Germany’s Halting Energiewende

Germany’s much-hyped Energiewende is on the defensive. There’s a backlash against it, even though opinion polls show three-quarters of Germans in favor of Germany’s clean energy transition. Indeed, the stiffened opposition comes not from the demos but from energy-traditionalists in the political elite, grid operators, the fossil fuel and nuclear lobby, and some sectors of heavy industry. This resistance has crystallized at a critical juncture: with clean energy capacity and output growing rapidly, key policymaking is called for on a range of issues from grids to capacity markets. Nothing major though is likely to happen between now and the national elections in autumn.

Merkel on the Energiewende (c) Süddeutsche / dpa
This backlash comes after roughly a year (spring 2011 to spring 2012) when there seemed to be a rock-solid, national consensus around the Energiewende. In the aftermath of the Fukushima disaster in spring 2011, Chancellor Merkel pulled a u-turn on the question of prolonging nuclear power as a “bridge technology,” shutting down of a third of Germany’s nuclear capacity and pledging that the remaining reactors would come off line over the next eleven years. Moreover, Merkel stated that a transition to renewables, already underway since 2000, would be accelerated to meet targets such as the EU goals and those set by her government in 2010, including Germany’s long-term aim to have 80 percent of its electricity generated by renewable by 2050. A wide range of new measures were proposed – from energy efficiency to grid expansion initiatives – that would speed implementation of the administration’s 2010 Energy Concept.

At the time and for about a year after the turnaround, there appeared to be wide-ranging, all-party agreement that Germany would lead the way in Europe. Merkel’s Christian Democratic Union (CDU) is a hierarchical party and even the vocal pro-nuclear faction in the CDU, closely linked to the fossil fuels lobby, fell grudgingly in line. Likewise, the Christian Democrats’ neo-liberal and pro-nuclear coalition partner, the Free Democrats, appeared cowed, at least for the time-being.

Renewables blossomed

Merkel’s epiphany on nuclear power came at a time when the Energiewende was suddenly on everybody’s radar in Germany. The explosion in renewables – in particular PV and onshore wind – had exceeded the wildest expectations of its designers. “In 2000 a competition was opened up to the whole array of renewables,” Rainer Baake of the Berlin-based think tank Agora Energiewende.

At the time and for about a year after the turnaround, there appeared to be wide-ranging, all-party agreement that Germany would lead the way in Europe
“Onshore wind and PV won it.” Renewables were generating 20 percent of Germany’s electricity needs; the clean energy industry employed 380,000 people, many of them in depressed eastern Germany; clean energy co-ops were sprouting up all over the country; and government at all levels was cashing in on tax revenues from the booming industry. The rest of the world had also taken note of Germany’s energy revolution, sending foreign delegations one after another to energy independent villages like Feldheim in Brandenburg or the energy-progressive college town of Freiburg. (I even ran into a North Korean delegation at Feldheim!) Merkel was touted as “the Energiewende chancellor” and countries across the planet were putting in place feed-in-tariff schemes along the lines of that in Germany.

Since then, Germany’s clean energy transition hasn’t stopped breaking one record after another in terms of zero-carbon electricity production. But the success has spelled consequences that the Merkel government simply wasn’t prepared for, banking as it originally had been on the prolongation of nuclear power. The government didn’t have a policy agenda in a bottom drawer to address pressing issues like the out-dated transmission system, the Cold War-era electricity market, the out-of-date Renewable Energy Sources Act, and other key issues all of which demanded engagement as a result of the epic shift underway in Germany’s energy system. Since then, the government has thus often looked unsure of itself and hesitant, as well as divided within itself as to the direction it wants to go. This indecision has been exacerbated by the replacement of the green-minded Norbert Roettgen with the less-convinced Peter Altmaier as environment minister.

In this limbo, important aspects of this fragile consensus have eroded over the last year. One exception is the nuclear phaseout: There’s no longer any serious advocate of nuclear power with clout enough to reverse Merkel’s Fukushima u-turn. Rather, the energy hawks, led by the economics minister Philipp Roesler, have pulled out the stops to brake the expansion of renewables, block energy efficiency initiatives, and undermine the EU’s carbon emissions trading scheme.

Ostensibly, this has been done in the name of free market economics and the interests of Germany industry. Yet, the arguments relied upon are specious at best. Over the course of the last two winters, the Energiewende’s opponents have warned in the shrillest tones that relying so heavily on PV and onshore wind would cause blackouts and power outages, leaving German industry prostate and German citizens freezing in their homes.

There’s no longer any serious advocate of nuclear power with clout enough to reverse Merkel’s Fukushima u-turn
None of this came to bear and Germany posted a new overall export record in 2012, and also exported more electricity than ever before. Industry is largely exempt from renewable energy taxes and has access to electricity at a competitive rate, in fact lower than in several neighboring countries. Moreover, claims that renewable energy surcharges above all were driving up energy prices also proved thin. While the renewables levy has gone up, the cost of imported fossil fuels has risen more. As the Reuters analyst Gerard Wynn noted: “Germany (and Nordic countries) benefit from low marginal cost renewable power, while Britain is stuck with increasing imports of expensive gas and coal, while its more isolated grid means it can import less electricity from its neighbors.” Renewable energy taxes were just one, relatively minor, factor in the total equation which includes transmission grid charges and other taxes.

The real motive behind the onslaught was the fact that renewables are slowly but surely squeezing fossil fuels out of the electricity market. Because cleanly generated electricity receives priority grid access (and because its marginal costs are less than those of fossil fuels) it is first in the merit-order line at the energy exchange. Thus every kilowatt of renewable energy fed into the grid is one less that the conventional energy utilities will sell. The former “Big Four” have all posted enormous losses since Fukushima and will continue to as the share of renewables in Germany’s energy mix continues to increase.

Big utilities under pressure

Thus while most of the country cheered when on April 18 Germany generated 50 percent (36,000 megawatts) of its total energy consumption for the first time ever on a working day, the fossil fuel suppliers experienced it as their blackest day yet. Since they aren’t investing significantly in renewables (with the exception of the beleaguered offshore wind power sector), their days are numbered. As Susanne Treptow, director of the Stadtwerke Hameln told the Hannoversche Allgemeine Zeitung last week: ”No one needs the big utilities with their enormous power plants anymore – the future lies in decentral generation in smaller units. E.on won’t be around in ten years.”

Yet the barrage of negative press has wounded the Energiewende. "When these myths are repeated again and again, they sink in," German energy expert Claudia Kemfert told EER earlier this year. "Not so long ago Germans were extremely concerned about climate change and the dangers of nuclear power. Now they're scared of the Energiewende."

Moreover, the fact that one of the Energiewende’s staunchest opponents presides over one of the government’s most powerful ministries, has enabled Roesler and his allies to slow – although not stop – the transition.

Yet despite these body blows, the energy transition has not been halted
In 2011, a change in the feed-in tariff regulations slashed the subsidy for PV. An effort to remove at least some industry from the list of those exempt from the renewable surcharge was squashed this year. Germany’s positions – often pushed through by the economics ministry against the wishes of the less muscular environment ministry – have halted critical Energiewende-related legislation at the EU level, such as initiatives to making energy efficiency criteria binding and another to resuscitate the carbon emissions trading scheme.

Yet despite these body blows, the energy transition has not been halted. Led by PV and onshore wind, capacity has grown consistently as has production. In 2012, the PV supply jumped 51% in 2012 from 19.3 in 2011 to 28.5 GWt. The slashed incentives late in the year did slow PV’s dramatic ascent in the final quarter, but not by that much. In 2012 Germany installed 1,008 new wind turbines (2011: 895) with a total capacity of 2,439 megawatts (2011: 2,008).

The demand for more renewable capacity, above all from municipal and state-level (Laender) governments, has pushed the Energiewende forward from below. Earlier this year, efforts of energy hawks to cut subsidies further and retroactively tax renewables producers was thwarted – by the chancellor herself, who has of late said very little about the Energiewende and for the most part has refrained from intervening in spats between the environment and the economics ministries. “This most the most recent attempt by opponents of the Energiewende to turn back the Energiewende was the last of its kind that will be possible during this term,” the Bavarian Christian democratic MP Josef Goeppel told EER, referring to an environment-ministry-led initiative earlier this year. “This failed because the chancellor stepped in and next year there’s going to be a different coalition in office in Germany. The worst is behind us.”

Indeed, there will be little new as the campaign heats up, with the exception of strident rhetoric. It will be interesting to see how Merkel positions her party on Energiewende issues, if at all. After all, though she certainly did not coin the moniker “Energiewende,” it is linked to her name and administration. If they fail to fill it with positive content, it could become a millstone around their necks.