Renewable Energy
Brandenburg was called the sandbox of the Holy Roman Empire for its poor soil and marginal geography. Today a more appropriate name might be “the wind farm of the European Union” because of all the spinning turbines that tower over the flat landscape. In Bavaria’s Holledau region endless rows of hop plants still cover the hills as they have for centuries; but today they share their slopes with solar panels. Germany’s Energiewende policy (“energy transition” or “revolution”) has transformed its countryside.
The main tool in this transition is a policy of subsidizing renewable power. Germany guarantees investors in green energy that their electricity is given priority over that from conventional sources, and at high prices fixed for 20 years. Thanks to this support, the share of renewable energy in German electricity generation has gone from 3.6% in 1990 to 30% last year. But although green energy is subsidized in most of the EU and America, Germany’s efforts are unusually generous. Unfortunately, consumers pay the price of the subsidies - €20 billion each year - through their electricity bills. Germans pay more for power than all other Europeans. (German industry is exempt from some of the burden).
As a result, Germany’s renewables law has long been in need of reform. In July, the German parliament finally changed it. The government will still determine the volume of renewable energy capacity it wants added each year, to try and slow climate change. Its target is for 40-45% of electricity to be generated from renewables by 2025, 55-60% by 2035 and 80% by 2050. But from next year the fixed sum paid to everyone supplying renewable power will be replaced with auctions. Investors will have to place sealed bids to build new wind or solar farms. Those who offer to do it for the lowest price will win, and only they will be paid for the power they supply. (Small installations, of solar panels on roofs and the like, will stay in the old system.)
This reform is an important step toward a market economy. But problems remain. Local politicians, especially in Bavaria, raise objections to the power lines that need to be built to bring electricity from the windy north to the industrial south. Those lines must now go underground, making them very expensive. Moreover, the new reform does not address the most fundamental problem in the Energiewende. It is that even as the share of renewable energy in electricity generation rises, overall energy production is far from being clean, as measured by pollution emissions. One reason is the snap decision after the disaster at Fukushima in 2011 by Angela Merkel, the chancellor, to abolish nuclear power (which emits no greenhouse gasses) by 2022.
While renewables can easily compensate for this missing nuclear capacity on windy and sunny days, other energy sources are needed for the rest. Environmentally, gas-fired plants would be the next best option, but they are more expensive to run than traditional coal-fired plants. And so Germany continues to rely on dirty coal. This gives the Energiewende a “credibility problem”, says Claudia Kemfert at the German Institute for Economic Research. There are critical voices pointing to inconsistency of the policy and putting it into question.
Alongside this, the Energiewende has so far focused almost entirely on electricity generation. But electricity accounts for only about 21% of energy consumed in Germany, with the rest used to drive cars and trucks and to heat homes. Renewable sources play a limited role in these sectors. Electric vehicles remain more of a marketing dream than reality. Too few Germans drive them to make the air cleaner, though this may change in the wake of the Volkswagen diesel emissions scandal not so long ago.
The policy of the Energiewende, according to Clemens Fuest of the Ifo Institute in Munich, had three goals: to keep energy supply reliable; to make it affordable; and to clean it up to save the environment, with a target of cutting emissions by 95% between 1990 and 2050. “All three goals are unlikely to be achieved,” he thinks, making Germany’s energy transition “an international example for bad policy”. That may be too unfair. In fact, Germany’s policy has helped bring down the cost of solar panels and wind technology. However, to get the revolution Germany really wants, far more drastic reforms will be needed.