28.09.2018  |   Special Report

Coordination and steering to implement energy transition by the Federal Ministry for Economic Affairs and Energy

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0 Executive summary

We audited the steps taken by the Federal Ministry for Economic Affairs and Energy to implement energy transition and found major shortcomings. These are set out below:

In spite of the considerable input of human and financial resources, Germany has largely not yet accomplished the targets set. (no. 1.2)

The Ministry has had lead responsibility for implementing energy transition for nearly five years. Thus, the Ministry has a coordinating role across government for relevant activities. At the Ministry alone, 34 divisions in four directorates are involved in this process. In addition, five other ministries and all federal states also have a role in implementing energy transition. Still, the Ministry has not defined cross-government coordination. No structure of overall responsibility has been put in place.

We feel that it is essential for the Ministry to play an effective role and, to this end, to determine

  • what coordination functions fall into its remit;
  • how coordination functions may be properly organised;
  • what cross-government coordination body is to be established;
  • whether an inter-ministerial committee for coordination among the federal ministries will be set up; and
  • whether to initiate a joint coordination committee on energy transition to be composed of federal and state governments.

The Ministry believes that energy transition is coordinated in an effective and efficient manner and that there is no need for action. The Ministry is also of the opinion that an appropriate level of coordination is established among all players at all government levels.

This assessment is not convincing if you look at the undisputed failed targets and the considerable burdens placed on the business community, public budgets and private households. One major shortcoming is the fact that the Ministry has not defined and does not plan to define the requirements for implementing energy transition transparently and efficiently. A body vested with overall responsibilities and decision-making powers is absolutely needed. (no. 2)

In the Ministry’s view, the steering tools for energy transition include monitoring, strategic controlling and internal cross-cutting controlling at divisional level. At the same time, statute law and delegated legislation have a steering effect.

  1. As part of monitoring, the Ministry used 48 different sources of data and 72 indicators to track the progress made. The Ministry intends to improve monitoring by introducing even more indicators. So far, the Ministry has not defined measurable targets and yardsticks for key goals such as “energy security” and “affordability”. Unless the Ministry has defined the targets of energy transition in a way permitting to measure and track any progress made, no effective steering is possible. Adding further indicators does not address the problem stated. The Ministry has still not ensured sufficient transparency of the costs and expenditures associated with energy transition, although it has comprehensive data on federal budget expenditures, the components of energy prices that government can influence and the input required to implement energy-specific legislation specified in regulatory impact assessments. The Ministry could use such information in order to make all costs and expenditures transparent. Calculating such a “total amount” is necessary in order to better inform Parliament and the public and to make the expenditures of final consumers on electricity and other costs of energy transition transparent.
  2. As part of controlling, the Ministry used various goals, target and actual figures and indicators in order to measure the status of target achievement. Data relevant for steering was not or not fully recorded. In addition, effective steering of energy transition was hardly possible because key indicator data could only be provided with considerable delay.
  3. The Ministry also uses various funding programmes to steer energy transition. It continued funding programmes although they were little in demand.
  4. Currently, 26 laws and 33 statutory instruments stipulate provisions, partly in great detail, on the generation, storage, transmission, distribution and consumption of energy. It takes much time to amend such laws and statutory instruments to make them fit for energy transition. This leaves little leeway to flexibly adapt steering to the dynamic development of this process. We make the point for deleting any detailed provisions in parliamentary and delegated legislation where possible. Instead, a legal framework for energy transition should be established. A potential supplementary tool outside a “planned economy measure” would be a general charge on carbon emissions. As carbon pricing would make the generation of renewable energy more attractive, the Ministry could use its funding programmes to provide supplementary incentives.

We demand that the

  • Federal Government set measurable targets for affordability and energy security;
  • Ministry use indicators only that can have a steering effect;
  • Ministry make the costs of energy transition as fully transparent as possible with a reasonable input;
  • Ministry use steering tools that always focus on the targets of energy transition;
  • Ministry consider relying on more effective steering mechanisms such as carbon pricing as a further tool for implementing energy transition.

In commenting on our findings, the Ministry states that it does not see any need for action as to better steering energy transition. The Ministry rejects our cost assessment regarding it as questionable from the methodological point of view. For instance, the Ministry states that the levy imposed by the Renewable Energy Sources Act as the biggest cost item and the relief measures cannot be considered as costs of energy transition. The Ministry also rejects our findings on controlling, arguing that the steering effect of the system currently in place has stood the practice test.

We acknowledge that the Ministry considers its steering system to be sufficiently effective and does not see any need for action. Given that the targets of energy transition may likely not be accomplished either in full or in part, the Ministry’s overall steering is flawed. For a steering system to be effective, verifiable targets need to be defined. In addition, it must be possible to identify any need for action – also in response to external impacts such as economic or population growth. What is also needed is commitment and possibility to change course.

To ensure that energy transition is accepted by society at large, the Ministry needs to disclose the financial impact associated clearly and transparently. According to our calculation, in 2017, costs and expenditures imputable to energy transition totalled at least €34 billion. With reasonable effort, the Ministry should make the costs of energy transition fully transparent. (no. 3)

In our view it is a top priority to enhance coordination and steering of energy transition. The Federal Government is still called upon to take action. Otherwise, the impression may arise among the German and international public that Germany is not able to successfully shape and implement energy transition which is a long-term process affecting economy and society as a whole. (no. 5)