Political engagement

Effective carbon pricing should be targeted in all sectors as a key market instrument. This creates the right incentives to achieve climate targets efficiently, for example with the exit from coal by market integration of renewables. The following is needed for implementation at European and national level:

• Reform of the EU ETS: Ambitious reform of the EU ETS is essential. In particular, quantities need to be adjusted to the new EU climate targets, with a significant reduction in the number of allowances in order to translate the targets into the ETS and stimulate sector coupling. Uniform carbon pricing in all sectors does make sense in the long term. However, the path chosen by the European Commission with a second ETS for buildings and transport at EU level is better for the time being. Immediate extending the current emissions trading system to additional sectors before 2030 would lead to an extreme increase in carbon prices in the ETS because of the very large differences in abatement costs. In EnBW’s opinion, the two separate systems can be better merged into a single system at a later date (beyond 2030).
• Reform of taxes, excise duties and surcharges in Germany: The heavy burden of levies within electricity retail prices in Germany prevents sector coupling and climate-friendly investment. The tax, excise duty and surcharge system urgently needs to be realigned to the carbon intensity of the various energy sources. EnBW is therefore in favour of raising the price path under the Fuel Emissions Trading Act (BEHG) to €40/t by 2023 and to €70/t by 2025. It should reach at least 100 €/t by 2030. EnBW also calls for the introduction of a minimum carbon price of €35/t to provide certainty for investment in renewables. The government revenues from carbon pricing are to be used to phase out the surcharge under the Renewable Energy Sources Act by 2025 and reduce electricity duty in Germany to the EU legal minimum of 0.1ct/kWh in order to lower the price of electricity.

• Climate change is arguably one of the most urgent challenges facing our planet. Decarbonisation calls for a comprehensive structural transformation cutting across all sectors of the economy, all of society and almost all areas of life. This also determines the way forward for EnBW in its business activities.
• EnBW is committed to actively supporting the Paris Climate Agreement and the resulting decarbonisation targets for the EU and Germany. Achieving the German climate protection targets involves all stages of the electricity and gas value chains in which EnBW is active, from switching generation away from fossil fuels and towards renewable sources such as wind and solar power to expansion of the grid infrastructure, and all the way through to customer-focused areas such as energy efficiency, e-mobility and energy services for households.
• In 2013, we began a process of systematically transforming and realigning our portfolio, with a corporate strategy increasingly focused on sustainability. Even before the German Coal Phase-out Act, we voluntarily parted with about 40% of our carbon-intensive generating capacity, for both environmental and economic reasons. We have transformed a power plant portfolio that previously consisted mainly of conventional generation into a portfolio that is planned to consist of equal shares of thermal and renewable generating capacity by as soon as 2025.

• The EU Green Deal – the flagship strategy launched by the European Commission in 2019 and supported by the member states and the European Parliament – not only covers climate policy, but is also a comprehensive industrial policy modernisation and investment programme to secure the future of the EU. EnBW expressly welcomes this integrated approach.
• We also take a fundamentally positive view of the more ambitious climate targets under the Green Deal, including EU-wide climate neutrality by 2050 and the increased EU climate target of 55% by 2030. The key is now to set the right parameters in the legislative process over the next 1½ to 2 years:
  • Appropriate carbon prices for all sectors
  • Accelerating the expansion of renewables (for example by fast-tracking planning and approval), including a matching EU state aid framework
  • Sufficient leeway for the use of natural gas in the transition phase, plus framework legislation to develop the hydrogen economy as quickly as possible.
• EnBW also endorses the ambition level in the recently presented Fit for 55 package. However, we also call for a pragmatic sense of proportion in certain matters at detail level. We consider it crucial in the forthcoming lengthy legislative process to maintain coherence between the individual, interacting policy areas.

• The amended Climate Change Act (Klimaschutzgesetz) commits Germany to significantly more ambitious climate targets for 2030 and beyond. This applies both to the overall targets and to the individual sectors, including the energy sector of particular relevance to EnBW.
• EnBW endorses the new target architecture. It confirms our transformation path with the goal of climate neutrality by 2035 at the latest and enables us to plan for the future.
• We are conscious that the energy industry must lead the way in achieving the targets as it has to deliver about two-thirds of the reduction in carbon emissions required under the Act.
• EnBW considers this to be realistic if the necessary enabling conditions are provided:
  • The expansion of renewables must be significantly accelerated (higher volumes put out to tender and simplified approval procedures).
  • Work must now proceed quickly on establishing an international hydrogen market suitable for mass scale.
  • The expansion of infrastructure must also be accelerated.
  • Above all, this means gas grid expansion in the south of Germany; integrated infrastructure planning for electricity, gas and hydrogen; and extending the availability of climate-neutral hydrogen to southern Germany by 2035, at least for power plants.
• Specific action is required for implementation of the new targets. The action framework adopted in the Immediate Climate Action Programme 2022 needs to be supplemented and fleshed out with detail. It must be adopted as binding by the new government following the 2021 general election.

• Our sustainable corporate strategy targets climate neutrality for EnBW by 2035. To achieve this target, we will continue to systematically expand renewable energy sources.
• Simultaneously, we aim to phase out the use of coal as an energy source in the medium term without jeopardising security of supply for electricity and heat. Today, we have 4.6 gigawatts of coal-fired generating capacity. We will gradually remove these power plants from the market.
• In light of this, we endorse the coal phase-out adopted by the German government.
• On current plans, only the newest plants will still be in operation by 2030. In our view, however, the new climate protection targets require a complete exit from coal by 2030. Certain enabling conditions have to be put in place to make this possible.
• At various hard coal power plants, we are planning what we call a double fuel switch. This enables immediate cuts in carbon emissions while safeguarding security of supply by keeping secure capacity on stream. The fuel switch is also important in terms of retaining locations and jobs.
• We will first switch from coal to more climate-friendly natural gas as a transitional technology, until renewable gases such as renewables-based hydrogen become available on sufficient scale. The availability of climate-neutral hydrogen needs to be expanded at an accelerated rate, both by establishing domestic production and by creating an efficient international market.

• The expansion of (gas-fired thermal) dispatchable backup power plant capacity has to be ensured at a sufficient rate in order to safeguard security of supply.
• This is because even if renewables ultimately expand to 400 GW (from about 125 GW today), the amount of gas-fired capacity then available in a ‘cold dark doldrums’ scenario would be in the low double-digit gigawatts.
• At an annual peak load of about 80 GW, this is not enough to ensure security of supply. Dispatchable gas-fired power plants are the most economic solution for backup capacity here. These need to be built or retrofitted to be H2-ready so that they can run on climate-neutral hydrogen once the hydrogen sector is established.
• Until that is available, natural gas has to be used as a transitional technology for the time being. So new investment in gas (both grid infrastructure and power plants) is needed for the transition to climate-neutral hydrogen.
• Greater scope therefore needs to be provided in the EU taxonomy for transition activities of this kind that offer a clear path to decarbonisation as soon as possible. This means provision needs to be made for qualifying key activities such as fuel switch as environmentally sustainable activities in the taxonomy.
• For the energy industry (especially in Germany), such provision is highly important in relation to the envisaged transition category. In the next few years at least, we have no other alternatives available for ensuring security of supply while transitioning to a decarbonised economy as cost-effectively as possible.

• Hydrogen is indispensable as a building block for achieving climate neutrality. The conditions must therefore be put in place now for the establishment of a liquid market for hydrogen in order to enable rapid upscaling and the associated cost degression.
• A clear long-term target vision for a national and European H₂ market with a clear framework is therefore needed to stimulate investment.
• EnBW is of the opinion that discrimination based on the ‘colour’ of hydrogen on the production side must be avoided as all forms of climate-neutral hydrogen are needed for the market ramp-up.
• H₂ infrastructure rollout is the key prerequisite for the emergence of a liquid market. Hydrogen production and transportation infrastructure needs to be quickly put in place. Expanding gas market regulation to climate-neutral hydrogen provides a proven framework to this end.
• Clear rules are needed for establishment of the H₂ market. These must be simple and practical while leaving scope for future change. Bureaucratic hurdles such as proof of simultaneous renewable electricity and hydrogen production stand in the way of a rapid market ramp-up.
• A hydrogen market will only develop via the demand side. Demand needs initial public stimulus. Selective incentives such as CCfDs need to be supplemented with broader-based policy instruments.

• Germany’s Climate Change Act was amended in June 2021 with the adoption of more ambitious climate targets:
  • 65% reduction in greenhouse gases relative to 1990 by 2030
  • 88% reduction in greenhouse gases relative to 1990 by 2040
  • Climate neutrality by 2045
• Achieving these targets requires a significant acceleration in the expansion of renewables.
• EnBW estimates an annual expansion requirement of at least
  • 9 gigawatts of solar power
  • 6 gigawatts of onshore wind power
  • 2 gigawatts of offshore wind power
• The main bottleneck in expanding renewables in line with the Federal Climate Change Act continues to be onshore wind power. 95-100 GW is needed here by 2030, which means gross additions of at least 6 GW a year.
• The initial tightening of requirements in the 2021 amendments to the Renewable Energy Sources Act is to be welcomed here (additional volume for wind and solar in 2022; municipal involvement now also for solar farms; surcharge under the Act to be reduced in 2023/24 (target of below 5 ct/kWh)).

• The two main problems of insufficient land availability and the delays in issuing permits need to be urgently addressed in order to achieve the climate targets.

• By supplying green electricity, the energy sector provides the basis for the electrification of other sectors (such as electric mobility in transport and heat pumps in the buildings sector) and makes possible the decarbonisation of the entire economy.

We consider the establishment of a classification system for sustainable economic activities with clear standards and instruments, as envisaged by the EU taxonomy, to be an important instrument for enhancing transparency about sustainable business activities, especially for financial market investors. EnBW welcomes the approach taken in the action plan on sustainable finance, and in particular the definition of sustainability in the Taxonomy Regulation.

• From EnBW’s point of view, however, it is important for the taxonomy to include necessary investment in intermediate steps of the transformation. Natural gas in particular is an important energy source for a number of member states, including Germany, as an intermediate step towards low-cost decarbonisation until green/decarbonised gas is available on a sufficient scale.
• This should be taken into account by the Commission when specifying the technical screening criteria.
• The same good judgement should apply in the planned further extension of the approaches to other policy areas (bank financing, state aid/public financing, public procurement, etc.).
• Regarding the more specific requirements being prepared for corporate reporting obligations under the taxonomy, EnBW calls for a better balance between cost and benefit in the reporting requirements, in particular:
  • Reporting is currently too granular; reporting at segment level and only in relation to one selected environmental target should suffice.
  • The requirement for reporting capex plans is likewise too granular/competition-sensitive.
  • Analysis needs to concentrate on future-oriented metrics such as capex rather than descriptive metrics such as revenue as in the status quo.

• EnBW supports the nationwide expansion of digital infrastructure, particularly in terms of optical fibre and passive mobile communication infrastructures. Key factors in the urgently needed rapid rollout comprise streamlined approval procedures, substantial and unbureaucratic funding for projects in white and grey areas that are uneconomic on their own, especially in rural regions, and preventing parallel laying of new fibre alongside existing subsidised fibre.
• Demand-side instruments such as vouchers for consumers can additionally help accelerate the rollout of gigabit networks.

• EnBW is committed to a consistent switch to electric mobility and sees itself as a pioneer in the rollout of charging infrastructure in Germany. Rapid nationwide rollout of the charging network to meet demand can only be delivered with free market competition.
• For the successful rollout of a charging network that meets customer needs, it is crucial for regulatory hurdles to be kept as low as possible. There should be no ‘gold-plating’ with requirements that are not in popular demand and delay the rollout (such as charging points having to be fitted with card payment terminals for ad-hoc charging); in addition, approval procedures must be kept streamlined and state incentives geared to the needs of accelerated rollout. In this connection, incentive policies need to be developed now for beyond 2025.
• EU and national requirements need to be coordinated in order to provide planning certainty.
• Rather than locking in specific standards or solutions that benefit only a select few, the focus should be on ensuring fair competition in the market and access for all market players. This applies most of all to consumer sovereignty over vehicle and charging data. Such data must not be monopolised by individual market players. This is the only way to prevent individual companies from establishing closed ecosystems.

The recent amendments to the German Climate Change Act have not only resulted in more ambitious sectoral targets for 2030 and brought forward Germany’s climate neutrality to 2045. Alongside more rapid electrification in all sectors, they also require a transformation of the gas sector to climate-neutral gases. To achieve this, the infrastructure must be converted and expanded even faster in the years ahead than so far planned. This relates to both electricity and gas infrastructure. EnBW therefore calls for:

• Grid planning and approval processes to be made uniform and faster throughout the country.
• Conditions for investment in grids to be adapted to the requirements of a global capital market rather than continuously being made more obstructive.
• Existing gas grid regulation to be applied where practicable to the hydrogen grid and shared financing made possible via grid use charges.

This will also enable us to retain the locational advantage of high security of supply and grid system stability for Europe’s largest economy.