THEMA Berlin looks back on 2024

The year 2024 was marked by plenty of ideas and attempts at accelerating and safeguarding the German power system. However, the fall of the coalition government in November casts uncertainty over many of these efforts. We at THEMA look back on the year, reflecting on our personal milestones and those of the nation at large.

2024 did not play out the way the country had hoped. There are many words that could describe the past year: chaos, mayhem, confusion, etc. You get the gist. The Economist opted for ‘political mess’. 

 What exactly happened? The German traffic light coalition which consisted of the Greens, the Liberals (yellow), and the Social Democrats (red) divorced after a 4 year-long unhappy marriage. In November, the curtains fell on the German political theatre as the season of light approached Berlin. There was little applause but plenty of finger-pointing throughout the city, as everyone seemed intent on shifting the blame onto others.  

 The political confusion has ensured that the fate of several climate and energy policies the coalition had initiated will not pass parliament. Meanwhile, the year-end is a reminder that we are a year closer to the planned 2038 coal phase-out as well as to 2045, the year by which Germany intends to reach climate neutrality.  

 The times they are a-changin’ for the German electricity market 

One of the efforts that has now come to a halt is the introduction of a “combined” capacity mechanism. It would have combined subsidies for both large and small plants, with two different markets. Critics had already doubted the feasibility of such a plan, since it has never been attempted anywhere in the world before. Well, the Germans have a penchant for adventure, at least when it comes to regulation. While the plans are delayed, it seems like both the Social Democrats and the Conservatives would re-use them if they come into power. This makes their implementation likely, regardless of who wins the elections. The original target year of 2028 will be challenging to uphold, however. 

The delay also affects plans to subsidise and tender up to 12 GW of gas- (and later hydrogen-) fired power plants, including both new and modernised facilities. The plans have not, and will not, pass parliament before year end. Any newly elected government will need to reintroduce all related laws and policies to parliament. As a result, tenders for firm capacity are unlikely to occur in 2025, further delaying the deployment of new flexible capacity beyond 2030. This setback complicates efforts to phase out coal before 2038. 

The key takeaway from this? Gas-fired power plants are here to stay, and natural gas will continue to be important for Germany’s energy security. 

How much hydrogen is too much hydrogen? 

It doesn´t feel like it right now, but the German H2 economy could celebrate some successes in 2024. One example is that the “core grid” was put on tracks, including government-backed funding plans. However, Germany cannot produce enough green hydrogen to supply a national H2-ification of steel and other industries, let alone of its heating or transport sector. So, Germany must import the rest of the hydrogen.  

To this end, Germany had another small success, developing an import strategy: 50-70% of the expected 95 TWh of H2 demand are to be imported. Germany has entered into almost 30 climate and hydrogen partnerships to secure imported hydrogen. Most importantly, blue hydrogen is also possible. But bad news is around the corner: The collaborations have not been off to a great start. A blue hydrogen export pipeline from Norway to Germany has been shelved citing insufficient demand and high expenses. The German-Denmark hydrogen pipeline has been postponed. The German hydrogen industry has its New Year wishes laid out: No further delays or cancellations of hydrogen projects.  

Shortage of grid capacity, and some good news for battery operators 

With an increasing renewable share, the need for grid modernisation and updates will grow by leaps and bounds. The challenge will remain with us for quite some years: Who will pay for the new grid, and how to limit the costs as much as possible? 

Everything is on the table: time-varying and location-based tariffs, even the introduction of tariffs for generators. But for now, progress is blocked until a new government comes to power. All parties promise that they will limit costs and accelerate the grid buildout if elected. Actual changes to current laws will be tough, however, as both the federal government, Länder governments and the regulator have a say. Finding a compromise will require experienced negotiators.  

Other topics that made their way to our policy nerds’ dinner tables included the decline in power demand from German industry and the proposal to cut subsidies for RES operators due to a large number of negative prices.  

Finally, no brownie points for guessing that the renewable share in Germany has increased compared to the last year. Onshore wind is set for a record buildout, as permits and auction results have multiplied. This in turn has led to a greater demand for flexibility. Good news for battery operators!  

Navigate the energy transition with confidence 

At THEMA Germany we are very happy to have helped both public and private partners through these rocky seas! We have for instance analysed investment risks for renewables across several European countries. Another highlight was the survey of grid readiness for electrical vehicle charging infrastructure. The study will be published next year. We also assessed the value of flexible power assets in Northern Europe and Germany. And much more is to come!   

Also, the THEMA team is growing. We welcomed two fantastic new team members: Kyra and Julian – so great to have you on board!  

A huge highlight was the THEMA strategy trip to Vienna in the Fall. We enjoyed schnitzels and Apfelstrudel at the cafes, and hiked across vineyards, we also visited Europe’s largest Urban power plant owned by Verbund and Wien Energie´s waste incinerator plant. It was great fun and inspiring to see the activities of power plants in real life, providing practical insights into the work we do from the comfort of our desks.  

But for now, it is time for some calm and reflection in the circle of friends and family. In this spirit, and with warm wishes from the entire THEMA Germany team: Merry Christmas and a Happy New Year!  

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