GERMANY

1. ENERGY, ECONOMICS AND ELECTRICITY INFORMATION

1.1 General Overview

The Federal Republic of Germany is situated in central Europe, in the north bordering on the North Sea, Denmark and the Baltic Sea, in the east on Poland and the Czech Republic, in the south on Austria and Switzerland and in the west on France, Luxembourg, Belgium and the Netherlands.

The climate is moderate and influenced mainly by winds from the West, the eastern part has more continental character. In the lowlands of the northern part the average July temperature is 16 - 18°C, the average precipitation amounting to 600 - 750 mm per annum. Half of the territory is used for agricultural purpose, one third is covered by woods, 12 % are taken by settlements and traffic area.

As a result of World War II Germany was split. Until 1990 two parts named Germany existed, the Federal Republic of Germany (FRG - Bundesrepublik Deutschland, hereafter referred to as West Germany) and the German Democratic Republic (GDR - Deutsche Demokratische Republik, known as East Germany). In October 1990, the GDR joined West Germany. Germany is a federal republic. This means, that unless otherwise specified, the execution of federal laws lies within the responsibility of the federal states, the 16 Länder.

After the reunification Berlin again became capital of Germany. Part of the Government, however, still remains in the former (provisional) capital Bonn. Area and population development is shown in Table 1 (for the country map see Figure 2).

TABLE 1: POPULATION INFORMATION

Numbers in brackets refer to data from the former GDR.
Source: Country Information

The gross domestic product (GDP) statistics are given in Table 2. Reunification has turned out to be a lengthy and difficult process. Germany has to fund improvements in infrastructure, environment, and industry in the eastern part, while many eastern companies collapsed acting in the unaccustomed western competition.

Germany imported 62 % of its primary energy supply in 2001, including oil, which accounts for nearly 40 % of its energy consumption. There are substantial reserves of both hard coal and lignite, the amount in place is about 5 times the recoverable quantities mentioned in Table 3. However, domestic hard coal is much more expensive than imported coal and expansion of open cast lignite mining is limited by environmental considerations. Hydro energy anyway contributes only a small amount, and possible sites are already in use, so there are no considerable reserves left. Uranium extraction has tapered off since 1991 and has more or less stopped by now. Energy statistics are given in Table 4.

TABLE 2: GROSS DOMESTIC PRODUCT (GDP)

1.2 Energy Policy

Since the 1970s, a central intention of the German energy policy has been to shift electricity production away from imported oil and gas towards (previously domestic) coal and nuclear power. The share of oil and gas in electricity production was reduced from the peak of 30 % in 1975 to 9 % in 2002, while during the same period the share of nuclear has grown from 9 % to 31 %, whereas that of coal (hard coal 22 % and lignite 29 %) has remained at around 50 %. Since the 1990s all Federal Governments promoted the utilization of renewable energies. The utilities are required by law to buy electricity generated by independent producers using renewables. In comparison with the generation price of nuclear or coal plants rather high minimum payments to the small producers are guaranteed. Also direct government subsidies for the construction of wind and photovoltaic generators are granted. In 2002, the share of electricity production from renewables comes up to 9 % - Hydro already makes 5 %, Wind another 3.5 % - and it is intended to double this share by the year 2010. Nevertheless, in the medium-term large scale electricity production will continue to come from Germany's coal and nuclear power plants.

In the past, the Federal Government encouraged the utilities to increasingly use domestic hard coal for electricity generation, this rose up to 45 million tons of hard coal per year in 1995. Subsidies were paid by the Government and amounted to € 5000 million per annum in 1994, but will be reduced continuously to € 2700 million per annum in 2005. Lignite production in Germany is not subsidized, nevertheless it accounts for nearly one third of the electricity production.

To comply with environmental regulations since the mid 1980s, German utilities implemented state of the art technologies to reduce emissions from electricity generation through coal. Also they invested in underground transmission networks. Both influenced company costs and electricity prices.

The current Federal Government (since September 1998) decided to phase out the use of nuclear power for commercial electricity production (see chapter 4).

TABLE 3: ESTIMATED RECOVERABLE ENERGY RESERVES IN 2000

1) For comparison purposes a rough attempt is made to convert hydro capacity to energy by multiplying the gross theoretical annual capability (World Energy Council - 1998) by a factor of 10
Source: Country Information

TABLE 4: ENERGY STATISTICS

1) Preliminary data.
2) Total energy consumption = Primary energy production + Net import of energy.
3) Solid fuels include coal and lignite.
4) Others are geothermal, solar energy etc.
Source: Country Information.

1.3 The Electricity System

The German electricity market was opened by the new energy law in 1998. Up to that time the electricity suppliers had regional monopolies. Now, the German public electricity sector is characterized by a pluralistic structure in electricity generation, transportation and distribution. Participants are large, medium and small-sized electricity suppliers, grid operators, electricity traders (electricity spot market), numerous large and small power plants (see Table 5), and so-called "small producers" not accounted for in Table 5. In 2001, around 1 100 electricity suppliers to final consumers operated in Germany, much more than before the liberalization of the market. Among them the three largest companies supply 53 %, and the next largest only 3 % of the final electricity consumption in Germany. Shareholders of the public electricity supply companies in 2001 included both, private investors - also from abroad - as well as governmental interests. All nuclear power plants in operation are run by private corporations under commercial legislation and with their sales revenues from electricity production and trade.

The larger utilities use a mix of power producing facilities, including nuclear power. So electricity prices in general reflect this energy-mix. Few distributors offer "Ökostrom" - electricity

TABLE 5: STRUCTURE OF THE ELECTRICITY SECTOR (2001)