20. December 2022 By Lars Zimmermann , Stephen Lorenzen and Maximilian Hammes
Annual review 2022 – the energy industry was rife with activity
We have written a total of 20 blog posts together this year – the result: 20 exciting topics that have impacted us all.
In addition to technical topics, for example, the faltering smart meter rollout or the potentials of cloud computing in the energy industry, we particularly reported on the social challenges connected with the war in Ukraine – the dominant theme being the electricity and gas crisis. The media reported almost daily on both the German and European supply problems. We have explained the events and repercussions to you in numerous blog posts – Reducing gas consumption, Warm socks campaign, €200 billion defensive shield.
Despite the war in Ukraine and the resulting gas supply problems, one topic remained ever-present in Germany: climate change. We described the background to this in greater detail in our article on Easter in summer.
With our last blog post for this year, we want to give you a final overview of the energy industry’s 2022 fiscal year and address the following general areas:
- 1. The German energy industry in 2022
- 2. The European energy industry in 2022
- 3. The European energy crisis caused by the war in Ukraine
The German energy industry in 2022
The energy industry in Germany has been in a state of flux in recent years. The energy transition continued to move renewable energies into the spotlight with greater intensity and, at the same time, put additional pressure on conventional power generation. This trend has continued this year as well.
Wind energy and photovoltaics continued to be among the markets demonstrating growth in the energy industry. The wind energy sector is currently expected to show stronger growth than photovoltaics. Other renewable energies – such as biomass and geothermal energy – will also continue to gain importance in future. In order to secure the expansion of renewable energies as well as climate protection, the Bundestag passed the German Climate Change Act (Klimaschutzgesetz), which sets ambitious targets for reducing greenhouse gas emissions by 2030. You can read more about this in our blog post on how the Federal Ministry for Economic Affairs and Climate Action wants to work even faster to achieve Germany’s climate targets.
Conventional power generation, on the other hand, is still in a state of upheaval. Nuclear energy, which has gained more and more attention in recent weeks due to the debate on the security of supply and the decision to extend the operating life of nuclear power plants, will no longer have a future in Germany. The same goes for coal-based electricity, which has merely gained a short-term boost due to the electricity and gas crisis but will continue to lose significance in the coming years. The German energy industry has resolved to phase out coal-fired power generation and is now planning to construct several large wind farms in the North Sea and in the Baltic. This is an important step for Germany, as policymakers have made it their goal to transition to one hundred per cent renewable energy by 2030.
Meanwhile, one thing is clear: rather than being a purely technical project, the energy transition is much more of a socio-political project that comes with major challenges in terms of market economy. The goals of the energy transition are clear: we want to reduce our carbon footprint in order to combat the climate crisis. At the same time, we want to reduce our dependence on fossil fuels and increase the use of renewable energies. We also intend to free ourselves from our dependence on autocracies, use innovative ideas to further advance digitalisation and secure grid stability. The only way to overcome all these challenges is via mutual effort at the European level.
The European energy industry in 2022
It was a turbulent year in the European energy industry. Environmental and climate protection issues, increasing digitalisation and the growing demand for renewable energies have changed the face of the industry. The European Union (EU) has set itself the goal of being climate neutral by 2050 and plans to increase the share of renewable energies in total energy consumption to 32 per cent by 2030. To achieve these goals, the EU’s largest economies have increased their focus on renewable energy and alternative energy sources:
In France, more and more nuclear power plants are being supplemented or replaced with solar and wind farms. Policymakers are increasingly focusing on renewable energies in this regard as well – this was confirmed by President Emmanuel Macron’s announcement of additional legislative proposals in September. Macron has made it his goal to build around 50 offshore wind farms in France by 2050. He also hopes to increase the amount of solar energy produced by a factor of ten and double the output of onshore wind farms in the same period. Last year, the share of renewable energy sources used to generate electricity in France was 24 per cent, which makes the goal of increasing their share to 40 per cent by 2030 attainable.
The newly elected Italian government not only wants to cover its own energy needs by expanding renewable energy sources, but it also wants to become an energy centre for Europe. Italy aims to export energy to other member states and has already built the first offshore wind farm in the Mediterranean, which has been producing electricity since August 2022. Compared to targets of over 75 per cent in Germany, Spain and the Netherlands, Italy aspires to have its electricity mix consist of 55 per cent renewable energy by 2030.
The Spanish government wants use part of its total €16.3 billion investment to tap the potential of environmentally friendly hydrogen. Its intention is to promote the production of hydrogen as well as to support industry in using the new technologies. A 75 per cent share of renewable energies is intended to be achieved by 2030.
In September 2022, the Netherlands commissioned the world’s first offshore hydrogen cluster. Its government wants to use the pilot project to further expand the country’s own hydrogen production. Electricity generated with wind power is bundled and seawater is split via electrolysis on a decommissioned gas drilling platform off the coast of The Hague. The resulting green hydrogen is transported to the mainland via the existing gas pipelines. Here, too, the share of renewable energies in electricity generation is intended to be 75 per cent by 2030.
The European energy crisis caused by the war in Ukraine
The European energy crisis is a term used to describe the situation in which the EU is facing an impending energy shortage. This is primarily due to the tensions between Russia and the EU (see Nordstream 1+2), which, to a considerable extent, resulted in a decline in Russian gas deliveries to the EU. Although the war in Ukraine is only disrupting the gas supply, the energy crisis also includes the electricity supply. We explained the background to this correlation in our blog post on the coupling of electricity and gas.
The following table provides an overview of the positive and negative effects resulting from the energy crisis:
- Improved energy efficiency
- Increased international cooperation
- Increase in renewable energies
- Emerging awareness to use energy more sparingly and make more sustainable decisions
- Significant decline in energy supply, as deliveries from Russia were greatly reduced
- Substantial downturn in Europe’s economic situation and destabilisation of the energy supply system
- Increase in energy prices due to supply chain bottlenecks
- Increase in CO₂ emissions due to coal-fired power generation
- Increased number of power outages
The EU member states have been focusing on basic measures to counteract the negative effects of the energy crisis:
- Continuing the liberalisation of the European internal gas market
- Closer cooperation between EU member states
- Measures to improve energy efficiency
- Relief packages for the general public
- Expanding renewable energies
- Expanding alternative energy sources — for example, hydrogen terminals
- Reducing dependence on Russian gas
- Short-term continued operation of coal-fired and nuclear power plants
Looking back on it, it was an eventful year in the energy industry. There are few issues that have impacted society in Germany and Europe more than climate change and the war in Ukraine. Policymakers in Germany are continuing their efforts regarding the energy transition in order to achieve the climate targets. At the same time, the German Federal Government is providing its population with relief in the form of rescue packages worth billions in order to counteract the rise in electricity and gas prices. We hope that, contrary to predictions, the ambitious climate targets set for Germany will be achieved by 2030/2050 and that the hoped-for relief will actually reach private households and industrial companies next year.
Efforts to achieve the EU’s climate targets are also evident at the European level. The large EU economies (Italy, France and Spain) have planned comprehensive measures and investments in renewable and alternative energy sources for this very purpose.
All of us have been forced to feel the impact of the war in Ukraine and its consequences. The EU, however, is showing itself to be more and more determined – because one thing is clear: there is still a long way to go to completely end the war in Ukraine and its consequences for the European energy industry. This path can only be taken together.
Nevertheless, we remain confident, wish you a Happy Christmas, a Happy New Year and will keep you informed about current topics from the energy industry in the coming year.
You will find more exciting topics from the adesso world in our latest blog posts.