Study by Aurora Energy Research and EnBW identifies package of supporting measures for sustainable economic growth

Berlin/Stuttgart, 1 July 2020: Aurora Energy Research and EnBW view the German government’s planned measures to support the economy in the current corona crisis as an important step in the right direction. The energy market analysis institute and the energy group also see an opportunity to supplement the agreed economic stimulus package with further long-term measures. These will help the German economy make a sustained and broad-based recovery from the corona crisis and shorten the recession. In the study published today, Aurora and EnBW thus recommend a powerfully sustainable structural and economic stimulus package that combines further necessary measures to surmount the corona crisis with an agenda for a future-oriented, sustainable and competitive German economy.

The study focuses on solutions to enable economic growth, create jobs and promote innovative sectors and infrastructure rollout while cutting carbon emissions. In total, the proposal features 28 specific measures in nine thematic clusters – among other things to kick-start the faltering expansion of renewables in the energy sector. Other suggestions target transportation, establishing a hydrogen industry, the buildings sector and decarbonising industry. Alongside sustainability aspects, the study authors highlight the possibilities of digitalisation, broadband rollout and cyber security – technologies that are just as fundamental to a future-oriented and climate-friendly economy as carbon-neutral energy generation. All in all, Aurora and EnBW believe the measures can enhance the long-term effectiveness of the German government’s economic stimulus package and reduce the need for subsidies.

The study authors see the current situation as a unique opportunity to set the course towards future-oriented technologies, business activities and economic models. For example, the corona crisis has demonstrated more acutely than ever the importance of nationwide broadband access. Furthermore, greater use of digital infrastructure is inconceivable without suitable cyber security strategies. Andreas Löschel, chair of Energy and Resource Economics at the University of Münster and member of the advisory board of Aurora Energy Research: “If we now look to a long-term vision, we can combine sustainable economic policy with serious climate policy for a double win of economic growth combined with climate action and resource conservation.”

The basis for all ensuing proposals in the study is further expansion of renewables – because without carbon-neutral electricity it is possible neither for e-mobility and hydrogen production to be climate-friendly nor for industry and the buildings sector to be decarbonised. However, there has been a sharp fall in the number of new wind power and solar power installations in recent years. Aurora’s calculations show that if no action is taken to counter this trend soon, the German government target of 65% renewable energy by 2030 would be missed by around 14 percentage points. The study’s authors therefore propose measures for the energy sector that are primarily directed at improving land availability and at simplifying and accelerating planning procedures. In addition, to provide the sector with planning certainty, policymakers must set clear targets for new installation volumes and also specify such targets for the long term. In order to be holistic, the approach should also be integrated into an EU-wide initiative: “Carbon emissions don’t respect geographical borders,” said study author Petter Baum from Aurora Energy Research. “If the EU states work closely together on transforming energy, they can unlock synergies, avoid inefficiencies, cut costs and speed up the whole process.”

Alongside the electricity sector, the study also looks at thematic areas such as transportation, the development of a hydrogen industry, the decarbonisation of industry and the buildings sector – in all cases taking into account the interdependencies between the proposed measures. For example, the switch to e-mobility not only calls for the rollout of charging infrastructure envisaged in the German government’s paper. Incentives are also needed for smart grid infrastructure that balances electric vehicle charging with a renewables-based electricity system in a grid-compatible manner. Smart solutions are also needed in the buildings sector, for example to avoid future electricity demand peaks caused by more widespread use of electric heat pumps. “We need a smarter energy supply system overall to better match consumption and generation,” said Baum.

As energy management is not the only set of measures in the package to depend on smart solutions, the study authors place an additional focus on digitalisation, broadband rollout and cyber security. “Digital technologies are just as fundamental to a future-oriented, climate-friendly and competitive economy as carbon-neutral energy generation,” Baum added. “This includes fast and transparent online planning procedures, smart technologies for grid-compatible vehicle charging, telemedicine – and also digital options for studying and working, which have been enormously important in the corona crisis. Data security and protection against cyber attacks are also increasingly important, because without them nobody can have confidence in technology.”

With a view to the German government stimulus package, the study’s authors expressly emphasise that their proposals only need a small amount of additional state funding. The government investment funding needed runs to just €4 billion by 2022, much of which can be met out of the existing stimulus package. On top of this come €20 billion in revenue shortfalls from a reform in electricity duty to ease the burden on German households.

The package of measures is primarily directed, however, at mobilising private capital for additional investment, reforming administrative processes and cutting red tape. Löschel, the economist, stresses that this last point is especially important: “Investment, whether private or public, that runs contrary to the structural conditions is inefficient and at best has only a short-term impact. Flash-in-the-pan measures are not enough for the transformation to a decarbonised economy and lifestyle. That takes long-term vision and a suitable framework.”