Germany as a Business Location

Heiko Staubitz Senior Manager Renewable Energies Germany Trade & Invest
09.02.2012 | www.gtai.com

The Agency

Germany Trade & Invest is the foreign trade and inward investment promotion agency of the Federal Republic of Germany. The agency is promoted by the Federal Ministry of Economics and Technology and the Federal Government Commissioner for the New Federal States in accordance with a German Parliament resolution. Germany Trade & Invest
supports export-oriented companies based in Germany with comprehensive foreign market information. promotes Germany as a high-performance business and technology location in order to attract investors who create/secure jobs in Germany. Provides consultancy services to foreign investors in terms of their business settlement plans and the necessary project management support in Germany. An additional special focal point of activity lies in promoting the economic development of the new federal states including Berlin.

9 February 2012

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The Agency
Areas of Activity

Companies in Germany (Exporters/Investors) Macroeconomic analyses and forecasts Country and industry analyses (over 125 countries) International projects and tenders Foreign economic and tax law Customs information and tariffs Practical business tips Business contacts and addresses

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Information about Germany/Consultancy

Foreign Country and Market Information

companies Economic framework in Germany Site-specific information Industry-specific information Direct contact with potential investors abroad Investor consultancy services Project management support

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The Agency
Partners
Germany Trade & Invest works in close cooperation with the 120 German Chambers of Commerce Abroad (AHKs) in 80 countries across the globe. Germany Trade & Invest cooperates with all foreign trade promotion partners in Germany - and in particular with trade associations and chambers of commerce. The economic development agencies of the federal states are Germany Trade & Invest's partners within the investor settlement process in Germany.

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The New Energy Concept (2010)

Main Objectives
Climate protection measures CO2 cuts vs. 1990 Renewable share of Total energy consumption Electricity consumption Heat generation Energy efficiency measures 2020 -40% 2020 18% 35% 14% 2050 -80% 2050 60% 80% 60%

Increase in energy productiveness

Reduction of energy consumption Reduction of electricity consumption Renovation rate Reduction of energy for transportation
09.02.2012

2.1% p.a.
-50% (2050 vs. 2008) -25% (2050 vs. 2008) 2% p.a. -40% (2050 vs. 2005)
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The Federal Energy Concept

Measures for implementing the new energy policy after the decision taken on the gradual phase-out of nuclear power by 2022
Faster expansion of renewable energies Integration of renewable energies into the overall energy system, e.g. through a market premium Central component: wind energy Increase energy R&D levels - up to 0.5 bn will be made available

Expansion of electricity and smart grids as well as increasing the level of energy
storage capacity Restructuring the fossil power plant park towards more flexible power stations (e.g. gas plants as responsive power to intermittent renewable energies) Increase energy efficiency (particularly in buildings) Cost efficiency and efficient procurement European initiatives for energy efficiency
Source: http://www.bmu.de/energiewende/beschluesse_und_massnahmen/doc/47892.php

09.02.2012

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Network Expansion
Expansion requirements for the transmission and distribution grid
Transmission grid

Grid expansion of 3,600km is required by 2020.

Baseline scenario with overhead lines as most cost-effective option: 0.946 bn. /a

Distribution grid For the medium-voltage power grid (500,000km), expansions of 11% to 28% are foreseen. For the low-voltage power grid (1.1m km), an expansion of 13% to 22% is anticipated. Investment needs

10-27 bn

Source: Dena 2010, BDEW 2011 09.02.2012 www.gtai.com 7

Network Expansion

The Federal Network Agencys competences Based on the amendment of the Federal Law on the Energy Industry (EnWG)

and the enacting of the Network Expansion Acceleration Act (NABEG),

competences for the extension of the high-voltage grid have been transferred to the Federal Network Agency.

Four major steps were developed: Appraisal and determination of the conditions for the network extension Based on the Network Agencys scenarios, the Transmission System Operators (TSO) calculate the extension requirements Federal advisory planning for finding adequate route corridors Plan approval procedure for the exact route

Source: Federal Network Agency 2012

09.02.2012

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Intelligent Grids and Metering - EnWG

Smart meter legal amendment and roll-out in Germany In 2011, the German Federal Law on the Energy Industry (EnWG) was
supplemented by specifications for metering elements e.g. smart meters, smart meter installations and requirements ( 21b, 21d, 21e, 21 f, 21i)

Smart meters are obligatory for: new constructions and complete refurbishments, consumer loads of over 6000 kWh/Year and plant operators under the renewable energy act (EEG) and in accordance with the cogeneration act (KWKG) of over 7 KW ( 21c para. 1 and 2 EnWG)

Expected smart meter roll-put in Germany: 2015 10% of grid accesses with smart meters 2020 already 60%
Source: EnWG 2011; Cronos smart utility consulting gmbh 2011 09.02.2012 www.gtai.com 9

Expected Smart Meter Roll-Out in Germany

Smart meter market: unit and revenue forecast Germany
800 700 600 7 Revenue ( million) 500 400 300 200 2 100 0 Revenues ( Mio.) Units 1 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 1 3 12 0,1 17 0,14 23 0,2 33 0,3 162 1,5 409 4 499 5,2 721 8,2 731 9 0,01 0,02 0 6 5 Units (million) 10

9
8

4
3

Revenues ( Mio.) Units

The market is expected to grow substantially with overall CAGR of 71.7% from 2010-2017
Source: Own draft according to Frost & Sullivan 2011

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The Optional Market Premium

Direct marketing of power from renewable energy create new business opportunities in Germany
Incentives Scheme
Sellers of renewable energy electricity can decide on a monthly basis to either feed the electricity into the grid and receive the feed-in tariff remuneration or participate in direct selling in the electricity market and receive an amount equal to the difference between a reference value based on the average electricity price and the feed-in tariff. An additional management premium is paid to cover cost of forecasting and feed-in management.
Requirements for direct marketing: Access to the electricity market Recognized trading participant in the European Energy Exchange Next day feed-in volume forecast and real-time load measurement of RE-installation

Requirements*

Opportunities

Challenges and opportunities exist in Technologies and services to forecast feed-in volume and feed-in management Energy storage options and smart grids Virtual linking different power plant technologies New business models for electricity trading services and utilities

Note: *not exhaustive; Source: Renewable Energies Sources Act (EEG) 2012; Federal Ministry for the Environment, Nature Conservation and Nuclear Safety 2011; Sonne Wind & Wrme 17/2011

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The Optional Market Premium

To improve market and system integration, incentives for direct selling of power from renewable energy have been established.
Operators of renewable energy facilities have two options for remuneration: 1) Feed-in tariff remuneration or 2) Direct sale under the direct marketing scheme

Source: Renewable Energies Sources Act (EEG) 2012; Federal Ministry for the Environment, Nature Conservation and Nuclear Safety 2011

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Implementation of the Market Premium in 01/2012

Forecast and actual direct marketing (MPM)
120%

100% 90%

100%

80%

60%

Registrations at TNOs for direct marketing (MPM) in 01/2012 (Dec. 21st 2011)
Fraunhofer ISI (Appraisal of market premium share for 2012 from 01/2011) 40%

43%

40%

20%

20%

20% 10% 0%

0% Controllable RE Wind Onshore Wind Offshore

PV

Source: Own draft according to BDEW 2012

09.02.2012

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The Own-Consumption Bonus Principle

Funding through feed-in tariff system AND cost savings on grid energy: Rooftop systems 500kWp may generate income of > 37 ct/kWh in 2011
Wattage PV Energy 500 kWp max. Feed-in tariff: 28.74 to 26.24 ct/kWh1 Own Consumption Bonus: 15.43 to 9.86 ct/kWh2 PLUS cost savings In-house consumption of PV Energy

Energy from grid: Costs ~ 22 ct/kWh3

Energy Demand

Time of day 0h 3h 6h 9h 12h 15h 18h 21h 24h

Notes: 1) Subject to size of system according to feed-in tariff classification | 2) Applicable only for rooftop systems 500kWp installed between July 2010 and December 2011 3) Subject to electricity retail price of respective utility company Source: German parliament resolution from July 2010

09.02.2012 | www.gtai.com

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Renewable Energies in Germany

Ambitious growth targets for RE: what does this mean for energy storage?
Required compensation capacity (GW) 16-17 ca. 22 ca. 26 ca. 28 TWh of energy required 22 30 37 39

RE-share Today 2015 2020 2025 17% n.a. (30%) 35% >35%

But: Almost no possibility of developing new pumped storage capacity! Use of new storage technologies combined with smart grid solutions will be a necessity Expected: Investment of 25-30 billion in storage capacity until 2030

Source: BCG analysis (Electricity Storage, March 2010), ZSW 2010, Bundestag 2010

09.02.2012

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Balancing Power
Easy market entry for smaller players in the balancing power sector
Primary control reserve (PCR) Time for activation 30 s Secondary control reserve (SCR) 5 min Tertiary control reserve (TCR) 15 min

Availability
Required min. bids by regulator 1) Required min. bids by regulator since April 13 Tendering period Tendering period since April 13 Focus on new technologies
Source: BMU 2011

Up to 15 min
5 MW 1 MW

15 min to 1hr
10 MW 5 MW monthly

Minimum of 15 min
15 MW 5 MW (10 MW)

daily weekly Flexible/controllable plants, battery storage systems, renewable energy systems at direct marketing

09.02.2012

Today for energy storage and balancing power only hydro-pump and gas power Plants attending at the balancing power market in Germany. Legislative framework has been changed to open the market for innovative storage technologies. IRR subject to the technology used and the control reserve segment targeted*
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Balancing Power
Price development of TCR 2006 2010 in / MW / d

2.200
2.000

1.800 1.600 1.400

positive Minutenreserve

1.200 1.000 800

600

negative Minutenreserve

400 200 0

Source: 50 Hertz

09.02.2012

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Potential Large-scale Storage Partners

Prequalified providers of different kind of balancing power
Provider Location Primary Secondary Capacity Capacity Reserve Reserve (PCR) (SCR) Tertiary Capacity Reserve (TCR)

1 2 3 4 5 6 7 8 9

ArcelorMittal Eisenhttenstadt GmbH BalancePower GmbH CURRENTA GmbH & Co. OHG E.ON Energy Trading SE E.ON Westfalen Weser Energie-Service GmbH EnBW Kraftwerke AG envia Mitteldeutsche Energie AG Evonik Power Saar GmbH Evonik Steag GmbH

Eisenhttensta dt Hannover Leverkusen Dsseldorf Herford Karlsruhe Chemnitz Saarbrcken Essen Berlin Marl Mainz Augsburg Hagen Mannheim Essen Essen Dsseldorf Hannover Mnchen Rosenheim Dsseldorf Bremen Duisburg Aachen Berlin Saarbrcken Wolfsburg Nordenham x x x x x x x x x x x x x x x x x x

x x x x x x x x x x x x x x x x x x x x x x x x x x x

10 GDF SUEZ Energie Deutschland AG 11 Infracor GmbH 12 Kraftwerke Mainz Wiesbaden AG 13 Lechwerke AG 14 Mark-E AG 15 MVV Energie AG 16 RWE Innogy GmbH 17 RWE Supply & Trading GmbH 18 Stadtwerke Dsseldorf AG 19 Stadtwerke Hannover AG 20 Stadtwerke Mnchen GmbH 21 Stadtwerke Rosenheim GmbH & Co. KG 22 Statkraft Markets GmbH 23 swb Erzeugung GmbH & Co. KG 24 ThyssenKrupp Steel AG 25 Trianel GmbH 26 Vattenfall Europe Generation AG 27 VSE AG 28 VW Kraftwerk GmbH 29 Xstrata Zink GmbH

Source: regelenergieleistung.net, 2011

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R&D Incentives
Funding Initiative Energy Storage growing awareness for stationary storage technologies.
The Initiative Energy Storage supports collaborative R&D projects with funding of EUR 200 million for the period 2011-2014. The program is focused on the development of storage technologies for electricity, heat and other energy sources. Non-repayable cash grants Eligible projects can be funded by up to 50% subject to applicability

Type of funding

Grant recipient

Industrial companies in collaboration with research institutions and universities

Electric, material, thermal storage technologies superordinated systems for management, communication, IT A registered business domicile in Germany The utilization of the research results must be in Germany First stage application until July 8, 2011 [project proposal] Second application round probably in 2012

Supported technologies and systems

Requirements

Application procedure

Subsequent to the objective of increasing renewable energy supply and building up smart grids in Germany, the necessity of balancing power receives more attention.
Source: Federal Gazette; BMU, BMWi, BMBF

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The Role of Germany Trade & Invest

Germany Trade & Invest closely supports the project team throughout the investment decision-making process
Example: Milestones of a manufacturing project
Months (est.): 0 2 4 6 8 T

Site Selection

European location analysis (long list) European incentives comparison

Detailed site evaluation

Initial site visits

Re-evaluation of site analysis (short list)

Negotiation of incentives (LOI)

In-depth site visit (LOIs)

Site Decision. MoU

Incentives

Detailed incentives assessment Advice on financial structure Discussion of utility requirements

Incentive calculation

Incentives application
Negotiation of Conditions (Term Sheet)

Approval of incentives

Financing

Meeting with financing partners Utility prices and reliability comparison Meeting with engineering companies

Financial agreement

Utilities

LOIs for utility supply Discussion Detailed about site matrix infrastructure (plot analysis) upgrades Building and Environmental permit

Engineering

Start of construction
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09.02.2012 | www.gtai.com

The Agency
Two headquarters in Germany - 46 locations worldwide
Athens Brussels Helsinki London Madrid Milan Paris Stockholm

Chicago New York San Francisco Toronto Washington

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Belgrade Budapest Bucharest Kiev Moscow Prague Warsaw Zagreb Dubai Istanbul

Tel Aviv

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Bangkok Beijing Hanoi Hong Kong Jakarta Kuala Lumpur Mumbai New Delhi Seoul Shanghai Taipeh Tokyo Sydney

9 February 2012

Germany Trade & Invest

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Germany Trade & Invest

Contact

Germany Trade & Invest Foreign Trade and Inward Investment Promotion Agency
Germany Trade and Invest GmbH Mr. Heiko Staubitz Senior Manager Renewable Energies Friedrichstrae 60 10117 Berlin Germany T. +49 30 200 099-226 F. +49 30 200 099-111 Heiko.Staubitz@gtai.com www.gtai.com

2011 Germany Trade & Invest

All information provided by Germany Trade & Invest has been put together with the utmost care. However we assume no liability for the accuracy of the information provided.

09.02.2012 | www.gtai.com

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First-Class Infrastructure
The EUs new geographic center is in Germany: providing rapid & easy access to all European markets.
State-of-the-art
2009 Population (millions) GDP (in EUR bn) GDP Growth (YoY) EU-27 500 11.806 -4.2% 1.0% 8.9% Germany 82 2.407 -5.0% 0.2% 7.5%

transportation infrastructure and logistics capabilities to serve all European markets.

3h

From Germany, most of

Inflation Unemployment Helsinki Stockholm

Europe can be reached by air in just 3 hours and by road in 24 hours (flight, truck, and rail distances from Berlin in hours).

1.5 h
Copenhagen London Berlin Brussels Paris

Riga

Moscow

12 h
Warsaw Prague

24 h

Vienna Budapest

24 h
Madrid Rome

EU member states Non-EU member states

48 h

Athens

Source: Eurostat 2010 Note: EU-27s center: 42 km east of Frankfurt/Main in Meerholz, Hessen, *Estimates

09.02.2012

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Company Taxation
Germany offers one of the most competitive tax systems among the big industrialized countries.
Average Corporate Tax Burden ( 2012, in %)
Slovak Rep. Poland Czech Rep. Hungary Germany (minimum) Netherlands UK Germany (average) India 19.00% 19.00% 19.00% 20.62%2 22.83% 25.50%2 26.00% 29.83%1

30.00%3
30.00%2 30.00% 31.40% 33.99%2 34.43%2 39.55% 39.62%2 5,00% 10,00% 15,00% 20,00% 25,00% 30,00% 35,00% 40,00% 45,00%

Spain
Canada (Ontario)

Italy
Belgium France Japan USA (New York) 0,00%
1National 2Top

German average. Lower overall tax rates in certain areas are possible, e.g. only 22.83% in certain municipalities. corporate income taxation rate incl. local taxes; lower starting rates or other special tax rates available. Example USA: progressive rate for the federal corporate income tax from 15 % to 35 %. 3 A surcharge of 5% is levied on taxable income exceeds INR 1 mio. Source: Federal Ministry of Finance (BMF), GTAI 9 February 2012 www.gtai.com 24

Global Player
Germany is the focal point for goods and services in Europe.

German Exports (2009, in EUR bn) Total German Exports to the World: EUR 808 bn
USA

11

Japan

54
Russia UK France

32 Poland Czech Republic

Italy

36
Source: Federal Statistical Office Germany 2010

China

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The Smart Grid Market Overview

New power structure in 2030 will lead to bottlenecks in Germany
Offshore wind parks
Conventional power plants

++

++

!
!
Bottleneck

!
-Nuclear power plant closures

Power balance 2008

09.02.2012

Power balance 2030

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Smart Grid
More than 1,000 market participants are active in the fully liberalized German electricity market.
German Transmission Grid (2010) German Distribution Grid (2010)

4 Interconnected Companies Companies operate transmission grids (and grids in the lower voltage level) Mainly owners of power plants with capacity

of more than 100 MW

866 Operators of Distribution Grids Total: 1,000 market participants Mainly municipal utilities (Stadtwerke)

App. 100 small private companies

150 new market participants

Source: www.enet.eu; BMWi 2010

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International Comparison
German industry electricity prices are slightly above the European average.
Electricity Prices for Industry (2010, EUR ct/kWh, 500-2,000 MWh) Electricity Prices for Industry (2010, EUR ct/kWh, 20,000-70,000 MWh)

Source: Eurostat 2011 Note: Prices incl. taxes, without VAT

09.02.2012

The German Electricity Market

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A Case for Medium and Low voltage (New)

Storage in the LV and MV? Distributed PV?
The German network authority launches quality regulation for electricity distribution systems

The Federal Network Agency has now communicated the level of the socalled quality element (Q element) to the electricity distribution system operators participating in the regular incentive regulation procedure during the first regulatory period.
The Q element level depends on the reliability of the relevant system. System operators whose network has had good quality levels relative to other system operators over the past few years will have an amount added to the revenue cap for the years 2012 and 2013. System operators whose networks have comparatively poor quality levels will, however, have amounts deducted.

Source: Bundesnetzagentur, November 2011

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Different Market Types

Balancing power as early market 4 a
T&D deferral Central conv. stabilization

Profitability of business case

6 7 2

Island Storage

Application Type Application Type

Central

Ind. Peak shaving Balancing Power

Black Start Services

Mixed/Both Decentralized

Price Arbitrage

Decent. Stab.
(mid-load)

4 b

Residential Storage

Difficult

Feasibility of Implementation

Easy

Calculations based on estimated storage prices 2015-2020 further price decrease improve profitability of all cases
Source: BCS, Allmerus, Gtai 2010

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E-Mobility in Germany
The German Government Program 2011: Germany to become e-mobility lead market and lead provider
Goal: Means: 1 million EVs on German roads by 2020 and 6 million EVs by 2030 EUR 500 m R&D funds until 2011 - additional EUR 1 bn until 2013

2014

Market Preparation

2017

Market Run-up

2020

Mass Market

Focus on R&D and pilot programs *German Industry invests up to EUR 17 bn. in R&D

Focus on establishing the market for vehicles and infrastructure

Focus on implementing stable business models

Planned Incentives (extract) Special parking spots for EVs Admission to restricted streets and areas Use of bus and special lanes Diverse tax incentives
Source: BMWi, BMVBS, BMU, BMBF 2011

R&D Projects, Lighthouses, Showcases All aspects of e-mobility to be covered Introduction to broad public 8 model regions for e-mobility 6 model regions e-energy on smart grids 7 model regions ICT for Electric Mobility

01.06.2011

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