When you want to learn more about the cleantech and energy trends of the future, taking a closer look at Germany usually has proven to be insightful. For several years now, Germany has been an outspoken frontrunner—conducting an ambitious national energy transition (the so-called “Energiewende)—and has played a key role in developing and improving renewables technologies such as wind and solar before implementing political decisions that can cause the industries to move to other locations. This has been the case with photovoltaics—conversion of light into electricity—and is currently affecting the wind industry as well.
On an international level, governments struggle with how to decarbonize different sectors. The initial impulse points towards an all-electrified society, with transportation and heat generation exclusively based on renewable power. Common criticisms of this approach include: (1) the intermittency, affecting security of supply and (2) funding (at least in the case of Germany) severe expansion of renewable energy plants and respective infrastructure such as wind parks, which often face acceptance issues and are rejected by the public. If achieving direct electrification is difficult, how can this all work out?
The German Federal Government has identified and heavily invested in three main technologies that are considered essential for reaching climate targets. All three also have a strong impact on businesses and corporate strategy:
- Hydrogen. Hydrogen technology is not a new concept, but it has regained significant traction in Germany during the past years. From political officials to utilities and power grid operators, hydrogen is being celebrated as a clean way to untie Germany’s dependence on coal. The technology is now seen as an important option to fill the energy gap left from the closure of nuclear stations and the phase-out of coal-fired power. The German government is currently preparing a “national hydrogen strategy” incentive program that will help to develop a local market for the technology, with a particular focus on the industrial, transportation and heating sectors. Hydrogen can be sourced in two ways—both through a process called power-to-gas utilizing electrolysis. “Green” hydrogen is derived from wind or solar power and “blue” hydrogen is made from natural gas but also utilizes Carbon Capture and Storage (CCS) technology. The former is clean but is quite expensive and bears the same disadvantages as widespread electrification. The latter is an economical solution but is not carbon dioxide (CO2)-free and CCS is often viewed critically in society.
- Carbon Capture and Storage (CCS). There are some industries that are particularly difficult to decarbonize and will continue to emit CO2 for the time being, including steel and chemical production. For these industries, CCS is a viable transition technology, as it can capture emissions—binding and storing them underground (in Germany, the North Sea is a debated alternate storage location). In the draft “National Industry Strategy 2030” proposal, the German Federal Government advocated for a revitalized perspective on CCS and how it can support national climate goals. While being feasible, cost-efficient and effective in reducing emissions, CCS still faces an acceptance issue as storage can also cause CO2 leakages, which may affect the groundwater in a negative way. In addition, CCS is criticized for prolonging the use of fossil fuels.
- Battery technology. There are two key potential applications for batteries. First, the transportation sector would benefit from more powerful batteries with a longer lifespan. Second, batteries can complement intermittent renewables such as wind and solar via storing the excess power and hence stabilizing the grid. This may be especially valuable to mitigate fluctuation in Germany where the source of wind power is located in the North and must be transported South. As such, the Federal Government has installed large scale support schemes for the funding of battery cell factories, potentially a reason why Elon Musk decided to build a new Tesla Gigafactory nearby Berlin.
Corporations in all sectors are facing massive changes in energy sources. While thinking about the means and ways of reducing their CO2 footprint, they must also try to secure a reliable and economical supply of power and heat. In the political arena and public debate, the three options mentioned above must be well understood by company leaders to credibly communicate corporate sustainability and energy agendas and voice legitimate demands in today’s ever-changing energy world.