[en] Current knowledge indicates that Germany will have to rely on importing hydrogen and hydrogen derivatives to achieve its ambitious targets. The country’s own economical potentials for electricity generation from renewables are too limited to be able to meet the projected demand using domestic production alone. So far, analyses of the economic viability of imports have usually been based on calculating the potential production and transportation costs. However, these calculations fall short, as the market prices for imported energy products such as gas and oil are strongly decoupled from production costs and are often significantly higher or display high price volatilities. Against this background, for the first time, an approach was presented for how to envisage a future emerging market and how to move from production costs to prices. First implementation steps were presented and conclusions drawn. The first methodological step assumes a perfect market. Under this assumption, marginal cost pricing can be derived from the intersection of the supply and demand curves. In addition to the cost potential curves for supplying hydrogen and its derivatives, demand curves for these products have to be determined. Cost potential curves are based on techno-economic analyses. The demand curves must take into account the willingness to pay and competitive options for defossilization, which vary in different fields of application. So-called no-regret sectors, such as iron and steel or international aviation, where there are few alternatives to hydrogen and its derivatives for reducing greenhouse gases, will be prepared to pay a higher price than, e.g., road transport with its option of direct electrification. Transportation costs must also be included, which can make up a significant share of the import costs, especially for hydrogen, depending on the distance and type of transportation involved. Transporting hydrogen using repurposed pipelines is cheaper over distances of a few thousand kilometers than transporting liquid hydrogen or its derivatives by ship. This suggests that transnational price regions for hydrogen could emerge to start with along these transport routes, as is the case on today‘s gas market. MENA regions or regions in Eastern Europe such as the Ukraine or Kazakhstan could be exporters of interest here. Since established global markets already exist for derivatives such as methanol or ammonia produced using fossil fuels, and since transport costs over distances of more than 5,000 km have a much lower impact, global markets could also be established here for renewably produced derivatives. In addition to transportation costs, flexibility and the security of supply must also be considered in the evaluation. Shipping offers the opportunity to change transport routes at short notice, e.g., due to political unrest or price changes, and increases supply diversification. References are made here to similarities on the natural gas market. A possible first approach to more accurate pricing is to take country-specific risks into account via the corresponding costs of capital. Equity risk premiums can be used here that are already available for countries. Calculations show that a realistic premium of five to ten percentage points on the costs of capital compared to Germany and other EU countries would have a strong negative affect on the economic viability of importing hydrogen from the MENA region compared to producing hydrogen in the EU. Quantifying country risks as much as possible is thus an important element when analyzing future prices of hydrogen and its derivatives. They also form an important basis for designing policy measures, e.g., by taking on credit default risks. It can also be shown that different time phases should be considered when analyzing market price formation. The current state of knowledge suggests different pricing mechanisms will emerge, at least during the transitional period. These can be based on the emergence of the gas markets. After the pilot phase, it is assumed that bilateral contracts and oligopoly markets with strategic behavior will have a major role. Legal regulations and support will play important roles in shaping the market. The concept is further developed and implemented in the HYPAT project.

[en] Given that the Paris Agreement has strengthened the long-term temperature goal and that it calls for a balance of greenhouse gas (GHG) emissions and sinks within the 21st century, there is the urgent need to re-assess the long-term targets of the EU and to show how the target of GHG neutrality can be reached in the EU. The aim of this study was to design one way to realize a European Union with net-zero greenhouse gas emissions under further sustainability criteria. The scenario shows that a GHG-neutral EU is feasible, based on a fully decarbonized energy supply, without carbon capture and storage. Key components of the scenario in all energy-consuming sectors are a strong increase in energy efficiency as well as far-reaching electrification. The use of bioenergy is strongly limited.

[en] In 2018, the European Commission published its Communication "A clean planet for all", which calls for net-zero greenhouse gas emissions by 2050. A thorough study commissioned by ⁠UBA⁠ assessing the underlying scenarios for policy making shows that central aspects for building an adequate ambitious long-term climate strategy, such as socio-economic, fiscal and technological were under consideration. Although the IDA serves as a basis for the discussion of a long-term GHG development strategy only for the EU internally, its merit lies in its extensive efforts on assessing the feasibility of net-zero GHG emissions which may be helpful to other countries as well.

[en] Artelys and its partners Fraunhofer ISI has been selected by GIZ to undertake a study on the key options for decarbonisation of energy use in Southeast Asia. This report assesses the current use of fossil fuels in the region and its evolution perspectives, with a particular focus on fossil gas and related infrastructure elements. The study then proceeds with the evaluation of the options to decarbonize energy use across the power system, industry, transport, and residential sectors in Southeast Asia, highlighting the specific challenges for the region

[en] This study analyses the processes and assumptions underlying the development of Indonesia's NDC and its revision in 2020. The assumptions underlying the related energy sector documents (KEN, RUEN, RUKN, RUPTL) and their relationships are also assessed. The study is completed by giving a snap-shot of the current state of discussion around constraints related to renewable energy. The unconditional target of Indonesia's NDC foresees a reduction of GHG emissions of 29% relative to a Business-as-Usual (BAU) scenario (41% conditional to international support). It specifies that electricity generation shall reduce emissions by 18.8% relative to BAU. The overall target of a 29% and 41% have been set by a non-public process. The sectoral shares of GHG reductions are determined by the responsible ministries (ESDM in case of the energy sector), with modelling per-formed by academic institutions (e.g. BTI for energy). This modelling is partly based on existing plans of the energy sector. Data underlying this modelling is not public, but underlying socio-economic assumptions suggest that the BAU scenario overestimates emissions. The NDC has no influence on planning in the energy sector but should be considered a by-product of existing planning documents. The process underlying the current revision is repeated for the current revision of the NDC and likely also for creation of the LTS. The ambition under the revised NDC will not be increased. The share of renewable energy in the NDC follows from a cascade of energy planning documents (KEN, RUEN, RUKN, RUPTL), which pass the target from the most overarching energy plans to the NDC. Arguably the most important target related to renewable energy planning in Indonesia set down by the countries' energy strategy KEN, to reach 23% renewable energy in each sector in total primary energy supply in 2025. The assumptions underlying this target are not known and can therefore not be contested. The national energy plan RUEN makes this target more specific in terms of technology. The power sector plan by the ministry of energy RUKN and the power sector plan by the utility RUPTL all consider 23% renewable energy target. Besides that, these plans remain largely disconnected from each other. Nearly all energy planning documents regularly make use of overestimated GDP growth assumptions for the future, which has implications for the relevance of target set relative to this baseline. Technological assumptions remain undisclosed. There is no evidence costs play a role in any of these planning documents and the underlying modelling is not cost-optimized. To understand the perspective of renewable energy in Indonesia, it is essential to consider factors that go beyond planning documents. Costs of renewable energy projects are higher in Indonesia than global averages. Project costs are especially determined by land permits, technology costs and an elevated cost of finance. The discussions often revolve around the impossibility to integrate renewable energy sources to the power system due to their variability. This line of argumentation claims lacking grid stability, inflexible grid management and points to difficulties in developing interconnections between islands. Implementation is not determined by following cost-optimized planning, but by a political agenda serving vested interests in the energy sector, which leads to an increased use of fossil fuels, in particular coal-fired power capacities.

[en] The unconditional target of Mexico's NDC foresees a reduction of GHG emissions of 22% relative to a Business-as-Usual (BAU) scenario, to reach 762 MtCO${}_2$eq in 2030. It further specifies that specifies that electricity generation shall take a share of 30% of this mitigation effort to reduce emissions by 31.4% relative to BAU, reaching 139 MtCO${}_2$eq in 2030. This study analyses how falling cost projections of renewable energy technologies (solar PV and wind energy) could inform energy sector and climate change mitigation plans of Indonesia. We show that cost projections valid for Mexico for renewables have dramatically fallen over the past years. Costs projected for 2030 a couple of years ago are well undercut by more recent projections for 2030. Recent cost projections for 2030 for wind energy are 77% lower than projections dating from 2015, solar PV cost projections have fallen by 74% on average. If falling costs for renewables are considered, the renewable capacities given in PRODESEN (the national power sector plan) could be revised at constant investments. The overall renewable energy capacity given in PRODESEN for 2030 could be increased from 37 GW to 52 GW. This increase in renewable capacities could inform the revision of Mexico's NDC. If falling cost projections of renewable energies are considered, the unconditional target could be reduced from 762 MtCO${}_2$eq to 747 MtCO${}_2$eq at constant costs. This corresponds an increase from 22% to 23.5% reduction and presents a 23.4% increase in the ambition of the power sector.

[en] The unconditional target of Indonesia's NDC foresees a reduction of GHG emissions of 29% relative to a Business-as-Usual (BAU) scenario, to reach 2034 MtCO${}_2$eq in 2030. It further specifies that the energy sector shall take a share of 37.6% of this mitigation effort to reduce emissions by 18.8% relative to BAU, reaching 1355 MtCO${}_2$eq emissions in 2030.This study analyses how falling cost projections of renewable energy technologies (solar PV and wind energy) could inform energy sector and climate change mitigation plans of Indonesia. We show that cost projections valid for Indonesia for renewable energies have dramatically fallen over the past years. Costs projected for 2030 a couple of years ago are well undercut by more recent projections for 2030. Recent cost projections for 2030 for wind energy are 31% lower than projections dating from 2015, solar PV cost projections have fallen by 49% on average. If falling costs for renewables are considered, the renewable capacities given in RUEN (the National Energy Master Plan) could be revised at constant in-vestments. The overall renewable energy capacity given in RUEN for 2030 could be increased from 70 GW to 85 GW. Solar PV would become the dominant source of renewable energy, wind energy would slightly sur-pass geothermal power generation. This increase in renewable capacities could inform the revision of Indonesia's NDC. If falling cost projections of renewables are considered, the unconditional target could be reduced from 2034 MtCO${}_2$eq to 2005 MtCO${}_2$eq at constant costs. This corresponds an increase from 29% to 30.1% reduction and presents a 9.1% increase in the ambition of the energy sector.

[en] Mexico is signatory to the Paris Agreement. As such, the country submitted its first Nationally Determined Contribution (NDC) in 2014 in the run-up to the Paris agreement. In the past years, renewable energy systems have seen a massive cost reduction, which should be considered energy sector and climate change mitigation plans (also see Eckstein et al. (2020)). In view of these developments, this study analyses the process underlying the development of Mexico's NDC and its revision in 2020 with a particular focus on the energy sector and renewable energy systems. The assumptions underlying the related energy sector planning document (PRODESEN) and the relationships to the NDC are assessed. The study is completed by giving a snapshot of political constraints under the current administration of President López Obrador. The study builds on literature review and insights gained from interviews with pertinent Mexican stakeholders. In Mexico's NDC, emissions are estimated to increase by roughly 50% between 2013 and 2030 in the business as usual (BAU) scenario. The unconditional mitigation target of Mexico's NDC foresees a greenhouse gas (GHG) emissions reduction by 22% by 2030 relative to BAU. In the electricity sector, the NDC aims at a 31% GHG emissions reduction. The target setting process remains publicly undisclosed and highly politicized. The main responsibility for the NDC revision is with the Environment Ministry of Mexico (SEMARNAT). SEMARNAT is supported by the National Institute for Ecology and Climate Change (INECC), a body created under the cli-mate change law. The highest level administrative body in the energy sector in Mexico is the Energy Ministry (SENER), responsible for the establishment of targets and strategic transmission investments for renewable energy. The 2020 NDC revision considers only enhanced energy efficiency measures and to a large extent disregards renewable energies in the power sector. Energy sector planning is described to align to political interests and not to follow cost optimization, despite the fact that cost optimization modelling exercises have been carried out by SENER and supported by international organizations. In 2013, Mexico launched a set of regulatory and administrative changes related to the energy sector that are referred to as the Energy Reform. This reform restructured the energy sector, moving away from state-owned enterprises for power generation (CFE) and oil extraction (PEMEX) to a liberalized market, open to private actors. This led to competitive bidding and record-low auction outcomes for solar PV projects in the Mexican power sector. The López Obrador administration, however, builds on fossil resources and state-owned PEMEX as backbone of economic development. It perceives fossil fuel extraction as integral part of the Mexican national sentiment and therefore fosters its continued exploration. While the laws implementing the reform of 2013 have not been formally revoked, institutional, administrative and procedural practice undermine its effectiveness, making renewable energy projects in the power sector un-likely due to limited government support and creating high uncertainty with regard to the regulatory future. Under the current administration, government agencies such as INECC and SEMARNAT have experienced substantial budget cuts, undermining their institutional capacity to support climate change goals. In conclusion, despite large potentials and record low costs for renewable energy projects, key energy sector planning documents in Mexico largely disregard low costs of renewable energies. The energy planning paradigm is determined by a shift away from competitive energy markets towards political patronage, locking Mexico's power sector into a future of higher costs and in-creased GHG emissions.

[en] This study builds on three case studies in Argentina, Indonesia and Mexico and which analyse the implications of falling costs for renewable energy systems on the countries' energy sector planning and climate policy. Each case study consists of two country specific reports. The first report analyses how falling costs of renewable energy could impact country specific power sector development. The second report analyses the process of climate and renewable energy target setting, as well as the prevalent narrative around renewable energy integration. Finally, the present report provides a cross-country synthesis of all case studies, providing insights into the question of how falling costs of renewable energy systems might support the achievement of the goals of the Paris Agreement. Globally falling cost figures for solar PV and wind energy do not naturally translate into increased ambition in planning. The integration of these technologies to the energy system still face substantial barriers in our case study countries. The integration of higher shares of renewable energy goes along with investments into transmission and distribution network modernisation, network expansion and interconnections between power grids. Though an important element, falling costs for renewable energy projects alone do not necessarily translate into overall reduced power system costs. While globally falling costs for wind and solar PV are indicative for learning curve effects in the manufacturing of these technologies, the LCOE of renewable projects is highly sensitive to financing costs. These are largely determined by the local political and regulatory framework and remain high in our case countries, representing a barrier. We find that a number of regulatory and administrative barriers hinder higher integration of solar PV and wind. Frequently changing regulations and ill-designed support schemes often prevail over well-designed renewable energy auction schemes that are followed over several years. We find the political economy fossil fuels to be pivotal in the energy sector and climate planning and target setting processes. Fossil fuel endowments and a long history of natural resource exploitation lead to strong vested interests towards sustaining the use of fossil fuels to satisfy a growing electricity demand. We conclude that falling costs for key renewable energy technologies alone are no silver bullet for climate change mitigation in the energy sector. Putting the country case studies in perspective of a schematic pathway to-wards achieving net zero emissions we find our case study countries to be in an early phase, struggling to integrate increasing shares of (variable) renewable energy into their power systems. The future challenges coming along with a phase-out of fossil fuels, successful sector coupling and questions related to full decarbonisation still lie ahead. While these are dominant topics in Europe, more basic and fundamental questions of renewables integration still determine the discussion in emerging economies. These local topics need to be reflected in policies and measures taken to support full decarbonisation. Nevertheless, as costs of renewables continue to fall, the balance of arguments will incline more strongly towards renewable energy. Overcoming key financial, technical, administrative and market related barriers will further support the integration of renewable energy technologies, thereby coming closer towards achieving the goals of the Paris Agreement.

[en] Hydrogen and synthesis products are considered to be of high importance in future energy systems and therefore play an increasing role in climate change mitigation strategies. This working paper provides an overview of scenarios for the future development of hydrogen demand from a global perspective. The results show the range of possible developments in total as well as for the sectors industry, buildings and transport. Next to worldwide demand, results for the EU and China are disclosed. The bandwidths of hydrogen demand have been determined based on over 40 recently published energy system and hydrogen scenarios. The focus is on scenarios with ambitious reduction targets for greenhouse gas (GHG) emissions. In the following, these scenarios are referred to as "focus scenarios". In addition, the projected hydrogen demand is compared to the bandwidth of over 300 mitigation scenarios from the 6th Assessment Report of the Intergovernmental Panel on Climate Change (IPCC), referred to as "IPCC scenarios".