Fraunhofer-Institut für System- und Innovationsforschung ISI

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Unveiling the cost competitiveness of sector coupling technologies - Policy impacts on levelised costs of heat pumps and battery electric vehicles in Germany

2024 , George, Jan Frederick , Held, Anne , Winkler, Jenny , Eichhammer, Wolfgang , Ragwitz, Mario

Heat pumps and battery electric vehicles play a crucial role in achieving a climate-neutral economy and integrating the Energy Efficiency First Principle into the building and transport sectors, rendering the overall energy system more efficient. To achieve cost competitiveness of these new technologies compared to conventional ones, investments, operating costs and conversion efficiencies are important. We conducted micro-simulations of the development of levelised cost of heat and transport for these sector coupling technologies to assess the direct cost impact of these parameters. With a broad and in-depth analysis of economies of scale, we determine future bandwidths of investment development. Based on this data, we compared implications of two policy scenarios of taxes and levies on final energy prices using a German case study. The first scenario considers recently adjusted taxes and levies: the national emissions trading system in 2021 and the abolishment of the electricity levy to finance renewable energy support in 2022. A counterfactual scenario includes previous framework conditions. Our results show that rising carbon and lower electricity prices already economically favour heat pumps from 2020 onwards. In contrast, taxes and levies do not decisively impact the cost competitiveness of battery electric vehicles, but expected reductions in manufacturing cost do.

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Is blue hydrogen a bridging technology? The limits of a CO2 price and the role of state-induced price components for green hydrogen production in Germany

2022 , George, Jan , Müller, Viktor Paul , Winkler, Jenny , Ragwitz, Mario

The European Commission aims to establish green hydrogen produced through electrolysis using renewable electricity and, in a transition phase, hydrogen produced in a low-carbon process, or blue hydrogen. In an extensive cost analysis for Germany up to 2050, based on scenario data and a component-based learning rate approach, we find that blue hydrogen is likely to establish itself as the most cost-effective option, and not only as a medium-term low-carbon alternative. We find that expected CO2 prices below €480/tCO2 have a limited impact on the economic feasibility of electrolysis and show that substantial increases in excise tax on natural gas could lead blue hydrogen to reach a sufficient cost level for electrolysed hydrogen. Unless alternatives for green hydrogen supply through infrastructure and imports become available at lower cost, electrolysed hydrogen may require long-term subsidies. As blue hydrogen comprises fugitive methane emissions and financing needs for green hydrogen support have implications for society and competition in the internal market, we suggest that policymakers rely on hydrogen for decarbonising only essential energy applications. We recommend further investigations into the cost of hydrogen infrastructure and import options as well as efficient subsidy frameworks.

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Balancing the books: unveiling the direct impact of an integrated energy system model on industries, households and government revenues

2024 , George, Jan Frederick , Marx, Alexander , Held, Anne , Winkler, Jenny , Bekk, Anke , Ragwitz, Mario

Background: The transition towards a sustainable energy system is reshaping the demand for final energy, driven by the diffusion of new end-use technologies. This shift not only impacts consumers’ energy expenses, but also holds implications for the public budget. Building on data from a German energy transition scenario, we analyse the direct impact of energy costs on industries, low-income households, and changes in government revenues from the taxes and levies on final energy carriers. Our analysis considers the impact of current policies and explores a scenario introducing additional excise tax rates to offset potential revenue losses. Results: We found that substantial carbon price increases could generate revenues that offset the losses from excise taxes on fossil fuels while enabling the financing of renewable support from the public budget by the end of this decade. Nevertheless, a decline in government revenues from taxes and levies is anticipated after 2030 until the middle of the century due to the declining use of fossil fuels. Maintaining current excise tax revenues during the transition could be achieved by introducing additional excise taxes on fossil fuels and electricity. Lastly, our analysis indicated a continuous decline in household energy expenditures until 2050, whereas energy-intensive industries face adverse impacts due to decarbonisation. Conclusions: This research provides valuable insights into the fiscal implications of the energy transition, shedding light on different industrial sectors and households while considering the evolving impact on the public budget. Policymakers may need to consider systemic reforms or alternative financing mechanisms outside the energy system to balance the books.

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The landlord-tenant dilemma: Distributional effects of carbon prices, redistribution and building modernisation policies in the German heating transition

2023 , George, Jan , Werner, Simon , Preuß, Sabine , Winkler, Jenny , Held, Anne , Ragwitz, Mario

A carbon price on heating fuels aims to reduce the use of fossil energy in the heating sector. However, it has a greater effect on tenants than on landlords. The heating transition requires adequate building insulation for efficientuse of low-temperature technologies. To encourage this particular kind of investment, German landlords are given the option to apply a modernisation levy of up to 8% on top of rents. Similar to carbon pricing, rent increases cause distributional effects. The net effect of these measures on tenants has not been analysed so far. Using a micro-simulation integrating representative empirical data on tenant households in Germany from KOSMA and the detailed building database TABULA, we analyse direct distributional effects of a carbon price (€55/t and €250/t), a per-capita redistribution of carbon price revenues and the modernisation levy (8% and 2% rent increases). The analysis shows that carbon prices and modernisation levies have strong regressive effects. These can be mitigated by the per-capita redistribution. However, the effect on tenants within a given income decile varies largely due to the diversity of buildings. Thus, when designing and evaluating policies, looking at average effects is not sufficientto assess economic impacts for individual households.

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