German renewables transition

"I think we need to start over,” Germany’s new Minister of Economics and Energy, Sigmar Gabriel, told a popular German weekly newspaper at the close of 2013 (dw.de). Gabriel was referring to Germany’s Energiewende, which translates to “energy revolution,” the country’s push to transform its economy from one reliant on fossil and nuclear generation to one powered chiefly by renewable energy sources.

Gabriel’s about-face shocked those committed to seeing the Energiewende through, but it resonated with those who have anxiously watched Germany’s electricity prices climb amidst widespread operational problems on the nation’s grid. At a recent energy conference in Berlin, Gabriel advised his listeners, “We need to keep in mind that the whole economic future of our country is riding on this…The energy transformation has the potential to be an economic success, but it can also cause a dramatic de-industrialization of our country” (New York Times).

With hopes to reign in runaway electricity prices, Gabriel is grappling with how best to reform the Energiewende’s lifeblood - the EEG, or Renewable Energy Sources Act, passed by the Bundestag in 2000.

Nearly fourteen years ago, the EEG gave electricity from wind, solar and other renewables priority access to the grid over conventional fuels by creating a feed-in tariff. As intended, it yielded the aggressive deployment of renewable energy capacity across Germany’s residential, commercial and industrial sectors. Thanks to this act, the country today boasts more than 63 gigawatts of solar and wind power capacity. It has also become home to some of Europe’s highest electricity prices. 

Germany’s residential consumers shoulder the costs of the EEG, in the form of a surcharge, and over the years their electricity bills have increased steadily to levels three times the U.S. national average. Such surge in prices has pushed some into “energy poverty,” where leaving the lights is no less than a luxury. Stoking further controversy, the EEG exempts some of Germany’s energy-intensive commercial and industrial consumers to avoid hindering their ability to compete in the global economy.

The values underpinning the Energiewende were and remain environmental, social and economic; they are rooted in a desire to address global climate change, foster public ownership of renewable generation assets and stimulate job growth within a clean energy economy. Through this movement, Germany aims to supply 80 percent of the country’s electricity demand with renewables by 2050 while dramatically cutting carbon emissions.

Boldness rarely goes without criticism. The nation’s energy shift receives denigration and praise both domestically and abroad. Those who consider climate change a top priority praise Germany for their leadership in taking action to address it. Those who downplay the implications of climate change, as well as those who value short-term economic prosperity over long-term environmental stewardship, condemn the effort as yet another example of failed government policy.

American energy expert and IHS Vice Chairman Daniel Yergin recently spoke with the Wall Street Journal about Germany’s energy dilemma. He believes the country should consider developing its domestic natural gas supplies through the proven, yet globally controversial, process of hydraulic fracturing, or fracking. IHS estimates Germany could meet 30 percent of its gas demand if it fracked.

In addition to burning cleaner than Germany’s robust reserves of brown coal, gas offers further value through its reliability and flexibility, making it a strong complement to renewables. Despite these benefits, Chancellor Angela Merkel and others hesitate to pursue fracking due to the broad environmental concerns it arouses.

Outside Germany’s borders, countless industry leaders and government officials deem its Energiewende a failure. Such an assertion, though considered reactionary by some, in reality harkens back to the success of the traditional utility business model. Utilities take issue with Germany’s high electricity prices and misalignment between electric generation and demand resulting from a liberal deployment of intermittent renewables. These critiques are valid and should be acknowledged as the EEG is reformed.

Nevertheless, writing off Germany’s Energiewende as a failure is unwise. In the grand scheme of electric system transitions, the Energiewende is in its infancy. Edison’s model was designed and built over more than a century to meet the affordability and reliability standards it offers today. The Energiewende needs time to mature in the hands of motivated, intelligent people with the technology of the 21st century at their disposal.

Let me offer just one example of how Germans have responded to the challenge of renewable intermittency. A recent article from designworld.com covered Germany’s largest utility, E.ON, demonstrating the conversion of surplus renewable power into hydrogen fuel via electrolysis. The hydrogen can be stored in pipelines or containers as physical energy for consumption at a later time. Such ingenuity may not have occurred on its own - it blossomed from the hurdles of 21st century modernization.

Germany’s boldness should be fairly criticized but absolutely recognized. Gabriel and other policymakers should welcome ideas and collaboration as they address tough issues and reform their approach. And finally, if nothing at all, we should all observe Germany in the coming decades, as it could show the world how to power a vital economy in a clean way.

Photo Credit: Energiewende a Failure?/shutterstock