For the first time, the new EEG 2021 specifies a Net Zero emissions target for the German power sector for 2050. This report discusses different pathways for reaching Net Zero and assesses their impacts on the German power market. It was presented during a virtual group meeting in December 2020.
According to the new law, the means to reach the Net Zero target are substantial additions of renewables capacity. At the same time, other options for low-carbon power generation are limited: The nuclear exit will be finalised by 2022, carbon capture and storage (CCS) raises fears in the public and is de facto banned in Germany.
Against this backdrop, this report analyses how a Net Zero power market would look if the current policy regime is sustained, and what impact different policy decisions would have, e.g. concerning CCS.
Key findings are:
- Depending on whether CCS is embraced or not, baseload prices will reach between 56 and 65 EUR/MWh by 2050 compared to 62 EUR/MWh in Aurora’s Central scenario
- To reach Net Zero, renewables still require support – directly through government guarantees to lower financing cost or indirectly via subsidies for green hydrogen. High carbon prices barely improve the RES business case in a decarbonised power system
- Hydrogen-fuelled CCGTs and gas turbines with CCS will be investable by 2040, but policy intervention will be required to drive legacy CCGTs out of the market. H2 OCGTs cannot cover their costs in an average weather year
- Moving to Net Zero increases system costs by 171 bn EUR until 2050 if CCS is allowed. Excluding CCS increases cost by another 160 bn EUR until 2050. Additional subsidies paid by the government vs today’s level are minimal, amounting to 15-25 bn EUR until 2050. Actual cost is born by consumers via higher power prices
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