Thursday, August 2, 2012

Germany and Energiewende: Going for Broke with Renewable Energy

Germany startled the world after the nuclear disaster in Japan when in March of 2011 it announced that it would forego nuclear power while continuing to pursue its long-term plan to wean itself off of fossil fuels. A recent article in The Economist discusses the issues and the risks involved. This introduction to Germany’s status is provided:
"....Germany’s Energiewende (energy transformation), a plan to shift from nuclear and fossil fuels to renewables. It was dreamed up in the 1980s, became policy in 2000 and sped up after the Fukushima disaster in March 2011. That led Angela Merkel, the chancellor, to scrap her extension of nuclear power (rather than phasing it out by 2022, as previous governments had planned). She ordered the immediate closure of seven reactors. Germany reaffirmed its clean-energy goals—greenhouse-gas emissions are to be cut from 1990 levels by 40% by 2020 and by 80% by 2050—but it must now meet those targets without nuclear power."

To meet these goals Germany has been willing to take risks with its economy. As should be well-recognized by now, Europe needs a stable and healthy German economy. Consequently, its neighbors are not necessarily supportive of its efforts.

"The rest of the world watches with wonder, annoyance—and anticipatory Schadenfreude. Rather than stabilising Europe’s electricity, Germany plagues neighbours by dumping unpredictable surges of wind and solar power. To many the Energiewende is a lunatic gamble with the country’s manufacturing prowess."

Supporters recognize the risks, but claim it is worth taking. The official government position might be well-represented by this quote taken from the abstract of a talk presented at MIT by Joschke Fischer, former Foreign Minister and vice-Chancellor from 1998-2005.

"Germany is a highly industrialized country and with its recent decision to eliminate nuclear energy, it has the potential to become a model for how a carbon-free economy without nuclear power can prosper. However, the political environment in Germany means it has passed a "point of no return" – nuclear energy will be completely phased out in 2022 while Germany vows to continue to honor its greenhouse gas emissions reductions commitment. For Germany, there is no way back to the energy sources of the 20th Century."

"Today, the country faces uncertainty regarding how exactly it will meet its energy needs while facing self-imposed nuclear and emissions constraints. But by creating a "sink or swim" situation, Germany will be forced to innovate and lead. In doing so, Germany seeks to create a huge opportunity for companies and technologies that will help it to master this ambitious energy transformation, or "Energiewende". A regulatory environment that favours cleaner energy sources, advanced storage solutions, better grid structure and management, and improved energy efficiency has the potential to develop into a uniquely innovative marketplace for companies around the world that lead in cutting edge green and clean technologies."

Besides the obvious benefit of reducing emissions, Germany expects to take the lead in developing the technologies required to pursue a fossil-free economy and society. It will then be in a position to benefit as others eventually follow its lead. Some observers believe that it is only Germany that can provide both the necessary technologies and the necessary will to succeed.

Will is what will be needed, because everyone will suffer during the transition to renewable resources. To encourage renewable energy producers, they are guaranteed for 20 years a subsidized price for their product. And the producers must be compensated for the power they provide even if the electrical grid can’t accommodate it. Rather than provide a government subsidy for the energy, the burden of the subsidy is passed on to energy consumers as an increase in electricity costs. While painful, this is probably the best incentive to pursue energy efficiency, both in homes and in industry.

"Much could go wrong. Wholesale electricity prices will be 70% higher by 2025, predicts the Karlsruhe Institute of Technology. Germany must build or upgrade 8,300km (5,157 miles) of transmission lines (not including connections to offshore wind farms). Intermittent wind and sun power creates a need for backup generators, while playing havoc with business models that justify investing in them. Hans-Peter Keitel, president of the Federation of German Industry, likens the Energiewende to ‘open-heart surgery’."

How is Germany doing thus far?

"....renewables grew ten times faster than the OECD average from 1990 to 2010 and now account for 20% of electricity output....The government’s target is 35% by 2020. Germany gets more electricity from renewable sources than any other big country."

And necessity breeds novel solutions.

"The number of "energy co-operatives" has risen sixfold since 2007, to 586 last year. Solar parks have migrated from farms and family houses to apartment blocks. "Roof exchanges" match owners with investors. Nieb├╝ll allows only wind farms in which residents can buy stakes, lest landowners become local fat cats and others rebel against the project. In 2010 over 50% of renewable-energy capacity was in the hands of individuals or farmers, according to trend:research, a consultancy."

Germany is not alone in believing their enterprise can succeed. Amory Lovins and his Rocky Mountain Institute have produced a book: Reinventing Fire: Bold Business Solutions for the New Energy Era. This persuasive document is essentially a roadmap for how the United States could accomplish exactly what Germany is attempting. He makes the case that it is not only possible, but it is good business to pursue this path. Lovins argues that the opportunities for energy efficiency gains are many, and they are ultimately cost-effective.

If the United States can do it then certainly Germany should be able to. It starts from the enviable position of having a per capita electricity consumption that is about half that of the United States

Even The Economist, normally rather conservative, finishes on a positive, although slightly ambiguous note.

"It is hard to think of a messier and more wasteful way of shifting from fossil and nuclear fuel to renewable energy than the one Germany has blundered into. The price will be high, the risks are large and some effects will be the opposite of what was intended. Greenhouse-gas emissions are likely to be higher than they would have been for quite a while to come. But that does not mean the entire enterprise will fail. Politicians cannot reinvent the Energiewende on the run, but they can stay a step ahead of the risks and push back against the costs—and they are beginning to do so. In the end Germany itself is likely to be transformed."

If Energievende succeeds, perhaps the term "iron lady" will have to be transferred to a twenty-first century national leader.


  1. In my opinion Germany will certainly fail in some or all of its objectives. But it will be fun to watch from afar. Renewable energy is great as long as no one considers that the costs. At several times the going rate no modern economy can survive such an abrupt change in energy costs and stay competitive in the world.

  2. that is no longer true.
    The break even point has already been reached by onshore wind power. Even the once feared price of electricity from solar panels is not far from reaching that point and the German State is now quickly phasing out its subsidies for that technology


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