McKinsey Study Predicts Decrease of Greenhouse Gas Emissions by 31% by 2020 and Increase of Costs for Energy Shift of 60%

Until 2020 greenhouse gas emissions in Germany will fall by 31% below the level of 1990, a new McKinsey study predicts. Simultaneously the costs for the energy shift towards more renewable energy for companies and private households will rise by 60% from currently EUR 13.5 billion to EUR 21.5 billion, and the security of the electricity supply will decrease, McKinsey says.

The McKinsey study assumes an annual growth of 1.6% and operates on the assumption that the currently applicable legal conditions continue to apply. The 31% greenhouse gas reduction comes close to the 34% greenhouse gas emission reduction by 2020 the Federal Environment Ministry (BMU) claimed feasible in March 2012, even without implementing further environment protection measures. If the further planned measures in the areas of emission trading, energy-efficient renovation of buildings and electricity efficiency as well as combined heat and power and automobile standards were implemented even a 40% reduction until 2020 was easily attainable, BMU said at the time.

Germany was a pioneer with respect to the reduction of greenhouse gas emissions, yet without an effective implementation of the environment protection measures already adopted and a faster adoption of measures for which there was currently the risk of delays, the 31% reduction was not feasible, McKinsey says. Instead, greenhouse gas emissions were likely to remain on the currently level of minus 24% (compared with 1990).

McKinsey advises to put the focus on measures that help to reduce greenhouse gas emissions at comparatively low costs while creating a high added value in Germany, such as energy-efficiency in the industry and with respect to buildings as well as the expansion of onshore and offshore wind power plants. As we pointed out in the past the Act on Fiscal Measures Promoting Energy-Efficient Renovations of Residential Buildings was approved by the Bundestag (Parliament), but not by the Bundesrat (Federal Council). A mediation process with the aim of reaching a compromise had been started, but was adjourned in February.

The bulk of the costs for the energy shift towards more renewable energy will have to be borne by private households and the trade, services and less energy-intensive industries, who will have to pay higher electricity costs, McKinsey says. According to the report, electricity prices will rise by 10% (adjusted by inflation) until 2020. Private households will then have to pay 29 ct/kWh, i.e. 3.1 ct/kWh more than today. The costs for the energy shift included in the electricity price will rise from 4.2 to 6.3 ct/kWh. Even though energy-intensive industries like the chemical and the steel industry are largely exempt from these costs, i.e. the EEG surcharge for renewable energy and grid charges, their competitiveness was affected, McKinsey says. If the EEG surcharge and the grid charges were equally split between all consumers, this would result in a slump of earnings by up to 50%, McKinsey partner Anja Hartmann warns.

The study identifies three main reasons for a decreasing grid stability and a higher risk of blackouts. Firstly the study names the decrease of load following power plants that adjust their output with fluctuating demand and supply by renewable energy sources. Given the current framework McKinsey believes that this will lead to reserve margins falling from 15% today to 5% by 2020. Finally McKinsey refers to the increase in decentralised power generation away from the places of  consumption and the slow grid expansion.

To ensure network stability McKinsey advises to increase the adjustable power plant capacity by maintaining existing power plants and encouraging new-build, an expansion of renewable energies and the distribution and transmission grids that is coordinated with repect to time and location, the promotion of a smart grid, creating transparency in the distribution grids as well as the promotion and expansion of storage technologies.

Source: McKinsey


1 Response to “McKinsey Study Predicts Decrease of Greenhouse Gas Emissions by 31% by 2020 and Increase of Costs for Energy Shift of 60%”

  • Costs increase by 60% to fix a fictitious “problem”, anthropomorphic climate change.

    Surprised the thrifty German citizen bought into this nonsense.

    Let’s see how they feel after the Greek, Portuguese and Spanish bailouts.

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