Germany’s Energiewende and the financial crisis

Originally published on 2012/07/17

It is one of the European Union’s major projects, but the decarbonisation of its economy was never going to be an easy or cheap development. From the beginning there have been obstacles that put the success of the project into doubt, starting with the uncertainty surrounding anthropogenic climate change, the expected consequences as well as the temperature increase still tolerable for Earth, to issues regarding how best to tackle the problem, and finally questions about the commitment of each member state. However, there was one certainty: Germany was committed to reduce its emissions and help trigger the gradual decarbonisation of its economy. Even though there has been disagreement how to achieve the greening of Europe’s most powerful economy, the commitment as such remained unquestioned. Since the first Schröder government (1998-2002) Germany has pledged to renew and actually re-develop its energy market, putting great trust into renewable energy sources such as wind and solar power. The Renewable Energy Act (Erneuerbare Energiengesetz) (2000) has triggered a massive development of wind power and somewhat paradoxically also solar power. According to the German Energy Agency (DENA) around 17% of electricity, 8% of heat and 6% of fuel used in Germany was generated from renewable sources (January 2011). The coalition of Social Democrats and Greens agreed to phase out nuclear power, the one energy source many consider most effective in the combat against climate change because it is almost carbon-emissions free and reliable. The conservative government of Angela Merkel first reversed the nuclear phase-out, and then reversed its decision after the nuclear incident at the Fukushima-Daiichi power plant in March 2011 and declared the country will shut down all nuclear power plants by 2022.

A slow start to green energy

Since then Germany’s Energiewende should be under way, however, the project has experienced serious setbacks from the start. Not only have energy companies such as RWE or E.ON only begrudgingly accepted the phase-out of nuclear power and the obligation to bring about the greening of the energy sector, but the government has failed to secure the consent of the population. Even though the EEG and the solar power subsidies have led to more small scale investments into RES, major projects, such as energy transmission lines, the connection of offshore wind parks to the grid and the construction of new gas-fueled power plants have been severely delayed. New developments such as NIMBYism have added to the slow transition of its economy. Last but not least, due to the financial crisis that continues to threaten the future of the common currency, especially after the failure of the Greek parties to form a new government after the recent elections, European leaders, and thus also Germany’s leaders, have neglected the challenges posed by the European Energiewende.

Why it matters for the EU

The problem of German’s delayed Energiewende is bigger than it might seem at first as any delay in the construction of the country’s energy highways connecting northern Europe with the southern states and the Balkans will inevitably lead to a more unstable supply of energy in the EU. Currently gas and coal-fired power plants will be used to provide back-up capacity to maintain a stable level of energy in the system. However, the increased share of RES, the more fluctuating nature of solar and wind power and the seasonally different energy generation potentials put the transmission system under strain and push it closer to the brink of collapse. Whereas most wind power is generated in the sparsely populated north, the biggest energy consumers are located in Germany’s southern states of Baden-Württemberg and Bavaria. Currently not enough transmission capacity is available to ensure all available energy is feed into the grid – unless more conventional power generation sources, such as coal and gas fired plants, are taken temporarily off the system during peak hours. This solution is neither effective nor cheap and heavily criticised even within the current government coalition.
The condition of Germany’s transmission system is of paramount significance as the country serves as a major exporter and transit country for electricity. The Bundesnetzagentur, Germany’s Federal Network Agency, has repeatedly warned of blackouts, in winter due to higher energy demand that will overload the outdated infrastructure, and in summer due to the fluctuating nature of solar and wind power and the lack of storage capacity to take off surplus energy off the grid.

The future EU-wide electricity network will also depend on Germany’s transmission network to a large extent, both for transmission and as the “last mile” (basically the last part of the transmission line that links the source to the consumer). Already now Germany is importing electricity from Austria and the Czech Republic and France, and exporting electricity to Poland and Belgium. In the next two decades electricity generated in the sun-rich Mediterranean south, energy from hydro and wind power, based on plans such as the North Sea grid, and electricity from bio-waste will add considerable quantities of electricity to the grid that will be transported throughout the EU, preferably through high voltage direct current lines (HVDC), but more likely through extended AC/ CD-lines.

It is here that Germany is missing out on a second important factor. Even though theEnergiewende will be a very expensive project, it is one that will benefit the country and the EU as a whole if conducted in a pan-European framework. Even though Germany’s EEG has created hundreds of thousands of new jobs and a myriad of supply industries to keep its leadership position worldwide in the field of renewable energies, the government has been slow to embrace measures that ensure energy companies will provide their share to modernise the country’s energy infrastructure, but more importantly has actively supported an irrational policy of supporting solar power as a major source of green energy. This is in particular surprising given that Germany’s solar energy potential, measured as kWh/m² is between 1000 and 1200, compared to 2200 kWh/m² in most regions in Spain and Portugal and 2000kWh/m² in Italy, Greece or southern France. It is in those countries’ vast energy potential that Europe should invest and given the bleak economic situation in particular in Greece and Portugal, major public or European investments could provide a stimulus for growth and job creation. Many German enterprises are leaders in the field of renewable energies, and a European investment plan to realise the southern sun and wind powered part of the EU-wide energy network would allow German investments and create new jobs in Greece, Portugal or Italy.