Alternative für Deutschland Stop Energiewende Pro nuclear Die Linke - Left party Prosumer Prices control Sector coupling 4
SOME PARTIES ARE RATHER APART REGARDING ENERGY POLICIES STYLIZED ILLUSTRATION Subsidies Moderate transition Fast transition Market 5
OPTION 1: CONTINUATION OF THE GRAND COALITION BUT THE SOCIAL DEMOCRATS CLEARLY RULED OUT THIS OPTION AFTER THE ELECTION Subsidies Moderate transition Fast transition Market 6
OPTION 1: CONTINUATION OF THE GRAND COALITION BUT THE SOCIAL DEMOCRATS CLEARLY RULED OUT THIS OPTION AFTER THE ELECTION Subsidies Moderate transition Fast transition Market 7
OPTION 2: JAMAICA COALITION THE ONLY OPTION IT SEEMS BUT IS IT AN OPTION? Subsidies Moderate transition Fast transition Market 8
A COALITION AGREEMENT IS STILL HIGHLY UNCERTAIN BUT IT IS NOT ENERGY POLICY THAT IS THE MAJOR OBSTACLE Source: Die Zeit, 41/2017 (5 October 2017) 9
SO WHAT ARE THE CONSEQUENCES OF DIFFERENT SUGGESTIONS? FDP Liberals Strong market and costs efficiency focus CDU/CSU Christian Democrats Increased cost focus No inner German price zones Die Grünen Green party Coal phase-out Energiewende 2.0 Carbon price SPD Social Democrats Carbon price AfD Alternative für Deutschland Stop Energiewende Pro nuclear Die Linke - Left party Prosumer Prices Sector coupling 10
A CARBON PRICE SUPPORT WOULD SIGNIFICANTLY LIFT PRICE AS A RULE OF THUMB: 50% OF THE PRICE EFFECT ENTERS THE NORDIC MARKET (SYSTEM PRICE) PRICE EFFECT IN GERMANY OF COAL PHASE-OUT* PRICE EFFECT GERMANY OF CARBON PRICE FLOOR Note: effect strongly depends on how fast coal is phased-out and how/if it is replaced * Based on the Agora Energiewende scneario for an earlier coal phase-out (implies no immediate coal phase-out), for the carbon price floor we assume a floor of EUR 30 per ton (ref. UK, ref. discussion France) 11
GAS WILL ANYWAY BECOME PRICE SETTING TECHNOLOGY IN MANY HOURS Merit order Germany 12
GAS WILL ANYWAY BECOME PRICE SETTING TECHNOLOGY IN MANY HOURS Merit order Germany 13
AND A CARBON TAX WOULD MAKE POWER EVEN MORE EXPENSIVE BEFORE COMPLAINING ABOUT POWER PRICES IN NORWAY HAVE A LOOK AT GERMANY Estimated development of EEG levy in Germany (Agora Energiewende) Source: Welt online 09-10-2017; Agora Energiewende 14
THE INDUSTRY IS ALREADY POSITIONING ITSELF IN THE DEBATE 15
HUGE IMBALANCES BETWEEN NORTH AND SOUTH IN GERMANY + low demand COMPLETELY DIFFERENT CAPACITY MIX Northern Germany has a ratio of close to 1:3 between peak demand and installed capacity After further nuclear and thermal decommissioning, there is also a deficit problem in Southern Germany Risk of price zones, with potential implications for Nordics Grid development lagging behind + high demand 16
A PRICE ZONE SPLIT COULD DRAG NORDIC PRICES DOWN CONSIDERABLY Bidding zone delimitation could have a severe price impact in Germany, creating a substantial price spread within Germany Price in Northern Germany would decline, while prices in Southern Germany would increase Prices in Nordics would also decline, by a factor of around 50% of Northern German price decline Amount is very uncertain, and strongly depends on how the grid in Germany develops Currently, no political will for price zone delimitation 17
LAST BUT NOT LEAST: PROSUMERS CAN SIGNIFICANTLY CHANGE MARKETS BUT VERY MUCH ALSO SUBJECT TO MARKET DESIGN GENERATION MIX GERMANY BAU SCENARIO GENERATION MIX GERMANY PROSUMER SCENARIO 18
Dr. Arndt von Schemde Managing Partner arndt.schemde@thema.no +47 982 63 986 Dr. Theodor Borsche Consultant theodor.borsche@thema.no + 47 474 72 512