Germany’s Renewable Energy Gamble

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Germany is giving up on nuclear and embracing renewable energy with a vengeance. Will the experiment work?

Energiewende is a German word en route to joining the English language, like angst and sauerkraut did long ago. It means “energy transition,” and refers to Germany’s historic plans to shift to a green economy based solely on renewable energies.

The German designation will come in handy, since Germany’s trailblazing energy policies and lofty ambitions have no equivalent in the U.S. or anywhere. The energiewende is a full-scale “industrial revolution,” as economist and author Jeremy Rifkin puts it, that will change many things as we know them: transportation, farming, power hierarchies, industrial production, urban architecture, the business world, resource distribution, foreign relations and more. It’s an endeavor of colossal proportions, comparable to the U.S. space program or German unification, although even these analogies ultimately fall short.

Germany is not just bolstering its energy arsenal with a hodgepodge of stylish renewables—which just about everybody is doing these days. Rather it is in the process of kicking the nuclear habit and abandoning fossil fuels altogether, while at the same time meeting ambitious EU climate targets. In the next decade, the country aims to supply Germany’s homes, offices and factories with an energy mix of which 40% comes from renewables. By 2050 Germany plans to have greened over 80% of its energy supply; environmental groups like Greenpeace think that with a little more chutzpah (in the form of proactive policies) Germany could even run on clean energy alone by then.

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What makes Germany so unique is not just the epic mission it has set, but that the country is among the world’s foremost industrial heavyweights: its powerful, export-driven economy relies on energy-intensive industry such as automobiles, machinery and chemicals. Indeed, if Germany can make this revolution happen then so can China, the U.S. and the rest of the world.

After Fukushima

It was Germany’s current leader, Chancellor Angela Merkel, who coined the term energiewende when her government pulled the plug on nuclear power in the aftermath of the Fukushima disaster last year. In one fell swoop, Berlin closed down eight of 17 nuclear reactors, reversed its earlier (and controversial) lifespan extension of the remaining plants and bumped up existing targets. Only with the tragedy in Japan did Merkel definitively commit her conservative party and the current administration—longtime cohorts of the muscular fossil fuel and nuclear industries—to a future powered by renewables.

Actually, Merkel deserves a lot less credit for Germany’s in-progress revolution than she’s given. Germany had been on a groundbreaking clean energy track ever since the Social Democrat-Green (or “red-green”) government held power from 1998 to 2005, seven crucial years during which the energiewende’s groundwork was laid.

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The red-green administration committed Germany to pulling out of nuclear energy gradually over several decades. Moreover, it passed inspired legislation, the gem of which was a generous feed-in tariff that created the means for Germany’s green energy capacity to expand from a bunch of garage tinkerers to a multibillion dollar industry with 380,000 jobs. The government-set rate allows for homeowners with solar panels on their rooftops or communities that have built their own biogas plants to be paid above-market prices for selling energy to the grid. The guaranteed rate ensures that their investments at least break even. The grid operators must accept the fed-in energy and prioritize it over non-renewables.

Stealing a page from the conservatives, the reds and the greens made profit the prime mover of the energy transition—and it worked better than anyone had imagined. Germany’s green electricity generation soared from under 6% in 1998 to over 20% of the total supply today as a result of the guaranteed rates for renewable energy, market incentives for wind farms and solar production, and the de-monopolization of Germany’s closed energy market. (By comparison, 13% of energy produced in the U.S. comes from renewable sources like wind, solar and geothermal power.)

Until Fukushima, the different Merkel-led governments had either passively pushed the red-green policies along or, in some cases, tried to block them. Merkel’s belated coming out for an energiewende was crucial because it brought conservatives on board, making almost everyone believers, regardless of their political leanings. “There is no turning back now,” underscored Germany’s environment minister recently. Rather, the questions are how to drive it forward and how fast to do it.

Of course there’s also the big question looming over this mission: Will it succeed? That will be answered in 20 years or so. If Germany is right, it will be way out in front. If the energiewende flops, the country may forfeit its status as an industrial powerhouse.

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A Mixed Scorecard

One year after Fukushima and Merkel’s green epiphany, the scorecard is mixed. There are reasons to cheer and good grounds for justified skepticism, too. Although Merkel’s government talks a lot about the energiewende, it has yet to back it in a convincing way. Many observers see it lacking in leadership.

But Germany has certainly extended its lead as a world champion in the field of renewables. Last year, Germany’s solar energy output surged by 60%, enough to power some 5.1 million households. Much of these investments were rooftop photovoltaic projects, a signal perhaps that small-scale, local production rather than massive wind or solar parks could be Germany’s future. The plummeting price of photovoltaics has made the technology available to a far broader segment of consumers and entrepreneurs than ever before.

Wind production increased by 30% last year, spurred by a good deal of onshore wind installations in southern Germany, a welcome counterpart to the wind parks along the Baltic and the North Seas. Despite Europe’s paralyzing economic crisis, both wind and solar continued to grow in the first half of 2012, at a pace set to best the gains of 2011.

During a frigid few weeks in early 2012, those impressive numbers provided a fleeting but important victory for the energiewende. When the Merkel administration backtracked on its nuclear power commitment in the wake of Fukushima, Germany’s utility giants, which hold all of the nuclear power, cried that such a rash move would threaten Germany’s electricity supply come winter, at the latest. They predicted blackouts, bottlenecks and miserably cold German families. Not to mention soaring prices and the possible humiliation of importing nuclear energy from unapologetic atomic neighbors France and the Czech Republic. They even threatened that German automakers such as Volkswagen and BMW would have to interrupt production, dragging down Europe’s largest economy.

Germany’s four big utilities (called the Big Four) have been relentless in their opposition. “For every new kilowatt of renewably produced energy that goes into the mix,” explains the Green parliamentarian Hans-Josef Fell, one of the tariff’s designers, “the Big Four sell that much less of their product. That’s how the feed-in tariff works. It’s like taking money right out of their pocket,” he adds. “Don’t be surprised to see them fighting tooth and nail.”

The Big Four’s dire predictions and full-press media offensive last winter unnerved a lot of Germans. After all, Merkel’s Fukushima U-turn pushed Germany out onto terra incognita. Even many Greens hadn’t advocated switching off half of the nation’s reactors from one day to the next.

But the doomsday scenarios never came to pass. Even though solar power only accounts for 3% of Germany’s electricity (and wind 8%), together they enabled Germany to compensate for the shuttered nuclear reactors. On the coldest days either the sun was shining brightly in southern Germany, where the photovoltaic (PV) supply is concentrated, or the winds were gusty on the northern coasts. Germany even exported power to France. “It was an exciting moment,” says Fell. “People saw, hey, we can do it!”

Equally as fortuitous, Germany’s carbon emissions fell in 2011. Trying to capitalize on the climate debate, the nuclear lobby had been touting nuclear as the only answer to the climate conundrum. The splitting of atoms, it professed, was a zero-carbon green power source, and dropping it would translate into greater demand for coal. Emissions would shoot up; climate targets would become beyond reach. Some of Germany’s dirty coal plants did clock in overtime during the winter. But the spurt from renewables, together with the blind luck of a balmy early winter, caused overall carbon emissions to sink by a percentage point or two.

More recently, another milestone was set. On one blissfully sunny day in May, German solar power plants produced a record 22 gigawatts of electricity in a single day—equal to 20 nuclear power stations at full capacity. It was more juice than one country’s solar modules had ever produced in a day. The output was enough for Germany to meet half of its electricity needs on a Saturday.

These kinds of symbolic victories have steadied the nerve of a nation that, while overwhelmingly pro-energiewende, could also lose faith should setback follow setback. Recent polls show that 75% to 80% of Germans favor dumping nuclear, and 70% say the energiewende is necessary. Most also say that they’re willing to pay higher energy costs to fund it, even though the number of willing payers falls as the costs rise. Ultimately, it is energy consumers who are bankrolling the energiewende, as they pay the costs incurred by the feed-in tariff and other surcharges.

Indeed, Germans have been part of their nation’s energy rethink as more than mere observers for several decades, long before the word energiewende became chic. The anti-nuclear energy movement that took off in the early 1970s mobilized hundreds of thousands of (West) Germans. In the course of the latter Cold War years its arguments—aided considerably by the airborne radiation that the 1986 Chernobyl meltdown launched in Western Europe’s direction—convinced the majority of the public that nuclear was a no-go.

Although the grassroots campaigns also made inroads into the political parties, including conservative circles, they had no distinct voice in the country’s legislatures. This is why the Greens came to life in 1980. Europe’s premier ecological party wrote “no nukes” and “renewable energy” on its banners from day one and hasn’t veered since.

Germany’s changing energy supply has private individuals and environmentally minded collectives to thank, too. It has been private investors, small start-ups, citizen’s cooperatives and locally owned utilities that have fueled the investment in wind parks, PV installations, biogas plants and other projects. Germany’s Big Four had been very reluctant to venture too far into renewable energy production as long as nuclear had a future. In fact, they account for only 6.5% of Germany’s renewables, while private investors and farmers own well over half the supply.

The astounding fact is that neither the impetus nor the investment behind the renewables boom stemmed either from government or industry. Of course state policies, like the feed-in tariff, made those investments possible and lucrative in the first place. But, contrary to the perception in the U.S., it is not government subsidies or some vague green sensibility that have pushed Germany’s energy turnaround. Science journalist Bob Johnstone, author of the definitive book on Germany’s solar energy journey, Switching to Solar (Prometheus Books), praises the “elegant simplicity of the German model,” namely the feed-in tariff, “especially compared to the confusing mélange of bureaucratic mechanisms employed elsewhere. With feed-in tariffs, the role of government is merely to insure that producers of clean energy are appropriately compensated. The paperwork is minimal. Not a penny of taxpayer money is involved. [It] appeals not just to people who want to save the planet but also to people who want to make money.”

Best Practices in Feldheim and Freiburg

Take, for example, two of Germany’s poster children, the hamlet of Feldheim deep in rural eastern Germany and the university city of Freiburg in Germany’s southwestern-most corner. Diminutive Feldheim, a speck of a village just south of Berlin, caught the eye of a young energy entrepreneur who saw the windswept backwater as a perfect site for a handful of wind turbines. Later the village invested in its own biogas plant (with the help of some EU funding), which produces renewable natural gas from local farms’ pig manure, corn cobs and other waste.

When one of the major public utilities refused to sell Feldheim the power grid, which needed reconstruction to fit the new energy supply, its 150 inhabitants raised the money to construct their own. Feldheim is now completely energy self-sufficient (it produces all of its own electricity and heating), has a zero-carbon footprint and boasts full employment, too. The energy that it doesn’t use is fed back into the system at a profit (once again: the feed-in tariff). These days it’s the off week when a busload of foreign energy planners isn’t visiting the village to determine whether the Feldheim model can work in their country.

And then there’s urbane Freiburg, teaming with students and leftist literati. The Black Forest market town is hailed as the most ecologically conscious city in Europe, and possibly the world. Freiburg calls itself a “solar region” and converts nearly as much power from the sun as does all of Britain. Its plethora of research institutes and solar firms have their roots in the 1970s environmental campaigns.

One of Freiburg’s most esteemed citizens is architect Rolf Disch, who builds super-isolated housing that requires just a week’s worth of heating every year; the pricey domiciles are paid off with the electricity generated from their roof-top panels. As for planet-friendly transportation, the entire city center is a pedestrian zone; several of its suburbs are completely car-free. The 300 miles of bike paths that crisscross Freiburg are a legacy of its Greens party mayor and resolute citizens’ groups

Feldheim and Freiburg aren’t one-off cases in Germany, but they aren’t the rule yet either. For all of Germany’s green credentials, the energiewende is in its early stages and has some formidable obstacles in its path.

Gridlocked

The first of these is the construction of a transmission grid suited for renewable energies. The current grid is still basically that of old, when the huge fossil fuel and nuclear installations of the Big Four, located primarily in southern Germany’s industrial hubs, dominated the country’s energy landscape. (At the time they owned the grid, too, which is not the case now.)

Unlike those powerful, centrally located plants, Germany’s green energy producers are smaller-scale operations, spread out across rural farmland, or wind parks dotting the coastline in the north. Already their peak output is far more than the current grid can handle. New mega offshore parks slated for construction could add another 25,000 megawatts, roughly the equivalent of the output from 25 coal plants, to Germany’s grid by 2030. Germany’s network of the future thus has to be decentralized, flexible and consist of new north-south transmission lines to bring the wind-generated power of the offshore parks down to the Volkswagen and BMW plants in Bavaria and Baden Württemberg.

This was obvious years ago but held up by the Big Four. As long as nuclear remained an option for them, a new grid was neither necessary nor desirable. Now the matter is urgent, particularly in light of the fact that in 2017 further nuclear reactors will go offline. Over the next decade, more than 2,300 miles of state-of-the-art, high-voltage cables will be laid at a cost of nearly $25 billion. Some of it will stretch over a hundred miles into the North Sea, a technological feat never attempted before on so large a scale.

But controversies swirl around the new grid. Germans will have to live with these decisions for a generation to come, maybe longer. The new power lines are sure to encroach on backyards, and in the handful of places where grid cabling is now being laid anew, local community groups are up in arms. Although no one knows yet which route the main energy corridors will take, there is already intense jockeying among regional stakeholders

Moreover, there is no consensus whether the new network will take the form of a “smart grid” or a “super grid,” a decision with far-reaching implications. A smart grid is a digital network that links decentralized suppliers and customers through the internet. Computers and other technology collect and act on country-wide information about energy supply and demand. The smart grid is ideal for a system based on multiple kinds of small-scale renewable energies that fluctuate, like solar and wind (which function under certain weather conditions but not others). A smart grid matches up the power available at any given time with consumer needs and, in contrast to a central power plant, electricity flows in both directions, since consumers with solar panels on their roofs could also be producers feeding into the grid.

“What Germany needs is a smart grid that links up and distributes the renewable energy production of Germany’s diverse and geographically dispersed producers,” explains R. Andreas Kraemer of the Ecologic Institute, a think tank with headquarters in Berlin. “This model hooks up producers and consumers in a way that is energy efficient and builds on the strength of Germany’s renewable energy sector, namely smaller producers, including individual households, and SMEs [small and medium enterprises]. There’s a world of difference between this and what I expect the Merkel administration wants.”

The German government seems to be leaning in the direction of the Big Four and others who prefer a super grid, namely enormous transmission corridors that emanate from offshore wind farms which are mostly under construction or in planning stages now. A super grid would resemble the current grid in that it would rely on enormous, centralized power plants dominated by the big petrochemical companies.

Norbert Allnoch, director of the Institute of the Renewable Energy Industry in Muenster, argues that the gigantic wind parks planned for the North Sea are critical to make up for lost nuclear capacity. One of the previous year’s key developments was the Big Four waking up to renewable options, he says. “They had no choice if they wanted to stay in the game” says Allnoch, who adds that the major utilities with their strong capital reserves have to be on board for the energiewende to fly. For this they need a grid that prioritizes their expansive wind farms, not small-scale projects in far-flung cow pastures or perched on mountaintops. The plan is to have 10,000 wind turbines in operation off Germany’s coasts by 2030. Currently there are only 27.

And then there’s the price tag. Experts estimate the total cost of the energiewende to fall between $125 billion and $250 billion by 2020, or between 3.5% and 7% of Germany’s 2011 GDP. Until now consumers have been willing to pay the price hikes caused by the feed-in tariff, roughly $260 a year for a family of four. But who will pay for the grid (or the decommissioning of the nuclear power plants) is entirely up in the air.

The grid is probably the highest hurdle in front of the energiewende. But there are a host of others that the Merkel administration has to address if it wants to show that it is serious about the project. There is, for example, the question of EU energy efficiency guidelines, the likes of which are considered key to putting the 2022 targets within reach. Yet it has been Germany of all countries that has held up and watered down the EU proposals at the behest of industry and the Big Four.

Moreover there are technology gaps to fill: At present Germany has just a fraction of the energy storage capacity it needs for a system based on renewables. The German government is lavishing funding on the country’s leading research institutes, hoping they will find a solution. Monies are flowing into research in lithium and redox flow batteries, heat pumps, electric double-layer capacitors, hydrogen options and thermal energy storage, among others. But experts agree that no one of these ideas is likely to materialize in the near-term future.

Another stumbling block is the creation of additional gas plants. It might sound counterintuitive that an energiewende based on renewables requires beefed-up natural gas production. But even optimists say that modern, clean-burning natural gas plants (that emit 60% less carbon dioxide than a coal plant) will be necessary to bridge the gap left by nuclear. Yet the gas price is currently at rock bottom, so low that utilities are unmoved to build new plants. Some observers say governments should subsidize them, even at the expense of renewables, in order to keep the energiewende on track.

Germany’s energiewende has its origins in grassroots activism and DIY business models. Yet without the right policies in place and the state’s hand guiding it, it will never amount to the kind of full-scale industrial revolution that observers like Rifkin envision it to be. Of course Merkel’s attention has been diverted by the euro crisis. Moreover, energiewende proponents in her administration have been obstructed by small but powerful factions still loyal to the old energy giants. Come 2013, Germans will again go to the polls. Merkel pulled off an incredible feat by managing to link the energiewende to her name, but if she fails to deliver, it may actually hurt her.

In other words, by the time energiewende makes it into an English language dictionary, its author may have entered the history books.

PAUL HOCKENOS is a writer living in Berlin. He is the author of several books on European politics, the most recent of which is Joschka Fischer and the Making of the Berlin Republic: An Alternative History of Postwar Germany (Oxford University Press). He writes the “Going Renewable” blog on the website of the German Council on Foreign Relations.